PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~CONDENSED~~ STATEMENTS OF EARNINGS

(unaudited)


												Three months ended March 31,
	Three months ended September 30,					Nine months ended September 30,
	2017			2016		2017			2016
	(In thousands, except per share amounts)
Lease and rental revenues	$	823,197		803,006		$	2,387,801		2,369,147
(In millions, except per share amounts)											(In millions, except per share amounts)	2023		2022
Lease & related maintenance and rental revenue											Lease & related maintenance and rental revenue	$	979	$	1,025
Services revenue	896,245			801,004		2,619,139			2,345,922		Services revenue	1,821		1,670
Fuel services revenue	129,087			120,408		382,966			342,765		Fuel services revenue	152		159
Total revenues	1,848,529			1,724,418		5,389,906			5,057,834
Total revenue											Total revenue	2,952		2,854

Cost of lease and rental	588,626			557,901		1,745,777			1,665,693
Cost of lease & related maintenance and rental											Cost of lease & related maintenance and rental	674		699
Cost of services	761,470			658,793		2,210,314			1,936,636		Cost of services	1,607		1,450
Cost of fuel services	124,562			116,904		372,016			331,283		Cost of fuel services	149		155
Other operating expenses	28,445			27,997		87,122			85,944
Selling, general and administrative expenses	216,653			191,337		620,041			602,768		Selling, general and administrative expenses	363		342
Non-operating pension costs	6,958			7,468		20,875			29,698
Non-operating pension costs, net											Non-operating pension costs, net	10		3
Used vehicle sales, net	(2,727		)	(1,873	)	11,815			(33,002	)	Used vehicle sales, net	(72)		(113)
Interest expense	34,854			37,440		104,591			112,597		Interest expense	65		52
Miscellaneous income, net	(4,655		)	(3,247	)	(17,636		)	(10,968	)	Miscellaneous income, net	(20)		—
Restructuring and other items, net											Restructuring and other items, net	(25)		14
												2,751		2,602
	1,754,186			1,592,720		5,154,915			4,720,649
Earnings from continuing operations before income taxes	94,343			131,698		234,991			337,185		Earnings from continuing operations before income taxes	201		252
Provision for income taxes	35,430			46,560		86,456			121,820		Provision for income taxes	61		76
Earnings from continuing operations	58,913			85,138		148,535			215,365		Earnings from continuing operations	140		176
Loss from discontinued operations, net of tax	(290		)	(386	)	(947		)	(1,069	)	Loss from discontinued operations, net of tax	(1)		—
Net earnings	$	58,623		84,752		$	147,588		214,296		Net earnings	$	139	$	176

Earnings (loss) per common share — Basic											Earnings (loss) per common share — Basic
Continuing operations	$	1.12		1.60		$	2.81		4.05		Continuing operations	$	3.00	$	3.42
Discontinued operations	(0.01		)	(0.01	)	(0.02		)	(0.02	)	Discontinued operations	(0.01)		—
Net earnings	$	1.11		1.60		$	2.79		4.03		Net earnings	$	2.99	$	3.42

Earnings (loss) per common share — Diluted											Earnings (loss) per common share — Diluted
Continuing operations	$	1.11		1.59		$	2.79		4.02		Continuing operations	$	2.95	$	3.35
Discontinued operations	(0.01		)	(0.01	)	(0.02		)	(0.02	)	Discontinued operations	(0.01)		—
Net earnings	$	1.11		1.59		$	2.77		4.00		Net earnings	$	2.94	$	3.35

Cash dividends declared per common share	$	0.46		0.44		$	1.34		1.26

See accompanying ~~notes~~Notes to Condensed Consolidated ~~Condensed~~ Financial Statements.

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

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~CONDENSED~~ STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)

Net earnings $ 58,623
84,752
$ 147,588
214,296

Other comprehensive income (loss):

Changes in currency translation adjustment and other 27,648
(19,296 ) 70,991
(37,874 )

Amortization of pension and postretirement items 7,960
7,171
23,741
22,040
Income tax expense related to amortization of pension and postretirement items (2,812 ) (2,667 ) (8,324 ) (7,854 )
Amortization of pension and postretirement items, net of taxes 5,148
4,504
15,417
14,186

Change in net actuarial loss and prior service cost 870
—
890
(17,367 )
Income tax benefit related to change in net actuarial loss and prior service cost (260 ) —
(80 ) 6,345
Change in net actuarial loss and prior service cost, net of taxes 610
—
810
(11,022 )

Other comprehensive income (loss), net of taxes 33,406
(14,792 ) 87,218
(34,710 )

Comprehensive income $ 92,029
69,960
$ 234,806
179,586


	Three months ended March 31,
(In millions)	2023		2022
Net earnings	$	139	$	176
Other comprehensive income:








Changes in cumulative translation adjustment and unrealized gains from cash flow hedges	9		2

Amortization of pension and postretirement items	7		6

Income tax expense related to amortization of pension and postretirement items	(2)		(1)
Amortization of pension and postretirement items, net of taxes	5		5






Other comprehensive income, net of taxes	14		7

Comprehensive income	$	153	$	183

See accompanying ~~notes~~Notes to Condensed Consolidated ~~Condensed~~ Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~CONDENSED~~ BALANCE SHEETS

(unaudited)


	September 30, 2017			December 31, 2016
(In millions, except share amounts)						(In millions, except share amounts)	March 31, 2023		December 31, 2022
	(Dollars in thousands, except per share amount)
Assets:						Assets:
Current assets:						Current assets:
Cash and cash equivalents	$	65,256		58,801		Cash and cash equivalents	$	253	$	267
Receivables, net of allowance of $13,192 and $14,915, respectively	981,702			831,947
Receivables, net						Receivables, net	1,682		1,610
Inventories	71,328			69,529		Inventories	74		78
Prepaid expenses and other current assets	134,294			141,280		Prepaid expenses and other current assets	251		245
Total current assets	1,252,580			1,101,557		Total current assets	2,260		2,200
Revenue earning equipment, net	8,249,317			8,147,722		Revenue earning equipment, net	8,253		8,190
Operating property and equipment, net of accumulated depreciation of $1,187,188 and $1,128,040, respectively	778,879			745,870
Operating property and equipment, net of accumulated depreciation of $1,393 and $1,377						Operating property and equipment, net of accumulated depreciation of $1,393 and $1,377	1,093		1,148
Goodwill	395,120			386,772		Goodwill	861		861
Intangible assets, net of accumulated amortization of $55,934 and $51,578, respectively	44,381			48,249
Direct financing leases and other assets	538,697			472,284
Intangible assets, net						Intangible assets, net	288		295
Operating lease right-of-use assets						Operating lease right-of-use assets	673		715
Sales-type leases and other assets						Sales-type leases and other assets	1,115		986
Total assets	$	11,258,974		10,902,454		Total assets	$	14,543	$	14,395

Liabilities and shareholders’ equity:						Liabilities and shareholders’ equity:
Current liabilities:						Current liabilities:
Short-term debt and current portion of long-term debt	$	143,942		791,410		Short-term debt and current portion of long-term debt	$	1,674	$	1,349
Accounts payable	557,216			445,470		Accounts payable	980		767
Accrued expenses and other current liabilities	529,171			507,189		Accrued expenses and other current liabilities	1,101		1,200
Total current liabilities	1,230,329			1,744,069		Total current liabilities	3,755		3,316
Long-term debt	5,205,284			4,599,864		Long-term debt	4,666		5,003
Other non-current liabilities	872,071			817,565		Other non-current liabilities	1,507		1,568
Deferred income taxes	1,776,226			1,688,681		Deferred income taxes	1,610		1,571
Total liabilities	9,083,910			8,850,179		Total liabilities	11,538		11,458

Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)
Shareholders’ equity:						Shareholders’ equity:
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding, September 30, 2017 or December 31, 2016	—			—
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding, September 30, 2017 — 52,947,715; December 31, 2016 — 53,463,118	26,474			26,732
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding, March 31, 2023 and December 31, 2022						Preferred stock, no par value per share — authorized, 3,800,917; none outstanding, March 31, 2023 and December 31, 2022	—		—
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding, March 31, 2023 — 46,492,233 and December 31, 2022 — 46,286,664						Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding, March 31, 2023 — 46,492,233 and December 31, 2022 — 46,286,664	23		23
Additional paid-in capital	1,039,598			1,032,549		Additional paid-in capital	1,168		1,192
Retained earnings	1,855,806			1,827,026		Retained earnings	2,596		2,518
Accumulated other comprehensive loss	(746,814		)	(834,032	)	Accumulated other comprehensive loss	(782)		(796)
Total shareholders’ equity	2,175,064			2,052,275		Total shareholders’ equity	3,005		2,937
Total liabilities and shareholders’ equity	$	11,258,974		10,902,454		Total liabilities and shareholders’ equity	$	14,543	$	14,395

See accompanying ~~notes~~Notes to Condensed Consolidated ~~Condensed~~ Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~CONDENSED~~ STATEMENTS OF CASH FLOWS

(unaudited)

Nine months ended September 30,
2017 2016
(In thousands)
Cash flows from operating activities from continuing operations:
Net earnings $ 147,588
214,296
Less: Loss from discontinued operations, net of tax (947 ) (1,069 )
Earnings from continuing operations 148,535
215,365
Depreciation expense 932,772
878,173
Used vehicle sales, net 11,815
(33,002 )
Amortization expense and other non-cash charges, net 27,933
20,196
Non-operating pension costs and share-based compensation expense 35,509
43,568
Deferred income tax expense 75,279
109,191
Changes in operating assets and liabilities:
Receivables (145,090 ) (69,169 )
Inventories (985 ) (3,524 )
Prepaid expenses and other assets 255
(24,241 )
Accounts payable 40,734
68,599
Accrued expenses and other non-current liabilities 39,434
(20,094 )
Net cash provided by operating activities from continuing operations 1,166,191
1,185,062

Cash flows from financing activities:
Net change in commercial paper borrowings and revolving credit facilities 2,153

73,597
Debt proceeds 873,302

298,254
Debt repaid (938,160 )
(340,707 )
Dividends on common stock (71,564 ) (67,651 )
Common stock issued 10,387
9,626
Common stock repurchased (65,856 ) (25,658 )
Debt issuance costs (1,517 ) (3,015 )
Net cash used in financing activities (191,255 ) (55,554 )

Cash flows from investing activities:
Purchases of property and revenue earning equipment (1,312,845 ) (1,511,359 )
Sales of revenue earning equipment 289,432
331,720
Sales of operating property and equipment 12,541
6,623
Acquisitions (7,240 ) —
Collections on direct finance leases and other items 54,227
60,229
Changes in restricted cash 1,694
4,203
Net cash used in investing activities (962,191 ) (1,108,584 )

Effect of exchange rate changes on cash (5,226 ) (5,567 )
Increase in cash and cash equivalents from continuing operations 7,519
15,357

Decrease in cash and cash equivalents from discontinued operations (1,064 ) (1,308 )

Increase in cash and cash equivalents 6,455
14,049
Cash and cash equivalents at January 1 58,801
60,945
Cash and cash equivalents at September 30 $ 65,256
74,994


	Three months ended March 31,
(In millions)	2023		2022

Cash flows from operating activities from continuing operations:
Net earnings	$	139	$	176
Less: Loss from discontinued operations, net of tax	(1)		—
Earnings from continuing operations	140		176
Depreciation expense	445		430

Used vehicle sales, net	(72)		(113)
Amortization expense and other non-cash charges, net	28		31
Non-cash lease expense	59		45
Non-operating pension costs, net and share-based compensation expense	20		14
Deferred income tax expense	42		58
Collections on sales-type leases	30		34
Changes in operating assets and liabilities:
Receivables	(7)		(64)
Inventories	4		(6)
Prepaid expenses and other assets	(26)		(15)
Accounts payable	45		13
Accrued expenses and other liabilities	(230)		(137)
Net cash provided by operating activities from continuing operations	478		466

Cash flows from investing activities from continuing operations:
Purchases of property and revenue earning equipment	(641)		(584)
Sales of revenue earning equipment	216		223
Sales of operating property and equipment	48		3
Acquisitions, net of cash acquired	—		(425)



Net cash used in investing activities from continuing operations	(377)		(783)

Cash flows from financing activities from continuing operations:
Net borrowings (repayments) of commercial paper and other	(216)		63
Debt proceeds	664		650
Debt repayments	(471)		(493)
Dividends on common stock	(35)		(34)
Common stock issued	(23)		(12)
Common stock repurchased	(45)		(300)


Other financing activities	—		(4)
Net cash used in financing activities from continuing operations	(126)		(130)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	11		(4)


Decrease in cash, cash equivalents, and restricted cash	(14)		(451)
Cash, cash equivalents, and restricted cash at beginning of period	267		673
Cash, cash equivalents, and restricted cash at end of period	$	253	$	222

See accompanying ~~notes~~Notes to Condensed Consolidated ~~Condensed~~ Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)


	Three months ended March 31, 2023
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In millions, except share amounts in thousands)	Amount		Shares	Par								Total
Balance as of January 1, 2023	$	—	46,287	$	23	$	1,192	$	2,518	$	(796)	$	2,937

Comprehensive income	—		—	—		—		139		14		153
Common stock dividends declared —$0.62 per share	—		—	—		—		(30)		—		(30)
Common stock issued under employee stock award and stock purchase plans and other (1)	—		670	—		(23)		2		—		(21)

Common stock repurchases	—		(465)	—		(12)		(33)		—		(45)
Share-based compensation	—		—	—		11		—		—		11
Balance as of March 31, 2023	$	—	46,492	$	23	$	1,168	$	2,596	$	(782)	$	3,005


	Three months ended March 31, 2022
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In millions, except share amounts in thousands)	Amount		Shares	Par								Total
Balance as of January 1, 2022	$	—	53,789	$	27	$	1,194	$	2,266	$	(689)	$	2,798

Comprehensive income	—		—	—		—		176		7		183
Common stock dividends declared —$0.58 per share	—		—	—		—		(31)		—		(31)
Common stock issued under employee stock award and stock purchase plans and other (1)	—		400	—		(12)		—		—		(12)

Common stock repurchases	—		(3,052)	(1)		(59)		(240)		—		(300)
Share-based compensation	—		—	—		11		—		—		11
Balance as of March 31, 2022	$	—	51,137	$	26	$	1,134	$	2,171	$	(682)	$	2,649

————————————

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

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS

(unaudited)

1. GENERAL

Interim Financial Statements

The accompanying unaudited ~~Consolidated Condensed Financial Statements~~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 ~~(VIEs) required~~(VIE) where Ryder is determined to be ~~consolidated~~the primary beneficiary in accordance with generally accepted accounting principles ~~generally accepted~~ in the United States (GAAP). Ryder is deemed to be the primary beneficiary if we have the power to direct the activities that most significantly impact the entity’s economic performance and we share in the significant risks and rewards of ~~America (U.S. GAAP).~~the entity. The accompanying unaudited ~~Consolidated Condensed Financial Statements~~condensed consolidated financial statements have been prepared in accordance with the accounting policies described in our ~~2016~~2022 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 ~~U.S.~~ GAAP. In the opinion of management, all adjustments, ~~(consisting of~~including normal recurring ~~accruals)~~accruals, considered necessary for a fair statement have been included and the disclosures herein are adequate. The operating results for interim periods are ~~unaudited and 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 months ended March 31, 2022, we previously reported certain costs in "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 added the "Operating lease right-of-use assets" financial statement line to the unaudited Condensed Consolidated Balance Sheets. These assets were previously included in "Sales-type leases and other assets" in the unaudited Condensed Consolidated Balance Sheets.

~~2. RECENT ACCOUNTING PRONOUNCEMENTS~~

~~Derivatives and Hedging~~

~~In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815)~~We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which ~~simplifies~~provides full service leasing and ~~clarifies~~leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the ~~accounting~~United States (U.S.) and ~~disclosure for hedging activities by more closely aligning~~Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, last mile, and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the ~~results of cash flow~~U.S., including dedicated vehicles, professional drivers, management, and ~~fair value hedge accounting with the risk management activities~~administrative support. Dedicated transportation services provided as part of an ~~entity. The amendments~~operationally integrated, multi-service, supply chain solution to SCS customers are primarily reported in ~~this update are effective for annual periods,~~the SCS business segment. We substantially completed the exit from our FMS Europe (primarily United Kingdom (U.K.)) business as of December 31, 2022, and ~~interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We do not~~we expect ~~this standard~~ to ~~have an impact on our consolidated financial position, results~~complete the shutdown of operations ~~or cash flows.~~as well as the sale of the remaining vehicles and properties by mid-2023.

~~Share-Based Compensation~~

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting~~, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. We will adopt the standard as of January 1, 2018, on a prospective basis. We do not expect this standard to have an impact on our consolidated financial position, results of operations or cash flows.

~~Employee Benefits Plans~~

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation-Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~, which requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The standard is effective January 1, 2018, with early adoption as of January 1, 2017 permitted. We adopted the standard during the first quarter of 2017 and recorded the other components of net benefit cost within "Non-operating pension costs" in the Consolidated Condensed Statements of Earnings for both the current and prior year periods.

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS ~~— (Continued)~~

(unaudited)

2. SEGMENT REPORTING

~~Intangibles - Goodwill~~

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 ~~Other~~

~~In January 2017,~~excludes Non-operating pension costs, net, intangible amortization expense, and certain other items as discussed in Note 14, "Other Items Impacting Comparability." The objective of the ~~FASB issued ASU No. 2017-04,~~ ~~Simplifying~~EBT measurement is to provide clarity on the ~~Test~~profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for ~~Goodwill Impairment (Topic 350), which requires an entity~~their allocated share of CSS costs. Certain costs are not attributable to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The standard is effective January 1, 2020, with early adoption as of January 1, 2017 permitted. We adopted the standard duringany segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation. In the first quarter of ~~2017 and it~~2023, we revised our primary measure of segment financial performance to exclude intangible amortization expense. We revised the presentation of the prior period to conform to the current period presentation. This change did not ~~have an impact on our consolidated financial position, results of operations or cash flows.~~

~~Statement of Cash Flows~~

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230),~~ which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. In November 2016, the FASB issued additional guidance related to the statement of cash flows, which requires companies to explain the change during the period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. The standard is effective January 1, 2018, with early adoption permitted. We will adopt the standard as of January 1, 2018, on a retrospective basis. We do not expect this standard to have a material impact ~~on the presentation of our consolidated cash flows.~~

~~Leases~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842),~~ ~~which sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard requires lessees~~ to classify leases as either finance or operating leases. This classification will determine whether the related expense will be recognized based on asset amortization and interest on the obligation or on a straight-line basis over the termsegment results. Segment results are not necessarily indicative of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. We do not expect the lessee requirements to have a material impact on our consolidated financial position, results of operations ~~or cash flows.~~that would have occurred had each segment been an independent, stand-alone entity during the periods presented.

The ~~new standard continues~~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 March 31,
(In millions)	2023		2022
Revenue:
Fleet Management Solutions:
ChoiceLease	$	776	$	764

Commercial rental	304		306
SelectCare and other	182		148
FMS Europe	—		64
Fuel services revenue	241		247

Fleet Management Solutions	1,503		1,529
Supply Chain Solutions	1,201		1,089
Dedicated Transportation Solutions	454		425
Eliminations (1)	(206)		(189)
Total revenue	$	2,952	$	2,854

Earnings from continuing operations before income taxes:
Fleet Management Solutions	$	182	$	249
Supply Chain Solutions	17		43
Dedicated Transportation Solutions	29		20
Eliminations	(25)		(26)
	203		286
Unallocated Central Support Services	(15)		(16)
Intangible amortization expense (2)	(9)		(10)
Non-operating pension costs, net (3)	(10)		(3)
Other items impacting comparability, net (4)	32		(5)
Earnings from continuing operations before income taxes	$	201	$	252

————————————

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

(2)Included within "Selling, general and administrative expenses" in our Condensed Consolidated Statements of Earnings.

(3)Refer to ~~require lessors~~Note 13, "Employee Benefit Plans," for a discussion on this item.

(4)Refer to ~~separate~~Note 14, "Other Items Impacting Comparability," for a discussion of items excluded from our primary measure of segment performance.

During the ~~lease component from~~first quarter of 2023, we identified impairment indicators primarily associated with specialized sortation and conveyor equipment used in the ~~non-lease component; however, it provides clarification on~~warehouse operations of a specific SCS customer. The impairment indicators were triggered by the ~~scope~~credit deterioration and eventual bankruptcy of ~~non-lease components (e.g., maintenance services). The new standard also provides more guidance on how to identify and separate~~this customer in April 2023. These events resulted in a significant decline in the ~~components. The lease component will be accounted for using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and~~current forecasted operating ~~leases. The non-lease component will be accounted for in accordance~~cash flows associated with the ~~revenue recognition guidance in ASU No. 2014-09. The adoption~~equipment. We performed an asset impairment test under the income-based approach using a discounted cash flow method of ~~the new lease standard will primarily impact our ChoiceLease product line, which includes a vehicle lease as well as maintenance~~valuation and ~~other services related to the vehicle. We will generally continue to recognize revenue for the lease portion~~determined we had an impairment of the product line on a straight-line basis. Revenue from maintenance services will be recognized at the time the maintenance services are performed, which will generally require the deferral of some portion of the customer's lease payments when received, as maintenance services are not performed evenly over the life of a ChoiceLease contract. We will adopt the standard effective January 1, 2019, using the modified retrospective transition method. Upon adoption, we will record a cumulative-effect adjustment to recognize deferred revenue related to the maintenance services on the opening balance sheet for 2017 and restate all prior periods presented (2017 and 2018). We expect the cumulative-effect adjustment will have a significant impact on our consolidated financial position. We continue to evaluate the impact of adoption of this standard on our results of operations. We do not expect the adoption of this standard to have an impact on our cash flows.$30 million.

~~Revenue Recognition~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which together with related, subsequently issued guidance, requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In June 2017, the FASB provided further clarification on the interaction of the transition provisions of the new revenue standard and the new lease standard. We will adopt the revenue standard on January 1, 2018, using the full retrospective transition method.

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS ~~— (Continued)~~

(unaudited)

~~This standard will primarily~~Events and/or changes in circumstances may occur in the near term resulting in a change in management’s estimates of undiscounted cash flows. Any such events or changes could ultimately impact ~~lease revenue from our ChoiceLease product line, specifically~~ the ~~non-lease component (primarily maintenance services). However, based on the FASB's clarification guidance issued in June 2017, on the interaction~~amount of the ~~transition provisions~~impairment loss. In the fourth quarter of 2022, we were notified by this customer of their intent to early terminate operations at one of their distribution centers and we recorded an impairment charge of $20 million in the ~~new~~fourth quarter of 2022.

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


	Three months ended March 31,
(In millions)	2023		2022
Fleet Management Solutions	$	621	$	551
Supply Chain Solutions	12		26
Dedicated Transportation Solutions	—		—
Central Support Services	8		7
Purchases of property and revenue earning equipment	$	641	$	584

3. REVENUE

Disaggregation of Revenue

The following tables disaggregate our revenue ~~standard~~recognized by primary geographical market by our reportable business segments and ~~the new lease standard, we will continue~~by industry for SCS. Refer to ~~apply the existing lease accounting guidance to our lease revenue upon adoption of the revenue standard on January 1, 2018 and will adopt the new revenue standard~~Note 2, "Segment Reporting," for the ~~maintenance and other services components of our ChoiceLease product line effective January 1, 2019.~~

With respect to other revenue sources, we continue to assess the impact of the following: (1) timing of recognition of variable consideration; (2) principal versus agent considerations; and (3) accounting for costs to obtain and fulfill contracts. We do not expect the adoption of this standard as it relates to other revenue sources to have a material impact on our consolidated financial position, results of operations or cash flows.

~~3. ACQUISITIONS~~

On September 29, 2017, we completed the acquisition of Dallas Service Center, Inc., an independent truck repair facility, for a purchase price of approximately $8.0 million, net of cash acquired, which includes $0.8 million in contingent consideration to be paid to the seller provided certain conditions are met.

~~4. REVENUE EARNING EQUIPMENT~~

September 30, 2017 December 31, 2016
Cost
Accumulated
Depreciation

Net Book
Value⁽¹⁾
Cost
Accumulated
Depreciation

Net Book
Value⁽¹⁾
(In thousands)
Held for use:
ChoiceLease $ 9,799,028
(3,284,267 ) 6,514,761
$ 9,486,977
(3,031,937 ) 6,455,040
Commercial rental 2,599,043
(973,126 ) 1,625,917
2,499,010
(935,346 ) 1,563,664
Held for sale 417,771
(309,132 ) 108,639
494,355
(365,337 ) 129,018
Total $ 12,815,842
(4,566,525 ) 8,249,317
$ 12,480,342
(4,332,620 ) 8,147,722

~~————————————~~


~~(1)~~	Revenue earning equipment, net includes vehicles acquired under capital leases of $29 million, less accumulated depreciation of $14 million, at September 30, 2017, and $43 million, less accumulated depreciation of $22 million, at December 31, 2016.

We lease revenue earning equipment to customers for periods typically ranging from three to seven years for trucks and tractors and up to ten years for trailers. The majority of our leases are classified as operating leases. However, somedisaggregation of our revenue ~~earning equipment leases are classified as direct financing leases and, to a lesser extent, sales-type leases. As~~by major products/service lines.

Primary Geographical Markets


	Three months ended March 31, 2023
(In millions)	FMS		SCS		DTS		Eliminations		Total
United States	$	1,426	$	1,069	$	454	$	(196)	$	2,753
Canada	77		62		—		(10)		129

Mexico	—		70		—		—		70

Total revenue	$	1,503	$	1,201	$	454	$	(206)	$	2,952


	Three months ended March 31, 2022
(In millions)	FMS		SCS		DTS		Eliminations		Total
United States	$	1,388	$	971	$	425	$	(179)	$	2,605
Canada	77		60		—		(10)		127
Europe	64		—		—		—		64
Mexico	—		58		—		—		58

Total revenue	$	1,529	$	1,089	$	425	$	(189)	$	2,854

Table of ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~, the net investment in direct financing and sales-type leases was $439 million and $409 million, respectively. Our direct financing lease customers operate in a wide variety of industries, and we have no significant customer concentrations in any one industry. We assess credit risk for all of our customers including those who lease equipment under direct financing leases prior to signing a ChoiceLease contract. For those customers who are designated as high risk, we typically require security deposits to be paid in advance in order to mitigate our credit risk. Additionally, our receivables are collateralized by the vehicles, which further mitigates our credit risk.Contents

As of September 30, 2017 and December 31, 2016, the amount of direct financing lease receivables past due was not significant, and there were no impaired receivables. Accordingly, we do not believe there is a material risk of default with respect to the direct financing lease receivables.

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

Industry

Beginning in the first quarter of 2023, we introduced the omnichannel retail industry to provide better visibility to the revenue mix following recent acquisitions and organic growth. This new vertical includes retail, e-commerce, last mile services, and technology. Our SCS business segment included revenue from the following industries:


	Three months ended March 31,
(In millions)	2023		2022
Omnichannel retail	$	453	$	418
Automotive	393		354
Consumer packaged goods	227		196
Industrial and other	128		121
Total SCS revenue	$	1,201	$	1,089

Lease & Related Maintenance and Rental Revenue

The non-lease revenue from maintenance services related to our ChoiceLease product is recognized in "Lease & related maintenance and rental revenue" in the Condensed Consolidated Statements of Earnings. For the three months ended March 31, 2023 and 2022, we recognized $243 million and $257 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:


	Three months ended March 31,
(In millions)	2023		2022
Balance as of beginning of period	$	544	$	593
Recognized as revenue during period from beginning balance	(56)		(60)
Consideration deferred during period, net	43		48
Foreign currency translation adjustment and other	2		—
Balance as of end of period	$	533	$	581

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 was $2.4 billion as of March 31, 2023, and primarily includes deferred revenue and amounts for ChoiceLease maintenance revenue that will be recognized as revenue in future periods as we provide maintenance services to our customers.

4. RECEIVABLES, NET


(In millions)	March 31, 2023		December 31, 2022

Trade	$	1,468	$	1,476
Sales-type lease	137		120
Other, primarily warranty and insurance	114		55
	1,719		1,651
Allowance for credit losses and other	(37)		(41)
Receivables, net	$	1,682	$	1,610

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

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


	Three months ended March 31,
(In millions)	2023		2022


Balance as of beginning of period	$	41	$	31
Changes to provisions for credit losses	8		4
Write-offs and other	(12)		(7)
Balance as of end of period	$	37	$	28

5. REVENUE EARNING EQUIPMENT, NET


	Estimated Useful Lives (In Years)	March 31, 2023						December 31, 2022
(Dollars in millions)		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net

Held for use:
Trucks	3 — 7	$	5,303	$	(2,133)	$	3,170	$	5,282	$	(2,114)	$	3,168
Tractors	4 — 7.5	7,142		(3,096)		4,046		7,153		(3,153)		4,000
Trailers and other	9.5 — 12	1,615		(693)		922		1,610		(690)		920
Held for sale (1)		463		(348)		115		388		(286)		102
Total		$	14,523	$	(6,270)	$	8,253	$	14,433	$	(6,243)	$	8,190

————————————

(1)Revenue earning equipment held for sale where net book values exceed fair values are adjusted to fair value on a nonrecurring basis and these adjustments are considered Level 3 fair value measurements. The fair value of revenue earning equipment held for sale adjusted with Level 3 fair value measurements were $4 million and $3 million as of March 31, 2023, and December 31, 2022, respectively. The net book value of all other assets held for sale were below fair value.

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. For the three months ended March 31, 2023 and 2022, we did not adjust the estimated residual values and useful lives of existing revenue earning equipment.

Used Vehicle Sales 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 ~~arrive at our used truck sales centers~~are deemed to meet the held for sale criteria and are presented within ~~“Used~~"Used vehicle sales, ~~net”~~net" in the Condensed Consolidated ~~Condensed~~ Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For ~~a certain population of our~~ revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for ~~sales of~~ each class of similar assets and vehicle ~~condition. These~~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, ~~were classified within Level 3~~as well as forecasted sales channel mix (retail/wholesale).

Table of ~~the fair value hierarchy.~~Contents

~~The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:~~

Total Losses ⁽²⁾
September 30, Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016 2017 2016
(In thousands)
Assets held for sale:
Revenue earning equipment ⁽¹⁾:

Trucks $ 14,081
17,091
$ 6,215
2,528
$ 22,942
6,842
Tractors 15,448
61,480
1,127
7,985
18,444
22,073
Trailers 2,279
2,563
1,871
1,152
5,044
2,589

Total assets at fair value $ 31,808
81,134
$ 9,213
11,665
$ 46,430
31,504

~~————————————~~


~~(1)~~	Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where net book values exceeded fair values and fair value adjustments were recorded. The net book value of assets held for sale which were less than fair value was $77 million and $76 million as of September 30, 2017 and 2016, respectively.


~~(2)~~	~~Total losses represent fair value adjustments for all vehicles reclassified to held for sale throughout the period for which fair value was less than net book value.~~

~~For the three and nine months ended September 30, 2017 and 2016, the components of gains on used vehicles, net were as follows:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
Gains on vehicle sales, net $ (11,940 ) (13,538 ) $ (34,615 ) (64,506 )
Losses from fair value adjustments 9,213
11,665
46,430
31,504
Used vehicle sales, net $ (2,727 ) (1,873 ) $ 11,815
(33,002 )

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

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

~~5. ACCRUED EXPENSES AND OTHER LIABILITIES~~


	Three months ended March 31,
(In millions)	2023		2022

Gains on vehicle sales, net (1)	$	(75)	$	(115)
Losses from valuation adjustments	3		2
Used vehicle sales, net	$	(72)	$	(113)

September 30, 2017 December 31, 2016

Accrued
Expenses

Non-Current
Liabilities
Total
Accrued
Expenses

Non-Current
Liabilities
Total
(In thousands)
Salaries and wages $ 100,273
—
100,273
$ 90,913
—
90,913
Deferred compensation 3,990
54,595
58,585
2,992
46,541
49,533
Pension benefits 3,842
462,935
466,777
3,796
451,940
455,736
Other postretirement benefits 1,520
19,163
20,683
1,506
19,459
20,965
Other employee benefits 22,678
2,958
25,636
29,358
5,854
35,212
Insurance obligations ⁽¹⁾
133,855
261,244
395,099
127,470
234,336
361,806
Asset retirement obligations 6,595
19,810
26,405
5,828
20,143
25,971
Operating taxes 99,086
—
99,086
92,150
—
92,150
Income taxes 2,570
24,623
27,193
4,197
23,174
27,371
Interest 26,066
—
26,066
27,277
—
27,277
Customer deposits 66,302
4,089
70,391
61,225
4,569
65,794
Deferred revenue 14,997
—
14,997
14,064
—
14,064
Other 47,397
22,654
70,051
46,413
11,549
57,962
Total $ 529,171
872,071
1,401,242
$ 507,189
817,565
1,324,754

————————————


~~(1)~~	~~Insurance obligations are primarily comprised of self-insured claim liabilities.~~

(1)For the three months ended March 31, 2023 and 2022, gains on vehicle sales, net includes $2 million and $8 million, respectively, related to the exit of the FMS U.K.business.

6. ACCRUED EXPENSES AND OTHER LIABILITIES


	March 31, 2023						December 31, 2022
(In millions)	Accrued Expenses		Non-Current Liabilities		Total		Accrued Expenses		Non-Current Liabilities		Total
Salaries and wages	$	131	$	—	$	131	$	259	$	—	$	259
Deferred compensation	5		86		91		5		80		85
Pension and other employee benefits	14		181		195		29		179		208


Insurance obligations, primarily self-insured	179		296		475		179		309		488




Operating taxes	137		—		137		132		—		132

Interest	41		—		41		41		—		41
Deposits, mainly from customers	81		—		81		84		—		84
Operating lease liabilities	187		506		693		191		541		732
Deferred revenue (1)	184		349		533		178		366		544


Other	142		89		231		102		93		195
Total	$	1,101	$	1,507	$	2,608	$	1,200	$	1,568	$	2,768

————————————

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

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

7. LEASES

~~6. DEBT~~

The components of revenue from leases were as follows:

Weighted-Average
Interest Rate

September 30,
2017 December 31,
2016 Maturities September 30,
2017 December 31,
2016
(In thousands)
Short-term debt and current portion of long-term debt:
Short-term debt 1.57% 1.07%
$ 59,410
177,629
Current portion of long-term debt 84,532
613,781
Total short-term debt and current portion of long-term debt 143,942
791,410
Long-term debt:
U.S. commercial paper ⁽¹⁾
1.44% 0.87% 2020 468,540
342,480
Global revolving credit facility 3.20% 2.06% 2020 7,596
4,703
Unsecured U.S. notes — Medium-term notes⁽¹⁾
2.69% 2.67% 2017-2025 4,013,602
4,113,421
Unsecured U.S. obligations 2.52% 2.19% 2018 50,000
50,000
Unsecured foreign obligations 1.50% 1.55% 2017-2020 229,030
232,092
Asset-backed U.S. obligations ⁽²⁾
1.85% 1.80% 2017-2024 516,009
459,876
Capital lease obligations 3.45% 3.17% 2017-2023 21,859
24,184
Total before fair market value adjustment 5,306,636
5,226,756
Fair market value adjustment on notes subject to hedging ⁽³⁾
(2,058 ) 1,110
Debt issuance costs (14,762 ) (14,221 )
5,289,816
5,213,645
Current portion of long-term debt (84,532 ) (613,781 )
Long-term debt 5,205,284
4,599,864
Total debt $ 5,349,226
5,391,274


	Three months ended March 31,
(In millions)	2023		2022
Operating leases
Lease income related to ChoiceLease	$	360	$	382
Lease income related to commercial rental (1)	$	288	$	298

Sales-type leases

Interest income related to net investment in leases	$	15	$	11




Variable lease income excluding commercial rental (1)	$	72	$	74

————————————


~~(1)~~	~~Amounts are net of unamortized original issue discounts of $7 million at September 30, 2017 and December 31, 2016.~~


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


~~(3)~~	~~The notional amount of the executed interest rate swaps designated as fair value hedges was $825 million at September 30, 2017 and December 31, 2016, respectively.~~

~~We maintain a $1.2 billion global revolving credit facility with a syndicate~~(1)Lease income related to commercial rental includes both fixed and variable lease income. Variable lease income is approximately 15% to 20% of ~~twelve lending institutions led by Bank~~total commercial rental income.

The components of ~~America N.A., Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Mizuho Corporate Bank, Ltd., Royal Bank of Canada, Lloyds Bank Plc, U.S. Bank National Association~~net investment in sales-type leases, which are included in "Receivables, net" and Wells Fargo Bank, N.A. The facility expires in January 2020. The agreement provides for annual facility fees which range from 7.5 basis points to 25 basis points based on Ryder's long-term credit ratings. The annual facility fee is currently 10 basis points, which applies to the total facility size of $1.2 billion.

~~The credit facility is used primarily to finance working capital but can also be used to issue up to $75 million in letters of credit (there were~~ no ~~letters of credit outstanding against the facility at~~ ~~September 30, 2017~~). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility contains no provisions limiting its availability"Sales-type leases and other assets" in the ~~event~~Condensed Consolidated Balance Sheets, were as follows:


(In millions)	March 31, 2023		December 31, 2022
Net investment in the lease — lease payment receivable	$	738	$	598
Net investment in the lease — unguaranteed residual value in assets	55		43

	793		641
Estimated loss allowance	(5)		(6)
Total	$	788	$	635

Table of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions and certain affirmative and negative covenants.Contents

In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or equal to 300%. Net worth, as defined in the credit facility, represents shareholders' equity excluding any accumulated other comprehensive income or loss associated with our pension and other postretirement plans. The ratio at ~~September 30, 2017, was~~ ~~192%. At~~ ~~September 30, 2017, there was $664 million available under the credit facility.~~

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

8. DEBT

~~Our global revolving credit facility enables us to refinance short-term obligations~~


	Weighted Average Interest Rate
(Dollars in millions)	March 31, 2023	Maturities	March 31, 2023		December 31, 2022





Debt:
U.S. commercial paper	5.02%	2026	$	457	$	672
Canadian commercial paper	—	2026	—		—
Trade receivables financing program	5.60%	2023	215		50
Global revolving credit facility	—	2026	—		—
Unsecured U.S. obligations	4.16%	2027	375		375
Unsecured medium-term note issued February 2018	—	2023	—		450
Unsecured medium-term note issued June 2018	3.75%	2023	450		450
Unsecured medium-term note issued October 2018	3.88%	2023	300		300
Unsecured medium-term note issued February 2019	3.65%	2024	600		600
Unsecured medium-term note issued August 2019	2.50%	2024	550		550
Unsecured medium-term note issued April 2020	4.63%	2025	400		400
Unsecured medium-term note issued May 2020	3.35%	2025	400		400
Unsecured medium-term note issued December 1995	6.95%	2025	150		150
Unsecured medium-term note issued November 2021 (1)	5.50%	2026	274		270
Unsecured medium-term note issued November 2019	2.90%	2026	400		400
Unsecured medium-term note issued February 2022 (1)	4.16%	2027	436		434
Unsecured medium-term note issued May 2022	4.30%	2027	300		300
Unsecured medium-term note issued February 2023	5.65%	2028	500		—
Unsecured foreign obligations	2.88%	2024	50		50
Asset-backed U.S. obligations (2)	3.06%	2023-2029	460		477
Finance lease obligations and other		2023-2041	43		42
			6,361		6,370
Debt issuance costs and original issue discounts			(21)		(18)
Total debt (3)			6,340		6,352
Short-term debt and current portion of long-term debt			(1,674)		(1,349)
Long-term debt			$	4,666	$	5,003

————————————

(1)Includes impact from the fair market values of hedging instruments on ~~a long-term basis. Short-term commercial paper obligations not expected to require the use~~our notes, which was $39 million as of ~~working capital are classified~~March 31, 2023, and $47 million as ~~long-term obligations, as we have both the intent and ability to refinance on a long-term basis. In addition, we have the intent and ability to refinance the current portion~~ of certain long-term debt on a long-term basis. At September 30, 2017, we classified $469 million of short-term commercial paper and $50 million of the current portion of long-term debt as long-term debt. At December 31, ~~2016, we classified $342~~2022, and was included in "Other non-current liabilities" within the unaudited Condensed Consolidated Balance Sheets. The notional amount of interest rate swaps designated as fair value hedges was $500 million and $450 million as of ~~short-term commercial paper~~March 31, 2023 and ~~$350 million of the current portion of long-term debt as long-term debt.~~December 31, 2022, respectively.

In August 2017, we issued $300 million of unsecured medium-term notes maturing in September 2022. In February 2017, we issued $300 million of unsecured medium-term notes maturing in March 2022. The proceeds from these notes were used(2)Asset-backed U.S. obligations are related to pay off maturing debt and for general corporate purposes. If these notes are downgraded below investment grade following, or as a result of, a change in control, the note holders can require us to repurchase all or a portion of the notes at a purchase price equal to 101% of principal value plus accrued and unpaid interest.

~~In June 2017, we received $98 million from~~ financing transactions backed by a portion of our revenue earning equipment.

(3)The proceeds from these transactions were used for general corporate purposes. We have provided end of term guarantees for the residual value of the revenue earning equipment in these transactions. The transaction proceeds, along with the end of term residual value guarantees, have been included within "asset-backed U.S. obligations" in the preceding table.unsecured medium-term notes bear semi-annual interest.

We have a trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to a bankruptcy remote, consolidated subsidiary of Ryder, that in turn sells, on a revolving basis, an ownership interest in certain of these accounts receivable to a committed purchaser. The subsidiary is considered a VIE and is consolidated based on our control of the entity’s activities. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in interest rates. The available proceeds that may be received under the program are limited to $175 million. The program was renewed in October 2017. If no event occurs which causes early termination, the 364-day program will expire on October 22, 2018. The program contains provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of the collateralized receivables. Sales of receivables under this program are accounted for as secured borrowings based on our continuing involvement in the transferred assets. No amounts were outstanding under the program at September 30, 2017 or December 31, 2016.

At September 30, 2017 and December 31, 2016, we had letters of credit and surety bonds outstanding totaling $357 million and $354 million, respectively, which primarily guarantee the payment of insurance claims.

The fair value of total debt (excluding ~~capital~~finance lease and asset-backed U.S. obligations) ~~at September 30, 2017~~was approximately $5.9 billion and $5.7 billion as of March 31, 2023 and December 31, ~~2016 was approximately $4.89 billion and $4.97 billion,~~2022, respectively. 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. ~~The carrying amounts reported~~

As of March 31, 2023, there was $943 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 ~~Consolidated Condensed Balance Sheets for “Cash and cash equivalents,” “Receivables, net” and “Accounts payable” approximate fair value because~~credit facility agreement. As of March 31, 2023, the ratio was 156%.

Table of ~~these financial instruments.~~Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

~~7. DERIVATIVES~~

~~From time to time, we enter into~~(ii) LIBOR was replaced as an available benchmark interest rate ~~derivative contracts to manage~~with Term SOFR, and (iii) the maximum absolute dollar amounts for our ~~fixed~~trade receivables financing program and ~~variable interest rate exposure~~asset-backed financings were removed and ~~to better align~~only percentage-based maximum amounts remain.

We had letters of credit and surety bonds outstanding of $515 million and $513 million as of March 31, 2023 and December 31, 2022, respectively, which primarily guarantee the ~~repricing~~payment of debt instruments to that of our portfolio of assets. We assess the risk that changes in interest rates will have either on the fair value of debt obligations or on the amount of future interest payments by monitoring changes in interest rate exposures and by evaluating hedging opportunities. We regularly monitor interest rate risk attributable to both our outstanding and forecasted debt obligations as well as any offsetting hedge positions. This risk management process involves the use of analytical techniques, including cash flow sensitivity analyses, to estimate the expected impact of changes in interest rates on our future cash flows.insurance claims.

As of ~~September 30, 2017, we had interest rate swaps outstanding, which are designated as fair value hedges for certain debt obligations, with a total notional value~~March 31, 2023, the available proceeds under the trade receivables financing program were $1 million. As of ~~$825~~March 31, 2023, utilization of the credit facility included borrowing of $215 million and ~~maturities through 2022. Interest rate swaps~~letters of credit outstanding of $84 million. On April 24, 2023, we extended the trade receivables financing program for an additional year to April 2024.

The following table summarizes our debt proceeds and repayments in 2023:


Three months ended March 31, 2023
(In millions)	Debt Proceeds			Debt Repayments
Medium-term notes (1)	$	499	Medium-term notes	$	450


U.S. and foreign term loans, finance lease obligations and other	165		U.S. and foreign term loans, finance lease obligations and other	21

Total debt proceeds	$	664	Total debt repaid	$	471

_______________

(1)Proceeds from medium-term notes presented net of discount and issuance costs.

Debt proceeds were used to repay maturing debt and for general corporate purposes. If the unsecured medium-term notes are ~~measured at fair value on~~downgraded below investment grade following, or as a ~~recurring basis using Level 2 fair value inputs. The fair value amounts~~result of, a change in control, the note holders can require us to repurchase all or a portion of the ~~interest rate swaps are recorded in "Direct financing leases~~notes at a purchase price equal to 101% of principal value plus accrued and other assets" and "Other non-current liabilities" in our Consolidated Condensed Balance Sheets. As of September 30, 2017, these amounts are not material to our consolidated financial position or results of operations and have not changed significantly from the amounts reported at December 31, 2016. Changes in the fair value of our interest rate swaps were offset by changes in the fair value of the hedged debt instruments. Accordingly, there was no ineffectiveness related to the interest rate swaps.unpaid interest.

8.9. SHARE REPURCHASE PROGRAMS

~~In December 2015, our Board of Directors authorized a~~We maintain two share repurchase programs. The firstprogram ~~intended~~authorizes management to repurchase up to 2.5 million shares of common stock, issued to employees under our 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 our employee stock ~~plans (the program). Under the~~plans. The 2021 Anti-Dilutive Program commenced October 14, 2021 and expires October 14, 2023. In February 2023, our board of directors authorized a new discretionary share repurchase program to grant management ~~is authorized~~discretion to repurchase ~~(i)~~ up to ~~1.5~~2 million shares of common stock over a period of two years (the "2023 Discretionary Program"). Share repurchases under both programs can be made from time to time using our working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the ~~sum~~Securities Exchange Act of ~~which will not exceed the~~1934. The timing and actual number of shares ~~issued to employees under Ryder's employee stock plans from December 1, 2015 to December 9, 2017, plus (ii) 0.5 million shares issued to employees that were not~~ repurchased under Ryder's previous share repurchase program. The program limits aggregate share repurchases to no more than 2 million shares of Ryder common stock. Share repurchases of common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements and other ~~factors. Management may establish prearranged written plans for Ryder under Rule 10b5-1~~factors, including balance sheet leverage, availability of ~~the Securities Exchange Act of 1934 as part of the program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan.~~ acquisitions and stock price.

During the ~~nine~~three months ended ~~September 30, 2017 and September 30, 2016,~~March 31, 2023, we repurchased ~~approximately 933,000~~0.5 million shares for ~~$65.9~~$45 million under the 2021 Anti-Dilutive Program and ~~380,000~~did not repurchase any shares under the 2023 Discretionary Program. During the three months ended March 31, 2022, we did not repurchase any shares under the 2021 Anti-Dilutive Program.

In February 2022, our board of directors authorized an accelerated share repurchase program to repurchase up to $300 million of common stock, with final settlement scheduled to occur no later than the end of October 2022. During the three months ended March 31, 2022, we remitted $300 million to our agent for ~~$25.7~~the accelerated share repurchase program. We received an initial share amount of approximately 3 million, ~~respectively.~~representing approximately 80% of the total notional value of the accelerated share repurchase agreement.

10. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)


	Three months ended March 31,
(In millions)		2023		2022

Cumulative translation adjustments		$	(224)	$	(159)
Net actuarial loss and prior service cost		(561)		(524)
Unrealized gain from cash flow hedges		3		1

Accumulated other comprehensive loss		$	(782)	$	(682)

~~9. ACCUMULATED OTHER COMPREHENSIVE LOSS~~

~~The following summary sets forth the components of accumulated other comprehensive loss, net of tax:~~

Currency
Translation
Adjustments and Other

Net Actuarial
Loss ⁽¹⁾

Prior Service (Cost)/
Credit ⁽¹⁾

Accumulated
Other
Comprehensive
Loss
(In thousands)
December 31, 2016 $ (206,610 ) (620,292 ) (7,130 ) (834,032 )
Amortization —
15,252
165
15,417
Other current period change 70,991
810
—
71,801
September 30, 2017 $ (135,619 ) (604,230 ) (6,965 ) (746,814 )

Currency
Translation
Adjustments and Other

Net Actuarial
Loss ⁽¹⁾

Prior Service
Credit ⁽¹⁾

Accumulated
Other
Comprehensive
Loss
(In thousands)
December 31, 2015 $ (136,020 ) (576,993 ) 278
(712,735 )
Amortization —
14,052
134
14,186
Other current period change (37,874 ) (5,495 ) (5,527 ) (48,896 )
September 30, 2016 $ (173,894 ) (568,436 ) (5,115 ) (747,445 )

~~_______________________~~


~~(1)~~	~~These amounts are included in the computation of net pension expense. See Note 12, "Employee Benefit Plans," for further information.~~

The gain from currency translation adjustments in the nine months ended September 30, 2017 of $71.0 million was primarily due to the strengthening of the British Pound and the Canadian Dollar against the U.S. Dollar. The loss from currency translation adjustments in the nine months ended September 30, 2016 of $37.9 million was due to the weakening of the British Pound against the U.S. Dollar, partially offset by the strengthening of the Canadian Dollar against the U.S. Dollar.

~~RYDER SYSTEM, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~

~~10.~~11. EARNINGS PER SHARE

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


	Three months ended March 31,
(Dollars in millions, except per share amounts; share amounts in thousands)	2023		2022
Earnings per share — Basic: (1)
Earnings from continuing operations	$	140	$	176
Less: Distributed and undistributed earnings allocated to unvested stock	(1)		(1)
Earnings from continuing operations available to common shareholders	$	139	$	175

Weighted average common shares outstanding	46,377		51,097

Earnings from continuing operations per common share — Basic	$	3.00	$	3.42

Earnings per share — Diluted: (1)
Earnings from continuing operations	$	140	$	176
Less: Distributed and undistributed earnings allocated to unvested stock	—		—
Earnings from continuing operations available to common shareholders — Diluted	$	140	$	176

Weighted average common shares outstanding — Basic	46,377		51,097
Effect of dilutive equity awards	1,097		1,379
Weighted average common shares outstanding — Diluted	47,474		52,476

Earnings from continuing operations per common share — Diluted	$	2.95	$	3.35

Anti-dilutive equity awards not included in diluted EPS	627		461

_______________

(1)Amounts in the table may not recalculate exactly due to rounding of earnings and shares.

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands, except per share amounts)
Earnings per share — Basic:
Earnings from continuing operations $ 58,913
85,138
$ 148,535
215,365
Less: Earnings allocated to unvested stock (222 ) (261 ) (536 ) (674 )
Earnings from continuing operations available to common shareholders — Basic $ 58,691
84,877
$ 147,999
214,691

Weighted average common shares outstanding — Basic 52,405
52,953
52,671
53,029

Earnings from continuing operations per common share — Basic $ 1.12
1.60
$ 2.81
4.05

Earnings per share — Diluted:
Earnings from continuing operations $ 58,913
85,138
$ 148,535
215,365
Less: Earnings allocated to unvested stock (222 ) (260 ) (536 ) (672 )
Earnings from continuing operations available to common shareholders — Diluted $ 58,691
84,878
$ 147,999
214,693

Weighted average common shares outstanding — Basic 52,405
52,953
52,671
53,029
Effect of dilutive equity awards 371
338
356
315
Weighted average common shares outstanding — Diluted 52,776
53,291
53,027
53,344

Earnings from continuing operations per common share — Diluted $ 1.11
1.59
$ 2.79
4.02

Anti-dilutive equity awards not included above 843
653
889
836

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

~~11.~~ 12.SHARE-BASED COMPENSATION PLANS

~~Share-based incentive awards are provided to employees under the terms of various~~We generally grant share-based compensation plans (collectively, the “Plans”). The Plans are administered by the Compensation Committee of the Board of Directors and principally include at-the-money stock options, unvested stock and cash awards. Unvested stock awards include grants of market-based, performance-based and time-vested restricted stock rights. Under the terms of our Plans, dividends are not paid unless the stock award vests. Upon vesting, the amount of the dividends paid is equal to the aggregate dividends declared on common shares during the period from the grant date of the award until the date the shares underlying the award are delivered.

~~The following table provides information on share-based compensation expense and income tax benefits recognized during the periods:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
Stock option and stock purchase plans $ 1,953
1,633
$ 5,811
5,410
Unvested stock 2,618
2,237
8,823
8,460
Share-based compensation expense 4,571
3,870

14,634

13,870
Income tax benefit (1,608 ) (1,321 ) (5,090 ) (4,691 )
Share-based compensation expense, net of tax $ 2,963
2,549

$ 9,544

9,179

~~The following table is a summary of compensation expense recognized for market-based cash~~ awards in ~~addition to~~ the ~~share-based compensation expense reported in~~first quarter of each year during our annual equity award process. The vesting conditions for the ~~previous table:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
Cash awards $ 124
119
$ 245
447

Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at September 30, 2017 was $23.3 million and is expected to be recognized over a weighted-average period of 1.9 years.

awards granted were consistent with prior year. The following table is a summary of the awards granted ~~under~~in the ~~Plans during the periods presented:~~first quarter of 2023:




(Shares in millions)	Shares Granted	Weighted-Average Fair Market Value Per Share


Time-vested restricted stock rights	0.2		$	96.38
Performance-based restricted stock rights	0.1		101.25






Total	0.3		$	98.16

Nine months ended September 30,
2017 2016
(Shares in thousands)
Stock options 465
513
Market-based restricted stock rights 46
34
Performance-based restricted stock rights 79
45
Time-vested restricted stock rights 110
129
Total 700

721

~~RYDER SYSTEM, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~

~~12.~~ 13.EMPLOYEE BENEFIT PLANS

Components of net pension expense were as follows:


	Three months ended March 31,
(In millions)	2023		2022

Company-administered plans:

Interest cost	$	22	$	16

Expected return on plan assets	(19)		(19)

Amortization of net actuarial loss and prior service cost	7		6





Net pension expense	$	10	$	3

Company-administered plans:
U.S.	$	8	$	3
Non-U.S.	2		—


Net pension expense	$	10	$	3

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
Pension Benefits
Company-administered plans:
Service cost $ 3,165
2,660
$ 9,431
9,065
Interest cost 21,609
22,754
64,524
72,086
Expected return on plan assets (22,822 ) (22,601 ) (68,012 ) (68,353 )
Amortization of:
Net actuarial loss 8,336
7,324
24,863
23,889
Prior service cost 133
320
399
3,060
10,421
10,457
31,205
39,747
Union-administered plans 7,873
2,493
12,996
7,221
Net pension expense $ 18,294
12,950
$ 44,201
46,968

Company-administered plans:
U.S. $ 10,929
10,952
$ 32,787
41,389
Non-U.S. (508 ) (495 ) (1,582 ) (1,642 )
10,421
10,457
31,205
39,747
Union-administered plans 7,873
2,493
12,996
7,221
Net pension expense $ 18,294
12,950
$ 44,201
46,968

~~During~~Non-operating pension costs, net include the ~~nine months ended September 30, 2017, we contributed $10.6 million~~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 do not expect to ~~our pension plans. In 2017, the expected total contributions~~contribute to our pension plans ~~are approximately $22 million.~~for the year 2023. We also maintain other postretirement benefit plans that are not reflected in the table above ~~table. The~~as the amount of postretirement benefit expense for such plans was not material for ~~the three or nine months ended September 30, 2017.~~any period presented.

~~During the third quarter~~

Table of 2017, we recorded an estimated pension settlement charge of $5.5 million for the exit from a U.S. multi-employer pension plan. This charge was recorded within “Selling, general, and administrative expenses” in our Consolidated Condensed Statement of Earnings and is included in the Union-administered plans expense.Contents

During the second quarter of 2016, we determined that certain pension benefit improvements made in 2009 had not been fully reflected in our projected benefit obligation. Because the amounts were not material to our consolidated financial statements in any individual period, and the cumulative amount was not material to 2016 results, we recognized a one-time, non-cash charge of $7.7 million in "Selling, general and administrative expenses" and a $12.8 million pre-tax increase to “Accumulated other comprehensive loss” in our second quarter 2016 consolidated condensed financial statements to correctly state the pension benefit obligation and account for these 2009 benefit improvements.

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

~~13.~~14. OTHER ITEMS IMPACTING COMPARABILITY

Our primary measure of segment performance as shown in Note ~~16,~~2, "Segment Reporting," excludes unallocated corporate costs, intangible amortization expense, and certain items we do not believe are representative of the ongoing operations of ~~the segment.~~our business segments. Excluding these other items from our segment measure of performance allows for better year over year comparison:


	Three months ended March 31,
(In millions)	2023		2022

FMS Europe results (1)	$	4	$	—
Gains on sale of U.K. revenue earning equipment (2)	(2)		(8)
Gains on sale of U.K. properties (3)	(5)		(1)
Commercial claims proceeds, net of fees (1)	(31)		7
Severance and other, net (1)	3		3
FMS U.K. exit	(31)		1
Other, net (1)	(1)		4

Other items impacting comparability	$	(32)	$	5

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
Pension settlement charge ⁽¹⁾
$ 5,454
—
$ 5,454
—
Fees related to cost-savings program 4,255
—
4,255
—
Operating tax adjustment —
—
2,205
—
Restructuring —
—
(2,574 ) —
Pension-related adjustments ⁽¹⁾
—
—
—
7,650
Restructuring and other items, net $ 9,709
—
$ 9,340
7,650
________________________

~~_______________~~


~~(1)~~	~~Refer to Note 12, Employee Benefit Plans for additional information.~~

~~During the third quarter of 2017, we incurred charges of $4.3 million related to consulting fees associated with a cost-savings program. These~~(1)Included within "Restructuring and other items, ~~were reflected within “Selling, general and administrative expenses”~~net" in our Condensed Consolidated ~~Condensed Statement~~Statements of Earnings.

During the first quarter of 2017, we determined that certain operating tax expenses related to prior periods had not been recognized in prior period earnings. We recorded a one-time charge of $2.2 million(2)Included within ~~“Selling, general and administrative expenses”~~"Used vehicle sales, net" in our Condensed Consolidated ~~Condensed Statement~~Statements of Earnings as the impact of the adjustment was not material to our consolidated condensed financial statements in any individual prior period, and the cumulative amount was not material to the first quarter 2017 results.Earnings.

During the second quarter of 2017, we realized restructuring credits of $2.6 million related to the gains on sale of certain UK facilities that were closed as part of prior year restructuring activities. These items were reflected(3)Included within "Miscellaneous income, net" in our Condensed Consolidated ~~Condensed Statement~~Statements of Earnings.

~~14.~~15.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 ~~but not limited to,~~ those relating to commercial and employment claims, environmental matters, risk management matters (e.g., vehicle liability, workers’ compensation, etc.), and administrative assessments primarily associated with operating taxes. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. We believe that the resolution of these claims, complaints and legal proceedings will not have a material effect on our ~~consolidated condensed financial statements.~~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 ~~reserves and estimates~~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. On April 18, 2023, the parties reached an agreement in principle to resolve this action, subject to the execution of definitive settlement documentation and court approval. We expect that the settlement amount will be covered by insurance, and accordingly is not material to our financial position or results of operations.

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 the allegations set forth in the Securities Class Action complaint and allege

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS — (Continued)

(unaudited)

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

~~15.~~

16.SUPPLEMENTAL CASH FLOW INFORMATION


	Three months ended March 31,
(In millions)	2023		2022

Interest paid	$	63	$	48
Income taxes paid	$	17	$	9




Cash paid for operating lease liabilities	$	55	$	42

Right-of-use assets obtained in exchange for lease obligations:
Finance leases	$	5	$	4
Operating leases	$	14	$	49



Capital expenditures acquired but not yet paid	$	361	$	257

~~Supplemental cash flow information was as follows:~~

Nine months ended September 30,
2017 2016
(In thousands)
Interest paid $ 99,889
100,903
Income taxes paid 10,596
12,250
Changes in accounts payable related to purchases of revenue earning equipment (63,184 ) (107,177 )
Operating and revenue earning equipment acquired under capital leases 6,209
947

~~16. SEGMENT REPORTING~~

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

Our primary measurement of segment financial performance, defined as segment “Earnings Before Tax” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes non-operating pension costs and restructuring and other items, net, as discussed in Note 13, "Other Items Impacting Comparability." CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, public affairs, information technology, health and safety, legal, marketing and corporate communications. The objective of the EBT measurement is to provide clarity on the profitability of each segment and, ultimately, to hold leadership of each segment accountable for their allocated share of CSS costs. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included among the unallocated overhead remaining within CSS are the costs for investor relations, public affairs and certain executive compensation. CSS costs attributable to the business segments are predominantly allocated to FMS, DTS and SCS as follows:

•~~Finance, corporate services, and health and safety~~ ~~— allocated to each segment based upon estimated and planned resource utilization for each segment;~~

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

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

•~~Other~~ — represents legal and other centralized costs and expenses including certain share-based incentive compensation costs. Such expenses, if allocated to a segment, are based primarily on the number of personnel supported in each segment.

~~RYDER SYSTEM, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~

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

The following tables set forth financial information for each of our segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three and nine months ended September 30, 2017 and 2016. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Prior period Segment EBT amounts and non-operating pension costs have been reclassified to conform to the current period presentation. These reclassifications were immaterial to the financial statements taken as a whole.

FMS DTS SCS Eliminations Total
(In thousands)
For the three months ended September 30, 2017
Revenue from external customers $ 1,080,191
272,334
496,004
—
1,848,529
Inter-segment revenue 115,607
—
—
(115,607 ) —
Total revenue $ 1,195,798
272,334
496,004
(115,607 ) 1,848,529

Segment EBT $ 100,693
13,770
22,052
(14,464 ) 122,051
Unallocated CSS (11,041 )
     Non-operating pension costs
(6,958 )
Restructuring and other items, net ⁽¹⁾
(9,709 )
Earnings from continuing operations before income taxes $ 94,343

   Segment capital expenditures paid $ 431,093
1,878
16,705
—
449,676
Unallocated CSS capital expenditures paid 7,917
Capital expenditures paid $ 457,593

For the three months ended September 30, 2016
Revenue from external customers $ 1,046,599
260,921
416,898
—
1,724,418
Inter-segment revenue 108,412
—
—
(108,412 ) —
Total revenue $ 1,155,011
260,921
416,898
(108,412 ) 1,724,418

Segment EBT $ 112,507
17,584
30,956
(12,606 ) 148,441
Unallocated CSS (9,275 )
Non-operating pension costs (7,468 )
Earnings from continuing operations before income taxes $ 131,698

  Segment capital expenditures paid $ 375,779
1,060
8,181
—
385,020
Unallocated CSS capital expenditures paid 6,157
Capital expenditures paid $ 391,177

~~————————————~~


~~(1)~~	~~Refer to Note 13, Other Items Impacting Comparability for additional information.~~

~~RYDER SYSTEM, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~

FMS DTS SCS Eliminations Total
(In thousands)
For the nine months ended September 30, 2017
Revenue from external customers $ 3,148,809
811,620
1,429,477
—
5,389,906
Inter-segment revenue 343,038
—
—
(343,038 ) —
Total revenue $ 3,491,847
811,620
1,429,477
(343,038 ) 5,389,906

Segment EBT $ 220,973
39,892
75,359
(38,053 ) 298,171
Unallocated CSS (32,965 )
     Non-operating pension costs (20,875 )
Restructuring and other items, net ⁽¹⁾
(9,340 )
Earnings from continuing operations before income taxes $ 234,991

  Segment capital expenditures paid $ 1,255,789
2,989
34,839
—
1,293,617
Unallocated CSS capital expenditures paid 19,228
Capital expenditures paid $ 1,312,845

For the nine months ended September 30, 2016
Revenue from external customers $ 3,086,144
764,025
1,207,665
—
5,057,834
Inter-segment revenue 318,308
—
—
(318,308 ) —
Total revenue $ 3,404,452
764,025
1,207,665
(318,308 ) 5,057,834

Segment EBT $ 306,554
48,300
79,105
(37,116 ) 396,843
Unallocated CSS (29,960 )
Non-operating pension costs (22,048 )
Pension-related charge ⁽²⁾

(7,650 )
Earnings from continuing operations before income taxes $ 337,185

  Segment capital expenditures paid $ 1,438,104
1,940
52,643
—
1,492,687
Unallocated CSS capital expenditures paid 18,672
Capital expenditures paid $ 1,511,359

~~————————————~~


~~(1)~~	~~Refer to Note 13, Other Items Impacting Comparability for additional information.~~


~~(2)~~	During the second quarter of 2016, we determined that certain pension benefit improvements made in 2009 were not fully reflected in our projected benefit obligation. We recognized a charge of $7.7 million related to these benefit improvements.

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

AND RESULTS OF OPERATIONS

~~OVERVIEW~~

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 ~~Condensed~~ Financial Statements and notes thereto included under Item ~~1. In addition, reference should be made to~~1, as well as our audited Consolidated Financial Statements and notes thereto and related ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MD&A included in the ~~2016~~2022 Annual Report on Form 10-K.

~~Ryder System, Inc. (Ryder) is a global leader~~ 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 ~~transportation~~the unaudited Condensed Consolidated Statement of Earnings. In the three months ended March 31, 2022, we previously reported certain costs in "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 ~~supply chain management solutions. We report~~we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial performance based on three segments: (1) Fleet Management Solutions (FMS), which provides leasing, commercial rental, and maintenance of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) Dedicated Transportation Solutions (DTS), which provides vehicles and drivers as part of a dedicated transportation solution in the U.S.; and (3) Supply Chain Solutions (SCS), which provides comprehensive supply chain solutions including distribution and transportation services in North America and Asia. Dedicated transportation services provided as part of an integrated, multi-service, supply chain solution to SCS customers are reported in the SCS business segment.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 ~~automotive, industrial,~~ food and beverage service, ~~consumer packaged goods (CPG),~~ transportation and ~~warehousing,~~logistics, retail and consumer goods, automotive, industrial, housing, technology, and ~~healthcare, retail, housing,~~ business and personal ~~services, and paper and publishing.~~services.

Business Trends

In ~~2016, we expanded~~the three months ended March 31, 2023, market conditions for our ~~full service lease product line~~used vehicle sales and rental continued to ~~provide lease customers additional flexibility, choice~~normalize, although used vehicle trends were moderately higher than expected. We are still experiencing favorable trends in logistics and transportation solutions due to secular trends including ongoing supply chain disruptions and a limited supply of vehicles available in the market. These market conditions, along with successful management of initiatives to increase long-term returns, are driving revenue growth and benefiting earnings in our Supply Chain Solutions (SCS) and Dedicated Transportation Solutions (DTS) business segments.

~~control~~

In our Fleet Management Solutions (FMS) North America business, used vehicle pricing declined from the historical highs of the prior year and rental utilization continued to normalize. We anticipate that market conditions for used vehicle sales and rental will continue to weaken in 2023. ChoiceLease vehicle fleet ~~management, and we renamed this lease product line "ChoiceLease." Our ChoiceLease product line allows customers to select~~grew during the ~~level of maintenance they prefer in their leases, from full service or total bumper-to-bumper coverage to on demand or pay-as-you-go maintenance. We also combined our historical contract maintenance~~first quarter and our ~~contract-related maintenance product offerings into a~~lease pricing initiatives are delivering improved portfolio returns. We expect to realize incremental earnings benefits as our remaining portfolio is renewed at higher returns.

In our SCS business, strong outsourcing trends in warehousing and distribution continue. Higher pricing and volumes drove strong revenue growth in SCS and DTS. SCS revenue growth also benefited from new product line "SelectCare." Our SelectCare product line allows customers to select the level of maintenance to keep their fleet running properly, as well as the option to choose where they want their service delivered. Beginning in 2017, FMS is using these new product names in its reporting.

~~This MD&A includes certain non-GAAP financial measures. Please refer to the “Non-GAAP Financial Measures” section of this MD&A for information on the non-GAAP measures included~~contract wins in the ~~MD&A, reconciliations~~prior year. Pricing adjustments and cost recovery initiatives benefited earnings in both segments, with profitability in DTS at the high end of our target range. SCS earnings in the first quarter were adversely affected by a $30 million asset impairment charge related to a customer bankruptcy. We are also seeing weaker trends in the ~~most comparable GAAP~~omnichannel retail vertical. In the first quarter of 2023, DTS contract sales activity slowed, consistent with a softer freight environment. We expect the moderation in DTS contract sales activity to continue for the remainder of the year.

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

SELECTED OPERATING PERFORMANCE ITEMS

•Total revenue of $3.0 billion and operating revenue (a non-GAAP measure) of $2.3 billion for first quarter of 2023 increased 3% and 6%, respectively as compared to prior year, primarily reflecting SCS revenue growth

•Diluted EPS from continuing operations of $2.95 in the ~~reasons why we believe each measure is useful to investors.~~first quarter of 2023 versus $3.35 in prior year

•Comparable EPS (a non-GAAP measure) from continuing operations of $2.81 in the first quarter of 2023 down from $3.59 in prior year, reflecting strong but lower results in FMS, and a SCS asset impairment partially offset by lower share count and better results in DTS

•Adjusted Return on Equity (ROE) (a non-GAAP measure) of 27% in the first quarter of 2023

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

•Net cash provided by operating activities from continuing operations of $478 million and free cash flow (a non-GAAP measure) of $101 million in the first quarter of 2023

~~Operating results were as follows:~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(In thousands, except per share amounts)
Total revenue $ 1,848,529
1,724,418
$ 5,389,906
5,057,834
   7 %    7 %
Operating revenue ⁽¹⁾
1,525,453
1,468,293
4,453,768
4,324,019
   4 %    3 %

EBT $ 94,343
131,698
$ 234,991
337,185
   (28 )%    (30 )%
Comparable EBT ⁽²⁾
111,010
139,141
265,206
366,858
   (20 )%    (28 )%
Earnings from continuing operations 58,913
85,138
148,535
215,365
   (31 )%    (31 )%
Comparable earnings from continuing operations ⁽²⁾
70,820
89,558
168,079
233,039
   (21 )%    (28 )%
Net earnings 58,623
84,752
147,588
214,296
   (31 )%    (31 )%

Earnings per common share (EPS) — Diluted

Continuing operations $ 1.11
1.59
$ 2.79
4.02
   (30 )%    (31 )%
Comparable ⁽²⁾
1.33
1.67
3.16
4.35
   (20 )%    (27 )%
Net earnings 1.11
1.59
2.77
4.00
   (30 )%    (31 )%

~~————————————~~


~~(1)~~	Non-GAAP financial measure. Refer to the“Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue and the reasons why management believes this measure is important to investors.


~~(2)~~	Non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section for a reconciliation of EBT, net earnings and earnings per diluted common share to the comparable measures and the reasons why management believes these measures are important to investors.

Total revenue increased 3% in the first quarter of 2023 due to higher operating revenue, partially offset by lower fuel revenue and ~~operating~~subcontracted transportation. Operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased ~~7% and 4%, respectively,~~6% in the ~~third~~first quarter of ~~2017. For~~2023, primarily reflecting SCS revenue growth.

EBT and comparable EBT (a non-GAAP measure) decreased in the ~~nine months ended September 30, 2017, total revenue and operating revenue increased 7% and 3%, respectively. Total revenue in both periods increased~~first quarter of 2023 primarily due to ~~higher operating revenue~~lower gains on used vehicles sold in North America and ~~increased subcontracted transportation passed through to customers, reflecting new business~~lower commercial rental results in FMS and ~~higher volumes, as well as higher fuel costs passed through to customers. Operating revenue in both periods increased due to higher revenue in the~~a SCS ~~business segment and higher contractual ChoiceLease revenue. Operating revenue growth was~~asset impairment partially offset by ~~lower commercial rental revenue~~higher earnings in DTS.

The following discussion provides a summary of financial highlights that are discussed in more detail throughout our MD&A and within the ~~nine months ended September 30, 2017.~~Notes to Condensed Consolidated Financial Statements:


	Three months ended March 31,				Change 2023/2022
(Dollars in millions, except per share)	2023		2022		Three Months
Total revenue	$	2,952	$	2,854	3%
Operating revenue (1)	2,346		2,216		6%

Earnings from continuing operations before income taxes (EBT)	$	201	$	252	(20)%
Comparable EBT (1)	179		260		(31)%
Earnings from continuing operations	140		176		(20)%
Comparable earnings from continuing operations (1)	133		188		(29)%
Net earnings	139		176		(21)%
Comparable EBITDA (1)	628		647		(3)%

Earnings per common share (EPS) — Diluted
Continuing operations	$	2.95	$	3.35	(12)%
Comparable (1)	2.81		3.59		(22)%
Net earnings	2.94		3.35		(12)%

EBT decreased 28% in the third quarter of 2017, reflecting lower year over year operating results in all segments, a $5.5 million estimated pension settlement charge for the exit from a U.S. multi-employer pension plan and $4.3 million related to consulting fees associated with a cost-savings program. In FMS, EBT decreased in the third quarter due to accelerated depreciation of $4 million on vehicles expected to be made available for sale through June 2018 and more normalized maintenance spending associated with vehicles being prepared for sale, as well as increased overhead spending, primarily due(1)Non-GAAP financial measure. Refer to the ~~timing~~"Non-GAAP Financial Measures" section of ~~incentive compensation and higher sales and marketing expense. DTS EBT decreased in~~this MD&A for reconciliations of the ~~third quarter due~~most comparable GAAP measure to ~~higher insurance premiums, higher maintenance costs on certain older model year vehicles~~the non-GAAP financial measure and the ~~impact of one less work day. SCS EBT decreased in the third quarter primarily due~~reasons why management believes this measure is important to the operating performance of two customer accounts, including a particularly challenging start-up, and higher overhead spending, primarily for planned investments in information technology and sales. The net impact of hurricanes was neutral in the third quarter of 2017, as hurricane-related increases in commercial rental demand were offset by property losses.investors.

EBT decreased 30% in the nine months ended September 30, 2017, primarily reflecting lower used vehicle sales and commercial rental results, as well as accelerated depreciation of $21 million, a $5.5 million estimated pension settlement charge, $4.3 million related to consulting fees associated with a cost-savings program and a particularly challenging start-up during the third quarter in the SCS segment.

~~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 March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months
Lease & related maintenance and rental revenue	$	979	$	1,025		(4)%
Cost of lease & related maintenance and rental	674		699			(4)%
Gross margin	$	305	$	326		(6)%
Gross margin %	31%		32%

Lease ~~and Rental~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Lease and rental revenues $ 823,197
803,006
$ 2,387,801
2,369,147
   3 %    1 %
Cost of lease and rental 588,626
557,901
1,745,777
1,665,693
   6 %    5 %
Gross margin 234,571
245,105
642,024
703,454
   (4 )%    (9 )%
Gross margin % 28 % 31 % 27 % 30 %

~~Lease~~& related maintenance and rental ~~revenues~~revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment. ~~Revenues increased 3% to $823 million~~Revenue decreased 4% in the ~~third~~first quarter ~~and 1% to $2.39 billion in~~of 2023, reflecting a 4% negative impact from the ~~nine months ended September 30, 2017, driven by growth in~~exit of the ChoiceLease fleet and higher prices on replacement vehicles in the ChoiceLease product offering. In the nine months ended September 30, 2017, ChoiceLease revenue growth was partially offset by lower commercial rental revenue reflecting lower demand.FMS U.K business.

Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and rental ~~revenues. These costs consist~~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.~~financing, which are reported within "Interest expense" in our Condensed Consolidated Statements of Earnings. Cost of lease & related maintenance and rental ~~increased 6%~~decreased 4% in the third quarter and 5% in the nine months ended September 30, 2017, primarily due to higher depreciation and maintenance costs from a larger average lease fleet and normalized maintenance spending associated with vehicles being prepared for sale. During the nine months ended, cost of lease and rental also increased due to higher maintenance costs on certain older model year vehicles. Cost of lease and rental was also impacted by accelerated depreciation on vehicles expected to be made available for sale through June 2018 of $4 million in the third quarter and $21 million in the nine months ended September 30, 2017. These increases were partially offset by lower depreciation on a smaller average rental fleet. Cost of lease and rental also increased ~~$1 million~~ ~~in the third~~first quarter of ~~2017 and $3 million in~~2023, primarily from the ~~nine months ended September 30, 2017, due to changes in estimated residual values effective January 1, 2017.~~

~~Lease and rental gross margin decreased~~ 4% inexit of the third quarter and 9% in the nine months ended September 30, 2017. Lease and rental gross margin as a percentage of revenue decreased to 28% in the third quarter and to 27% in the nine months ended September 30, 2017. The decrease in gross margin dollars and as a percentage of revenue in the third quarter was due to accelerated depreciation on vehicles expected to be made available for sale through June 2018 and more normalized maintenance spending associated with vehicles being prepared for sale. The decrease in gross margin dollars in the nine months ended September 30, 2017, was due to lower commercial rental demand, higher maintenance costs and accelerated depreciation. The decrease in gross margin dollars and as a percentage of revenue in the nine months ended September 30, 2017, was primarily due to higher maintenance costs and accelerated depreciation.

~~Services~~FMS U.K. business.

Three months ended September 30, Nine months ended September 30, Change 2017/2016

2017 2016 2017 2016 Three Months Nine Months

(Dollars in thousands)

Services revenue $ 896,245
801,004
$ 2,619,139
2,345,922
   12 %    12 %
Cost of services 761,470
658,793
2,210,314
1,936,636
   16 %    14 %
Gross margin 134,775
142,211
408,825
409,286
   (5 )% — %
Gross margin % 15 % 18 % 16 % 17 %

Table of Contents

Services revenue represents all the revenues associated with our DTS and SCS segments, as well as SelectCare and fleet support services associated with our FMS segment. Services revenue increased 12% in the third quarter, primarily due to new business in the SCS and DTS segments. Services revenue increased 12% in the nine months ended September 30, 2017, primarily due to new business and increased volumes in the SCS and DTS segments. Services revenue also benefited from higher fuel costs passed through to our customers in both the three and nine months ended September 30, 2017.

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

AND RESULTS OF OPERATIONS -— (Continued)

Lease & related maintenance and rental gross margin decreased in the first quarter of 2023, primarily due to lower commercial rental demand partially offset by higher commercial rental pricing. Lease & related maintenance and rental gross margin percentage decreased in the first quarter of 2023, primarily due to lower commercial rental utilization.

Services


	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months
Services revenue	$	1,821	$	1,670		9%
Cost of services	1,607		1,450			11%
Gross margin	$	214	$	220		(3)%
Gross margin %	12%		13%

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 9% in the first quarter of 2023, due to increases in revenue in SCS and DTS primarily driven by new business, higher volumes and increased pricing. Services revenue also increased from higher volumes in SelectCare.

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 ~~16%~~11% in the ~~third~~first quarter of 2023, from growth in revenue and ~~14% in the nine months ended September 30, 2017, primarily due to higher volumes in~~a $30 million SCS ~~and SelectCare and higher fuel costs in SCS and DTS. Cost~~asset impairment charge as a result of services also increased in both periods due to higher costs incurred during the start-up phase on certain new SCS contracts and higher vehicle maintenance costs on certain older model year vehicles in DTS.a customer bankruptcy.

Services gross margin ~~decreased~~ 5% ~~in the third quarter of 2017~~ and ~~remained unchanged in the nine months ended September 30, 2017. Services~~ gross margin as a percentage of revenue decreased ~~to 15%~~ in the ~~third~~first quarter of 2023, due to a SCS asset impairment partially offset by higher pricing, new business, and to 16% in the nine months ended September 30, 2017. The decrease in gross margin dollars and as a percentage of revenue in the third quarter and nine months ended, reflects lower operating performance on certain SCS contracts, including a particularly challenging start-up during the third quarter, as well as increased ~~maintenance costs on certain older model year vehicles in DTS.~~volumes.

Fuel


	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months
Fuel services revenue	$	152	$	159		(4)%
Cost of fuel services	149		155			(4)%
Gross margin	$	3	$	4		(25)%
Gross margin %	2%		3%

Three months ended September 30, Nine months ended September 30, Change 2017/2016

2017 2016 2017 2016 Three Months Nine Months

(Dollars in thousands)

Fuel services revenue $ 129,087
120,408
$ 382,966
342,765
   7 %    12 %
Cost of fuel services 124,562
116,904
372,016
331,283
   7 %    12 %
Gross margin 4,525
3,504
10,950
11,482
   29 %    (5 )%
Gross margin % 4 % 3 % 3 % 3 %

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue ~~increased~~ 7%decreased 4% in the ~~third~~first quarter of ~~2017 and 12% in the nine months ended September 30, 2017,~~2023, primarily ~~due to~~reflecting a lower volume of gallons sold partially offset by higher fuel ~~costs~~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 7%~~decreased 4% in the ~~third~~first quarter ~~and 12% in the nine months ended September 30, 2017,~~of 2023, as a result of lower volume of gallons sold partially offset by higher fuel ~~costs.~~prices.

Fuel services gross margin ~~increased 29% in the third quarter~~ and ~~decreased 5% in the nine months ended September 30, 2017. Fuel services~~ gross margin as a percentage of revenue ~~increased to 4%~~declined in the ~~third~~first quarter ~~and remained at 3% in the nine months ended September 30, 2017,~~of 2023, compared to ~~the same periods of 2016.~~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 ~~trailing~~current market fuel costs. Fuel services gross margin for the first quarter of 2023, was not significantly impacted by these price change dynamics as fuel prices fluctuated during the period.

Three months ended September 30, Nine months ended September 30, Change 2017/2016

2017 2016 2017 2016 Three Months Nine Months

(In thousands)

Other operating expenses $ 28,445
27,997
$ 87,122
85,944
2 % 1 %

Table of Contents

Other operating expenses include costs related to our owned and leased facilities within the FMS segment, such as facility depreciation, rent, purchased insurance, utilities and taxes. These facilities are utilized to provide maintenance to our ChoiceLease, commercial rental, and SelectCare customers. Other operating expenses increased slightly to ~~$28.4 million~~ ~~in the third quarter and to $87.1 million in the nine months ended September 30, 2017.~~

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

AND RESULTS OF OPERATIONS -— (Continued)

Selling, General and Administrative Expenses


	Three months ended March 31,						Change 2023/2022
(Dollars in millions)	2023			2022				Three Months
Selling, general and administrative expenses (SG&A)	$	363		$	342			6%
Percentage of total revenue	12		%	12		%

Three months ended September 30, Nine months ended September 30, Change 2017/2016

2017 2016 2017 2016 Three Months Nine Months

(Dollars in thousands)

Selling, general and administrative expenses (SG&A) $ 216,653
191,337
$ 620,041
602,768
13 % 3 %
Percentage of total revenue 12 % 11 % 12 % 12 %

SG&A expenses increased6% in the first quarter of 2023. The increase in SG&A expenses in the ~~third~~first quarter of ~~2017 increased 13%~~2023 primarily reflects higher travel and as a percentage of total revenue increased to 12% driven by an estimated pension settlement charge for the exit from a U.S. multi-employer pension plan of $5.5 million during the quarter as well as higher compensation-related costs, professional fees, including consulting fees associated with a cost-savings program, andbad debt expense, strategic investments in information technology ~~costs. SG&A expenses in the nine months ended September 30, 2017,~~and marketing and increased ~~3% primarily due to the estimated pension settlement charge, higher information technology costs and professional fees.~~compensation-related expenses. SG&A expenses as a percentage of total revenue remained at 12% in for the ~~nine months ended September 30, 2017 compared to the same period in 2016.~~first quarter of 2023.

Non-Operating Pension Costs, Net


	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months
Non-operating pension costs, net	$	10	$	3		233%

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Non-operating pension costs $ 6,958
7,468
20,875
29,698
(7 )% (30 )%

Non-operating pension costs, ~~includes~~net include the ~~components~~amortization of ~~our~~ net ~~periodic benefit~~actuarial loss and prior service cost, ~~other than service cost. These components include~~ interest cost and expected return on plan assets ~~amortization~~components of ~~actuarial loss~~pension and ~~prior service cost. Non-operating~~postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. The non-operating pension costs, ~~decreased $0.5 million in the third quarter and $8.8 million in the nine months ended September 30, 2017, from the respective prior year periods. The year-to-date decrease is primarily~~net increased due to higher interest expense from a ~~one-time charge of $7.7 million~~higher discount rate partially offset by an increase in ~~the second quarter of 2016 to fully reflect pension benefit improvements made in 2009 in our pension benefit obligation.~~expected return on plan assets.

Used Vehicle Sales, net


	Three months ended March 31,				Change 2023/2022
(In millions)	2023		2022			Three Months
Gains on used vehicle sales, net	$	(72)	$	(113)		(36)%

Three months ended September 30, Nine months ended September 30, Change 2017/2016

2017 2016 2017 2016 Three Months Nine Months

(Dollars in thousands)

Used vehicle sales, net $ 2,727
1,873
$ (11,815 ) 33,002
46 % (136 )%

Used vehicle sales, net includes gains or losses from sales of used vehicles, ~~as well as the~~ selling costs associated with used vehicles and write-downs of vehicles held for sale to fair market ~~values.~~values (referred to as "valuation adjustments"). Used vehicle sales, net ~~increased to a gain of $2.7 million~~decreased in the ~~third~~first quarter of ~~2017 and decreased~~2023, due to ~~a loss~~lower proceeds per unit on sales of ~~$11.8 million in the nine months ended September 30, 2017. The quarterly increase is driven by lower fair market value write-downs on~~used vehicles ~~held for sale,~~ partially offset by ~~lower tractor and truck~~higher volumes.

Average proceeds per unit ~~resulting in lower gains on sales. For the nine months ended September 30, 2017, used vehicle sales results have been impacted primarily by a sharp drop~~decreased in the ~~market value~~first quarter of ~~tractors and trucks, which resulted in lower gains on sales and greater fair market value write-downs on vehicles held for sale.~~2023. The following table presents the average used vehicle pricing changes for North America compared to the ~~three and nine months ended September 30, 2017.~~prior year:


			2023/2022
			Three Months
Tractors			(35)%
Trucks			(16)%

Interest Expense


	Three months ended March 31,						Change 2023/2022
(In millions)	2023			2022				Three Months
Interest expense	$	65		$	52			25%
Effective interest rate	4.1		%	3.1		%

Interest expense increased 25% in the first quarter of 2023, reflecting higher interest rates primarily from variable rate debt.

Proceeds per unit change 2017/2016
Three Months Nine Months

Tractors (19 )%
(17 )%
Trucks (15 )% (16 )%

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

Miscellaneous Income, net


	Three months ended March 31,				Change 2023/2022
(In millions)	2023		2022			Three Months
Miscellaneous income, net	$	(20)	$	—		NM

NM - Denotes Not Meaningful throughout the MD&A

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Interest expense $ 34,854
37,440
$ 104,591
112,597
(7 )% (7 )%
Effective interest rate 2.6 % 2.7 % 2.6 % 2.7 %

Interest expense decreased 7% in the third quarter of 2017 and in the nine months ended September 30, 2017, reflecting lower average outstanding debt and a lower effective interest rate. The decrease in average outstanding debt reflects lower planned vehicle capital spending. The lower effective interest rate in 2017 reflects the replacement of higher interest rate debt with debt issuances at lower rates.

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Miscellaneous income, net $ 4,655
3,247
$ 17,636
10,968
43 % 61 %

Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income,

gains ~~from~~on sales of operating property, foreign currency transaction ~~gains~~remeasurement and other non-operating items. ~~The increase~~Miscellaneous income, net was $20 million in the ~~third~~first quarter ~~and nine months ended September 30, 2017 is driven by increased rabbi trust investment income,~~of 2023, primarily reflecting higher gains on sales of ~~properties~~properties.

We expect to complete the exit of ~~$0.6~~U.K. operations by mid-2023, and as a result of the liquidation of the balance sheet, we anticipate recognizing a foreign currency cumulative translation adjustment loss of approximately $180 million or $3.75 per share. The foreign currency cumulative translation adjustment loss will have no impact on our consolidated financial position or cash flows.

Restructuring and Other Items, net


	Three months ended March 31,				Change 2023/2022
(In millions)	2023		2022			Three Months
Restructuring and other items, net	$	(25)	$	14		NM

Refer to Note 14, "Other Items Impacting Comparability," in the ~~third quarter~~Notes to Condensed Consolidated Financial Statements for a discussion of restructuring charges and ~~$3.7 million~~other items.

Provision for Income Taxes


	Three months ended March 31,						Change 2023/2022
(In millions)	2023			2022				Three Months
Provision for income taxes	$	61		$	76			(20)%
Effective tax rate from continuing operations	30.5		%	30.2		%
Comparable effective tax rate on continuing operations (1)	25.5		%	27.6		%

————————————

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

Our effective tax rate on continuing operations was 30.5% in the ~~nine months ended September 30, 2017, respectively, and recoveries from business interruption claims~~first quarter of ~~$3.2 million~~2023 compared to 30.2% in the ~~nine months ended September 30, 2017.~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Provision for income taxes $ 35,430
46,560
$ 86,456
121,820
(24 )% (29 )%
Effective tax rate from continuing operations 37.6 % 35.4 % 36.8 % 36.1 %

~~Provision for income taxes~~prior year. The comparable effective tax rate on continuing operations decreased ~~24%~~to 25.5% in the ~~third~~first quarter of ~~2017 and 29%~~2023 from 27.6% in the ~~nine months ended September 30, 2017.~~prior year. The decrease in the ~~provision for income taxes~~comparable rate reflects ~~lower taxable earnings, partially offset by a higher effective~~discrete tax ~~rate primarily due to a state tax law change~~benefits in the ~~third quarter.~~first quarter of 2023.

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

OPERATING RESULTS BY BUSINESS SEGMENT


																Three months ended March 31,				Change 2023/2022
	Three months ended September 30,					Nine months ended September 30,					Change 2017/2016
	2017			2016		2017			2016		Three Months		Nine Months
	(Dollars in thousands)
Total Revenue:
(In millions)															(In millions)	2023		2022			Three Months
Revenue:															Revenue:
Fleet Management Solutions	$	1,195,798		1,155,011		$	3,491,847		3,404,452		4	%	3	%	Fleet Management Solutions	$	1,503	$	1,529		(2)%
Supply Chain Solutions															Supply Chain Solutions	1,201		1,089			10%
Dedicated Transportation Solutions	272,334			260,921		811,620			764,025		4		6		Dedicated Transportation Solutions	454		425			7%
Supply Chain Solutions	496,004			416,898		1,429,477			1,207,665		19		18
Eliminations	(115,607		)	(108,412	)	(343,038		)	(318,308	)	7		8		Eliminations	(206)		(189)			(9)%
Total	$	1,848,529		1,724,418		$	5,389,906		5,057,834		7	%	7	%	Total	$	2,952	$	2,854		3%

Operating Revenue: ⁽¹⁾															Operating Revenue: (1)
Fleet Management Solutions	$	1,026,011		997,903		$	2,986,792		2,955,465		3	%	1	%	Fleet Management Solutions	$	1,262	$	1,282		(2)%
Supply Chain Solutions															Supply Chain Solutions	879		738			19%
Dedicated Transportation Solutions	197,917			196,648		591,045			581,213		1		2		Dedicated Transportation Solutions	322		296			9%
Supply Chain Solutions	376,429			345,453		1,096,899			999,427		9		10
Eliminations	(74,904		)	(71,711	)	(220,968		)	(212,086	)	4		4		Eliminations	(117)		(100)			(17)%
Total	$	1,525,453		1,468,293		$	4,453,768		4,324,019		4	%	3	%	Total	$	2,346	$	2,216		6%
EBT:

Earnings from continuing operations before income taxes:															Earnings from continuing operations before income taxes:
Fleet Management Solutions	$	100,693		112,507		$	220,973		306,554		(11	)%	(28	)%	Fleet Management Solutions	$	182	$	249		(27)%
Supply Chain Solutions															Supply Chain Solutions	17		43			(60)%
Dedicated Transportation Solutions	13,770			17,584		39,892			48,300		(22	)	(17	)	Dedicated Transportation Solutions	29		20			45%
Supply Chain Solutions	22,052			30,956		75,359			79,105		(29	)	(5	)
Eliminations	(14,464		)	(12,606	)	(38,053		)	(37,116	)	15		3		Eliminations	(25)		(26)			4%
	122,051			148,441		298,171			396,843		(18	)	(25	)		203		286			(29)%
Unallocated Central Support Services	(11,041		)	(9,275	)	(32,965		)	(29,960	)	19		10		Unallocated Central Support Services	(15)		(16)			(6)%
Non-operating pension costs	(6,958		)	(7,468	)	(20,875		)	(22,048	)	(7	)	(5	)
Restructuring and other items, net	(9,709		)	—		(9,340		)	(7,650	)	NM		NM
Intangible amortization expense															Intangible amortization expense	(9)		(10)			(10)%
Non-operating pension costs (2)															Non-operating pension costs (2)	(10)		(3)			233%
Other items impacting comparability, net (3)															Other items impacting comparability, net (3)	32		(5)			NM
Earnings from continuing operations before income taxes	$	94,343		131,698		$	234,991		337,185		(28	)%	(30	)%	Earnings from continuing operations before income taxes	$	201	$	252		(20)%

——————————————


~~(1)~~	Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue, and segment total revenue to segment operating revenue for FMS, DTS and SCS, as well as the reasons why management believes these measures are important to investors.

(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.

(3)Refer to Note 14, "Other Items Impacting Comparability," and below for a discussion of items excluded from our primary measure of segment performance.

As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as ~~“Earnings Before Taxes” (EBT)~~segment "Earnings from continuing operations before income taxes" (EBT), which includes an allocation of Central Support Services (CSS), and excludes non-operating pension costs, intangible amortization expense, and ~~restructuring and~~certain other items ~~net~~as discussed in Note ~~16, "Segment Reporting,~~14, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated ~~Condensed~~ Financial Statements. CSS represents those costs incurred to support all business segments, including finance and procurement, corporate services, human resources, ~~finance, corporate services and~~information technology, public affairs, ~~information technology, health and safety,~~ legal, marketing, and corporate communications.

The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs. In the first quarter of 2023, we revised our primary measurement of segment financial performance to exclude intangible amortization expense. This change did not have a material impact to segment results. 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 corporate 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, as well as provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments. Inter-segment ~~revenue~~EBT allocated to SCS and ~~EBT are accounted for at rates similar~~DTS includes earnings related to ~~those executed with third parties.~~equipment

Table of Contents

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

AND RESULTS OF OPERATIONS — (Continued)

used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to ~~DTS~~SCS and ~~SCS~~DTS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation (presented as ~~“Eliminations”~~"Eliminations").

The following table sets forth the benefits from equipment contribution included in EBT for our SCS and DTS business segments:


	Three months ended March 31,				Change 2023/2022
(In millions)	2023		2022			Three Months
Equipment Contribution:
Supply Chain Solutions	$	10	$	10		—%
Dedicated Transportation Solutions	14		16			(13)%
Total	$	24	$	26		(8)%

The decreased DTS equipment contribution in the ~~table above). Prior year amounts have been reclassified~~first quarter of 2023 was related to ~~conform~~lower proceeds on sales of used vehicles and lower utilization of the DTS vehicle fleet.

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


		Three months ended March 31,
Description	Classification	2023		2022
FMS Europe results (1)	Restructuring and other items, net	$	(4)	$	—
Gains on sale of U.K. revenue earning equipment (1)	Used vehicles sales, net	2		8
Gains on sale of U.K. properties (1)	Miscellaneous income, net	5		1
Commercial claims proceeds, net of fees (1)	Restructuring and other items, net	31		(7)
Severance and other, net (1)	Restructuring and other items, net	(3)		(3)
FMS U.K. exit (1)		31		(1)
Other, net (1)	Restructuring and other items, net	1		(4)

Other items impacting comparability, net		32		(5)
Non-operating pension costs (2)	Non-operating pension costs	(10)		(3)
		$	22	$	(8)

———————————

(1)Refer to Note 14, "Other Items Impacting Comparability," in the ~~current period presentation.~~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.

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

~~The following table sets forth equipment contribution included in EBT for our DTS and SCS segments:~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Equipment Contribution:
    Dedicated Transportation Solutions $ 8,320
8,047
$ 22,532
24,214
  3 %   (7 )%
    Supply Chain Solutions 6,144
4,559
15,521
12,902
  35
  20
Total ⁽¹⁾
$ 14,464
12,606
$ 38,053
37,116
  15 %   3 %
Fleet Management Solutions


	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022		Three Months
ChoiceLease	$	776	$	764	2%

Commercial rental (1)	304		306		(1)%
SelectCare and other	182		148		23%
FMS Europe	—		64		NM
Fuel services revenue	241		247		(2)%

FMS total revenue	$	1,503	$	1,529	(2)%

FMS operating revenue (2)	$	1,262	$	1,282	(2)%

FMS EBT	$	182	$	249	(27)%
FMS EBT as a % of FMS total revenue	12.1%		16.3%		(420) bps
FMS EBT as a % of FMS operating revenue (2)	14.4%		19.4%		(500) bps

	Twelve months ended March 31,				Change 2023/2022
	2023		2022
FMS EBT as a % of FMS total revenue	15.7%		14.5%		120 bps
FMS EBT as a % of FMS operating revenue (2)	19.1%		16.8%		230 bps

———————————


~~(1)~~	~~Total amount is included in FMS EBT.~~

—

~~DTS equipment contribution increased slightly~~(1)For the three months ended March 31, 2023 and 2022, rental revenue from lease customers in place of a lease vehicle represented 37% and 34% of commercial rental revenue, respectively.

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

FMS total revenue decreased 2% in the ~~third~~first quarter of 2023, due to lower operating revenue (a non-GAAP measure excluding fuel) and lower fuel services revenue due to lower gallons sold partially offset by higher fuel prices passed through to customers. FMS operating revenue decreased 2% in the first quarter of 2023, reflecting a 4% increase in North America due to higher SelectCare and ChoiceLease revenue offset by a 6%negative impact from the exit of the FMS U.K. business.

FMS EBT decreased 27% in the first quarter of 2023, primarily from lower gains on used vehicle sales and decreased commercial rental results. Lower North America gains reflect a 16% and 35% decrease in used truck and tractor pricing, respectively, partially offset by higher volumes. Lower commercial rental results reflect decreased utilization partially offset by a 3%increase in power fleet pricing. Rental power fleet utilization decreased to 75% from a record level of 82% in the ~~nine months ended September 30, 2017. The decrease in~~first quarter of the ~~nine months ended is primarily driven by higher maintenance costs~~prior year, on ~~an older vehicle fleet used in DTS operations. The increase in SCS equipment contribution in the third quarter and in the nine months ended is primarily driven by increased volumes.~~a 6% larger average power fleet.

~~The following table sets forth items excluded from our segment EBT measure and their classification within our Consolidated Condensed Statements of Earnings:~~

Three months ended September 30, Nine months ended September 30,
Description Classification 2017 2016 2017 2016
(In thousands)
Non-operating pension costs ⁽¹⁾
Non-operating pension costs $ (6,958 ) (7,468 ) $ (20,875 ) (22,048 )
Pension settlement charge ⁽²⁾
SG&A (5,454 ) —
(5,454 ) —
Fees related to cost-savings program ⁽³⁾
SG&A (4,255 ) —
(4,255 ) —
Operating tax adjustment ⁽³⁾
SG&A —
—
(2,205 ) —
Restructuring ⁽³⁾
Miscellaneous income, net —
—
2,574
—
Pension-related adjustments ⁽²⁾
Non-operating pension costs —
—
—
(7,650 )
$ (16,667 ) (7,468 ) $ (30,215 ) (29,698 )

~~———————————~~

Table of Contents


~~(1)~~	~~See Note 16, “Segment Reporting ," in the Notes to Consolidated Condensed Financial Statements for a discussion of adjustments.~~


~~(2)~~	~~See Note 12, “Employee Benefit Plans,�� in the Notes to Consolidated Condensed Financial Statements for a discussion of adjustments.~~


~~(3)~~	~~See Note 13, “Other Items Impacting Comparability,” in the Notes to Consolidated Condensed Financial Statements for a discussion of adjustments.~~

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 2017/2016
   2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)

ChoiceLease $ 673,882

649,208
$ 1,992,656
1,918,418
  4 %   4 %
SelectCare 116,986

113,093
347,979
341,350
  3
  2
Commercial Rental 216,015

216,592
589,353
636,028
—
  (7 )
Other 19,128

19,010
56,804
59,669
  1
  (5 )
Fuel services revenue 169,787

157,108
505,055
448,987
  8
  12
FMS total revenue ⁽¹⁾
$ 1,195,798
1,155,011

$ 3,491,847
3,404,452
  4 %   3 %

FMS operating revenue ⁽²⁾
$ 1,026,011
997,903
$ 2,986,792
2,955,465
  3
  1

FMS EBT $ 100,693

112,507
$ 220,973
306,554
  (11 )%   (28 )%
FMS EBT as a % of FMS total revenue 8.4 %
9.7 % 6.3 % 9.0 %   (130) bps   (270) bps
FMS EBT as a % of FMS operating revenue ⁽²⁾
9.8 %
11.3 % 7.4 % 10.4 %   (150) bps   (300) bps

~~————————————~~


~~(1)~~	~~Includes intercompany fuel sales from FMS to DTS and SCS.~~


~~(2)~~	Non-GAAP financial measures. Reconciliations of FMS total revenue to FMS operating revenue, FMS EBT as a % of FMS total revenue to FMS EBT as a % of FMS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.

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

Three months ended September 30, 2017 Nine months ended September 30, 2017
Total
Operating ⁽¹⁾
Total
Operating ⁽¹⁾
Organic, including price and volume 3 % 3 % 2 % 2 %
Fuel 1
—
2
—
Foreign exchange —
—
(1 ) (1 )
Net increase 4 % 3 % 3 % 1 %

~~————————————~~


~~(1)~~	Non-GAAP financial measure. A reconciliation of FMS total revenue to FMS operating revenue as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.

FMS total revenue increased to $1.20 billion in the third quarter of 2017, due to higher FMS operating revenue (a non-GAAP measure excluding fuel) and fuel services revenue. FMS total revenue increased to $3.49 billion in the nine months ended September 30, 2017, due to higher fuel services revenue and FMS operating revenue, partially offset by negative impacts from foreign exchange. FMS operating revenue grew in both periods as a result of organic growth, primarily in the ChoiceLease product line. In the nine months ended September 30, 2017, FMS operating revenue growth was partially offset by lower commercial rental revenue and negative impacts from foreign exchange. Foreign exchange negatively impacted both total revenue and operating revenue growth by 100 basis points in the nine months ended September 30, 2017.

~~ChoiceLease revenue increased~~ 4% in both the third quarter and the nine months ended September 30, 2017, reflecting a larger average fleet size and higher prices on replacement vehicles. Foreign exchange negatively impacted ChoiceLease revenue growth by 100 basis points in the nine months ended September 30, 2017. We expect favorable ChoiceLease revenue comparisons to continue through the end of the year based on sales activity. SelectCare revenue increased 3% in the third quarter and 2% in the nine months ended September 30, 2017, due to new business and increased volumes, partially offset by negative impacts from foreign exchange year-to-date. Commercial rental revenue was unchanged in the third quarter and decreased 7% in the nine months ended September 30, 2017, due to lower demand. We expect favorable commercial rental revenue comparisons in the fourth quarter given the current rental demand environment.

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

~~AND RESULTS OF OPERATIONS - (Continued)~~

~~The following table provides commercial rental statistics on our global fleet:~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Rental revenue from non-lease customers $ 138,887
141,836
$ 372,853
397,305
(2 )% (6 )%
Rental revenue from lease customers ⁽¹⁾
$ 77,128
74,756
$ 216,500
238,723
3 % (9 )%
Average commercial rental power fleet size — in service ^(2), ⁽³⁾
30,100
30,900
29,600
31,700
(3 )% (7 )%
Commercial rental utilization — power fleet ⁽²⁾
78.0 %
76.7 % 73.7 % 73.9 % 130 bps (20) bps

~~————————————~~


~~(1)~~	~~Represents revenue from rental vehicles provided to our existing ChoiceLease customers, generally in place of a lease vehicle.~~


~~(2)~~	~~Number of units rounded to nearest hundred and calculated using quarterly average unit counts.~~


~~(3)~~	~~Excluding trailers.~~

FMS EBT decreased 11% in the third quarter of 2017, reflecting impacts to ChoiceLease and commercial rental gross margin from accelerated depreciation of $4 million on vehicles expected to be made available for sale through June 2018, and more normalized maintenance spending associated with vehicles being prepared for sale. FMS EBT was also impacted by higher overhead spending due to the timing of incentive compensation and higher sales and marketing expense. These items were partially offset by improved performance across all product lines. Commercial rental performance improved due to higher pricing and a 130 basis point improvement in utilization, reflecting fleet right-sizing actions taken earlier in the year. Used vehicle results improved modestly due to lower fair market value write-downs on vehicles held for sale, partially offset by lower proceeds per unit.

FMS EBT decreased 28% in the nine months ended September 30, 2017, due to lower used vehicle sales and commercial rental results, as well as $21 million of accelerated depreciation on vehicles expected to be made available for sale through June 2018 and higher maintenance costs, partially offset by improved SelectCare results. Used vehicle sales results decreased year-to-date due to lower pricing, which resulted in lower gains on sales and greater fair market value write-downs on vehicles held for sale. Commercial rental results declined year-to-date from lower demand. ChoiceLease and commercial rental results were negatively impacted by $1 million of higher depreciation in the third quarter and $3 million in the nine months ended September 30, 2017, due to residual value changes implemented January 1, 2017.

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

~~AND RESULTS OF OPERATIONS - (Continued)~~

Our ~~global~~North America 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, 2017 December 31, 2016 September 30, 2016 Sept. 2017/Dec. 2016 Sept. 2017/Sept. 2016
End of period vehicle count
By type:
Trucks ⁽¹⁾
75,700
73,300
73,500
  3 %   3 %
Tractors ⁽²⁾
65,600
67,900
68,600
  (3 )   (4 )
Trailers ^{(3), (4)}
42,200
42,800
42,300
  (1 ) —
Other 1,200
1,100
1,200
  9
—
Total 184,700
185,100
185,600
— % — %

By ownership:
Owned 183,400
183,700
184,100
— % — %
Leased 1,300
1,400
1,500
  (7 )   (13 )
Total 184,700
185,100
185,600
— % — %

By product line:⁽⁴⁾

ChoiceLease 137,300
136,500
136,600
  1 %   1 %
Commercial rental 37,800
37,800
38,000
—
  (1 )
  Service vehicles and other 3,300
3,300
3,500
—
  (6 )
Active units 178,400
177,600
178,100
—
—
Held for sale 6,300
7,500
7,500
  (16 )   (16 )
Total 184,700
185,100
185,600
— % — %

Customer vehicles under SelectCare contracts 54,400
49,000
49,300
  11 %   10 %

Quarterly average vehicle count
By product line:
ChoiceLease 137,200
136,500
135,100
  1 %   2 %
Commercial rental 37,600
37,800
38,300
  (1 )   (2 )
Service vehicles and other 3,300
3,400
3,300
  (3 ) —
Active units 178,100
177,700
176,700
—
  1
Held for sale 6,900
7,500
8,700
  (8 )   (21 )
Total 185,000
185,200
185,400
— % — %

Customer vehicles under SelectCare contracts 52,800
49,200
49,600
  7 %   6 %

Customer vehicles under SelectCare on-demand ⁽⁵⁾
8,700
7,800
8,000
  12 %   9 %

Total vehicles serviced 246,500
242,200
243,000
  2 %   1 %

Year-to-date average vehicle count
By product line:
ChoiceLease 137,400
134,400
133,800
  2 %   3 %
Commercial rental 37,500
39,200
39,600
  (4 )   (5 )
Service vehicles and other 3,400
3,400
3,400
—
—
Active units 178,300
177,000
176,800
  1
  1
Held for sale 6,900
8,400
8,600
  (18 )   (20 )
Total 185,200
185,400
185,400
— % — %

Customer vehicles under SelectCare contracts ⁽⁵⁾
51,300
49,200
49,000
  4 %   5 %
Customer vehicles under SelectCare on-demand ⁽⁶⁾
20,600
21,000
22,700
  (2 )%   (9 )%
Total vehicles serviced 257,100
255,600
257,100
  1 % — %


				Change
	March 31, 2023	December 31, 2022	March 31, 2022	Mar 2023/ Dec 2022	Mar 2023/ Mar 2022
End of period vehicle count
By type:
Trucks (1)	72,900	72,100	70,300	1%	4%
Tractors (2)	70,100	69,300	69,100	1%	1%
Trailers and other (3)	41,800	41,200	39,300	1%	6%
Total	184,800	182,600	178,700	1%	3%

By product line:
ChoiceLease	136,600	134,600	133,900	1%	2%
Commercial rental	41,100	41,800	39,800	(2)%	3%
Service vehicles and other	2,000	2,100	2,000	(5)%	—%
	179,700	178,500	175,700	1%	2%
Held for sale	5,100	4,100	3,000	24%	70%
Total	184,800	182,600	178,700	1%	3%
Memo: U.K. Vehicle Count (excluded from above)	400	1,000	12,300	(60)%	(97)%

Customer vehicles under SelectCare contracts (4)	52,600	54,600	54,500	(4)%	(3)%


Quarterly average vehicle count
By product line:
ChoiceLease	135,300	134,500	133,800	1%	1%
Commercial rental	41,200	41,800	39,300	(1)%	5%
Service vehicles and other	2,000	2,000	2,000	—%	—%
	178,500	178,300	175,100	—%	2%
Held for sale	4,600	3,700	2,700	24%	70%
Total	183,100	182,000	177,800	1%	3%




Customer vehicles under SelectCare contracts (4)	54,100	55,300	53,700	(2)%	1%
Customer vehicles under SelectCare on-demand (5)	5,200	5,800	6,300	(10)%	(17)%
Total vehicles serviced	242,400	243,200	237,800	—%	2%

————————————


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


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


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


~~(4)~~	Includes 4,800 UK trailers (3,000 ChoiceLease and 1,800 commercial rental), 5,300 UK trailers (3,300 ChoiceLease and 2,000 commercial rental) and 5,400 UK trailers (3,500 ChoiceLease and 1,900 commercial rental) as of September 30, 2017, December 31, 2016, and September 30, 2016, respectively.


~~(5)~~	Comprised of the number of unique vehicles serviced under on-demand maintenance agreements for the quarterly and year-to-date 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.


~~(6)~~	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.

(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 ~~and year-to-date~~ amounts were computed using a 6-point ~~and 18-point~~ average ~~respectively,~~ based on monthly information.

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

The following table provides ~~a breakdown of~~information on our ~~non-revenue earning equipment included in our global~~North America active ChoiceLease fleet ~~count~~ (number of units rounded to nearest hundred):

Change
September 30,
2017 December 31,
2016 September 30,
2016 Sept. 2017/Dec. 2016 Sept. 2017/Sept. 2016
Not yet earning revenue (NYE) 2,100 1,700 1,900 24 % 11 %
No longer earning revenue (NLE):
Units held for sale 6,300 7,500 7,500 (16 ) (16 )
Other NLE units 3,900 4,400 5,000 (11 ) (22 )
Total 12,300 13,600 14,400 (10 )% (15 )%

~~NYE units represent new vehicles on hand that are being prepared for deployment to a lease customer or into the~~ and our commercial rental fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. NLE units represent vehicles held for sale and vehicles for which no revenue has been earned in the previous 30 days. Accordingly, these vehicles may be temporarily out of service, being prepared for sale or awaiting redeployment. NLE units decreased compared to September 30, 2016, reflecting lower used vehicle inventories, which are at the midpoint of our target range, and a lower number of units being prepared for sale. We expect NLE levels to decline through the end of the year.

~~Dedicated Transportation Solutions~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
DTS total revenue $ 272,334
260,921
$ 811,620

764,025
4 % 6 %

DTS operating revenue ⁽¹⁾
$ 197,917

196,648

$ 591,045

581,213
1 % 2 %

DTS EBT $ 13,770
17,584
$ 39,892
48,300
(22 )% (17 )%
DTS EBT as a % of DTS total revenue 5.1 % 6.7 % 4.9 % 6.3 % (160) bps (140) bps
DTS EBT as a % of DTS operating revenue ⁽¹⁾
7.0 % 8.9 % 6.7 % 8.3 % (190) bps (160) bps

Memo:
Average fleet 8,200
8,300
8,200
8,200
(1 )% — %
power fleet (excludes trailers):


							Change
	March 31, 2023		December 31, 2022		March 31, 2022		Mar 2023/ Dec 2022	Mar 2023/ Mar 2022
Active ChoiceLease fleet
End of period vehicle count (1)	129,100		128,400		128,700		1%	—%
Quarterly average vehicle count (1)	128,700		128,800		128,900		—%	—%

Commercial rental statistics
Quarterly commercial rental utilization - power fleet (2)	75	%	82	%	82	%	(800) bps	(700) bps

————————————


~~(1)~~	Non-GAAP financial measures. Reconciliations of DTS total revenue to DTS operating revenue, DTS EBT as a % of DTS total revenue to DTS EBT as a % of DTS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.

(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 March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months
Omnichannel retail	$	311	$	270		15%
Automotive	254		195			30%
Consumer packaged goods	218		187			17%
Industrial and other	96		86			12%
Subcontracted transportation and fuel	322		351			(8)%

SCS total revenue	$	1,201	$	1,089		10%

SCS operating revenue (1)	$	879	$	738		19%

SCS EBT	$	17	$	43		(60)%
SCS EBT as a % of SCS total revenue	1.4%		3.9%			(250) bps
SCS EBT as a % of SCS operating revenue (1)	1.9%		5.8%			(390) bps

Memo:
End of period fleet count (2)	13,500		11,600			16%

	Twelve months ended March 31,				Change 2023/2022
	2023		2022
SCS EBT as a % of SCS total revenue	4.0%		3.7%			30 bps
SCS EBT as a % of SCS operating revenue (1)	5.7%		5.4%			30 bps

————————————

(2)End of period power fleet count is 4,300 and 3,900 as of March 31, 2023 and March 31, 2022, respectively.

SCS total revenue increased 10% in the first quarter of 2023, due to higher operating revenue (a non-GAAP measure excluding subcontracted transportation and fuel) partially offset by lower subcontracted transportation. SCS operating revenue

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

~~The following table summarizes~~increased 19% in the ~~components of the change in DTS revenue on a percentage basis versus the prior year:~~

Three months ended September 30, 2017 Nine months ended September 30, 2017
Total
Operating ⁽¹⁾
Total
Operating ⁽¹⁾
Organic, including price and volume 3 % 1 % 5 % 2 %
Fuel 1
—
1
—
Net increase 4 % 1 % 6 % 2 %

~~————————————~~


~~(1)~~	Non-GAAP financial measure. A reconciliation of DTS total revenue to DTS operating revenue, as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.

~~In the third~~first quarter of ~~2017, DTS total revenue and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 4% and 1%, respectively, primarily~~2023, due to strong revenue growth in all industry verticals primarily reflecting new business, higher volumes and increased pricing.

SCS EBT decreased 60% in the first quarter of 2023, due to a $30 million asset impairment charge related to a customer bankruptcy. Refer to Note 2, "Segment Reporting," for additional discussion. The decrease was partially offset by ~~one less work day in the quarter. DTS EBT decreased 22% in the third quarter of 2017,~~revenue growth, primarily ~~due to higher insurance premiums, higher vehicle maintenance costs on certain older model year vehicles and the impact of one less work day.~~from automotive vertical performance.

In the nine months ended September 30, 2017, DTS total and operating revenue increased 6% and 2%, respectively, due to new business and higher pricing. We expect DTS total revenue comparisons for the remainder of the year to be consistent with the prior year and DTS operating revenue comparisons to remain favorable through the end of the year. DTS EBT decreased 17% in the nine months ended September 30, 2017, primarily due to higher maintenance costs on certain older model year vehicles and higher insurance costs during the first half of the year.

~~Supply Chain~~

Dedicated Transportation Solutions

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Automotive $ 135,853
140,785
$ 420,113
407,083
(4 )% 3 %
Technology and healthcare 68,008
61,425
194,561
177,138
11
10
CPG and Retail 130,528
110,840
365,185
324,814
18
12
Industrial and other 42,040
32,403
117,040
90,392
30
29
Subcontracted transportation 101,740

56,089
279,326
162,743
81
72
Fuel 17,835

15,356
53,252
45,495
16
17
SCS total revenue $ 496,004
416,898

$ 1,429,477
1,207,665
19 % 18 %

SCS operating revenue ⁽¹⁾
$ 376,429

345,453
$ 1,096,899
999,427
9 % 10 %

SCS EBT $ 22,052

30,956
$ 75,359
79,105
(29 )% (5 )%
SCS EBT as a % of SCS total revenue 4.4 %
7.4 % 5.3 % 6.6 % (300) bps (130) bps
SCS EBT as a % of SCS operating revenue ⁽¹⁾
5.9 %
9.0 % 6.9 % 7.9 % (310) bps (100) bps

Memo:

Average fleet 7,900
7,400
7,800
7,100
7 % 10 %


	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months
DTS total revenue	$	454	$	425		7%

DTS operating revenue (1)	$	322	$	296		9%




DTS EBT	$	29	$	20		45%
DTS EBT as a % of DTS total revenue	6.4%		4.7%			170 bps
DTS EBT as a % of DTS operating revenue (1)	9.0%		6.8%			220 bps

Memo:
End of period fleet count (2)	11,400		11,700			(3)%

	Twelve months ended March 31,				Change 2023/2022
	2023		2022
DTS EBT as a % of DTS total revenue	6.1%		3.6%			250 bps
DTS EBT as a % of DTS operating revenue (1)	8.8%		5.0%			380 bps

————————————


~~(1)~~	Non-GAAP financial measures. Reconciliations of SCS total revenue to SCS operating revenue, SCS EBT as a % of SCS total revenue to SCS EBT as a % of SCS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.

(2)End of period power fleet count is 5,400 as of March 31, 2023 and March 31, 2022.

DTS total revenue increased 7% in the first quarter of 2023, primarily due to higher operating revenue (a non-GAAP measure excluding subcontracted transportation and fuel). DTS operating revenue increased 9% in the first quarter of 2023, due to increased pricing and volumes.

DTS EBT increased 45% in the first quarter of 2023, due to revenue growth and improved conditions for hiring professional drivers.

Central Support Services


	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022			Three Months







Total CSS	$	103	$	97		6%
Allocation of CSS to business segments	(88)		(81)			9%
Unallocated CSS	$	15	$	16		(6)%

Total CSS costs increased 6% in the first quarter of 2023, primarily due to strategic investments in information technology and marketing and increased professional fees partially offset by the gain from the sale of our corporate headquarters building and lower compensation-related expenses. Unallocated CSS slightly decreased in the first quarter of 2023 reflecting the gain from the sale of our corporate headquarters building offset by increased professional fees.

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

FINANCIAL RESOURCES AND LIQUIDITY

Cash Flows

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


	Three months ended March 31,
(In millions)	2023		2022

Net cash provided by (used in):
Operating activities	$	478	$	466
Investing activities	(377)		(783)
Financing activities	(126)		(130)
Effect of exchange rate changes on cash	11		(4)
Net change in cash, cash equivalents, and restricted cash	$	(14)	$	(451)

	Three months ended March 31,
(In millions)	2023		2022
Net cash provided by operating activities
Earnings from continuing operations	$	140	$	176
Non-cash and other, net	522		465
Collections on sales-type leases	30		34
Changes in operating assets and liabilities	(214)		(209)



Cash flows from operating activities from continuing operations	$	478	$	466

Cash provided by operating activities increased to $478 million for the three months ended March 31, 2023, compared with $466 million in 2022, primarily reflecting higher cash earnings. Cash used in investing activities decreased to $377 million for the three months ended March 31, 2023, compared with $783 million in 2022, primarily due to the acquisition of the Whiplash business in 2022. Cash used in financing activities decreased to $126 million for the three months ended March 31, 2023, compared with $130 million in 2022.

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

Three months ended September 30, 2017 Nine months ended September 30, 2017
Total
Operating ⁽¹⁾
Total
Operating ⁽¹⁾
Organic, including price and volume 18 % 8 % 18 % 10 %
Fuel —
—
—
—
Foreign exchange 1
1
—
—
Net increase 19 %
9 %
18 %
10 %
shows our free cash flow computation:


	Three months ended March 31,
(In millions)	2023		2022

Net cash provided by operating activities	$	478	$	466
Sales of revenue earning equipment (1)	216		223

Sales of operating property and equipment (1)	48		3



Total cash generated (2)	742		692
Purchases of property and revenue earning equipment (1)	(641)		(584)
Free cash flow (2)	$	101	$	108

————————————


~~(1)~~	Non-GAAP financial measure. A reconciliation of SCS total revenue to SCS operating revenue, as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.

(1)Included in cash flows from investing activities.

In(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 ~~third quarter~~"Non-GAAP Financial Measures" section of ~~2017, SCS total revenue increased 19%, and SCS operating revenue~~this MD&A for the reasons why management believes this measure is important to investors.

Free cash flow (a non-GAAP ~~measure excluding fuel and subcontracted transportation) increased 9%, primarily reflecting new business. SCS EBT decreased 29%~~measure) of $101 million for the three months ended March 31, 2023, compared to $108 million in ~~the third quarter of 2017, primarily related to the performance of two customer accounts, including a particularly challenging start-up. Additionally, results were impacted~~2022, was generally unchanged as increase in cash paid for capital expenditures was largely offset by higher ~~overhead spending, primarily due to planned investments in information technology~~proceeds from the sale of operating property and ~~sales.~~equipment.

In the nine months ended September 30, 2017, SCS total revenue increased 18%, reflecting organic growth. SCS operating revenue increased 10% due to new business, increased volumes and higher pricing. We expect SCS total revenue and SCS operating revenue comparisons to remain favorable through the end of the year. SCS EBT decreased 5% in the nine months ended September 30, 2017, primarily related to a particularly challenging start-up in the third quarter, higher costs incurred during the start-up phase of certain new accounts in the first half of the year, as well as planned investments in information technology and sales and higher compensation-related costs.

~~Central Support Services~~

Three months ended September 30, Nine months ended September 30, Change 2017/2016
2017 2016 2017 2016 Three Months Nine Months
(Dollars in thousands)
Human resources $ 3,778
4,184
$ 12,186
12,968
(10 )% (6 )%
Finance 14,426
15,143
43,604
44,267
(5 ) (1 )
Corporate services and public affairs 2,618
2,471
7,612
7,463
6
2
Information technology 22,265
20,466
64,744
60,369
9
7
Legal and safety 6,246
5,711
19,109
17,798
9
7
Marketing 4,556
4,336
13,290
14,220
5
(7 )
Other 8,318
4,911
23,597
19,317
69
22
Total CSS 62,207
57,222

184,142
176,402
9
4
Allocation of CSS to business segments (51,166 )
(47,947 ) (151,177 ) (146,442 )
7
3
Unallocated CSS $ 11,041
9,275

$ 32,965
29,960

19 % 10 %

~~Total CSS costs increased~~ 9% ~~in the third quarter~~Table of 2017, due to higher information technology, compensation-related and professional services costs associated with strategic initiatives. Total CSS costs increased 4% in the nine months ended September 30, 2017, due to higher information technology and professional services costs associated with strategic initiatives. Unallocated CSS increased 19% in the third quarter and 10% in the nine months ended September 30, 2017, driven by higher professional services costs associated with strategic initiatives.Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

~~FINANCIAL RESOURCES AND LIQUIDITY~~

~~Cash Flows~~

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

Nine months ended September 30,
2017 2016
(In thousands)
Net cash (used in) provided by:
Operating activities $ 1,166,191
1,185,062
Financing activities (191,255 ) (55,554 )
Investing activities (962,191 ) (1,108,584 )
Effect of exchange rates on cash (5,226 ) (5,567 )
Net change in cash and cash equivalents $ 7,519
15,357

Cash provided by operating activities decreased to $1.17 billion in the nine months ended September 30, 2017, compared with $1.19 billion in 2016, primarily due to lower earnings adjusted for non-cash items. Cash used in financing activities was $191 million in the nine months ended September 30, 2017, compared with $56 million in ~~2016, due to lower borrowing needs from lower capital spending. Cash used in investing activities decreased to $962 million in the nine months ended September 30, 2017, compared with $1.11 billion in~~ ~~2016, primarily due to lower payments for capital expenditures.~~

~~The following table shows our free cash flow computation:~~

Nine months ended September 30,
2017 2016
(In thousands)
Net cash provided by operating activities from continuing operations $ 1,166,191

1,185,062
Sales of revenue earning equipment ⁽¹⁾
289,432

331,720
Sales of operating property and equipment ⁽¹⁾
12,541

6,623
Collections on direct finance leases and other items ⁽¹⁾
54,227

60,229
Total cash generated ⁽²⁾
1,522,391

1,583,634
Purchases of property and revenue earning equipment ⁽¹⁾
(1,312,845 )
(1,511,359 )
Free cash flow ⁽²⁾
$ 209,546

72,275

Memo:
Net cash used in financing activities $ (191,255 ) (55,554 )
Net cash used in investing activities $ (962,191 ) (1,108,584 )

~~———————————~~


~~(1)~~	~~Included in cash flows from investing activities.~~


~~(2)~~	Non-GAAP financial measures. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in this table. Refer to the “Non-GAAP Financial Measures” section of this MD&A for the reasons why management believes these measures are important to investors.

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

~~AND RESULTS OF OPERATIONS - (Continued)~~

The following table provides a summary of gross capital expenditures:


	Three months ended March 31,
(In millions)	2023		2022

Revenue earning equipment:
ChoiceLease	$	579	$	422
Commercial rental	177		180
	756		602
Operating property and equipment	46		60
Gross capital expenditures	802		662
Changes to liabilities related to purchases of property and revenue earning equipment	(161)		(78)
Cash paid for purchases of property and revenue earning equipment	$	641	$	584

Nine months ended September 30,
2017 2016
(In thousands)
Revenue earning equipment:
ChoiceLease $ 985,541
1,223,141
Commercial rental 295,638
79,204
1,281,179
1,302,345
Operating property and equipment 94,850
101,837
Total capital expenditures 1,376,029

1,404,182
Changes in accounts payable related to purchases of revenue earning equipment (63,184 ) 107,177
Cash paid for purchases of property and revenue earning equipment $ 1,312,845

1,511,359

~~Capital~~Gross capital expenditures inincreased to $802 million for the ~~nine~~three months ended ~~September 30, 2017 of $1.38 billion, were largely unchanged from the prior year,~~March 31, 2023, primarily reflecting ~~greater use of redeployed vehicles to fulfill new ChoiceLease contracts. Lower ChoiceLease spending was offset by~~ higher planned investments to refresh our commercial rental fleet. We expect full-year 2017 capital expenditures to be approximately $1.9 billion. We expect to fund 2017 capital expenditures primarily with internally generated funds and additional debt financing.in ChoiceLease.

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 ~~debt~~ 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 $253 million as of March 31, 2023. As of March 31, 2023, $206 million was held outside the U.S. and is available to fund operations. Our intention is to permanently reinvest the earnings of our foreign subsidiaries, with the exception of our U.K. and Germany subsidiaries where the assertion was removed in 2021. Federal, state and foreign income taxes, withholding taxes and the tax impact of foreign currency exchange gains or losses were considered on the remaining U.K. and Germany undistributed earnings as of March 31, 2023, and there was no impact to deferred taxes. In February 2023, we repatriated $38 million of foreign earnings from the U.K.

We believe that our operating cash flows, together with our access to the public ~~debt.~~unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, volatility or disruption in the public unsecured debt market or the commercial paper market may impair our ability to access these markets 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 2023, we issued an aggregate principal amount of $500 million unsecured medium-terms notes that mature on March 1, 2028. The notes bear interest at a rate of 5.65% per year. Refer to Note 8, "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 ~~Ryder~~ 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, ~~and above in Note 6, "Debt," to Consolidated Condensed Financial Statements,~~ assuming ongoing compliance with the terms and conditions of the credit facility.

~~Our debt ratings and rating outlooks at~~ ~~September 30, 2017, were as follows:~~



	~~Rating Summary~~
	~~Short-Term~~	~~Long-Term~~	~~Outlook~~
~~Fitch Ratings~~	~~F-2~~	A-	~~Stable~~
~~Standard & Poor’s Ratings Services~~	~~A-2~~	~~BBB+~~	~~Stable~~
~~Moody’s Investors Service~~	~~P-2~~	~~Baa1~~	~~Stable~~

~~Cash and cash equivalents totaled $65 million as~~Table of September 30, 2017. As of September 30, 2017, approximately $29 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. If we decide to repatriate cash and cash equivalents held outside the U.S., we may be subject to additional U.S. income taxes and foreign withholding taxes. However, our intent is to permanently reinvest these foreign amounts outside the U.S. and our current plans do not demonstrate a need to repatriate these foreign amounts to fund our U.S. operations.Contents

We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, there can be no assurance that unanticipated volatility and disruption in the public unsecured debt market or the commercial paper market would not impair our ability to access these markets on terms commercially acceptable to us or at all. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements as described below and/or by seeking other funding sources.

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

AND RESULTS OF OPERATIONS -— (Continued)

Our debt ratings and rating outlooks as of March 31, 2023, were as follows:

Rating Summary

Short-term

Short-term Outlook

Long-term

Long-term Outlook

Standard & Poor’s Ratings Services (1)

—

BBB

Stable

Moody’s Investors Service

Stable

Baa2

Stable

Fitch Ratings

—

BBB+

Stable

DBRS

R-1 (Low)

Stable

A (Low)

Stable

————————————

(1)In April 2023, the long-term rating was upgraded to BBB+.

As of ~~September 30, 2017~~,March 31, 2023, we had the following amounts available to fund operations under the following facilities:


			(In millions)

			~~(In millions)~~
Global revolving credit facility	$~~664~~	943
Trade receivables financing program			$~~175~~	1

~~See Note 6, "Debt", in the Notes to Consolidated Condensed Financial Statements for a discussion of these debt facilities.~~

~~The following table shows the movements in our debt balance:~~

Nine months ended September 30,
2017 2016
(In thousands)
Debt balance at January 1 $ 5,391,274
5,502,627
Cash-related changes in debt:
Net change in commercial paper borrowings 2,153
73,597
Proceeds from issuance of medium-term notes 595,785
298,254
Proceeds from issuance of other debt instruments 277,517
—
Retirement of medium term notes (700,000 ) (300,000 )
Other debt repaid (238,160 ) (40,707 )
Debt issuance costs paid (1,379 ) (622 )
(64,084 ) 30,522
Non-cash changes in debt:
Fair value adjustment on notes subject to hedging (3,168 ) 8,960
Addition of capital lease obligations 6,209
948
Changes in foreign currency exchange rates and other non-cash items 18,995
(23,416 )
Total changes in debt (42,048 ) 17,014
Debt balance at September 30 $ 5,349,226
5,519,641

In accordance with our funding philosophy, we attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our vehicle assets. We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% ~~variable-rate~~variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap ~~agreements)~~agreements) was ~~30%~~18% and 19% as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022, respectively.

Refer to Note 6, “Debt,” in the Notes to Consolidated Condensed Financial Statements for further discussion around the global revolving credit facility, the trade receivables program, the issuance of medium-term notes, asset-backed financing obligations and debt maturities.

~~Ryder’s~~Our debt to equity ~~ratios were 246%~~ ratio was 211% and ~~263%~~216% as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively. The debt to equity ratio represents total debt divided by total equity. ~~The Company's target debt to equity ratio is 250% to 300%.~~

~~Pension Information~~

The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. We review pension assumptions regularly and may, from time to time, make voluntary contributions to our pension plans, which exceed the amounts required by statute. In ~~2017~~, the expected total contributions to our pension plans are approximately $22 million. During the nine months ended September 30, 2017, we contributed $10.6 million to our pension plans. Changes in interest rates and the market value of the securities held by the plans during ~~2017~~ ~~could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and contributions in~~ ~~2017~~ ~~and beyond. See Note 12, “Employee Benefit Plans,” in the Notes to Consolidated Condensed Financial Statements for additional information.~~

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

~~AND RESULTS OF OPERATIONS - (Continued)~~

Share Repurchases and Cash Dividends

~~See~~As of March 31, 2023, we repurchased 0.5 million shares for $45 million under the 2021 Anti-Dilutive program.

Refer to Note ~~8, “Share~~9, "Share Repurchase Programs,”" in the Notes to Condensed Consolidated ~~Condensed~~ Financial Statements for a discussion ofon our share ~~repurchases.~~repurchase programs.

In ~~October 2017,~~February 2023 and 2022, our ~~Board~~board of ~~Directors~~directors declared a quarterly cash dividend of ~~$0.46~~$0.62 and $0.58 per ~~common~~ share of common ~~stock.~~stock, respectively.

~~RECENT ACCOUNTING PRONOUNCEMENTS~~

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

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes information extracted from condensed consolidated ~~condensed~~ financial information, but not required by generally accepted accounting principles in the United States ~~of America (U.S. GAAP)~~(GAAP) to be presented in the financial statements. Certain elements of this information are considered ~~“non-GAAP~~"non-GAAP financial ~~measures”~~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 ~~U.S.~~ GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable ~~U.S.~~ GAAP measure in this non-GAAP financial measures ~~section.~~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.

Table of Contents

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 ~~U.S.~~ 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
~~SCS Operating Revenue~~		~~SCS 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
~~SCS EBT as a % of SCS Operating Revenue~~	~~SCS EBT as a % of SCS 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

Table of Contents

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

AND RESULTS OF OPERATIONS -— (Continued)

Set forth in the table below is an ~~explanation~~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:~~

investors.

Operating Revenue ~~Measures~~:

Measures:

Operating Revenue

FMS Operating Revenue

SCS Operating Revenue

DTS Operating Revenue

~~SCS 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

~~SCS EBT as a % of SCS Operating Revenue~~

Operating revenue is defined as total revenue for Ryder ~~System, Inc.~~ or each business segment (FMS, ~~DTS~~SCS and ~~SCS), respectively,~~DTS) excluding any (1) fuel and (2) subcontracted transportation. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, ~~DTS~~SCS EBT and ~~SCS~~DTS EBT, our primary measures of segment performance, are not non-GAAP measures.

Fuel: We exclude FMS, ~~DTS~~SCS and ~~SCS~~DTS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our ~~customers, which~~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 ~~trailing~~current market fuel costs.

Subcontracted ~~transportation~~:transportation: We ~~also~~ exclude subcontracted transportation from the calculation of our operating revenue measures, as these services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability. While our ~~DTS~~SCS and ~~SCS~~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.

Table of Contents

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

AND RESULTS OF OPERATIONS — (Continued)

Comparable Earnings ~~Measures~~:

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 earnings before tax (EBT)~~

~~Comparable Earnings~~

~~Comparable earnings per diluted common share (EPS)~~

Comparable EBT, ~~comparable earnings~~Comparable Earnings and ~~comparable~~Comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs, net and (2) ~~any~~ other ~~significant~~ items ~~that are not representative of our business operations.~~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~~:

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.~~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 ~~Significant~~ Items: Impacting Comparability: Our comparable and adjusted earnings measures also exclude other significant items that are not representative of our business ~~operations.~~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. ~~In the three and nine month periods ended September 30, 2017, we exclude the following other significant items from our comparable earnings measures in this Form 10-Q:~~

~~(1)~~ ~~Fees related to cost-savings program: In the third quarter of 2017, we recorded consulting fees associated with a cost-savings program.~~

~~(2) Pension settlement charge: In the third quarter of 2017, we recorded an estimated pension settlement charge for the exit from a U.S. multi-employer pension plan.~~

~~(3)~~ Comparable Tax ~~law change - rate increase: In the third quarter of 2017, the state of Illinois enacted changes to their tax system, which increased the provision for income taxes by $1.8 million.~~

~~(4)~~ ~~Restructuring: In the second quarter of 2017, we recorded restructuring credits related to the gains on sale of certain UK facilities.~~

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

~~AND RESULTS OF OPERATIONS - (Continued)~~



	~~(5)~~ ~~Operating tax adjustment: In the first quarter of 2017, we recorded a one-time charge of $2.2 million related to operating tax expenses that had not been recognized in prior period earnings.~~ ~~(6)~~ ~~Pension-related adjustments~~: In the second quarter of 2016, it was determined that certain pension benefit improvements made in 2009 were not fully reflected in our projected benefit obligation, resulting in a charge to reflect those pension benefits. ~~Calculation of comparable tax rate: The comparable provision for income taxes~~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 ~~statutory~~marginal tax rates ~~of the jurisdictions~~ to which the non-GAAP adjustments ~~relate.~~are related. Adjusted ROE is defined as adjusted net earnings divided by adjusted average shareholders' equity and represents the rate of return on shareholders' investment. Other items impacting comparability described above are excluded, as applicable, from the calculation of adjusted net earnings and adjusted average shareholders' equity. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations.

Table of Contents

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 our 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~~:

Measures:

Total Cash Generated

Free Cash Flow

We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.

Total Cash Generated~~: Total cash generated~~ is defined as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment ~~(4) collections on direct finance leases~~ and ~~(5)~~(4) other cash inflows from investing activities. We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities.

Free Cash Flow~~: We refer to~~ 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 as “free cash flow”.~~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 ~~(3) net cash provided by the sale of~~and operating property and equipment, ~~(4) collections on direct finance leases~~ and ~~(5)~~(3) other cash inflows from investing activities, less ~~(6)~~(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 ~~U.S.~~ GAAP earnings before taxes (EBT), earnings, and earnings per diluted share ~~(EPS)~~(Diluted EPS) from continuing operations to comparable EBT, comparable earnings, and comparable ~~EPS from continuing operations, which was not provided within the MD&A discussion.~~

EPS. Certain items included in EBT, earnings, and diluted EPS from continuing operations ~~in the three and nine months ended September 30, 2017 and 2016, included certain items we do not consider indicative of our business operations and~~ 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 ~~Condensed~~ Financial Statements:

EBT Earnings Diluted EPS
2017 2016 2017 2016 2017 2016
Three months ended September 30, (In thousands, except per share amounts)
EBT/Earnings/EPS $ 94,343
131,698
$ 58,913
85,138
$ 1.11
1.59
Non-operating pension costs 6,958
7,443
4,019
4,420
0.08
0.08
Pension settlement charge 5,454
—
3,304
—
0.06
—
Fees related to cost-savings program 4,255
—
2,740
—
0.05
—
Tax law change - rate increase —
—
1,844
—
0.03
—
Comparable EBT/ Earnings/ EPS $ 111,010
139,141
$ 70,820
89,558
$ 1.33
1.67

Nine months ended September 30,
EBT/Earnings/EPS $ 234,991
337,185
$ 148,535
215,365
$ 2.79
4.02
Non-operating pension costs 20,875
22,023
12,065
12,857
0.24
0.24
Pension settlement charge 5,454
—
3,303
—
0.06
—
Fees related to cost-savings program 4,255
—
2,740
—
0.05
—
Operating tax adjustment 2,205
—
1,677
—
0.03
—
Restructuring (2,574 ) —
(2,085 ) —
(0.04 ) —
Tax law change - rate increase —
—
1,844
—
0.03
—
Pension-related adjustment —
7,650
—
4,817
—
0.09
Comparable EBT/ Earnings/ EPS $ 265,206
366,858
$ 168,079
233,039
$ 3.16
4.35

~~The following table provides a reconciliation of the provision for income taxes to the comparable provision for income taxes:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(Dollars in thousands)
Provision for income taxes ⁽¹⁾
$ (35,430 ) (46,560 ) $ (86,456 ) (121,820 )
Income tax effects of non-GAAP adjustments ⁽¹⁾
(4,760 ) (3,023 ) (10,671 ) (11,999 )
Comparable provision for income taxes ⁽¹⁾
$ (40,190 ) (49,583 ) $ (97,127 ) (133,819 )


	Continuing Operations
	Three months ended March 31,
(In millions, except per share amount)	2023		2022
EBT	$	201	$	252
Non-operating pension costs, net	10		3
FMS U.K. exit (1)	(31)		1
Other, net (1)	(1)		4
Comparable EBT	$	179	$	260

Earnings	$	140	$	176
Non-operating pension costs, net	8		2
FMS U.K. exit (1)	(31)		1
Other, net (1)	(1)		4
Tax adjustments, net (2)	17		5
Comparable Earnings	$	133	$	188

Diluted EPS	$	2.95	$	3.35
Non-operating pension costs, net	0.17		0.04
FMS U.K. exit (1)	(0.66)		0.02
Other, net (1)	(0.01)		0.08
Tax adjustments, net (2)	0.36		0.10
Comparable EPS	$	2.81	$	3.59

———————————


~~(1)~~	The comparable provision for income taxes is computed using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on statutory tax rates of the jurisdictions to which the non-GAAP adjustments related.

—

(1)Refer to Note 14, “Other Items Impacting Comparability,” in the Notes to Condensed Consolidated Financial Statements for additional information.

(2)Adjustments include the global tax impacts related to the FMS U.K. exit in the first quarter of 2023, and gains on sales of U.K. revenue earning equipment and properties in the first quarter of 2022.

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 ~~numerical~~ reconciliation of ~~net cash provided by operating activities~~the effective tax rate to ~~total cash generated and free cash flow for~~ the ~~nine months ended September 30, 2017:~~

Nine months ended September 30,
2017 2016
(In thousands)
Net cash provided by operating activities from continuing operations $ 1,166,191
1,185,062
Sales of revenue earning equipment ⁽¹⁾
289,432
331,720
Sales of operating property and equipment ⁽¹⁾
12,541
6,623
Collections on direct finance leases and other items ⁽¹⁾
54,227
60,229
Total cash generated 1,522,391
1,583,634
Purchases of property and revenue earning equipment ⁽¹⁾
(1,312,845 ) (1,511,359 )
Free cash flow $ 209,546
72,275

Memo:
Net cash (used in) provided by financing activities $ (191,255 ) (55,554 )
Net cash used in investing activities $ (962,191 ) (1,108,584 )
comparable tax rate:


	Three months ended March 31,
(In millions)	2023	2022






Effective tax rate on continuing operations (1)	30.5%	30.2%
Tax adjustments and income tax effects of non-GAAP adjustments (2)	(5.0)%	(2.6)%
Comparable effective tax rate on continuing operations (1)	25.5%	27.6%

————————————


~~(1)~~	~~Included in cash flows from investing activities.~~

(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 March 31,
(In millions)	2023		2022
Net earnings	$	139	$	176
Loss from discontinued operations, net of tax	1		—
Provision for income taxes	61		76
EBT	201		252
Non-operating pension costs, net	10		3
Other items impacting comparability, net (1)	(32)		5
Comparable EBT	179		260
Interest expense	65		52
Depreciation	445		430
Used vehicle sales, net (2)	(70)		(105)
Amortization	9		10
Comparable EBITDA	$	628	$	647

————————————

(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 14,“Other Items Impacting Comparability” in the Notes to Condensed Consolidated Financial Statements for additional information.

(2)Refer to Note 5,"Revenue Earning Equipment, net," in the Notes to Consolidated Financial Statements for additional information. In 2023, used vehicle sales, net of $2 million related to the sale of used vehicles in the U.K. is excluded as it is included above in "Other Items Impacting Comparability."

The following table provides a reconciliation of total revenue to operating ~~revenue, which was not provided within the MD&A discussion:~~revenue:


	Three months ended March 31,
(In millions)	2023		2022
Total revenue	$	2,952	$	2,854
Subcontracted transportation and fuel	(606)		(638)


Operating revenue	$	2,346	$	2,216

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
Total revenue $ 1,848,529
1,724,418
$ 5,389,906
5,057,834
Fuel (175,106 ) (162,293 ) (519,979 ) (464,176 )
Subcontracted transportation (147,970 ) (93,832 ) (416,159 ) (269,639 )
Operating revenue $ 1,525,453
1,468,293
$ 4,453,768
4,324,019

~~The following table provides a reconciliation~~Table of ~~FMS total revenue to FMS operating revenue, which was not provided within the MD&A discussion:~~Contents

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
FMS total revenue $ 1,195,798
1,155,011
$ 3,491,847
3,404,452
Fuel ⁽¹⁾
(169,787 ) (157,108 ) (505,055 ) (448,987 )
FMS operating revenue $ 1,026,011
997,903
$ 2,986,792
2,955,465

FMS EBT $ 100,693
112,507
$ 220,973
306,554
FMS EBT as a % of FMS total revenue 8.4 % 9.7 % 6.3 % 9.0 %
FMS EBT as a % of FMS operating revenue 9.8 % 11.3 % 7.4 % 10.4 %

~~————————————~~


~~(1)~~	~~Includes intercompany fuel sales from FMS to DTS and SCS.~~

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

AND RESULTS OF OPERATIONS -— (Continued)

The following table provides a reconciliation of ~~DTS~~FMS total revenue to ~~DTS~~FMS operating ~~revenue, which was not provided within the MD&A discussion:~~revenue:


	Three months ended March 31,				Twelve months ended March 31,
(Dollars in millions)	2023		2022		2023		2022
FMS total revenue	$	1,503	$	1,529	$	6,301	$	5,873
Fuel services revenue	(241)		(247)		(1,108)		(818)

FMS operating revenue	$	1,262	$	1,282	$	5,193	$	5,055

FMS EBT	$	182	$	249	$	990	$	850
FMS EBT as a % of FMS total revenue	12.1%		16.3%		15.7%		14.5%
FMS EBT as a % of FMS operating revenue	14.4%		19.4%		19.1%		16.8%

————————————

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
DTS total revenue $ 272,334
260,921
$ 811,620
764,025
Subcontracted transportation (46,230 ) (37,743 ) (136,833 ) (106,896 )
Fuel (28,187 ) (26,530 ) (83,742 ) (75,916 )
DTS operating revenue $ 197,917
196,648
$ 591,045
581,213

DTS EBT $ 13,770
17,584
$ 39,892
48,300
DTS EBT as a % of DTS total revenue 5.1 % 6.7 % 4.9 % 6.3 %
DTS EBT as a % of DTS operating revenue 7.0 % 8.9 % 6.7 % 8.3 %

The following table provides a reconciliation of SCS total revenue to SCS operating ~~revenue, which was not provided within the MD&A discussion:~~revenue:


	Three months ended March 31,				Twelve months ended March 31,
(Dollars in millions)	2023		2022		2023		2022
SCS total revenue	$	1,201	$	1,089	$	4,832	$	3,537
Subcontracted transportation and fuel	(322)		(351)		(1,437)		(1,091)

SCS operating revenue	$	879	$	738	$	3,395	$	2,446

SCS EBT	$	17	$	43	$	194	$	132
SCS EBT as a % of SCS total revenue	1.4%		3.9%		4.0%		3.7%
SCS EBT as a % of SCS operating revenue	1.9%		5.8%		5.7%		5.4%

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands)
SCS total revenue $ 496,004
416,898
$ 1,429,477
1,207,665
Subcontracted transportation (101,740 ) (56,089 ) (279,326 ) (162,743 )
Fuel (17,835 ) (15,356 ) (53,252 ) (45,495 )
SCS operating revenue $ 376,429
345,453
$ 1,096,899
999,427

SCS EBT $ 22,052
30,956
$ 75,359
79,105
SCS EBT as a % of SCS total revenue 4.4 % 7.4 % 5.3 % 6.6 %
SCS EBT as a % of SCS operating revenue 5.9 % 9.0 % 6.9 % 7.9 %

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 DTS total revenue to DTS operating revenue:


	Three months ended March 31,				Twelve months ended March 31,
(Dollars in millions)	2023		2022		2023		2022
DTS total revenue	$	454	$	425	$	1,815	$	1,562
Subcontracted transportation and fuel	(132)		(129)		(550)		(447)

DTS operating revenue	$	322	$	296	$	1,265	$	1,115

DTS EBT	$	29	$	20	$	111	$	56
DTS EBT as a % of DTS total revenue	6.4%		4.7%		6.1%		3.6%
DTS EBT as a % of DTS operating revenue	9.0%		6.8%		8.8%		5.0%

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 March 31,
(Dollars in millions)	2023		2022
Net earnings	$	832	$	644
Other items impacting comparability, net (1)	(121)		(13)
Income taxes (2)	339		228
Adjusted earnings before income taxes	1,050		859
Adjusted income taxes (3)	(280)		(215)
Adjusted net earnings [A]	$	770	$	644

Average shareholders’ equity	$	2,887	$	2,532
Average adjustments to shareholders’ equity (4)	(15)		(2)
Adjusted average shareholders’ equity [B]	$	2,872	$	2,530

Adjusted return on equity [A/B]	27%		25%

————————————

(1)Refer to the table below for (benefit) and charge adjustments to net earnings, 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.

Note: Amounts may not be additive due to rounding.


	Twelve months ended March 31,
(In millions)	2023		2022

FMS U.K. exit	$	(114)	$	(28)
Other, net	(7)		10
ERP implementation costs	—		5
Other items impacting comparability, net	$	(121)	$	(13)

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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”~~"believe," "expect," "intend," "estimate," "anticipate," "will," "may," "could," "should" or similar expressions. This Quarterly Report ~~on Form 10-Q~~ contains forward-looking statements including ~~but not limited to,~~ statements regarding:

•our expectations with respect to the effects of ongoing global supply chain disruptions on our business and financial results;

•our expectations with respect to a softening macroeconomic and freight environment;

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

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

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

•our expectations in our FMS business segment regarding ~~anticipated ChoiceLease and commercial rental revenue and demand;~~ChoiceLease;

•our expectations in our ~~DTS~~SCS and ~~SCS~~DTS business segments ~~regarding anticipated total~~related to revenue and ~~operating revenue trends~~earnings growth and ~~growth rates;~~contract sales activity;

•our expectations of ~~the long-term residual values of revenue earning equipment;~~

~~the anticipated decline in NLE vehicles in inventory through the end of the year;~~

~~our expectations of~~cash flow from operating activities, free cash flow, and capital ~~expenditures through the end of 2017;~~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, asset impairments, the valuation of our pension ~~expense, compensation expense~~plans, allowance for credit losses, and ~~employee benefit plan obligations, depreciation and residual value guarantees and income taxes;~~self-insurance loss reserves;

•the adequacy of ~~estimates we make in preparing financial statements including~~ our fair value estimates of ~~employee incentive awards under our share-based compensation plans,~~ publicly traded debt and other debt;

~~our beliefs regarding the default risk of our direct financing lease receivables;~~

•our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources;

•our expected level of use and availability of outside funding sources, anticipated future payments under debt and lease agreements, and risk of losses resulting from counterparty default under hedging and derivative agreements;

•our ability to meet our objectives with the share repurchase programs;

•the anticipated impact of fuel ~~price~~and energy prices, interest rate movements, subcontracted transportation costs, 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 ~~and the adequacy of our loss provisions~~ with respect to certain claims, proceedings and lawsuits;

~~our expectations about the need to repatriate foreign cash to the U.S.;~~

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

•our intent to permanently reinvest the earnings of our non U.K. & Germany foreign subsidiaries indefinitely;

•our expectations regarding the ~~future use~~benefits from our strategic investments and ~~availability~~initiatives;

•our expectations regarding the exit of ~~funding sources;~~the FMS U.K. business and the timing of such exit;

•our expectation regarding a material foreign currency cumulative translation adjustments loss;

•our expectations regarding the ~~anticipated impact~~achievement of ~~recent accounting pronouncements.~~our return on equity improvement initiatives;

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

AND RESULTS OF OPERATIONS -— (Continued)

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

•our expectations with respect to the asset impairment charge associated with specialized sortation and conveyor equipment used in the warehouse operation of a specific SCS customer;

•the anticipated impact of inflationary pressures;

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

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

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 ~~statement.~~statements. These risk factors, among others, include ~~but are not limited to,~~ the following:

•Market Conditions:

◦Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services and products, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets.

◦Decreases in freight demand which would impact both our transactional and variable-based contractual business.

◦Changes in our customers’ operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services and products.

◦Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions.

◦Volatility in customer volumes and shifting customer demand in the industries we service.

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

•Competition:

◦Advances in technology may impact demand for our services or may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.

◦Competition from other service providers, some of which 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 where we operate, which may create large competitors with greater financial resources.

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

•Profitability:

◦Lower than expected sales volumes or customer retention levels.

◦Decreases in commercial rental fleet utilization and pricing.

◦Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail versus wholesale sales.

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



	Ÿ		Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services, lower profit margins, increased levels of bad debt and reduced access to credit

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	Ÿ		~~Decreases in freight demand which would impact both our transactional and variable-based contractual business~~



	Ÿ		~~Changes in our customers’ operations, financial condition or business environment that may limit their need for, or ability to purchase, our services~~



	Ÿ		~~Further decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions~~



	Ÿ		~~Volatility in customer volumes and shifting customer demand in the industries serviced by our SCS business~~



	Ÿ		~~Changes in current financial, tax or regulatory requirements that could negatively impact the leasing market~~

~~Competition:~~



	Ÿ		Advances in technology may impact demand for our services or may require increased investments to remain competitive, which may take time and require additional investment and increase costs which our customers may not be willing to accept



	Ÿ		~~Competition from other service providers, some of which have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves~~



	Ÿ		~~Continued consolidation in the markets in which we operate which may create large competitors with greater financial resources~~



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

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

AND RESULTS OF OPERATIONS -— (Continued)

◦Decreases in volume in our omnichannel retail vertical.

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

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

◦The inability of our information security program to safeguard our data.

◦Sudden changes in market fuel prices and fuel shortages.

◦Higher prices for vehicles, diesel engines and fuel as a result of new regulations or inflationary 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 as originally scheduled.

◦Our inability to successfully execute our strategic returns and asset management initiatives, maintain our fleet at normalized levels and right-size our fleet in line with demand.

◦Our key assumptions and pricing structure, including any assumptions made with respect to inflation, of our SCS and DTS contracts prove to be inaccurate.

◦Increased unionizing, labor strikes and work stoppages.

◦Difficulties in attracting and retaining professional drivers, warehouse personnel and technicians due to labor 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 other natural occurrences.

•Financing Concerns:

◦Higher borrowing costs.

◦Increased inflationary pressures.

◦Unanticipated interest rate and currency exchange rate fluctuations.

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

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

•Accounting Matters:

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

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

◦Changes in accounting rules, assumptions and accruals.



	Ÿ		~~Our inability to obtain adequate profit margins for our services~~

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	Ÿ		~~Lower than expected sales volumes or customer retention levels~~



	Ÿ		~~Decreases in commercial rental fleet utilization and pricing~~



	Ÿ		~~Lower than expected demand for, and values of used vehicles~~



	Ÿ		~~Loss of key customers in our DTS and SCS business segments~~



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



	Ÿ		~~The inability of our legacy information technology systems to provide timely access to data~~



	Ÿ		~~Sudden changes in fuel prices and fuel shortages~~



	Ÿ		~~Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives~~



	Ÿ		~~Our inability to successfully execute our asset management initiatives, maintain our fleet at normalized levels and right-size our fleet in line with demand~~



	Ÿ		~~Our inability to redeploy vehicles and prepare vehicles for sale in a cost-efficient manner~~



	Ÿ		~~Our key assumptions and pricing structure of our DTS and SCS contracts prove to be inaccurate~~



	Ÿ		~~Increased unionizing, labor strikes and work stoppages~~



	Ÿ		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



	Ÿ		~~Our inability to manage our cost structure~~



	Ÿ		~~Our inability to limit our exposure for customer claims~~



	Ÿ		~~Unfavorable or unanticipated outcomes in legal proceedings or uncertain positions~~



	Ÿ		~~Business interruptions or expenditures due to severe weather or natural occurrences~~



	Ÿ		~~Inability to react to and quickly adapt to changing market conditions~~

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

AND RESULTS OF OPERATIONS -— (Continued)

~~Financing Concerns:~~



	Ÿ		~~Higher borrowing costs and possible decreases in available funding sources caused by an adverse change in our debt ratings~~



	Ÿ		~~Unanticipated interest rate and currency exchange rate fluctuations~~



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



	Ÿ		~~Withdrawal liability as a result of our participation in multi-employer plans~~



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

~~Accounting Matters:~~



	Ÿ		~~Impact of unusual items resulting from ongoing evaluations of business strategies, asset valuations, acquisitions, divestitures and our organizational structure~~



	Ÿ		~~Reductions in residual values or useful lives of revenue earning equipment~~



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



	Ÿ		~~Increases in health care costs resulting in higher insurance costs~~



	Ÿ		~~Changes in accounting rules, assumptions and accruals~~



	Ÿ		~~Impact of actual insurance claim and settlement activity compared to historical loss development factors used to project future development~~



	Ÿ		~~Lower than expected operating performance in our FMS Europe reporting unit could affect key assumptions used in our annual goodwill impairment test and result in impairment~~

•Other risks detailed from time to time in our SEC filings including our ~~2016~~2021 Annual Report on Form ~~10-K.~~

10-K and in "Item 1A.-Risk Factors" of this Quarterly Report.

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, nowe cannot provide assurance ~~can be given~~ as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this 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, ~~2016.~~2022. Please refer to the ~~2016~~2022 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~~first quarter of ~~2017,~~2023, 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~~first quarter of ~~2017,~~2023, 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 ~~Controls~~Control over Financial Reporting

During the three months ended ~~September 30, 2017,~~March 31, 2023, there were no changes in ~~Ryder’s~~Ryder's internal control over financial reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please refer to Note 15, "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, 2022, filed with the SEC on February 15, 2023. 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, 2017~~:March 31, 2023:


(Dollars in millions, 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)
January 1 through January 31, 2023	60	$	83.40	—	1,574,607
February 1 through February 28, 2023	788,489	97.18		465,110	1,109,497
March 1 through March 31, 2023	195	86.08		—	1,109,497
Total	788,744	$	97.18	465,110

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
Anti-Dilutive
Program ⁽²⁾
July 1 through July 30, 2017 8,758
$ 72.82
—
636,128
August 1 through August 31, 2017 105,394
72.36
105,394
530,734
September 1 through September 30, 2017 34
78.92
—
530,734
Total 114,186
$ 72.40
105,394

————————————

~~(1)~~

During the three months ended September 30, 2017, we purchased an aggregate of 8,892 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 employees' tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.

~~(2)~~

In December 2015, our Board of Directors authorized a new share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans. Under the December 2015 program, management is authorized to repurchase (i) up to 1.5 million shares of common stock, the sum of which will not exceed the number of shares issued to employees under Ryder's employee stock plans from December 1, 2015 to December 9, 2017 plus (ii) 0.5 million shares issued to employees that were not purchased under Ryder's previous share repurchase program. The December 2015 program limits aggregate share repurchases to no more than 2 million shares of Ryder common stock. Share repurchases of common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish prearranged written plans for Ryder under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the December 2015 program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan.

(1)During the three months ended March 31, 2023, we purchased an aggregate of 323,634 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)Our board of directors authorized 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 our employee stock plans. The 2021 Anti-Dilutive Repurchase Program commenced on October 14, 2021 and expires on October 14, 2023. In February 2023, our board of directors authorized a new discretionary share repurchase program to grant management discretion to repurchase up to 2 million shares of common stock over a period of two years (the "2023 Discretionary Program"). Share repurchases under both programs can be made from time to time using our working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of acquisitions and stock price.

ITEM 5. OTHER INFORMATION

On April 25, 2023, certain terms of our global revolving credit facility were amended. Pursuant to the amendment, among other items, (i) the definition of consolidated net worth was revised to exclude impacts from our exit of the FMS U.K. business, (ii) LIBOR was replaced as an available benchmark interest rate with Term SOFR, and (iii) the maximum absolute dollar amounts for our trade receivables financing programs and asset-backed financings were removed and only percentage-based maximum amounts remain.

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ITEM 6. EXHIBITS



Exhibit Number		Description
~~12.1~~
10*		~~Calculation~~First Amendment to Third Amended and Restated Global Revolving Credit Agreement, dated as of ~~Ratio of Earnings to Fixed Charges~~December 14, 2021, by and among Ryder System, Inc., certain Ryder subsidiaries, and the lenders and agents named therein
31.1
~~31.1~~	Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2
~~31.2~~	Certification of ~~Art A. Garcia~~John J. Diez pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32
32	Certification of Robert E. Sanchez and ~~Art A. Garcia~~John J. Diez pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 ~~U.S.C.~~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)

* Management contract or compensation plan arrangement pursuant to Item 601(b)(10) of Regulation S-K.

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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 24, 2017~~		~~By:~~April 26, 2023	By:	/s/ ~~Art A. Garcia~~JOHN J. DIEZ
			~~Art A. Garcia~~	John J. Diez
				Executive Vice President and Chief Financial Officer
				(Principal Financial Officer)

Date: ~~October 24, 2017~~		April 26, 2023	By:	/s/ ~~Frank Mullen~~CRISTINA GALLO-AQUINO
			~~Frank Mullen~~	Cristina Gallo-Aquino
				Senior Vice President and Controller
				(Principal Accounting Officer)


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



		Page No.
			~~Page No.~~

PART I . FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)	1

	Condensed Consolidated ~~Condensed~~ Statements of Earnings ~~— Three and nine months ended September 30, 2017 and 2016~~	1

	Condensed Consolidated ~~Condensed~~ Statements of Comprehensive Income ~~— Three and nine months ended September 30, 2017 and 2016~~	2

	Condensed Consolidated ~~Condensed~~ Balance Sheets ~~— September 30, 2017 and December 31, 2016~~	3

	Condensed Consolidated ~~Condensed~~ Statements of Cash Flows ~~— Nine months ended September 30, 2017 and 2016~~	4

	Condensed Consolidated Statements of Shareholders' Equity	5

	Notes to Condensed Consolidated ~~Condensed~~ Financial Statements	56

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	4844

ITEM 4.	Controls and Procedures	4844

PART II . OTHER INFORMATION

ITEM 1.	Legal Proceedings	45

ITEM 1A.	Risk Factors	45

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4845







ITEM 6 ~~Exhibits~~.	49Exhibits	46

SIGNATURE		5047



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



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



	September 30, 2017					December 31, 2016
	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾
	(In thousands)
Held for use:
ChoiceLease	$	9,799,028	(3,284,267	)	6,514,761	$	9,486,977	(3,031,937	)	6,455,040
Commercial rental	2,599,043		(973,126	)	1,625,917	2,499,010		(935,346	)	1,563,664
Held for sale	417,771		(309,132	)	108,639	494,355		(365,337	)	129,018
Total	$	12,815,842	(4,566,525	)	8,249,317	$	12,480,342	(4,332,620	)	8,147,722



				Total Losses ⁽²⁾
	September 30,			Three months ended September 30,			Nine months ended September 30,
	2017		2016	2017		2016	2017		2016
	(In thousands)
Assets held for sale:
Revenue earning equipment ⁽¹⁾:
Trucks	$	14,081	17,091	$	6,215	2,528	$	22,942	6,842
Tractors	15,448		61,480	1,127		7,985	18,444		22,073
Trailers	2,279		2,563	1,871		1,152	5,044		2,589

Total assets at fair value	$	31,808	81,134	$	9,213	11,665	$	46,430	31,504



	Weighted-Average Interest Rate
	September 30, 2017	December 31, 2016	Maturities	September 30, 2017			December 31, 2016
				(In thousands)
Short-term debt and current portion of long-term debt:
Short-term debt	1.57%	1.07%		$	59,410		177,629
Current portion of long-term debt				84,532			613,781
Total short-term debt and current portion of long-term debt				143,942			791,410
Long-term debt:
U.S. commercial paper ⁽¹⁾	1.44%	0.87%	2020	468,540			342,480
Global revolving credit facility	3.20%	2.06%	2020	7,596			4,703
Unsecured U.S. notes — Medium-term notes⁽¹⁾	2.69%	2.67%	2017-2025	4,013,602			4,113,421
Unsecured U.S. obligations	2.52%	2.19%	2018	50,000			50,000
Unsecured foreign obligations	1.50%	1.55%	2017-2020	229,030			232,092
Asset-backed U.S. obligations ⁽²⁾	1.85%	1.80%	2017-2024	516,009			459,876
Capital lease obligations	3.45%	3.17%	2017-2023	21,859			24,184
Total before fair market value adjustment				5,306,636			5,226,756
Fair market value adjustment on notes subject to hedging ⁽³⁾				(2,058		)	1,110
Debt issuance costs				(14,762		)	(14,221	)
				5,289,816			5,213,645
Current portion of long-term debt				(84,532		)	(613,781	)
Long-term debt				5,205,284			4,599,864
Total debt				$	5,349,226		5,391,274



	Currency Translation Adjustments and Other			Net Actuarial Loss ⁽¹⁾		Prior Service (Cost)/ Credit ⁽¹⁾		Accumulated Other Comprehensive Loss
	(In thousands)
December 31, 2016	$	(206,610	)	(620,292	)	(7,130	)	(834,032	)
Amortization	—			15,252		165		15,417
Other current period change	70,991			810		—		71,801
September 30, 2017	$	(135,619	)	(604,230	)	(6,965	)	(746,814	)



	Currency Translation Adjustments and Other			Net Actuarial Loss ⁽¹⁾		Prior Service Credit ⁽¹⁾		Accumulated Other Comprehensive Loss
	(In thousands)
December 31, 2015	$	(136,020	)	(576,993	)	278		(712,735	)
Amortization	—			14,052		134		14,186
Other current period change	(37,874		)	(5,495	)	(5,527	)	(48,896	)
September 30, 2016	$	(173,894	)	(568,436	)	(5,115	)	(747,445	)



	Proceeds per unit change 2017/2016
	Three Months		Nine Months

Tractors	(19	)%	(17	)%
Trucks	(15	)%	(16	)%



	Three months ended September 30, 2017				Nine months ended September 30, 2017
	Total		Operating ⁽¹⁾		Total		Operating ⁽¹⁾
Organic, including price and volume	3	%	3	%	2	%	2	%
Fuel	1		—		2		—
Foreign exchange	—		—		(1	)	(1	)
Net increase	4	%	3	%	3	%	1	%



	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 Anti-Dilutive Program ⁽²⁾
July 1 through July 30, 2017	8,758	$	72.82	—	636,128
August 1 through August 31, 2017	105,394	72.36		105,394	530,734
September 1 through September 30, 2017	34	78.92		—	530,734
Total	114,186	$	72.40	105,394