UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

		
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016
OR

		
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	
FOR THE TRANSITION PERIOD FROM                      TO                     
Commission File Number: 1-4364

RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)

	
		
Florida	59-0739250	
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)	
 	 	
11690 N.W. 105th Street	 	
Miami, Florida 33178	(305) 500-3726	
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)	
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ         NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ         NO ¨

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

	
				
Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company  ¨	
 	(Do not check if a smaller reporting company)	 	

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  ¨ YES    þ NO

The number of shares of Ryder System, Inc. Common Stock ($0.50 par value per share) outstanding at June 30, 2016 was 53,478,452.

					

RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS

	

 	 	Page No.  	
 	 	
PART I       FINANCIAL INFORMATION	 	
 	 	
ITEM 1       Financial Statements (unaudited)	 	
 	 	 	
 	Consolidated Condensed Statements of Earnings — Three and six months ended June 30, 2016 and 2015	1	
 	 	 	
 	Consolidated Condensed Statements of Comprehensive Income — Three and six months ended June 30, 2016 and 2015	2	
 	 	 	
 	Consolidated Condensed Balance Sheets — June 30, 2016 and December 31, 2015	3	
 	 	 	
 	Consolidated Condensed Statements of Cash Flows — Six months ended June 30, 2016 and 2015	4	
 	 	 	
 	Notes to Consolidated Condensed Financial Statements	5	
 	 	
ITEM 2        Management’s Discussion and Analysis of Financial Condition and Results of Operations	20	
 	 	
ITEM 3        Quantitative and Qualitative Disclosures About Market Risk	46	
 	 	
ITEM 4       Controls and Procedures	46	
 	 	
PART II       OTHER INFORMATION	 	
 	 	
ITEM 2        Unregistered Sales of Equity Securities and Use of Proceeds	46	
 	 	
ITEM 6       Exhibits	47	
 	 	 	
SIGNATURES	48	

i

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(unaudited)

	
														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands, except per share amounts)	
Lease and rental revenues	$	798,387		 	779,046		 	$	1,566,141		 	1,508,070		
Services revenue	785,791		 	737,170		 	1,544,918		 	1,430,874		
Fuel services revenue	119,566		 	146,715		 	222,357		 	291,140		
Total revenues	1,703,744		 	1,662,931		 	3,333,416		 	3,230,084		
 	 	 	 	 	 	 	 	
Cost of lease and rental	555,302		 	531,308		 	1,107,792		 	1,049,730		
Cost of services	646,129		 	603,488		 	1,277,843		 	1,185,818		
Cost of fuel services	115,478		 	142,176		 	214,379		 	278,465		
Other operating expenses	27,796		 	29,582		 	57,947		 	61,955		
Selling, general and administrative expenses	222,448		 	214,868		 	433,661		 	421,473		
Gains on used vehicles, net	(12,000	)	 	(29,985	)	 	(31,129	)	 	(57,193	)	
Interest expense	37,268		 	39,075		 	75,157		 	75,877		
Miscellaneous income, net	(5,456	)	 	(1,028	)	 	(7,721	)	 	(3,665	)	
 	1,586,965		 	1,529,484		 	3,127,929		 	3,012,460		
Earnings from continuing operations before income taxes	116,779		 	133,447		 	205,487		 	217,624		
Provision for income taxes	42,737			47,530		 	75,260		 	78,381		
Earnings from continuing operations	74,042			85,917		 	130,227		 	139,243		
Loss from discontinued operations, net of tax	(292	)	 	(758	)	 	(683	)	 	(1,295	)	
Net earnings	$	73,750		 	85,159		 	$	129,544		 	137,948		
 	 	 	 	 	 	 	 	
Earnings (loss) per common share — Basic	 	 	 	 	 	 	 	
Continuing operations	$	1.39		 	1.62		 	$	2.45		 	2.63		
Discontinued operations	(0.01	)	 	(0.01	)	 	(0.01	)	 	(0.02	)	
Net earnings	$	1.39		 	1.61		 	$	2.43		 	2.61		
 	 	 	 	 	 	 	 	
Earnings (loss) per common share — Diluted	 	 	 	 	 	 	 	
Continuing operations	$	1.38		 	1.61		 	$	2.43		 	2.61		
Discontinued operations	(0.01	)	 	(0.01	)	 	(0.01	)	 	(0.03	)	
Net earnings	$	1.38		 	1.59		 	$	2.42		 	2.59		
 	 	 	 	 	 	 	 	
Cash dividends declared per common share	$	0.41		 	0.37		 	$	0.82		 	0.74		

See accompanying notes to consolidated condensed financial statements.

Note: EPS amounts may not be additive due to rounding

1

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

    

														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
 	 	 	 	 	 	 	 	
Net earnings	$	73,750		 	85,159		 	$	129,544		 	137,948		
 	 	 	 	 	 	 	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Currency translation adjustment and other	(32,264	)	 	27,027		 	(18,578	)	 	(30,345	)	
 	 	 	 	 	 	 	 	
Amortization of pension and postretirement items	7,446		 	6,834		 	14,869		 	13,892		
Income tax expense related to amortization of pension and postretirement items	(2,479	)	 	(2,366	)	 	(5,187	)	 	(4,814	)	
Amortization of pension and postretirement items, net of tax	4,967		 	4,468		 	9,682		 	9,078		
 	 	 	 	 	 	 	 	
Change in net actuarial loss and prior service cost	(17,367	)	 	(8,526	)	 	(17,367	)	 	(8,526	)	
Income tax benefit related to change in net actuarial loss and prior service cost	6,345		 	3,205		 	6,345		 	3,205		
Change in net actuarial loss and prior service cost, net of taxes	(11,022	)	 	(5,321	)	 	(11,022	)	 	(5,321	)	
 	 	 	 	 	 	 	 	
Other comprehensive income (loss), net of taxes	(38,319	)	 	26,174		 	(19,918	)	 	(26,588	)	
 	 	 	 	 	 	 	 	
Comprehensive income	$	35,431		 	111,333		 	$	109,626		 	111,360		
See accompanying notes to consolidated condensed financial statements.

2

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)

	
							
 	June 30,
2016	 	December 31,
2015	
 	(Dollars in thousands, except per
share amount)	
Assets:	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	65,964			60,945		
Receivables, net of allowance of $16,138 and $15,560, respectively	850,504			835,489		
Inventories	66,553			63,725		
Prepaid expenses and other current assets	143,227			138,143		
Total current assets	1,126,248		 	1,098,302		
Revenue earning equipment, net	8,300,108			8,184,735		
Operating property and equipment, net of accumulated depreciation of $1,105,458 and $1,083,604, respectively	741,022			714,970		
Goodwill	388,278			389,135		
Intangible assets, net of accumulated amortization of $48,691 and $45,736, respectively	51,618			55,192		
Direct financing leases and other assets	528,853			510,246		
Total assets	$	11,136,127			10,952,580		
 	 	 	 	
Liabilities and shareholders’ equity:	 	 	 	
Current liabilities:	 	 	 	
Short-term debt and current portion of long-term debt	$	1,047,208			634,530		
Accounts payable	462,335			502,373		
Accrued expenses and other current liabilities	508,517			543,352		
Total current liabilities	2,018,060		 	1,680,255		
Long-term debt	4,586,806			4,868,097		
Other non-current liabilities	828,181			829,595		
Deferred income taxes	1,655,982			1,587,522		
Total liabilities	9,089,029		 	8,965,469		
 	 	 	 	
Shareholders’ equity:	 	 	 	
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding,
June 30, 2016 or December 31, 2015	—		 	—		
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding,
June 30, 2016 — 53,478,452; December 31, 2015 — 53,490,603	26,739		 	26,745		
Additional paid-in capital	1,016,173		 	1,006,021		
Retained earnings	1,736,839		 	1,667,080		
Accumulated other comprehensive loss	(732,653	)	 	(712,735	)	
Total shareholders’ equity	2,047,098			1,987,111		
Total liabilities and shareholders’ equity	$	11,136,127			10,952,580		
See accompanying notes to consolidated condensed financial statements.

3

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)

							
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Cash flows from operating activities from continuing operations:	 	 	 	
Net earnings	$	129,544		 	137,948		
Less: Loss from discontinued operations, net of tax	(683	)	 	(1,295	)	
Earnings from continuing operations	130,227		 	139,243		
Depreciation expense	581,043		 	541,076		
Gains on used vehicles, net	(31,129	)	 	(57,193	)	
Share-based compensation expense	10,001		 	11,169		
Amortization expense and other non-cash charges, net	31,407		 	28,329		
Deferred income tax expense	67,031		 	67,592		
Changes in operating assets and liabilities:	 	 	 	
Receivables	(39,071	)	 	(33,535	)	
Inventories	(2,633	)	 	1,006		
Prepaid expenses and other assets	(18,734	)	 	(25,555	)	
Accounts payable	68,584		 	(30,439	)	
Accrued expenses and other non-current liabilities	(34,054	)	 	17,005		
Net cash provided by operating activities from continuing operations	762,672		 	658,698		
 	 	 	 	
Cash flows from financing activities:	 	 	 	
Net change in commercial paper borrowings and revolving credit facilities	162,105			34,750		
Debt proceeds	298,254			930,090		
Debt repaid	(328,416	)		(486,103	)	
Dividends on common stock	(44,261	)	 	(39,690	)	
Common stock issued	6,259		 	17,129		
Common stock repurchased	(21,899	)	 	(6,141	)	
Excess tax benefits from share-based compensation and other items	(1,710	)	 	710		
Debt issuance costs	(933	)	 	(5,225	)	
Net cash provided by financing activities	69,399		 	445,520		
 	 	 	 	
Cash flows from investing activities:	 	 	 	
Purchases of property and revenue earning equipment	(1,120,182	)	 	(1,329,218	)	
Sales of revenue earning equipment	245,681		 	211,153		
Sales of operating property and equipment	6,322		 	641		
Collections on direct finance leases and other items	43,957		 	33,912		
Changes in restricted cash	886		 	4,849		
Net cash used in investing activities	(823,336	)	 	(1,078,663	)	
 	 	 	 	
Effect of exchange rate changes on cash	(3,415	)	 	(1,198	)	
Increase in cash and cash equivalents from continuing operations	5,320		 	24,357		

Decrease in cash and cash equivalents from discontinued operations	(301	)	 	(1,096	)	
 	 	 	 	
Increase in cash and cash equivalents	5,019		 	23,261		
Cash and cash equivalents at January 1	60,945		 	50,092		
Cash and cash equivalents at June 30	$	65,964		 	73,353		
See accompanying notes to consolidated condensed financial statements.

4

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)

1. GENERAL

Interim Financial Statements

The accompanying unaudited Consolidated Condensed 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 to be consolidated in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with the accounting policies described in our 2015 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 audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation 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.

Beginning in 2016, we reclassified the losses from fair value adjustments on our used vehicles from "Other operating expenses" to "Gains on used vehicles, net" within the Consolidated Condensed Statement of Earnings. Prior year amounts have been reclassified to conform to the current period presentation.

5

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

2. RECENT ACCOUNTING PRONOUNCEMENTS

Share-Based Payments

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Stock Compensation, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance will be effective January 1, 2017. We are in the process of evaluating the impacts of the adoption of this standard.

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term 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. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The standard is effective January 1, 2019, with early adoption permitted. The standard is to be applied using a modified retrospective transition method. We are in the process of determining the effect on our consolidated financial position, results of operations and cash flows.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , 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. The ASU is effective January 1, 2018, and will replace most existing revenue recognition guidance. The standard permits the use of either the modified retrospective or cumulative effect transition methods.

In connection with the FASB’s recently issued guidance on leases, the standard requires the lease component of our full service lease product line to be accounted for under the lease accounting guidance and the maintenance and other elements of the product line to be accounted for under the new revenue guidance. Because of the interrelationship of these standards on our full service lease product line, we have not yet selected a transition method. We are in the process of determining the effect on our consolidated financial position, results of operations and cash flows.

Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires an entity to present debt issuance costs as a direct reduction from the carrying amount of the related debt liability on the balance sheet. We adopted this guidance on January 1, 2016 and reclassified $15 million from other assets to long-term debt in our December 31, 2015 balance sheet. Other than the change in presentation within the Consolidated Condensed Balance Sheets, this accounting guidance did not impact our consolidated financial position, results of operations or cash flows.

6

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

3. REVENUE EARNING EQUIPMENT

	
																				
 	June 30, 2016	 	December 31, 2015	
 	Cost	 	Accumulated
Depreciation	 	Net  Book
Value (1)	 	Cost	 	Accumulated
Depreciation	 	Net  Book
Value (1)	
 	(In thousands)	
Held for use:	 	
Full service lease	$	9,239,442		 	(2,838,897	)	 	6,400,545		 	$	8,839,941		 	(2,723,605	)	 	6,116,336		
Commercial rental	2,589,646		 	(874,713	)	 	1,714,933		 	2,811,715		 	(907,412	)	 	1,904,303		
Held for sale	576,449		 	(391,819	)	 	184,630		 	496,634		 	(332,538	)	 	164,096		
Total	$	12,405,537		 	(4,105,429	)	 	8,300,108		 	$	12,148,290		 	(3,963,555	)	 	8,184,735		
 
————————————
		
(1)	Revenue earning equipment, net includes vehicles acquired under capital leases of $43.9 million , less accumulated depreciation of $21.1 million , at June 30, 2016 , and $47.5 million , less accumulated depreciation of $22.2 million , at December 31, 2015 .	

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, some of our revenue earning equipment leases are classified as direct financing leases and, to a lesser extent, sales-type leases. As of June 30, 2016 and December 31, 2015 , the net investment in direct financing and sales-type leases was $431 million and $438 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 full service lease contract. For those customers who are designated as high risk, we typically require 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.

As of June 30, 2016 and December 31, 2015 , 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.

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 are recognized at the time they arrive at our used truck centers and are presented within “Gains on used vehicles, net ” in the 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 vehicles held for sale were classified within Level 3 of the fair value hierarchy.

7

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

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)	
 	June 30,	 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Assets held for sale:	 	 	 	 	 	 	 	 	 	 	 	
Revenue earning equipment (1) :	 	 	 	 	 	 	 	 	 	 	 	
Trucks	$	13,749		 	6,805		 	$	2,570		 	1,515		 	$	4,314		 	2,743		
Tractors	51,795		 	7,389		 	9,206		 	1,081		 	14,088		 	1,908		
Trailers	3,015		 	1,625		 	775		 	656		 	1,437		 	972		
 	 	 	 	 	 	 	 	 	 	 	 	
Total assets at fair value	$	68,559		 	15,819		 	$	12,551		 	3,252		 	$	19,839		 	5,623		
 ————————————
		
(1)	Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where carrying value exceeded fair value.	
		
(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 carrying value.	

For the three and six months ended June 30, 2016  and 2015 , the components of gains on used vehicles, net were as follows:

														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	 	 	 	 	
Gains on vehicle sales, net	$	(24,551	)	 	(33,237	)	 	$	(50,968	)	 	(62,816	)	
Losses from fair value adjustments	12,551		 	3,252		 	19,839		 	5,623		
Gains on used vehicles, net	$	(12,000	)	 	(29,985	)	 	$	(31,129	)	 	(57,193	)	

8

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

4. GOODWILL

The carrying amount of goodwill attributable to each reportable business segment was as follows:

													
 	Fleet
Management
Solutions	 	Dedicated
Transportation
Solutions	 	Supply
Chain
Solutions	 	Total	
 	(In thousands)	
Balance at January 1, 2016:	 	 	 	 	 	 	 	
Goodwill	$	231,358		 	40,808		 	146,190		 	418,356		
Accumulated impairment losses	(10,322	)	 	—		 	(18,899	)	 	(29,221	)	
 	221,036		 	40,808		 	127,291		 	389,135		
Foreign currency translation adjustments	(1,246	)	 	—		 	389		 	(857	)	
Balance at June 30, 2016:	 	 	 	 	 	 	 	
Goodwill	230,112		 	40,808		 	146,579		 	417,499		
Accumulated impairment losses	(10,322	)	 	—		 	(18,899	)	 	(29,221	)	
 	$	219,790		 	40,808		 	127,680		 	388,278		

We assess goodwill for impairment on April 1st of each year or more often if deemed necessary. In the second quarter of 2016 , we completed our annual goodwill impairment test. We performed quantitative assessments on two of our reporting units and determined there was no impairment. We performed qualitative assessments for three reporting units, which considered individual factors such as macroeconomic conditions, changes in our industry and the markets in which we operate as well as our historical and expected future financial performance. After performing the qualitative assessments, we concluded it was more likely than not that fair value is greater than the carrying value and determined there was no impairment.

5.  ACCRUED EXPENSES AND OTHER LIABILITIES

	
																				
 	June 30, 2016	 	December 31, 2015	
 	Accrued
Expenses	 	Non-Current
Liabilities	 	Total	 	Accrued
Expenses	 	Non-Current
Liabilities	 	Total	
 	(In thousands)	
Salaries and wages	$	87,558		 	—		 	87,558		 	$	99,032		 	—		 	99,032		
Deferred compensation	2,725		 	42,378		 	45,103		 	2,252		 	41,691		 	43,943		
Pension benefits	3,822		 	482,187		 	486,009		 	3,790		 	484,892		 	488,682		
Other postretirement benefits	1,637		 	19,677		 	21,314		 	1,624		 	20,002		 	21,626		
Other employee benefits	18,404		 	4,290		 	22,694		 	8,956		 	9,706		 	18,662		
Insurance obligations (1)	139,959		 	218,058		 	358,017		 	157,014		 	213,256		 	370,270		
Environmental liabilities	3,997		 	6,333		 	10,330		 	3,791		 	6,554		 	10,345		
Operating taxes	97,187		 	—		 	97,187		 	101,649		 	—		 	101,649		
Income taxes	448		 	24,110		 	24,558		 	3,378		 	22,366		 	25,744		
Interest	31,369		 	—		 	31,369		 	31,218		 	—		 	31,218		
Customer deposits	63,272		 	4,791		 	68,063		 	61,869		 	5,085		 	66,954		
Deferred revenue	16,738		 	—		 	16,738		 	13,038		 	—		 	13,038		
Restructuring liabilities (2)	3,489		 	—		 	3,489		 	12,333		 	—		 	12,333		
Other	37,912		 	26,357		 	64,269		 	43,408		 	26,043		 	69,451		
Total	$	508,517		 	828,181		 	1,336,698		 	$	543,352		 	829,595		 	1,372,947		
  ————————————
		
(1)	Insurance obligations primarily represent claims for which we are self-insured.	
		
(2)	The reduction in restructuring liabilities from December 31, 2015 principally represents cash payments for employee termination costs. The majority of the balance remaining in restructuring liabilities is expected to be paid by the end of 2016.	

9

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

6.  DEBT

													
 	Weighted-Average
Interest Rate	 	 	 	 	 	 	
 	June 30,
2016	 	December 31,
2015	 	Maturities	 	June 30,
2016	 	December 31,
2015	
 	 	 	 	 	 	 	(In thousands)	
Short-term debt and current portion of long-term debt:	 	 	 	 	 	 	 	 	 	
Short-term debt	0.94%	 	2.26%	 		 	$	122,354		 	35,947		
Current portion of long-term debt	 	 	 	 	 	 	924,854		 	598,583		
Total short-term debt and current portion of long-term debt	 	 	 	 	 	1,047,208		 	634,530		
Long-term debt:	 	 	 	 	 	 	 	 	 	
U.S. commercial paper (1)	0.71%	 	0.55%	 	2020	 	599,605		 	547,130		
Global revolving credit facility	2.01%	 	2.31%	 	2020	 	53,037		 	25,291		
Unsecured U.S. notes — Medium-term notes  (1)	2.88%	 	2.84%	 	2016-2025	 	4,113,137		 	4,112,519		
Unsecured U.S. obligations	1.86%	 	1.73%	 	2018	 	50,000		 	50,000		
Unsecured foreign obligations	1.93%	 	1.92%	 	2016-2020	 	254,448		 	275,661		
Asset-backed U.S. obligations  (2)	1.78%	 	1.81%	 	2016-2022	 	407,217		 	434,001		
Capital lease obligations	3.22%	 	3.31%	 	2016-2022	 	28,031		 	32,054		
Total before fair market value adjustment	 	 	 	 	 	 	5,505,475		 	5,476,656		
Fair market value adjustment on notes subject to hedging  (3)	 	 	 	 	 	20,989		 	5,253		
Debt issuance costs (4)	 	 	 	 	 	 	(14,804	)	 	(15,229	)	
 	 	 	 	 	 	 	5,511,660		 	5,466,680		
Current portion of long-term debt	 	 	 	 	 	 	(924,854	)	 	(598,583	)	
Long-term debt	 	 	 	 	 	 	4,586,806		 	4,868,097		
Total debt	 	 	 	 	 	 	$	5,634,014		 	5,502,627		
  ————————————
		
(1)	Amounts are net of aggregate unamortized original issue discounts of $7.2 million and $7.7 million at June 30, 2016 and December 31, 2015 , respectively.	
		
(2)	Asset-backed U.S. obligations are related to financing transactions involving revenue earning equipment.	
		
(3)	The notional amount of executed interest rate swaps designated as fair value hedges was $825 million at June 30, 2016 and December 31, 2015 .	
		
(4)	See Note 2 , " Recent Accounting Pronouncements ," for further discussion of the presentation of debt issuance costs.	

We maintain a $1.2 billion global revolving credit facility with a syndicate of twelve lending institutions led by Bank 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 and Wells Fargo Bank, N.A. The facility matures 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 June 30, 2016 ). 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 in the event 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.

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 June 30, 2016 was 214% . At June 30, 2016 , there was $424.7 million available under the credit facility.

10

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

Our global revolving credit facility enables us to refinance short-term obligations on a long-term basis. Short-term commercial paper obligations not expected to require the use of working capital are classified as long-term 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 June 30, 2016 , we classified $599.6 million of short-term commercial paper and $351.9 million of current debt obligations as long-term. At December 31, 2015 , we classified $547.1 million of short-term commercial paper and $300.0 million of current debt obligations as long-term.

In February 2016, we issued $300 million of unsecured medium-term notes maturing in November 2021. The proceeds from these notes were used to pay off maturing debt and for general corporate purposes. If these notes are downgraded below investment grade following, and 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 plus accrued and unpaid 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 committed purchasers. 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 . If no event occurs which causes early termination, the 364 -day program will expire on October 21, 2016. 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 June 30, 2016 or December 31, 2015 .

At June 30, 2016 and December 31, 2015 , we had letters of credit and surety bonds outstanding totaling $339.1 million and $345.7 million , respectively, which primarily guarantee the payment of insurance claims.

The fair value of total debt (excluding capital lease and asset-backed U.S. obligations) at June 30, 2016 and December 31, 2015 was approximately $5.31 billion and $5.06 billion , 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 other debt were classified within Level 2 of the fair value hierarchy. The carrying amounts reported in the Consolidated Condensed Balance Sheets for “Cash and cash equivalents,” “Receivables, net” and “Accounts payable” approximate fair value because of the immediate or short-term maturities of these financial instruments.

7.  DERIVATIVES

From time to time, we enter into interest rate derivatives to manage our fixed and variable interest rate exposure and to better match the repricing 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 or 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.
 
As of June 30, 2016 , we had interest rate swaps outstanding which are designated as fair value hedges for certain debt obligations, with a total notional value of $825 million and maturities through 2020 . Interest rate swaps are measured at fair value on a recurring basis using Level 2 fair value inputs. The fair value of these interest rate swaps was approximately $21.0 million as of June 30, 2016 , and was presented in "Direct financing leases and other assets" in our Consolidated Condensed Balance Sheets. 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.

11

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

8.  SHARE REPURCHASE PROGRAMS

In December 2015, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans (the December 2015 program).  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 the Company’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 the Company’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 the Company 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. 

During the six months ended June 30, 2016 and June 30, 2015 , we repurchased 321,718 shares for $21.9 million and 69,107 shares for $6.1 million , respectively.

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, 2015	 	$	(136,020	)	 	(576,993	)	 	278		 	(712,735	)	
Amortization	 	—		 	9,754		 	(72	)	 	9,682		
Other current period change	 	(18,578	)	 	(5,597	)	 	(5,425	)	 	(29,600	)	
June 30, 2016	 	$	(154,598	)	 	(572,836	)	 	(5,219	)	 	(732,653	)	

	
														
 	 	Currency
Translation
Adjustments and Other	 	Net Actuarial
Loss (1)	 	Prior Service
Credit (1)	 	Accumulated
Other
Comprehensive
Loss	
 	 	(In thousands)	
December 31, 2014	 	$	(36,087	)	 	(585,941	)	 	1,758		 	(620,270	)	
Amortization	 	—		 	9,790		 	(712	)	 	9,078		
Other current period change	 	(30,345	)	 	(5,321	)	 	—		 	(35,666	)	
June 30, 2015	 	$	(66,432	)	 	(581,472	)	 	1,046		 	(646,858	)	

_______________________ 

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

The loss from currency translation adjustments in the six months ended June 30, 2016 of $18.6 million was primarily 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. The loss from currency translation adjustments in the six months ended June 30, 2015 of $30.3 million was due to the weakening of the Canadian Dollar and British Pound against the U.S. Dollar.

12

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

10. EARNINGS PER SHARE

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

														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands, except per share amounts)	
Earnings per share — Basic:	 	 	 	 	 	 	 	
Earnings from continuing operations	$	74,042		 	85,917		 	$	130,227		 	139,243		
Less: Earnings allocated to unvested stock	(235	)	 	(246	)	 	(398	)	 	(393	)	
Earnings from continuing operations available to common shareholders — Basic	$	73,807		 	85,671		 	$	129,829		 	138,850		
 	 	 	 	 	 	 	 	
Weighted average common shares outstanding — Basic	53,057		 	52,827		 	53,067		 	52,712		
 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share — Basic	$	1.39		 	1.62		 	$	2.45		 	2.63		
 	 	 	 	 	 	 	 	
Earnings per share — Diluted:	 	 	 	 	 	 	 	
Earnings from continuing operations	$	74,042		 	85,917		 	$	130,227		 	139,243		
Less: Earnings allocated to unvested stock	(234	)	 	(244	)	 	(397	)	 	(390	)	
Earnings from continuing operations available to common shareholders — Diluted	$	73,808		 	85,673		 	$	129,830		 	138,853		
 	 	 	 	 	 	 	 	
Weighted average common shares outstanding — Basic	53,057		 	52,827		 	53,067		 	52,712		
Effect of dilutive equity awards	320		 	468		 	303		 	492		
Weighted average common shares outstanding — Diluted	53,377		 	53,295		 	53,370		 	53,204		
 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share — Diluted	$	1.38		 	1.61		 	$	2.43		 	2.61		
 	 	 	 	 	 	 	 	
Anti-dilutive equity awards not included above	669		 	363		 	928		 	273		

13

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

11. SHARE-BASED COMPENSATION PLANS

Share-based incentive awards are provided to employees under the terms of various 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 option, 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 may be paid on our unvested stock awards but are not paid unless the 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 June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Stock option and stock purchase plans	$	1,904		 	1,956		 	$	3,777		 	4,257		
Unvested stock	3,209		 	3,548		 	6,224		 	6,912		
Share-based compensation expense	5,113		 	5,504			10,001			11,169		
Income tax benefit	(1,715	)	 	(1,860	)	 	(3,370	)	 	(3,743	)	
Share-based compensation expense, net of tax	$	3,398		 	3,644			$	6,631			7,426		

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 the previous table:

														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Cash awards	$	177		 	281		 	$	328		 	464		

Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at June 30, 2016 was $26.8 million and is expected to be recognized over a weighted-average period of 1.9 years.

The following table is a summary of the awards granted under the Plans during the periods presented:

						
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Stock options	513		 	362		
Market-based restricted stock rights	34		 	19		
Performance-based restricted stock rights	45		 	42		
Time-vested restricted stock rights	129		 	80		
Total	721			503		

14

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

12.  EMPLOYEE BENEFIT PLANS

Components of net pension expense were as follows:

														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
 	 	 	 	 	 	 	 	
Pension Benefits	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
Service cost	$	3,005		 	3,566		 	$	6,405		 	7,193		
Interest cost	27,093		 	22,048		 	49,332		 	43,935		
Expected return on plan assets	(22,667	)	 	(25,021	)	 	(45,752	)	 	(49,921	)	
Amortization of:	 	 	 	 	 	 	 	
Net actuarial loss	8,600		 	7,664		 	16,565		 	15,472		
Prior service cost/(credit)	2,740		 	(74	)	 	2,740		 	(150	)	
 	18,771		 	8,183		 	29,290		 	16,529		
Union-administered plans	2,406		 	2,113		 	4,728		 	4,285		
Net pension expense	$	21,177		 	10,296		 	$	34,018		 	20,814		
 	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
U.S.	$	19,263		 	8,599		 	$	30,437		 	17,491		
Non-U.S.	(492	)	 	(416	)	 	(1,147	)	 	(962	)	
 	18,771		 	8,183		 	29,290		 	16,529		
Union-administered plans	2,406		 	2,113		 	4,728		 	4,285		
Net pension expense	$	21,177		 	10,296		 	$	34,018		 	20,814		

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 prior period, and the cumulative amount is 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.

During the six months ended June 30, 2016 we contributed $42.3 million to our pension plans. In 2016 , we expect total contributions to our pension plans to be approximately $ 80 million . We also maintain other postretirement benefit plans that are not reflected in the above table. The amount of postretirement benefit expense was not material for the three or six months ended June 30, 2016 .

15

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

13.   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. For matters from continuing operations, we believe that the resolution of these claims, complaints and legal proceedings will not have a material effect on our consolidated condensed 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 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.

Although we discontinued our South American operations in 2009, we continue to be party to various federal, state and local legal proceedings involving labor matters, tort claims and tax assessments. We have established loss provisions for any matters where we believe a loss is probable and can be reasonably estimated. Other than with respect to the matters discussed below, we believe that such losses will not have a material effect on our consolidated condensed financial statements.

In Brazil, we were assessed $5 million in prior years for various federal income taxes and social contribution taxes for the 1997 and 1998 tax years. These federal tax assessments were overturned in the lower courts; however, there is a reasonable possibility that these rulings could be reversed and we would be required to pay the assessments. We believe it is more likely than not that our position will ultimately be sustained if appealed and no amounts have been reserved for these matters. We are entitled to indemnification for a portion of any resulting liability on these federal tax claims which, if honored, would reduce the amount of any potential loss.

14.  SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information was as follows:

							
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Interest paid	$	71,141		 	69,681		
Income taxes paid	10,233		 	9,970		
Changes in accounts payable related to purchases of revenue earning equipment	(105,480	)	 	124,766		
Operating and revenue earning equipment acquired under capital leases	777		 	5,847		

16

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

15.  SEGMENT REPORTING

Our primary measurement of segment financial performance, defined as “Earnings Before Tax” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes non-operating pension costs and professional fees. 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 not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.

Our Fleet Management Solutions (FMS) segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (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 customers (equipment contribution) are included in both FMS and the segment which served the customer and then eliminated (presented as “Eliminations”).  

The following tables set forth financial information for each of our segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three and six months ended June 30, 2016 and 2015 . 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.

17

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

	
																	
 	FMS	 	DTS	 	SCS	 	Eliminations	 	Total	
 	(In thousands)	
For the three months ended June 30, 2016	 	 	 	 	 	 	 	 	
Revenue from external customers	$	1,043,430		 	258,262		 	402,052		 	—		 	1,703,744		
Inter-segment revenue	108,083		 	—		 	—		 	(108,083	)	 	—		
Total revenue	$	1,151,513		 	258,262		 	402,052		 	(108,083	)	 	1,703,744		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	111,184		 	16,472		 	28,371		 	(12,766	)	 	143,261		
Unallocated CSS	 	 	 	 	 	 	 	 	(11,215	)	
     Non-operating pension costs  	 	 	 	 	 	 	 	 	(7,617	)	
Pension-related charge (1)	 	 	 	 	 	 	 	 	(7,650	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	116,779		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2)	$	502,040		 	363		 	37,139		 	—		 	539,542		
Unallocated CSS	 	 	 	 	 	 	 	 	5,609		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	545,151		

For the three months ended June 30, 2015	 	 	 	 	 	 	 	 	
Revenue from external customers	$	1,042,476		 	223,514		 	396,941		 	—		 	1,662,931		
Inter-segment revenue	106,873		 	—		 	—		 	(106,873	)	 	—		
Total revenue	$	1,149,349		 	223,514		 	396,941		 	(106,873	)	 	1,662,931		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	122,452		 	12,435		 	27,699		 	(11,588	)	 	150,998		
Unallocated CSS	 	 	 	 	 	 	 	 	(10,924	)	
Non-operating pension costs  	 	 	 	 	 	 	 	 	(4,688	)	
Professional fees (3)	 	 	 	 	 	 	 	 	(1,939	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	133,447		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid	$	761,542		 	646		 	3,570		 	—		 	765,758		
Unallocated CSS	 	 	 	 	 	 	 	 	10,218		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	775,976		
  ————————————
		
(1)	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.	
		
(2)	Excludes revenue earning equipment acquired under capital leases.	
		
(3)	Charges related to professional fees associated with cost savings initiatives.	

18

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

	
																	
 	FMS	 	DTS	 	SCS	 	Eliminations	 	Total	
 	(In thousands)	
For the six months ended June 30, 2016	 	 	 	 	 	 	 	 	
Revenue from external customers	$	2,039,545		 	503,104		 	790,767		 	—		 	3,333,416		
Inter-segment revenue	209,896		 	—		 	—		 	(209,896	)	 	—		
Total revenue	$	2,249,441		 	503,104		 	790,767		 	(209,896	)	 	3,333,416		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	194,105		 	30,740		 	48,167		 	(24,510	)	 	248,502		
Unallocated CSS	 	 	 	 	 	 	 	 	(20,880	)	
     Non-operating pension costs	 	 	 	 	 	 	 	 	(14,485	)	
Pension-related charge (1)	 	 	 	 	 	 	 	 	(7,650	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	205,487		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2)	$	1,062,325		 	880		 	44,462		 	—		 	1,107,667		
Unallocated CSS	 	 	 	 	 	 	 	 	12,515		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	1,120,182		

For the six months ended June 30, 2015	 	 	 	 	 	 	 	 	
Revenue from external customers	$	2,025,916		 	436,173		 	767,995		 	—		 	3,230,084		
Inter-segment revenue	210,583		 	—		 	—		 	(210,583	)	 	—		
Total revenue	$	2,236,499		 	436,173		 	767,995		 	(210,583	)	 	3,230,084		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	212,170		 	21,405		 	43,388		 	(23,122	)	 	253,841		
Unallocated CSS	 	 	 	 	 	 	 	 	(22,866	)	
Non-operating pension costs	 	 	 	 	 	 	 	 	(9,571	)	
Professional fees (3)	 	 	 	 	 	 	 	 	(3,780	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	217,624		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2)	$	1,300,285		 	1,355		 	9,557		 	—		 	1,311,197		
Unallocated CSS	 	 	 	 	 	 	 	 	18,021		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	1,329,218		
  ————————————
		
(1)	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.	
		
(2)	Excludes revenue earning equipment acquired under capital leases.	
		
(3)	Charges related to professional fees associated with cost savings initiatives.	

19

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

OVERVIEW

The following discussion should be read in conjunction with the unaudited Consolidated Condensed Financial Statements and notes thereto included under Item 1. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2015 Annual Report on Form 10-K.

Ryder System, Inc. (Ryder) is a global leader in transportation and supply chain management solutions. We report our financial performance based on three segments: (1) FMS, which provides full service leasing, commercial rental, contract maintenance, and contract-related maintenance of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) DTS, which provides vehicles and drivers as part of a dedicated transportation solution in the U.S.; and (3) SCS, which provides comprehensive supply chain solutions including distribution and transportation services in North America and 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.

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, technology and healthcare, retail, housing, business and personal services, and paper and publishing.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

Operating results were as follows:

																			
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	Six Months	
 	(In thousands, except per share amounts)	 	 	 	
Total revenue	$	1,703,744		 	1,662,931		 	$	3,333,416		 	3,230,084		 	   2	 %	   3	 %	
Operating revenue (1)	1,449,713		 	1,392,618		 	2,855,726		 	2,692,904		 	   4	 %	   6	 %	

EBT	$	116,779		 	133,447		 	$	205,487		 	217,624		 	   (12	)%	   (6	)%	
Comparable EBT (2)	132,046		 	140,074		 	227,622		 	230,975		 	   (6	)%	   (1	)%	
Earnings from continuing operations	74,042		 	85,917		 	130,227		 	139,243		 	   (14	)%	   (6	)%	
Comparable earnings from continuing operations (2)	83,307		 	87,952		 	143,481		 	145,231		 	   (5	)%	   (1	)%	
Net earnings	73,750		 	85,159		 	129,544		 	137,948		 	   (13	)%	   (6	)%	

Earnings per common share (EPS) — Diluted		 		 	 	 	 	 			 	
Continuing operations	$	1.38		 	1.61		 	$	2.43		 	2.61		 	   (14	)%	   (7	)%	
Comparable (2)	1.56		 	1.65		 	2.68		 	2.72		 	   (5	)%	   (1	)%	
Net earnings	1.38		 	1.59		 	2.42		 	2.59		 	   (13	)%	   (7	)%	
   ————————————
		
(1)	Non-GAAP financial measure. Refer to the“Non-GAAP Financial Measures” section 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 2% to $1.70 billion and operating revenue increased 4% to $1.45 billion in the second quarter of 2016 . For the first half of 2016 , total revenue increased 3% to $3.33 billion and operating revenue increased 6% to $2.86 billion . These increases reflect higher revenue across all business segments, partially offset by negative impacts from foreign exchange. Increased total revenue was also partially offset by lower fuel costs passed through to customers.

FMS total revenue in the second quarter was consistent with the prior year as higher operating revenue was partially offset by lower fuel prices passed through to customers and a negative impact from foreign exchange. FMS total revenue in the first half of 2016 increased as higher operating revenue was partially offset by lower fuel prices passed through to customers and a negative impact from foreign exchange. FMS operating revenue growth in both periods was due to growth in the full service lease fleet and higher prices on replacement vehicles, partially offset by lower demand in the commercial rental product line. The increase in DTS and SCS total revenue was driven by operating revenue growth, partially offset by lower fuel costs passed through to customers in the second quarter and first half of 2016 . Increased subcontracted transportation also contributed to DTS total revenue growth, while lower subcontracted transportation partially offset total revenue growth in SCS. DTS and SCS operating revenue growth was due to new business, increased volumes and higher pricing in the second quarter and first half of 2016 .

EBT decreased 12% in the second quarter of 2016 to $116.8 million and 6% in the first half of 2016 , reflecting lower commercial rental and used vehicle results, partially offset by higher full service lease results, lower insurance costs in DTS and increased pricing, new business and increased volumes in DTS and SCS. The 2016 EBT decrease also reflects a $7.7 million pension-related charge related to certain 2009 pension benefit improvements that were not fully reflected in our pension benefit obligation. EBT was negatively impacted by foreign exchange in the second quarter and first half of 2016 by 100 basis points.

21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

CONSOLIDATED RESULTS

Lease and Rental

																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Lease and rental revenues	$	798,387		 	779,046		 	$	1,566,141		 	1,508,070		 	   2	 %	 	   4	%	
Cost of lease and rental	555,302		 	531,308		 	1,107,792		 	1,049,730		 	   5	 %	 	   6	%	
Gross margin	243,085		 	247,738		 	458,349		 	458,340		 	   (2	)%	 	—	%	
Gross margin %	30	%	 	32	%	 	29	%	 	30	%	 	 	 	 	

Lease and rental revenues represent full service lease and commercial rental product offerings within our FMS segment. Revenues increased 2% in the second quarter of 2016 and 4% in the first half of 2016 primarily driven by a 5% larger average full service lease fleet and higher prices on replacement vehicles, partially offset by lower commercial rental revenue reflecting lower demand. Foreign exchange negatively impacted revenue growth by 100 basis points .

Cost of lease and rental represents the direct costs related to lease and rental revenues. These costs consist 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 and rental excludes interest costs from vehicle financing. Cost of lease and rental increased 5% in the second quarter and 6% in the first half of 2016 primarily due to higher depreciation and maintenance costs from a larger average lease fleet, partially offset by lower depreciation on a smaller average rental fleet ( 7% lower in the second quarter and 2% lower in the first half of 2016 ). Cost of lease and rental benefited by approximately $9 million in the second quarter of 2016 and by $17 million in the first half of 2016 due to changes in estimated residual values effective January 1, 2016 . Foreign exchange also reduced cost of lease and rental by 100 basis points .

Lease and rental gross margin decreased 2% in the second quarter and remained consistent with the first half of 2015. Lease and rental gross margin as a percentage of revenue decreased to 30% in the second quarter and 29% in the first half of 2016 . The decrease in gross margin dollars in the second quarter of 2016 was due to lower commercial rental demand, partially offset by higher prices on replacement vehicles and lease fleet growth as well as benefits from improved residual values. The decrease in gross margin as a percentage of revenue in the second quarter and first half of 2016 reflects lower commercial rental fleet utilization, partially offset by benefits from improved residual values.

Services

																				
	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
	(Dollars in thousands)	 			 	 	
Services revenue	$	785,791		 	737,170		 	$	1,544,918		 	1,430,874		 	   7	%	 	   8	%	
Cost of services	646,129		 	603,488		 	1,277,843		 	1,185,818		 	   7	%	 	   8	%	
Gross margin	139,662		 	133,682		 	267,075		 	245,056		 	   4	%	 	   9	%	
Gross margin %	18	%	 	18	%	 	17	%	 	17	%	 	 	 	 	

Services revenue represents all the revenues associated with our DTS and SCS segments as well as contract maintenance, contract-related maintenance and fleet support services associated with our FMS segment. Services revenue increased 7% in the second quarter and 8% in the first half of 2016 due to new business, increased volumes and higher pricing in the SCS and DTS segments. The contract-related maintenance and contract maintenance product lines benefited from growth in fleet size, and contract-related maintenance revenue also increased from higher volumes. These increases were partially offset by lower fuel prices passed through to our DTS and SCS customers. Foreign exchange also negatively impacted revenue growth by 100 basis points .

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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) and maintenance costs. Cost of services increased 7% in the second quarter of 2016 and 8% in the first half of 2016 due to higher volumes, partially offset by lower fuel costs and lower insurance costs. Foreign exchange reduced cost of services by 100 basis points .

Services gross margin increased 4% in the second quarter and 9% in the first half of 2016 . Services gross margin as a percentage of revenue in second quarter of 2016 and first half of 2016 were consistent with prior periods. The increase in gross margin dollars reflects higher pricing in our DTS and SCS segments. Gross margin dollars also benefited from new business and higher volumes in our SCS and DTS segments, growth in full service lease fleet size and higher volumes in the contract-related business and growth in the contract maintenance fleet.

Fuel

																				
	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
	(Dollars in thousands)	 			 	 	
Fuel services revenue	$	119,566		 	146,715		 	$	222,357		 	291,140		 	   (19	)%	 	   (24	)%	
Cost of fuel services	115,478		 	142,176		 	214,379		 	278,465		 	   (19	)%	 	   (23	)%	
Gross margin	4,088		 	4,539		 	7,978		 	12,675		 	   (10	)%	 	   (37	)%	
Gross margin %	3	%	 	3	%	 	4	%	 	4	%	 	 	 	 	

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 19% in the second quarter of 2016 and 24% in the first half of 2016 due to lower fuel prices passed through to customers.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services decreased 19% in the second quarter and 23% in the first half of 2016 as a result of lower fuel prices.

Fuel services gross margin decreased 10% in the second quarter and 37% in the first half of 2016 . Fuel services gross margin as a percentage of revenue remained at 3% in the second quarter and 4% in the first half of 2016 compared to the same periods of 2015. 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 market fuel costs. Fuel services gross margin was favorably impacted by rapid decreases in the market fuel prices during the first quarter of 2015.

																				
	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
	(In thousands)	 			 	 	
Other operating expenses	$	27,796		 	29,582		 	$	57,947		 	61,955		 	(6	)%	 	(6	)%	

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 lease, rental, contract maintenance and fleet support services customers. Other operating expenses decreased 6% in the second quarter and first half of 2016 largely due to lower utility costs for FMS facilities.

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

	
																				
	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
	(Dollars in thousands)	 			 	 	
Selling, general and administrative expenses (SG&A)	$	222,448		 	214,868		 	$	433,661		 	421,473		 	4	%	 	3	%	
Percentage of total revenue	13	%	 	13	%	 	13	%	 	13	%	 	 	 	 	
Percentage of operating revenue	15	%	 	15	%	 	15	%	 	16	%	 	 	 	 	

SG&A expenses increased 4% in the second quarter of 2016 compared with the year-earlier period and increased 3% in the first half of 2016 . The increase in the second quarter and first half of 2016 is primarily due to increased pension expenses, partially offset by lower professional fees, compensation-related expenses and foreign exchange. Foreign exchange reduced the growth in SG&A expenses by 100 basis points . Pension expense, which primarily impacts SG&A expenses, increased $10.9 million in the second quarter of 2016 and $13.2 million in the first half of 2016 due to a one-time charge of $7.7 million related to pension benefit improvements made in 2009 that were not fully reflected in our pension benefit obligation, as well as the impact of a lower asset return assumption and a higher discount rate.

	
																				
	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
	(Dollars in thousands)	 		 	 	
Gains on used vehicles, net	$	12,000		 	29,985		 	$	31,129		 	57,193		 	(60	)%	 	(46	)%	

Gains on used vehicles, net includes gains from sales of used vehicles as well as the costs associated with used vehicles such as write-downs of vehicles to fair market values. Gains on used vehicles, net decreased to $12 million in the second quarter of 2016 and $31 million in the first half of 2016 due to higher fair market value write-downs and lower gains on the sale of used vehicles. Write-downs increased $9.3 million in the second quarter and $14.2 million in the first half of 2016 due to an increase in the used vehicle inventory and lower pricing. Global average proceeds per unit in the second quarter decreased from the prior year reflecting a 15% decrease in tractor proceeds per unit and a 4% decrease in truck proceeds per unit. Global proceeds per unit in the first half of 2016 decreased from the prior year reflecting a 12% decrease in tractor proceeds per unit, partially offset by a 1% increase in truck proceeds per unit in the first half of 2016 .

	
																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Interest expense	$	37,268		 	39,075		 	$	75,157		 	75,877		 	(5	)%	 	(1	)%	
Effective interest rate	2.7	%	 	3.1	%	 	2.7	%	 	3.1	%	 	 	 	 	

Interest expense decreased 5% to $37.3 million in the second quarter of 2016 and 1% to $75.2 million in the first half of 2016 reflecting a lower effective interest rate, partially offset by higher average outstanding debt. The increase in average outstanding debt reflects planned higher vehicle capital spending. The lower effective interest rate in 2016 reflects the replacement of higher interest rate debt with debt issuances at lower rates.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

	
																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Miscellaneous income, net	$	5,456		 	1,028		 	$	7,721		 	3,665		 	431	%	 	111	%	
  
Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income,
gains from sales of operating property, foreign currency transaction gains and other non-operating items. The increase in the second quarter and first half of 2016 is primarily driven by increased gains from sales of operating property and equipment.

	
																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Provision for income taxes	$	42,737		 	47,530		 	$	75,260		 	78,381		 	(10	)%	 	(4	)%	
Effective tax rate from continuing operations	36.6	%	 	35.6	%	 	36.6	%	 	36.0	%	 	 	 	 	

Provision for income taxes decreased 10% in the second quarter of 2016 and 4% in the first half of 2016 . The decrease in the provision for income taxes reflects lower taxable earnings, partially offset by a higher effective income tax rate. Our effective income tax rate from continuing operations increased to 36.6% in both the second quarter and first half of 2016 . The effective tax rates in the prior year benefited from enacted tax law changes in multiple jurisdictions, which decreased the provision for income taxes by $1.9 million in the prior year.

25

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

OPERATING RESULTS BY SEGMENT

																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	
Fleet Management Solutions	$	1,151,513		 	1,149,349		 	$	2,249,441		 	2,236,499		 	—	 %	 	  1	 %	
Dedicated Transportation Solutions	258,262		 	223,514		 	503,104		 	436,173		 	  16		 	  15		
Supply Chain Solutions	402,052			396,941		 	790,767		 	767,995		 	  1		 	  3		
Eliminations	(108,083	)		(106,873	)	 	(209,896	)	 	(210,583	)	 	  1		 	—		
Total	$	1,703,744			1,662,931		 	$	3,333,416		 	3,230,084		 	  2	 %	 	  3	 %	
Operating Revenue: (1)				 	 	 	 				 			
Fleet Management Solutions	$	995,238			959,050		 	$	1,957,562		 	1,858,237			  4	 %	 	  5	 %	
Dedicated Transportation Solutions	194,292			176,805		 	384,565		 	342,635			  10		 	  12		
Supply Chain Solutions	331,558			320,053		 	653,974		 	615,494			  4		 	  6		
Eliminations	(71,375	)		(63,290	)	 	(140,375	)	 	(123,462	)		  13		 	  14		
Total	$	1,449,713			1,392,618		 	$	2,855,726		 	2,692,904			  4	 %	 	  6	 %	
EBT:	 	 	 	 	 	 	 	 	 	 			
Fleet Management Solutions	$	111,184			122,452		 	$	194,105		 	212,170		 	  (9	)%	 	  (9	)%	
Dedicated Transportation Solutions	16,472		 	12,435		 	30,740		 	21,405		 	  32		 	  44		
Supply Chain Solutions	28,371			27,699		 	48,167		 	43,388		 	  2		 	  11		
Eliminations	(12,766	)		(11,588	)	 	(24,510	)	 	(23,122	)	 	  10		 	  6		
 	143,261			150,998			248,502			253,841		 	  (5	)	 	  (2	)	
Unallocated Central Support Services	(11,215	)		(10,924	)	 	(20,880	)	 	(22,866	)	 	  3		 	  (9	)	
Non-operating pension costs	(7,617	)		(4,688	)	 	(14,485	)	 	(9,571	)	 	  62		 	  51		
Other items	(7,650	)		(1,939	)	 	(7,650	)	 	(3,780	)	 	NM		 	NM		
Earnings from continuing operations before income taxes	$	116,779			133,447			$	205,487			217,624		 	  (12	)%	 	  (6	)%	
   ————————————
		
(1)	Non-GAAP financial measures. Refer to the“Non-GAAP Financial Measures” section for a reconciliation of total revenue to operating revenue and the reasons why management believes these measure are important to investors. The reconciliations for each segment's total revenue to operating revenue are set forth in this "Operating Results by Segment" section on pages 27 (FMS), 30 (DTS) and 31 (SCS).	

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) from continuing operations, which includes an allocation of Central Support Services (CSS), and excludes non-operating pension costs and other items discussed in Note 15 , " Segment Reporting ," in the Notes to Consolidated Condensed Financial Statements. CSS represents those costs incurred to support all segments, including human resources, finance, corporate services and 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. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.

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 customers (equipment contribution) are included in FMS, DTS and SCS and then eliminated (presented as “Eliminations” in the table above). Prior year amounts have been revised to conform to the current period presentation.

26

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 June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Equipment Contribution:	 	 	 	 	 	 	 	 	 	 	 	
    Dedicated Transportation Solutions	$	8,449		 	8,020		 	$	16,167		 	15,824		 	  5	%	 	  2	%	
    Supply Chain Solutions	4,317		 	3,568		 	8,343		 	7,298		 	  21		 	  14		
Total	$	12,766		 	11,588		 	$	24,510		 	23,122		 	  10	%	 	  6	%	

Items excluded from our segment EBT measure and their classification within our Consolidated Condensed Statements of Earnings follow:  

																	
 	 	 	 	Three months ended June 30,	 	Six months ended June 30,	
Description	 	Classification	 	2016	 	2015	 	2016	 	2015	
 	 	 	 	(In thousands)	
Non-operating pension costs	 	SG&A	 	$	(7,617	)	 	(4,688	)	 	$	(14,485	)	 	(9,571	)	
Pension-related charge (1)	 	SG&A	 	(7,650	)	 	—		 	(7,650	)	 	—		
Professional fees (2)	 	SG&A	 	—		 	(1,939	)	 	—		 	(3,780	)	
 	 	 	 	$	(15,267	)	 	(6,627	)	 	$	(22,135	)	 	(13,351	)	
———————————
		
(1)	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 in the second quarter of 2016 related to these benefit improvements.	
		
(2)	Charges related to professional fees associated with cost savings initiatives.	

Fleet Management Solutions

																				
  	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
  	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 		 	 	
Full service lease	$	646,347			595,693		 	$	1,269,210		 	1,172,806		 	  9	 %	 	  8	 %	
Contract maintenance	51,177			48,985		 	101,303		 	94,936		 	  4		 	  7		
Contractual revenue	697,524			644,678		 	1,370,513		 	1,267,742		 	  8		 	  8		
Commercial rental	214,599			239,051		 	419,436		 	444,144		 	  (10	)	 	  (6	)	
Contract-related maintenance	62,693			56,535		 	126,954		 	109,681		 	  11		 	  16		
Other	20,422			18,786		 	40,659		 	36,670		 	  9		 	  11		
 Operating revenue (1)	995,238			959,050		 	1,957,562		 	1,858,237		 	  4		 	  5		
Fuel services revenue (2)	156,274			190,299		 	291,878		 	378,262		 	  (18	)	 	  (23	)	
Total revenue	$	1,151,512			1,149,349			2,249,440			2,236,499		 	—	 %	 	  1	 %	
 	 	 	 	 	 	 	 	 	 	 			
Segment EBT	$	111,184			122,452		 	$	194,105		 	212,170		 	  (9	)%	 	  (9	)%	
Segment EBT as a % of total revenue	9.7	%		10.7	%	 	8.6	%	 	9.5	%	 	  (100) bps	 	  (90) bps	
Segment EBT as a % of operating revenue (1)	11.2	%		12.8	%	 	9.9	%	 	11.4	%	 	  (160) bps	 	  (150) bps	
————————————
		
(1)	Non-GAAP financial measures. Reconciliations of FMS total revenue to FMS operating revenue, and FMS EBT as a % of total revenue to FMS EBT as a % of operating revenue, are set forth in this table. Refer to the “Non-GAAP Financial Measures” section for the reasons why management believes these measures are important to investors.	
		
(2)	Includes intercompany fuel sales from FMS to DTS and SCS.	

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

												
 	Three months ended June 30, 2016	 	Six months ended June 30, 2016	
 	Total	 	Operating	 	Total	 	Operating	
Organic including price and volume	4	 %	 	5	 %	 	6	 %	 	6	 %	
Fuel	(3	)	 	—		 	(4	)	 	—		
Foreign exchange	(1	)	 	(1	)	 	(1	)	 	(1	)	
Net increase	—	 %	 	4	 %	 	1	 %	 	5	 %	

Total revenue remained at $1.15 billion in the second quarter and increased 1% in the first half of 2016 due to higher operating revenue, largely offset by a decline in fuel services revenue and negative impacts from foreign exchange. Operating revenue (revenue excluding fuel) increased 4% in the second quarter and 5% in the first half of 2016 as a result of organic growth, primarily in the full service lease product line, partially offset by lower commercial rental revenue. In the first half of 2016 , foreign exchange negatively impacted both total and operating revenue growth by 100 basis point s.

Full service lease revenue increased 9% in the second quarter and 8% in the first half of 2016 reflecting a 5% larger average fleet size and higher prices on replacement vehicles. Foreign exchange negatively impacted full service lease revenue growth by 100 basis points in both the second quarter and the first half of 2016 . We expect favorable full service lease revenue comparisons to continue through the end of the year based on strong sales activity. Commercial rental revenue decreased 10% in the second quarter and 6% in the first half of 2016 due to lower demand. We expect unfavorable commercial rental revenue comparisons through the end of the year based on a projected weaker demand environment. Contract-related maintenance revenue increased 11% in the second quarter and 16% in the first half of 2016 reflecting favorable impacts from growth in the full service lease fleet and higher volumes.

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

																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Rental revenue from non-lease customers (1)	$	134,767		 	144,293		 	$	255,469		 	260,444		 	(7	)%	 	(2	)%	
Rental revenue from lease customers (2)	$	79,832		 	94,758		 	$	163,967		 	183,700		 	(16	)%	 	(11	)%	
Average commercial rental power fleet size — in service (3),   (4)	31,800		 	33,200		 	32,400		 	33,200		 	(4	)%	 	(2	)%	
Commercial rental utilization — power fleet (3)	74.7	%		78.1	%	 	72.5	%	 	75.8	%	 	(340) bps	 	(330) bps	
————————————
		
(1)	Includes extra vehicles rented to lease customers.	
		
(2)	Represents revenue from rental vehicles provided to our existing full service lease customers, generally in place of a lease vehicle.	
		
(3)	Number of units rounded to nearest hundred and calculated using quarterly average unit counts.	
		
(4)	Excluding trailers.	

FMS EBT decreased 9% in both the second quarter and the first half of 2016 reflecting lower commercial rental and used vehicle results, partially offset by higher full service lease results. Commercial rental results declined from lower demand and a decline in utilization of 340 basis point in the second quarter and 330 basis point in the first half of 2016 . Used vehicle results decreased due to lower pricing, partially offset by higher sales volume. Full service lease results benefited from growth in the average lease fleet size and higher prices on replacement vehicles, partially offset by higher depreciation and maintenance from a larger average fleet. Full service lease and commercial rental results benefited from approximately $9 million of lower depreciation in the second quarter and $17 million in the first half of 2016 due to residual value changes implemented January 1, 2016 .

28

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

															
 	 	 	 	 	 	 	Change	
 	June 30, 2016	 	December 31, 2015	 	June 30, 2015	 	June 2016/Dec. 2015	 	June 2016/June 2015	
End of period vehicle count	 	 	 	 	 	 	 	 	 	
By type:	 	 	 	 	 	 	 	 	 	
Trucks (1)	73,100		 	72,800		 	72,300		 	—	 %	 	  1	 %	
Tractors (2)	68,700		 	68,700		 	65,800		 	—		 	  4		
Trailers (3) (4)	42,300		 	42,400		 	41,900		 	—		 	  1		
Other	1,400		 	1,300		 	1,500		 	  8		 	  (7	)	
Total	185,500		 	185,200		 	181,500		 	—	 %	 	  2	 %	
 	 	 	 	 	 	 	 	 	 	
By ownership:	 	 	 	 	 	 	 	 	 	
Owned	183,900		 	184,700		 	179,600		 	—	 %	 	  2	 %	
Leased	1,600		 	500		 	1,900		 	  220		 	  (16	)	
Total	185,500		 	185,200		 	181,500		 	—	 %	 	  2	 %	
 	 	 	 	 	 	 	 	 	 	
By product line:  (4)	 	 	 	 	 	 	 	 	 	
Full service lease	134,300		 	131,800		 	128,700		 	  2	 %	 	  4	 %	
Commercial rental	38,700		 	42,100		 	43,700		 	  (8	)	 	  (11	)	
  Service vehicles and other	3,400		 	3,300		 	3,200		 	  3		 	  6		
Active units	176,400		 	177,200		 	175,600		 	—		 	—		
Held for sale	9,100		 	8,000		 	5,900		 	  14		 	  54		
Total	185,500		 	185,200		 	181,500		 	—	 %	 	  2	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	50,200		 	46,700		 	42,000		 	  7	 %	 	  20	 %	

Quarterly average vehicle count	 	 	 	 	 	 	 	 	 	
By product line:	 	 	 	 	 	 	 	 	 	
Full service lease	133,800		 	131,100		 	127,700		 	  2	 %	 	  5	 %	
Commercial rental	39,600		 	43,200		 	42,500		 	  (8	)	 	  (7	)	
Service vehicles and other	3,400		 	3,300		 	3,200		 	  3		 	  6		
Active units	176,800		 	177,600		 	173,400		 	—		 	  2		
Held for sale	8,800		 	6,900		 	6,100		 	  28		 	  44		
Total	185,600		 	184,500		 	179,500		 	  1	 %	 	  3	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	49,700		 	45,500		 	43,500		 	  9	 %	 	  14	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under on-demand maintenance (5)	7,600		 	7,200		 	8,300		 	  6	 %	 	  (8	)%	
 	 	 	 	 	 	 	 	 	 	
Total vehicles under service	242,900		 	237,200		 	231,300		 	  2	 %	 	  5	 %	

Year-to-date average vehicle count	 	 	 	 	 	 	 	 	 	
By product line:	 	 	 	 	 	 	 	 	 	
Full service lease	133,200		 	128,800		 	127,100		 	  3	 %	 	  5	 %	
Commercial rental	40,300		 	42,400		 	41,300		 	  (5	)	 	  (2	)	
Service vehicles and other	3,400		 	3,200		 	3,200		 	  6		 	  6		
Active units	176,900		 	174,400		 	171,600		 	  1		 	  3		
Held for sale	8,600		 	6,100		 	5,800		 	  41		 	  48		
Total	185,500		 	180,500		 	177,400		 	  3	 %	 	  5	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	48,900		 	43,300		 	43,100		 	  13	 %	 	  13	 %	
Customer vehicles under on-demand maintenance (5)	14,700		 	20,000		 	12,600		 	NM		 	  17	 %	
———————————
		
(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 5,300 UK trailers ( 3,400 full service lease and 1,900 commercial rental), 6,100 UK trailers ( 3,900 full service lease and 2,200 commercial rental) and 6,400 UK trailers ( 4,300 full service lease and 2,100 commercial rental) as of June 30, 2016 , December 31, 2015 , and June 30, 2015 , 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.	
Note: Quarterly and year-to-date amounts were computed using a 6-point and 12-point average, respectively, based on monthly information.  

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table provides a breakdown of our non-revenue earning equipment included in our global fleet count (number of units rounded to nearest hundred):

												
 	 	 	 	 	 	 	Change	
 	June 30,
2016	 	December 31,
2015	 	June 30,
2015	 	June 2016/Dec. 2015	 	June 2016/June 2015	
Not yet earning revenue (NYE)	2,200	 	2,800	 	3,300	 	  (21	)%	 	  (33	)%	
No longer earning revenue (NLE):	 	 	 	 	 	 	 	 	 	
Units held for sale	9,100	 	8,000	 	5,900	 	14		 	54		
Other NLE units	3,500	 	3,300	 	3,500	 	6		 	—		
Total	14,800	 	14,100	 	12,700	 	  5	 %	 	  17	 %	

NYE units represent new vehicles on hand that are being prepared for deployment to a lease customer or into the rental fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. NYE units decreased compared to June 30, 2015 , reflecting planned lower investments in the commercial rental fleet. 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 increased compared to June 30, 2015 due to higher used vehicle inventories. We expect NLE levels to decline through the end of the year as a result of lower expected used vehicle inventories.

Dedicated Transportation Solutions

	
																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating revenue (1)	$	194,292		 	176,805		 	$	384,565		 	342,635		 	10	 %	 	12	 %	
Subcontracted transportation	37,924		 	14,539		 	69,153		 	29,160		 	161		 	137		
Fuel (2)	26,046		 	32,170		 	49,386		 	64,378		 	(19	)	 	(23	)	
Total revenue	$	258,262		 	223,514		 	$	503,104			436,173		 	16	 %	 	15	 %	
 	 	 	 	 	 	 	 	 	 	 			
Segment EBT	$	16,472		 	12,435		 	$	30,740		 	21,405		 	32	 %	 	44	 %	
Segment EBT as a % of total revenue	6.4	%	 	5.6	%	 	6.1	%	 	4.9	%	 	80 bps	 	120 bps	
Segment EBT as a % of operating revenue (1)	8.5	%	 	7.0	%	 	8.0	%	 	6.2	%	 	150 bps	 	180 bps	
Memo:	 	 	 	 	 	 	 	 	 	 	 	
Average fleet	8,200		 	7,600		 	8,100		 	7,600		 	8	 %	 	7	 %	
————————————
		
(1)	Non-GAAP financial measures. Reconciliations of DTS total revenue to DTS operating revenue, and DTS EBT as a % of total revenue to DTS EBT as a % of operating revenue, are set forth in this table. Refer to the “Non-GAAP Financial Measures” section for the reasons why management believes these measures are important to investors.	
		
(2)	Includes intercompany fuel sales from FMS to DTS.	

30

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

												
 	Three months ended June 30, 2016	 	Six months ended June 30, 2016	
 	Total	 	Operating	 	Total	 	Operating	
Organic including price and volume	8	 %	 	10	%	 	10	 %	 	12	%	
Subcontracted transportation	11		 	—		 	8		 	—		
Fuel	(3	)	 	—		 	(3	)	 	—		
Net increase	16	 %	 	10	%	 	15	 %	 	12	%	

In the second quarter of 2016 , total revenue increased 16% reflecting increased revenue from subcontracted transportation and organic growth, partially offset by lower fuel prices passed through to our customers. Operating revenue (revenue excluding subcontracted transportation and fuel) increased 10% due to new business, higher pricing and increased volumes. DTS EBT increased 32% in the second quarter of 2016 due to lower insurance costs and the benefits of increased operating revenue.

In the first half of 2016 , total revenue increased 15% reflecting increased revenue from organic growth and subcontracted transportation, partially offset by lower fuel prices passed through to our customers. Operating revenue (revenue excluding subcontracted transportation and fuel) increased 12% due to new business, increased volumes and higher pricing. We expect operating revenue comparisons to remain favorable through the end of the year, however at a lower growth rate. DTS EBT increased 44% in the first half of 2016 due to lower insurance costs and the benefits of increased operating revenue.

Supply Chain Solutions

																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Automotive	$	137,174		 	119,332		 	$	266,298		 	228,498		 	15	 %	 	17	 %	
Technology and healthcare	58,275		 	63,985		 	115,713		 	123,306		 	(9	)	 	(6	)	
CPG and Retail	105,372		 	110,732		 	213,974		 	213,427		 	(5	)	 	—		
Industrial and other	30,737		 	26,004		 	57,989		 	50,263		 	18		 	15		
Operating revenue (1)	331,558			320,053			653,974			615,494		 	4		 	6		
Subcontracted transportation	54,675			59,842		 	106,654		 	117,997		 	(9	)	 	(10	)	
Fuel (2)	15,819			17,046		 	30,139		 	34,504		 	(7	)	 	(13	)	
Total revenue	$	402,052			396,941			$	790,767			767,995		 	1	 %	 	3	 %	
 	 	 	 	 	 	 	 	 	 	 			
Segment EBT	$	28,371			27,699		 	$	48,167		 	43,388		 	2	 %	 	11	 %	
Segment EBT as a % of total revenue	7.1	%		7.0	%	 	6.1	%	 	5.6	%	 	10 bps	 	50 bps	
Segment EBT as a % of operating revenue (1)	8.6	%		8.7	%	 	7.4	%	 	7.0	%	 	(10) bps	 	40 bps	
Memo:	 	 	 	 	 	 	 	 		 	 	
Average fleet	6,900		 	6,200		 	6,900		 	6,100		 	11	 %	 	13	 %	
————————————
		
(1)	Non-GAAP financial measures. Reconciliations of SCS total revenue to SCS operating revenue, and SCS EBT as a % of total revenue to SCS EBT as a % of operating revenue, are set forth in this table. Refer to the “Non-GAAP Financial Measures” section for the reasons why management believes these measures are important to investors.	
		
(2)	Includes intercompany fuel sales from FMS to SCS.	

31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

												
 	Three months ended June 30, 2016	 	Six months ended June 30, 2016	
 	Total	 	Operating	 	Total	 	Operating	
Organic including price and volume	5	 %	 	5	 %	 	10	 %	 	8	 %	
Subcontracted transportation	(1	)	 	—		 	(1	)	 	—		
Fuel	(1	)	 	—		 	(4	)	 	—		
Foreign exchange	(2	)	 	(1	)	 	(2	)	 	(2	)	
Net increase	1	 %		4	 %		3	 %		6	 %	

In the second quarter of 2016 total revenue increased 1% as operating revenue growth was partially offset by a negative impact from foreign exchange, lower subcontracted transportation and reduced fuel costs passed through to customers. Operating revenue (revenue excluding subcontracted transportation and fuel) increased 4% to $331.6 million in the second quarter of 2016 due to new business, increased volumes and higher pricing, partially offset by a negative impact from foreign exchange. SCS EBT remained at $28 million in the second quarter of 2016 .

In the first half of 2016 , total revenue increased 3% as operating revenue was partially offset by reduced fuel costs passed through to customers, a negative impact from foreign exchange and lower subcontracted transportation. Operating revenue (revenue excluding subcontracted transportation and fuel) increased 6% to $654.0 million . Operating revenue growth was due to new business, higher volumes and increased pricing, partially offset by a negative impact from foreign exchange. We expect operating revenue comparisons to remain favorable through the end of the year. SCS EBT increased 11% in the first half of 2016 due to higher pricing, new business and increased volumes.

Central Support Services

																				
 	Three months ended June 30,	 	Six months ended June 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Six Months	
 	(Dollars in thousands)	 	 	 	 	
Human resources	$	4,260		 	5,038		 	$	8,784		 	10,380		 	(15	)%	 	(15	)%	
Finance	14,350		 	14,512		 	29,124		 	29,048		 	(1	)	 	—		
Corporate services and public affairs	2,537		 	2,555		 	4,992		 	5,109		 	(1	)	 	(2	)	
Information technology	19,995		 	20,462		 	39,903		 	41,124		 	(2	)	 	(3	)	
Legal and safety	5,829		 	5,835		 	12,087		 	12,432		 	—		 	(3	)	
Marketing	6,174		 	6,348		 	9,884		 	10,128		 	(3	)	 	(2	)	
Other	7,875		 	9,359		 	14,601		 	18,106		 	(16	)	 	(19	)	
Total CSS	61,020		 	64,109			119,375			126,327		 	(5	)	 	(6	)	
Allocation of CSS to business segments	(49,805	)		(53,185	)	 	(98,495	)	 	(103,461	)		(6	)	 	(5	)	
Unallocated CSS	$	11,215			10,924			$	20,880			22,866			3	 %	 	(9	)%	

Total CSS costs decreased 5% in the second quarter and 6% in the first half of 2016 primarily due to lower compensation-related expenses. Unallocated CSS increased 3% in the second quarter and decreased 9% in the first half of 2016 . The decrease in the first half of 2016 is primarily due to lower compensation-related expenses.

32

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:

	
							
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Net cash provided by (used in):	 	 	 	
Operating activities	$	762,672		 	658,698		
Financing activities	69,399		 	445,520		
Investing activities	(823,336	)	 	(1,078,663	)	
Effect of exchange rates on cash	(3,415	)	 	(1,198	)	
Net change in cash and cash equivalents	$	5,320		 	24,357		
 
Cash provided by operating activities increased to $762.7 million in the six months ended June 30, 2016 compared with $658.7 million in 2015 , due to higher earnings adjusted for non-cash items, primarily depreciation, and working capital improvements, partially offset by higher pension contributions. Cash provided by financing activities was $69.4 million in the six months ended June 30, 2016 compared with $445.5 million in 2015 due to lower borrowing needs. Cash used in investing activities decreased to $823.3 million in the six months ended June 30, 2016 compared with $1.08 billion in 2015 primarily due to lower payments for capital expenditures and higher proceeds from revenue earning equipment sales.
 
Our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment. We refer to the sum of operating cash flows, proceeds from the sale of revenue earning equipment and operating property and equipment, collections on direct finance leases and other investing cash inflows from continuing operations as “total cash generated”, a non-GAAP financial measure. We refer to the net amount of cash generated from operating and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations as “free cash flow”, also a non-GAAP financial measure.
 
The following table shows our free cash flow computation:

							
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Net cash provided by operating activities from continuing operations	$	762,672			658,698		
Sales of revenue earning equipment (1)	245,681			211,153		
Sales of operating property and equipment (1)	6,322			641		
Collections on direct finance leases and other items (1)	43,957			33,912		
Total cash generated (2)	1,058,632			904,404		
Purchases of property and revenue earning equipment (1)	(1,120,182	)		(1,329,218	)	
Free cash flow (2)	$	(61,550	)		(424,814	)	
    
———————————
		
(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 for the reasons why management believes these measures are important to investors.	

33

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table provides a summary of capital expenditures:

							
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Revenue earning equipment:	 	 	 	
Full service lease	$	869,081		 	947,280		
Commercial rental	67,738		 	452,928		
 	936,819		 	1,400,208		
Operating property and equipment	77,883		 	53,776		
Total capital expenditures	1,014,702			1,453,984		
Changes in accounts payable related to purchases of revenue earning equipment	105,480		 	(124,766	)	
Cash paid for purchases of property and revenue earning equipment	$	1,120,182			1,329,218		
   
Capital expenditures decreased 30% to $1.0 billion in the six months ended June 30, 2016 reflecting planned lower investments in our commercial rental fleet. We expect full-year 2016 capital expenditures to be approximately $2 billion . We expect to fund 2016 capital expenditures primarily with internally generated funds and additional debt financing.

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 commercial paper and medium-term notes.

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 particular Ryder securities based on current information obtained by the rating agencies from us or from other sources. 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 revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.

Our debt ratings and rating outlooks at June 30, 2016 were as follows:

								
 	Short-term	 	 	 	Long-term	
 	Rating	 	Outlook	 	Rating	 	Outlook	
Moody’s Investors Service	P2	 	Stable	 	Baa1	  	Stable	
Standard & Poor’s Ratings Services	A2	 	Stable	 	BBB	  	Positive	
Fitch Ratings	F2	 	Stable	 	A-	  	Stable	

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

Cash and equivalents totaled $66 million as of June 30, 2016 . As of June 30, 2016 , approximately $30 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 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.

We believe that our operating cash flows, together with our access to commercial paper markets 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 commercial paper markets 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 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.

At June 30, 2016 , we had the following amounts available to fund operations under the following facilities:

		
 	(In millions)	
Global revolving credit facility	$425	
Trade receivables program	$175	
 
We maintain a global revolving credit facility used to finance working capital. The availability under our global revolving credit facility is $1.2 billion and the facility matures in January 2020 . The credit facility is used primarily to finance working capital. 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 June 30, 2016 was 214% .
We also have a $175 million trade receivables purchase and sale program, pursuant to which we ultimately sell certain ownership interests in certain of our domestic trade accounts receivable to committed purchasers. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. 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. If no event occurs that causes early termination, the 364 -day program will expire October 21, 2016.
In February 2016, Ryder filed an automatic shelf registration statement on Form S-3 with the SEC. The registration is for an indeterminate number of securities and is effective for three years. Under this universal shelf registration statement, we have the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock and debt securities, subject to market demand and ratings status.

35

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table shows the movements in our debt balance:

							
 	Six months ended June 30,	
 	2016	 	2015	
 	(In thousands)	
Debt balance at January 1	$	5,502,627		 	4,717,524		
Cash-related changes in debt:	 	 	 	
Net change in commercial paper borrowings	162,105		 	34,750		
Proceeds from issuance of medium-term notes	298,254		 	698,911		
Proceeds from issuance of other debt instruments	—		 	231,179		
Retirement of medium term notes	(300,000	)	 	(360,000	)	
Other debt repaid	(28,416	)	 	(126,103	)	
Debt issuance costs paid	(622	)	 	(2,546	)	
 	131,321		 	476,191		
Non-cash changes in debt:	 	 	 	
Fair value adjustment on notes subject to hedging	15,736		 	1,837		
Addition of capital lease obligations	777		 	5,847		
Changes in foreign currency exchange rates and other non-cash items	(16,447	)	 	(15	)	
Total changes in debt	131,387		 	483,860		
Debt balance at June 30	$	5,634,014		 	5,201,384		

In accordance with our funding philosophy, we attempt to match the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our assets. We utilize both fixed-rate and variable-rate debt to achieve this match and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreements) was 32% and 30% at June 30, 2016 and December 31, 2015 , 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 under this shelf registration statement, asset-backed financing obligations and debt maturities.
Ryder’s debt to equity ratios were 275% and 277% as of June 30, 2016 and December 31, 2015 , respectively.
The debt to equity ratio represents total debt divided by total equity. Additional obligations, including the present value of minimum lease payments under operating leases for vehicles, were not significant as of June 30, 2016 or December 31, 2015 .

36

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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 we may from time to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. In 2016 , we expect total contributions to our pension plans to be approximately $ 80 million . During the six months ended June 30, 2016 , we contributed $42 million to our pension plans. Changes in interest rates and the market value of the securities held by the plans during 2016 could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and contributions in 2016 and beyond. See Note 12 , “ Employee Benefit Plans ,” in the Notes to Consolidated Condensed Financial Statements for additional information.

Share Repurchases and Cash Dividends

See Note 8 , “ Share Repurchase Programs ,” in the Notes to Consolidated Condensed Financial Statements for a discussion of share repurchases.

In May 2016 , our Board of Directors declared a quarterly cash dividend of $0.41 per share of common stock.

RECENT ACCOUNTING PRONOUNCEMENTS

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

37

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes information extracted from consolidated condensed financial information but not required by generally accepted accounting principles (GAAP) to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures” as defined by SEC rules. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in the management's discussion and analysis or in this non-GAAP financial measures section. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.
Specifically, we refer to the following non-GAAP financial measures in this Form 10Q:

				
Non-GAAP Financial Measure	Comparable GAAP Measure	Reconciliation in Section Entitled	Page	
Operating Revenue Measures :	 	 	 	
Operating Revenue	Total Revenue	MD&A - Non-GAAP Financial Measures section	41	
FMS Operating Revenue	FMS Total Revenue	MD&A - Operating Results by Segment, Fleet Management Solutions section	27	
DTS Operating Revenue	DTS Total Revenue	MD&A - Operating Results by Segment, Dedicated Transportation Solutions section	30	
SCS Operating Revenue	SCS Total Revenue	MD&A - Operating Results by Segment, Supply Chain Solutions section	31	
FMS EBT as a % of Operating Revenue	FMS EBT as a % of Total Revenue
	MD&A - Operating Results by Segment, Fleet Management Solutions section	27	
DTS EBT as a % of Operating Revenue	DTS EBT as a % of Total Revenue	MD&A - Operating Results by Segment, Dedicated Transportation Solutions section	30	
SCS EBT as a % of Operating Revenue	SCS EBT as a % of Total Revenue	MD&A - Operating Results by Segment, Supply Chain Solutions section	31	
Comparable Earnings Measures :	 	 	 	
Comparable Earnings	Earnings from Continuing Operations	MD&A, Non-GAAP Financial Measures section	40	
Comparable EPS	EPS from Continuing Operations			
Comparable Earnings Before Income Tax	Earnings Before Income Tax			
Cash Flow Measures :	 	 	 	
Total Cash Generated and Free Cash Flow	Cash Provided by Operating Activities	MD&A - Financial Resources and Liquidity, Cash Flows section	33	

38

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

Set forth in the table below is an explanation of each non-GAAP financial measure and why management believes that presentation of each non-GAAP financial measure provides useful information to investors:

					
 	Operating Revenue Measures :	 	 	 	
 	Operating Revenue
FMS Operating Revenue
DTS Operating Revenue
SCS Operating Revenue
FMS EBT as a % of Operating Revenue
DTS EBT as a % of Operating Revenue
SCS EBT as a % of Operating Revenue	Operating revenue is defined as total revenue for Ryder System, Inc. or each business segment (FMS, DTS and SCS), respectively, excluding any (1) fuel and (2) subcontracted transportation. We use operating revenue to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc. as well as for each of our business segments. We also use segment EBT as a percentage of operating revenue for each business segment for the same reason.
Fuel : We exclude FMS, DTS and SCS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers, which 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 market fuel costs.
Subcontracted 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 and SCS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS.	
 	Comparable Earnings Measures :	 	 	 	
 	Comparable Earnings
Comparable EPS
Comparable Earnings Before Income Tax	Comparable earnings, comparable earnings per diluted common share (EPS) and comparable earnings before income tax are defined, respectively, as GAAP earnings, EPS and earnings before income tax, all from continuing operations, excluding (1) non-operating pension costs and operations (2) any other significant items that are not representative of our business. 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 : Our comparable earnings measures exclude non-operating pension costs, which include the amortization of net actuarial loss, interest cost and expected return on plan assets components of pension and postretirement costs. We exclude non-operating pension costs because we consider these to be impacted by financial market performance and outside the operational performance of our business.
Other Significant Items : Our comparable earnings measures also exclude other significant items that are not representative of our business operations. These other significant items vary from period to period and, in some periods, there may be no such significant items. In this reporting period, we exclude the following other significant items from our comparable earnings measures in this Form 10Q:
___ (1) Pension-related charge  (in the second quarter 2016 and year to date 2016). This charge represents a one-time, non-cash charge for benefit improvements made in 2009 that were not fully reflected in our projected benefit obligation.
      (2) Professional fees  (in the second quarter 2015 and year to date 2015). These charges represent professional fees associated with the assessment of potential cost savings initiatives.
___ (3) A benefit from a tax law change  (in the second quarter 2015 and year to date 2015). In the second quarter of 2015, the states of Connecticut and Texas and the city of New York enacted changes to their tax systems, which decreased Ryder's provision for income taxes in each jurisdiction.
Calculation of comparable tax rate : The comparable provision for income taxes 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 tax rates of the jurisdictions to which the non-GAAP adjustments relate.

 			

39

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

	
				
Cash Flow Measures :	 	 	 	
Total Cash Generated
Free Cash Flow
	We consider total cash generated and free cash flow to be important measures of comparative operating performance as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
Total Cash Generated : 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 and (3) operating property and equipment, (4) collections on direct finance leases and (5) 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 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”. We calculate free cash flow as the sum of (1) net cash provided by operating activities and (2) net cash provided by the sale of revenue earning equipment and (3) operating property and equipment, (4) collections on direct finance leases and (5) other cash inflows from investing activities, less (6) 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.	

The following table provides a reconciliation of GAAP earnings before taxes (EBT), earnings, and earnings per diluted share (EPS) from continuing operations to comparable EBT, earnings and EPS from continuing operations, which was not provided within the MD&A discussion.

EBT, earnings and EPS from continuing operations in the six months ended June 30, 2016 and 2015 included certain items we do not consider indicative of our business operations and have been excluded from our comparable EBT, earnings and EPS measures. The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated Condensed Financial Statements:

	
																					
 	EBT	 	Earnings	 	Diluted EPS	
 	2016	 	2015	 	2016	 	2015	 	2016	 	2015	
Three months ended June 30,	(In thousands, except per share amounts)	
EBT/Earnings/EPS	$	116,779		 	133,447		 	$	74,042		 	85,917		 	$	1.38		 	1.61		
Non-operating pension costs	7,617		 	4,688		 	4,448		 	2,671		 	0.09		 	0.05		
Pension-related charge	7,650		 	—		 	4,817		 	—		 	0.09		 	—		
Professional fees	—		 	1,939		 	—		 	1,224		 	—		 	0.02		
Tax law change	—		 	—		 	—		 	(1,860	)	 	—		 	(0.03	)	
Comparable	$	132,046		 	140,074		 	$	83,307		 	87,952		 	$	1.56		 	1.65		

Six months ended June 30,	 	 	 	 	 	 	 	 	 	 	 	
EBT/Earnings/EPS	$	205,487		 	217,624		 	$	130,227		 	139,243		 	$	2.43		 	2.61		
Non-operating pension costs	14,485		 	9,571		 	8,437		 	5,463		 	0.16		 	0.10		
Pension-related charge	7,650		 	—		 	4,817		 	—		 	0.09		 	—		
Professional fees	—		 	3,780		 	—		 	2,385		 	—		 	0.04		
Tax law change	—		 	—		 	—		 	(1,860	)	 	—		 	(0.03	)	
Comparable	$	227,622		 	230,975		 	$	143,481		 	145,231		 	$	2.68		 	2.72		

40

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

														
 	Three months ended June 30,	 	Six months ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Total revenue	$	1,703,744		 	1,662,931		 	$	3,333,416		 	3,230,084		
Fuel	(161,432	)	 	(195,932	)	 	(301,883	)	 	(390,023	)	
Subcontracted transportation	(92,599	)	 	(74,381	)	 	(175,807	)	 	(147,157	)	
Operating revenue	$	1,449,713		 	1,392,618		 	$	2,855,726		 	2,692,904		

41

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

FORWARD-LOOKING STATEMENTS

Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Quarterly Report on Form 10-Q contains forward-looking statements including, but not limited to, statements regarding:

•	our expectations in our FMS business segment regarding anticipated full service lease and commercial rental revenue and demand;	
		
•	our expectations in our DTS and SCS business segments regarding anticipated operating revenue trends and growth rates;	
		
•	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 operating cash flow and capital expenditures through the end of 2016 ;	
		
•	the adequacy of our accounting estimates and reserves for pension expense, compensation expense and employee benefit plan obligations, depreciation and residual value guarantees and income taxes;	
		
•	the adequacy of 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;	
		
•	the anticipated impact of fuel price fluctuations;	
		
•	our expectations as to return on pension plan assets, future pension expense and estimated contributions;	
		
•	our expectations regarding the scope, anticipated outcomes and the adequacy of our loss provisions with respect to certain claims, proceedings and lawsuits;	
		
•	our ability to access commercial paper and other available debt financing in the capital markets; and	
		
•	our expectations regarding the future use and availability of funding sources.	

42

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

These statements, as well as other forward-looking statements contained in this Quarterly Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors include, but are not limited to, the following:

•	Market Conditions:	

				
 	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	

				
 	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 require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments	

				
 	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	

43

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

•	Profitability:	

				
 	Ÿ	 	Our inability to obtain adequate profit margins for our services	

				
 	Ÿ	 	Lower than expected sales volumes or customer retention levels	

				
 	Ÿ	 	Lower full service lease sales activity	

				
 	Ÿ	 	Decreases in commercial rental fleet utilization	

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

				
 	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 prices for vehicles, diesel engines and fuel as a result of exhaust emissions standards enacted over the last few years	

				
 	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 key assumptions and pricing structure of our DTS and SCS contracts prove to be invalid	

				
 	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	

44

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	
		
•	Other risks detailed from time to time in our SEC filings	

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this 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.

45

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, 2015 . Please refer to the 2015 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 second quarter of 2016 , 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 second quarter of 2016 , 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 over Financial Reporting

During the six months ended June 30, 2016 , there were no changes in Ryder’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.

PART II. OTHER INFORMATION

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 June 30, 2016 :

	
													
 	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)	
April 1 through April 30, 2016	233		 	$	62.09		 	—		 	2,000,000		
May 1 through May 31, 2016	321,819		 	68.05		 	321,718		 	1,678,000		
June 1 through June 30, 2016	289		 	65.01		 	—		 	1,678,000		
Total	322,341		 	$	68.04		 	321,718		 	 	
  ————————————
		
(1)	During the three months ended June 30, 2016 , we purchased an aggregate of 322,000 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 the Company’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 the Company’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 the Company 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. 	

46

ITEM 6. EXHIBITS

	
				
10.4 (x)		 	Form of terms and conditions applicable to 2016 annual cash incentive awards granted under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan.	
 	 	 	
10.4 (y)		 	Form of terms and conditions applicable to non-qualified stock options granted under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan.	
 	 	 	
10.4 (z)		 	Form of terms and conditions applicable to performance-based restricted stock rights granted under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan.	
 	 	 	
10.4 (aa)		 	Form of terms and conditions applicable to performance-based cash awards granted under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan.	
 	 	 	
10.4 (bb)		 	Form of terms and conditions applicable to restricted stock rights granted under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan.	
 	 	 	
10.4 (cc)		 	Form of terms and conditions applicable to restricted stock units granted under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan.	
 	 	 	
12.1		 	Calculation of Ratio of Earnings to Fixed Charges	
 	 	 	
31.1		 	Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a)	
 	 	
31.2		 	Certification of Art A. Garcia pursuant to Rule 13a-14(a) or Rule 15d-14(a)	
 	 	
32		 	Certification of Robert E. Sanchez and Art A. Garcia pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350	

47

SIGNATURES

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: July 27, 2016	By:	/s/ Art A. Garcia	
 	 	Art A. Garcia	
 	 	Executive Vice President and Chief Financial Officer	
 	 	(Principal Financial Officer)	
 	 	 	
Date: July 27, 2016	By:	/s/ Scott R. Allen	
 	 	Scott R. Allen	
 	 	Vice President and Controller	
 	 	(Principal Accounting Officer)	

48

EXHIBIT 10.4 (x)

ANNUAL CASH INCENTIVE AWARDS
GRANTED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

2016 TERMS AND CONDITIONS
(162(m) COVERED EMPLOYEE EXECUTIVE AWARDS)

The following terms and conditions apply to the 2016 annual incentive cash awards (the “Awards”) granted to certain individuals by Ryder System, Inc. (the “Company”) under the Ryder System, Inc. Amended and Restated 2012 Equity and Incentive Compensation Plan (the “Plan”), a description of which is set forth in the relevant Guide to the Annual Incentive Compensation Program (the “Guide”) which references these terms and conditions. No individual shall receive an Award unless the Company has notified the individual of the Award and delivered these Terms and Conditions and the Guide to the individual. Certain terms of the Award, including the performance goals and target payout amounts, are also set forth in the Guide and the payout grids titled “Incentive Payout Components by Position” (“Payout Grid”) applicable to the Participant. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the Awards in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or the Guide.

1.	General . The Award represents the right to receive a cash payment based on the attainment of certain financial performance goals, on the terms and conditions set forth herein, in Schedule A attached hereto, in the Guide and in the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). It is intended that any Awards granted to “Covered Employees” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, including any successor provisions and regulations (the “Code”), shall qualify as “performance-based compensation” for purposes of Section 162(m) of the Code.	

(a)	The Award Documents supersede any and all prior oral representations, promises or guarantees relating to short-term incentives or annual bonuses. All provisions of the Award Documents shall apply unless otherwise prohibited by law. In the event there is an express conflict between the provisions of the Plan and those set forth in the Guide or in these terms and conditions, the terms and conditions of the Plan shall govern. Unless otherwise approved by the Committee, individuals who have written agreements which specifically provide for annual incentive compensation other than that which is provided under the Award or who are participants in any other short-term incentive compensation plan of the Company or its subsidiaries and affiliates are not eligible to receive an Award hereunder. The Company may, in its sole discretion, provide discretionary or other bonuses to Company employees, whether or not they receive an Award.	

(b)	The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the Award may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of an Award and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the Awards shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under the Plan.	

2.	Financial Performance Goals; Performance Period . The Awards are intended to reward Participants for the attainment by the Company of certain performance goals during the period beginning on January	

1, 2016 and ending on December 31, 2016 (the “Performance Period”). The amount payable pursuant to this Award shall be calculated in accordance with the attached Schedule A, subject to the additional terms and conditions of this Award and the Plan.

3.	Payment . Subject to Sections 4 and 5 below and the provisions of the Guide and the Plan, amounts payable with respect to the Award will be payable in cash to the Participant following the determination of the Company’s performance, the calculation of the Award pursuant to Schedule A, and approval by the Committee (or the Board, as the case may be) of the payout. Payment shall be made during the 2017 calendar year, but in no event later than March 15, 2017 (the applicable date, the “Payment Date”), provided that, subject to Section 5 below, the Participant is, on the Payment Date, and has been from the first day of the Performance Period through the Payment Date, continuously employed in good standing by the Company or a Subsidiary. No Participant shall have a vested or accrued right to any payment under the Award. For purposes of these terms and conditions, the Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then immediately thereafter employed by the Company or another Subsidiary. Participation in the Plan and receipt of any payments thereunder is expressly conditioned upon the Participant remaining fully compliant with all Company values, principles, agreements, plans, procedures, protocols and policies and all rules contained in the Award Documents. Notwithstanding anything to the contrary set forth herein, to the fullest extent permitted under applicable law, (i) the Company retains the right, in its sole and absolute discretion, to withhold payment and participation from any Participant who violates or has violated any Company value, principle, agreement, plan, procedure, protocol, policy or the rules contained in the Award Documents even if there are no documented performance issues in the Participant’s personnel file and (ii) if the Company has any claim against the Participant for money or assets owed that have not been satisfied by the Participant, the amount otherwise payable pursuant to the Award shall be reduced by any such unpaid claims unless otherwise prohibited by law, including without limitation Section 409A of the Code. The calculation of amounts payable pursuant to the Award with respect to Participants outside of the U.S. will be set forth in the Guide.	

4.	New Hire, Promotion or Transfer. Participants who are newly hired, promoted, or transferred into or out of eligible positions, and those who move from one eligibility level to another, will receive a pro-rata incentive based on the terms in effect for his or her Management Level position, the portion of time spent in each position during the Performance Period, the annual rate of pay and the target incentive award for the eligible position(s).	

5.	Termination of Employment; Temporary Leave. Except as specifically set forth below, the Award will terminate and no amounts will be paid under the Award following the termination of the Participant’s employment.	

(a)	Resignation by the Participant or Termination by the Company or a Subsidiary : Notwithstanding anything herein to the contrary, (i) with respect to Participants who are entitled to severance benefits under the terms and conditions of any individual agreement or under the Company’s Executive Severance Plan, any amounts due will be calculated in accordance with such agreement or plan and (ii) with respect to Participants who are not otherwise entitled to severance benefits under the terms of any individual agreement or the Company’s Executive Severance Plan, if any, the Award will terminate and no amounts will be paid under the Award, provided that if a Participant’s employment is terminated by the Company after October 1, 2016 but before the Payment Date as a result of a reduction in force by the Company, or a location closing or loss of business, as determined by the Committee, in its sole and absolute discretion, the Participant shall be eligible to receive a payment hereunder on the Payment Date, if the Participant would have received a payment under the Award but for his or her termination. Payment made to a terminated employee pursuant to the preceding sentence shall only be made if the Participant has executed and delivered to the Company a release in favor of the Company in form and substance satisfactory to the Company, which has not been revoked, and shall not be made prior to the effective date of such release.	

		
i.	Notwithstanding the foregoing, if the Participant is terminated by the Company or a Subsidiary prior to the Payment Date and is subsequently re-employed by the Company or a Subsidiary prior to the Payment Date, such Participant shall be eligible to receive a pro-rata payment on the Payment Date based on the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company.	

ii.	In the event that the Participant voluntarily terminates his or her employment with the Company prior to the Payment Date, (x) if the Participant is re-employed by the Company or a Subsidiary within 90 days of the effective date of such termination, but in any event prior to the Payment Date, the Participant shall be eligible to receive a pro-rata payment on the Payment Date based on the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company; or (y) unless otherwise provided for herein, if the Participant is re-employed by the Company or a Subsidiary more than 90 days after the effective date of such resignation, but in any event before the end of the Performance Period, the Participant shall be eligible to receive a pro-rata payment on the Payment Date based on the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company, after the Participant was re-employed.	

(b)	Death or Disability (including Disability Retirement) : If the Participant’s death or Disability occurs after the end of the Performance Period, the Participant (or his or her Beneficiary, in the event of death) shall receive all amounts otherwise payable to him or her under the Award on the Payment Date. If the death or Disability occurs during the Performance Period and the Participant would have received a payment under the Award but for his or her death or Disability, the Participant (or his or her Beneficiary, in the event of death) will be eligible to receive a pro-rata payment on the Payment Date based on the amount otherwise payable to the Participant and the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company.	

(c)	Workers’ Compensation or Approved Leave of Absence : Except as otherwise set forth herein, a Participant who takes an approved workers’ compensation leave or an approved leave of absence during any portion of the Performance Period and is actively employed for at least 180 days during 2016, as determined by the Company, will be eligible to receive a payment on the Payment Date (to the extent the Participant would have received a payment under the Award but for his or her leave of absence), which will be pro-rated based on the number of days during the Performance Period that the Participant is considered to be an active employee, as determined by the Company.	

(d)	Military Leave of Absence : A Participant who takes an approved military leave of absence will be eligible to receive a payment on the Payment Date (to the extent the Participant would have received a payment under the Award but for his or her military leave of absence) based on the Participant’s full Eligible Base Salary (as defined on Schedule A ) regardless of the number of days worked during the Performance Period.	

(e)	Retirement : If the Participant’s Retirement occurs after December 31, 2016 (the last day worked) and before the Payment Date, the Participant shall receive all amounts due to him or her under the Award on the Payment Date. If the Participant’s Retirement occurs on or prior to December 31, 2016 (the last day worked is December 30 or earlier), the Award will terminate and no amounts will be paid under the Award, unless Section 5(a) or 5(b) applies. As used herein, the term “Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service.	

(f)	Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from	

the Participant all cash paid to the Participant pursuant to Section 3 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment.

6.	U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the Award. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the Award an amount equal to the federal (including FICA), state, and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the Award. Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside of the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.	

7.	Section 409A. All payments made under the Award are intended to constitute short-term deferral amounts excludible from the requirements of Section 409A of the Code and shall be administered in accordance with Section 9.17 of the Plan. In the event that the Participant is required to execute a release of claims to receive payment pursuant to the Award and the 60 day period following the Participant’s termination of employment spans two calendar years, notwithstanding any provision herein, payment shall not be made until the later calendar year.	

8.	Change of Control . Notwithstanding anything herein to the contrary, in the event of a Change of Control of the Company during the Performance Period, (i) with respect to Participants who are entitled to Change of Control benefits under the terms of any individual agreement or any severance plan or arrangement, the amount payable pursuant to this Award will be calculated in accordance with such agreement or plan and (ii) with respect to Participants who are not otherwise entitled to Change of Control benefits under the terms of any individual agreement or any severance plan or arrangement, and whose employment is terminated in connection with or as a result of the Change of Control, upon approval by the Committee, the Participant will be entitled to receive a pro-rata payment based on the number of days during the Performance Period that the Participant is considered to be an active employee, as determined by the Company, assuming target performance. This payment shall be made on or before March 15, 2017.   	

9.	Sale of Business . If a business unit is sold during the Performance Period, the Participants that are employees of such business unit will receive a pro-rata payment based on performance on the Payment Date. Such payment will be made over time or in one lump sum, as determined by the Committee, provided that in any event all payments will be made on or before March 15, 2017.	

10.	Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the Award or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The Awards and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.	

11.	No Employment Right . Neither the grant of the Award, nor any action taken hereunder, shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant Awards hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.	

12.	No Assignment . A Participant’s rights and interest under the Award may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company's obligation under the Award to make any payment thereunder.	

		
13.	Unfunded Plan . Any amounts owed under the Award shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure payment of any amounts payable under the Award.	

14.	Recoupment Policy . This Award is considered “incentive compensation” under the Company’s Recoupment Policy, in effect from time to time. The Award and any amounts payable hereunder shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.	

15.	Definitions . Capitalized terms used above that are not defined below have the meanings set forth in the Plan. For purposes of these Terms and Conditions:	

(a)	“Proscribed Activity” means any of the following:	

(i)	the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;	

(ii)	the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;	

(iii)	the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;	

(iv)	the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;	

(v)	the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;	

(vi)	following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or	

		
(vii)	the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.	

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)	“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.	

Schedule A to [EXECUTIVE NAME]’s
2016 Annual Cash Incentive Award
GRANTED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

The following sets forth the method for calculating the payment amount applicable to the Award to which this Schedule A is attached. This Schedule A shall be subject to the Award Documents. Unless otherwise specified in this Schedule A , all defined terms have the meanings set forth in the Award.

(a)	The amount payable pursuant to the Award shall not exceed [X%] of the Company’s Pretax Operating Earnings (the “Maximum Payment”), up to Pretax Operating Earnings of $300 million, for the Performance Period. As soon as practicable after the end of the Performance Period, the Committee will determine the Company’s Pretax Operating Earnings, to the extent applicable, in accordance with generally accepted accounting principles (“GAAP”), provided that, the Committee shall exclude, without duplication, the following items from actual results in determining Pretax Operating Earnings: (i) changes in accounting methods; (ii) non-vehicle asset impairments; (iii) non-recurring acquisition expenses and restructuring charges; (iv) multiemployer pension plan withdrawal liability; and (v) unusual or infrequently occurring income or expense, in each case, other than those included in the Company’s 2016 business plan.	

(b)	Once the Maximum Payment is calculated pursuant to paragraph (a), the Committee shall apply: (i) the performance metrics (the “EPS/OR Metrics”); (ii) the performance targets (the “EPS/OR Targets”); (iii) the weight given to each performance metric; (iv) the threshold, target and maximum payout amounts (expressed as a percentage of the Participant’s Eligible Base Salary) payable if the EPS/OR Targets are achieved; and (v) any other requirements or limitations of the Award approved by the Committee, in each case as applicable to the Participant and specified in the Guide and the Payout Grid, to calculate the amount payable pursuant to this Award. The Committee may, in its sole discretion, increase or decrease the amount calculated pursuant to this paragraph (b), provided that such adjusted amount shall not exceed the Maximum Payment.	

(c)	Once established, neither the EPS/OR Metrics, the EPS/OR Targets, nor the provisions of paragraph (a) above shall be changed during the Performance Period; provided that, with respect to the EPS/OR Metrics and the EPS/OR Targets, if the Committee determines that external changes or other unanticipated business conditions have materially affected the fairness of the EPS/OR Metrics or EPS/OR Targets, then the appropriate adjustments may be made (either up or down) during the Performance Period.	

(d)	For purposes of the Award, Eligible Base Salary means the annual rate of pay for the Performance Period, excluding all other compensation paid to the Participant during the year, including but not limited to bonuses, incentives, commissions, car allowance, employee benefits, relocation expenses, and any imputed income for which the Participant may be eligible (all as more fully described in the Guide).	

(e)	For purposes of this Schedule A, “Pretax Operating Earnings” means Comparable Earnings from Continuing Operations Before Income Tax, as reported in the Company’s earnings press release for the fiscal year ending December 31, 2016.	

EXHIBIT 10.4 (y)

NON-QUALIFIED STOCK OPTIONS
ISSUED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

2016 TERMS AND CONDITIONS

The following terms and conditions apply to the non-qualified stock option (“Option”) granted by Ryder System, Inc. (the “Company”) under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan”) during the 2016 calendar year, as specified in the Stock Option Award Notification (the “Notification”) for the Option which references these terms and conditions. Certain terms of the Option, including the number of Shares subject to the Option, the exercise price, the vesting schedule and the expiration date, are set forth in the Notification. The terms and conditions contained herein may be amended by the Compensation Committee of the Company’s Board of Directors (the “Committee”) as permitted by the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.	General . The Option represents the right to purchase Shares on the terms and conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein. A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in these terms and conditions, the terms and conditions of the Plan shall govern.	

2.	Exercisability of Option .  Subject to Sections 4 and 5 below, the Option shall vest and become exercisable pursuant to the vesting schedule set forth in the Notification and shall remain exercisable until the expiration date set forth in the Notification, or such other expiration date designated by the Committee pursuant to Section 7 of the Plan (the “Expiration Date”).	

3.	Exercise Procedures. The Option, to the extent exercisable, may be exercised by delivering to the Company’s stock administrator, notice of intent to exercise in the manner designated by the stock administrator on behalf of the Company which may vary based on the Participant’s position with the Company. Payment of the aggregate exercise price and applicable withholding taxes shall be made in the manner, consistent with the Plan and these terms and conditions, designated by the stock administrator on behalf of the Company.	

4.	Termination of Option; Forfeiture. Notwithstanding the vesting and expiration dates set forth in the Notification, the Option will terminate upon or following the termination of the Participant’s employment with the Company and its Subsidiaries as described below. Except as otherwise provided in Section 4(d) and 5(a) below, upon the Participant’s termination of employment for any reason, the unvested portion of the Option will immediately terminate. For purposes of these terms and conditions, a Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a break in service.	

(a)	Resignation by the Participant or Termination by the Company or a Subsidiary other than for Cause : Except as otherwise provided in this Section 4 or Section 5(b) below, the vested portion of the Option will terminate at 12:01 a.m. on the 91st day following the Participant’s last day of employment (but not later than the Expiration Date), provided that if the Participant dies during such 90 day period, such portion of the Option will terminate no earlier than 12:01 a.m. on the first anniversary of the date of death (but not later than the Expiration Date) and	

provided further that, if, upon such termination, the Participant is entitled to severance benefits in the form of salary continuation, then the vested portion of the Option will terminate at 12:01 a.m. on the 91st day following the date that salary continuation is no longer payable to the Participant (but not later than the Expiration Date).

Notwithstanding the foregoing, if the Participant is terminated by the Company or a Subsidiary without Cause and is subsequently re-employed by the Company or a Subsidiary prior to 12:01 a.m. on the 91st day following the later of (i) the last day of employment or (ii) if applicable, the date that salary continuation is no longer payable to the Participant, but in either case, not later than the Expiration Date, then the vested, but unexercised, portion of the Options will remain exercisable until the Expiration Date, unless terminated earlier pursuant hereto.

In the event that the Participant voluntarily terminates his or her employment with the Company or a Subsidiary and is subsequently re-employed by the Company or a Subsidiary prior to 12:01 a.m. on the 91 st day following the Participant’s last day of employment (but not later than the Expiration Date), then the vested, but unexercised, portion of the Options will remain exercisable until the Expiration Date, unless terminated earlier pursuant hereto.

(b)	Retirement : If a Participant’s employment terminates for any reason (other than for Cause, death or Disability) at a time when he or she is eligible for Retirement, then the vested portion of the Option will terminate upon the Expiration Date.	

(c)	Termination due to Death : If a Participant’s employment terminates on account of the Participant’s death, the vested portion of the Option will expire upon the Expiration Date. Following the Participant’s death, the right to exercise such vested portion will pass to the Participant’s Beneficiary.	

(d)	Termination due to Disability : If a Participant’s employment terminates on account of the Participant’s Disability, the unvested portion of the Option that would otherwise have become vested during the three years following Disability will continue to vest as scheduled (without regard to subsequent status changes). The vested portion of the Option, including the portion that becomes vested pursuant to the preceding sentence, will expire upon the Expiration Date.	

(e)	Termination for Cause : Notwithstanding the foregoing provisions of this Section 4, the entire Option, including the vested portion, will terminate immediately upon the Participant’s termination of employment for Cause. To the extent the Participant exercised any portion of the Option during the one year period immediately prior to the date of such termination of employment for Cause, the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant upon such exercise, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash, and in each case upon receipt thereof, the Company shall return the exercise price paid by the Participant.	

(f)	Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then any portion of the Option still outstanding shall terminate and the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant upon the exercise of the Option during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash, and in each case upon receipt thereof, the Company shall return the exercise price paid by the Participant.	

		
5.	Change of Control.	

(a)	Treatment of the Option : In the event of a Change of Control, the Committee may take such actions with respect to the Option as it deems appropriate pursuant to the Plan; provided that if the Option continues in effect after a Change of Control and the Participant’s employment is terminated by the Company without Cause, the Participant terminates employment for Good Reason, or the Participant’s employment is terminated on account of death, Disability or Retirement, in each case, upon or within 24 months following the Change of Control, any unvested portion of the Option shall become fully vested upon such termination of employment.	

(b)	Option Termination : Notwithstanding anything contained herein to the contrary and except as otherwise determined by the Committee prior to a Change of Control in accordance with Section 7 or 8 of the Plan, in the event of a Change of Control, any portion of the Option which is vested as of the Change of Control or becomes vested upon or following the Change of Control (whether pursuant to this Section 5 or otherwise) shall remain outstanding until the Expiration Date, but subject to earlier termination under the circumstances described in Sections 4(e) and (f) above.	

(c)	Termination of Employment Prior to a Change of Control : For purposes of this Section 5, the term Option shall refer only to those Options that are outstanding at the time of the Change of Control and not to any unvested Options that have terminated pursuant to Section 4 above, provided that, if (i) the Participant’s employment was terminated by the Company other than for Cause or Disability during the 12 month period prior to the Change of Control, (ii) during such 12 month period, the Participant does not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, within 30 days following the Change of Control, with respect to any portion of the Option which the Participant forfeited upon the Participant’s termination of employment, the Participant shall receive a lump sum cash payment per Share equal to the excess, if any, of the Fair Market Value of a Share on the date that the Change of Control occurs, over the exercise price per Share subject to the Option. In addition, in the event that a Participant’s employment terminates on account of Disability prior to a Change of Control, any portion of the Option which is unvested and outstanding as of the Change of Control and would otherwise vest during the three years following Disability in accordance with Section 4(d) above shall become fully vested upon the Change of Control.	

6.	U.S. Federal, State and Local Income Withholding. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the Option, and the Option may not be exercised unless the Participant makes arrangements satisfactory to the Company to ensure that its withholding tax obligations will be satisfied. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the Option, including by withholding Shares otherwise issuable upon the exercise of the Option, an amount equal to the federal (including FICA), state and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the Option. Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.	

7.	Definitions .	

(a)	“Proscribed Activity” means any of the following:	

(i)	the Participant’s breach or violation of (A) any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement,	

to the extent such agreements are enforceable under applicable law, or (B) any legal obligation it may have to the Company;

(ii)	the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;	

(iii)	the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;	

(iv)	the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;	

(v)	the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of the Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of the Participant, or the identity of which was learned by the Participant as a result of the Participant’s employment with the Company;	

(vi)	following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or	

(vii)	the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.	

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage

in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any if its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)	“Proscribed Period” means the period beginning on the date of termination of the Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.	

(c)	“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.	

8 .	Company Policies. The Option and any Shares or cash delivered pursuant to the Option shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.	

9.	Other Benefits . No amount accrued or paid under this Award shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.	

EXHIBIT 10.4 (z)

PERFORMANCE-BASED RESTRICTED STOCK RIGHTS (TSR and ROC)
ISSUED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

2016 TERMS AND CONDITIONS

The following terms and conditions apply to the 2016 performance-based restricted stock rights (the “PBRSRs”) granted by Ryder System, Inc. (the “Company”) under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Performance-Based Restricted Stock Right Award Notification (the “Notification”) which references these terms and conditions. Certain terms of the PBRSRs, including the number of Shares underlying the PBRSRs, are set forth in the Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the PBRSRs in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.	General . Each PBRSR represents the right to receive one Share on a future date based upon the attainment of certain financial performance goals and continued employment, on the terms and conditions set forth herein, in the Notification and in the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in any other Award Document, the terms and conditions of the Plan shall govern. It is intended that the PBRSRs qualify as “performance-based compensation” for purposes of Section 162(m) of the Code.	

The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the PBRSRs may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of his or her PBRSRs and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the PBRSRs shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under the Plan.

2.	Financial Performance Goals .	

Fifty percent (50%) of the number of PBRSRs subject to an Award as set forth in the Notification (the “Target PBRSRs”) will accrue based on the Company’s Return on Capital and fifty percent (50%) of the Target PBRSRs will accrue based on the Company’s TSR Rank (as defined in this Section 2, in each case as further described herein).

Return on Capital

With respect to each ROC Performance Period, the Company’s ROC, as finally determined by the Committee pursuant to this Section 2, will be measured annually against a Maximum ROC, Target ROC and Threshold ROC, and the right to one-third of the ROC PBRSR Award will accrue for each ROC Performance Period (referred to as the ROC Accrued PBRSR for the ROC Performance Period), based on the following schedule:

	
		
Company’s ROC	ROC Accrual Percentage	
Maximum ROC	125%	
Target ROC	100%	
Threshold ROC	25%	
Below Threshold ROC	0%	

For purposes of the schedule above, by March 31 of each ROC Performance Period, the Committee will determine the Maximum ROC, Target ROC and Threshold ROC for such ROC Performance Period. If the Company’s ROC falls between the measuring points on the foregoing schedule, the ROC Accrual Percentage for such ROC Performance Period will be determined proportionally between the measuring points. Any fractional PBRSR resulting from the vesting of the PBRSRs shall be rounded down to the nearest whole number.

As soon as practicable after the end of the applicable ROC Performance Period, the Committee will determine the attainment of the applicable performance goals, to the extent applicable, in accordance with generally accepted accounting principles (“GAAP”), provided that the Committee may exclude or include certain items from actual results in determining performance including (i) changes in accounting principle, standard or policy; (ii) changes in law or regulation; (iii) asset impairments; (iv) restructuring charges; (v) discontinued operations; and (vi) non-operational or non-recurring items, in each case, other than those included in the Target ROC for the relevant ROC Performance Period, consistent with the requirements of “performance-based compensation” under Section 162(m) of the Code, as applicable.

TSR Rank

At the end of each TSR Performance Period, the Company TSR and the Total Shareholder Return of the companies included in the Comparator Group for that TSR Performance Period will be ranked from highest to lowest, with the Company’s rank being defined as the “Company’s TSR Rank”. The right to one-third of the TSR PBRSR Award will accrue for each TSR Performance Period (referred to as the TSR Accrued PBRSR for the TSR Performance Period), based on the following schedule:

	
		
Company’s TSR Rank	TSR Accrual Percentage	
1 - 9	125%	
10	 120%	
11	 115%	
12	 110%	
13	 105%	
14	 100%	
15	 90%	
16	 80%	
17	 70%	
18	 60%	
19	 50%	
20	40%	
21	30%	
22 - 27	0%	

If any company in the Comparator Group does not have a stock price that is quoted on a national securities exchange during the last ten (10) trading days of the applicable TSR Performance Period, such company will be deleted from the Comparator Group effective at the beginning of such TSR Performance Period. Notwithstanding the foregoing, if any company(ies) in the Comparator Group file for bankruptcy, become

insolvent or dissolve prior to the end of the applicable TSR Performance Period, such company(ies) will be deemed to be ranked last among all companies in the Comparator Group. If the number of companies in the Comparator Group changes, the Committee will, if deemed necessary, adjust the TSR Accrual Percentages forth above, consistent with the methodology used to determine the TSR Accrual Percentages set forth above.

Any fractional PBRSR resulting from the vesting of the PBRSRs shall be rounded down to the nearest whole number.

3.	Delivery of Shares . Provided that the Participant remained continuously employed through the end of the Three-Year Performance Period (but subject to Sections 4 and 5 below), the number of Shares equal to the number of Accrued PBRSRs, net of the number of Shares necessary to satisfy applicable withholding taxes, will be transferred to an account held in the name of the Participant by the Company’s independent stock plan administrator and the Participant will receive notice of such transfer together with all relevant account details. Such transfer will occur as soon as practicable after the Committee has determined the Company’s ROC Accrual Percentage for the Third ROC Performance Period and the Company’s TSR Accrual Percentage for the Third TSR Performance Period, provided that in no event shall the transfer be made after March 15, 2019.	

4.	Termination of the PBRSRs; Forfeiture. The PBRSRs will be cancelled upon the termination of the Participant’s employment with the Company and its Subsidiaries as described below.	

(a)	Resignation by the Participant or Termination by the Company or a Subsidiary : Except as provided in subsection (b) or Section 5 below, upon any termination of a Participant’s employment with the Company and its Subsidiaries prior to the end of the Three-Year Performance Period, all outstanding PBRSRs, whether or not accrued, will be forfeited and the Participant will not have any right to delivery of Shares. In addition, even if a Participant remains employed through the end of the Three-Year Performance Period, if the Participant’s employment is subsequently terminated by the Company or a Subsidiary for Cause, the right to any undelivered Shares shall be forfeited, and the Company shall have the right to reclaim and receive from the Participant any Shares delivered to the Participant pursuant to Section 3 within the one year period before the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the equivalent after-tax value thereof (as of the date the Shares were transferred by the Participant) in cash.	

(b)	Termination by reason of Death, Disability or Retirement : Except as otherwise provided in Section 5 below, if a Participant’s employment terminates due to death, Disability or Retirement prior to the end of the Three-Year Performance Period, the Participant (or his or her Beneficiary, in the event of death) will be entitled to receive a pro-rata number of Shares that would have been delivered pursuant to Section 3, had the Participant remained employed through the end of the Three-Year Performance Period, based on the number of days during the Three-Year Performance Period that the Participant is considered to be an active employee as determined by the Company, payable at the time and manner specified in Section 3 above.	

(c)	Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant pursuant to Section 3 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash.	

5.	Change of Control . Notwithstanding anything contained herein to the contrary, in the event of a Change of Control during the Three-Year Performance Period, unless otherwise determined by the Committee prior to the Change of Control, each Participant shall be entitled to delivery of a number of Shares equal	

to the COC Share Amount (as defined below) (such Shares, the COC Shares); provided that, except as set forth in subsections (c) and (d) below, the Participant remains actively employed through the last day of the Three-Year Performance Period. Except as set forth in subsections (c) and (d) below, the COC Shares shall be delivered at the time and manner specified in Section 3 above.

(a)	Calculation of the COC Share Amount . The COC Share Amount shall be equal to the sum of (i), (ii), (iii) and (iv) below:	

i.	with respect to each completed ROC Performance Period and TSR Performance Period at the time of the Change of Control, the sum of the ROC Accrued PBRSRs and the TSR Accrued PBRSRs for the applicable Performance Periods;	

ii.	with respect to the ROC Performance Period in which the Change of Control occurs, the greater of the ROC Accrued PBRSRs for such ROC Performance Period (measured as though the last day of the applicable ROC Performance Period was the date immediately preceding the date of the Change of Control) or one-third of the ROC PBRSR Award;	

iii.	with respect to each TSR Performance Period in which the Change of Control occurs, the greater of the TSR Accrued PBRSRs for such TSR Performance Period (measured as though the last day of the applicable TSR Performance Period was the date immediately preceding the date of the Change of Control) or one-third of the TSR PBRSR Award; and	

iv.	with respect to each ROC Performance Period which has not commenced as of the date of the Change of Control, one-third of the ROC PBRSR Award.	

(b)	Form of Payment . The Committee may determine that the COC Shares shall be (i) converted to and payable in units with respect to shares or other equity interests of the acquiring company or its parent or (ii) payable in cash based on the Fair Market Value of the COC Shares as of the Change of Control.	

(c)	Termination without Cause or for Good Reason . If the Participant’s employment is terminated by the Company without Cause or the Participant terminates employment for Good Reason, prior to the end of the Three-Year Performance Period and upon or within 24 months following a Change of Control, the COC Shares shall be delivered in a lump sum within 60 days following the Participant’s employment termination date, subject to Section 9.17 of the Plan; provided that such Change of Control constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company under Section 409A of the Code and the rulings and regulations issued thereunder (any such transaction, a “409A Compliant COC”). In the event that such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), the COC Shares will be delivered to the Participant at the time and manner specified in Section 3 above.	

(d)	Termination due to Death, Disability or Retirement . If a Participant’s employment terminates due to death, Disability or Retirement prior to the end of the Three-Year Performance Period and upon or within 24 months following a Change of Control, the Participant (or his or her Beneficiary, in the event of death) will be entitled to receive the COC Shares, which shall be delivered in a lump sum within 60 days following the Participant’s employment termination date, subject to Section 9.17 of the Plan; provided that, the COC Shares will be delivered to the Participant at the time and manner specified in Section 3 above if the Change of Control is a Non-409A Compliant COC. If such termination occurs more than 24 months following a Change of Control, the COC Payment Amount will be pro-rated, based on the number of days during the Three-Year Performance Period that the Participant is considered to be an	

active employee, as determined by the Company, and will be paid at the time and manner specified in Section 3 above.

(e)	Termination Prior to a Change of Control . To the extent (i) a Participant’s employment was terminated by the Company other than for Cause or Disability within the 12 months prior to the date on which the Change of Control occurred, (ii) during such 12 month period the Participant did not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, then upon the Change of Control, the Participant will become entitled to a cash payment equal to the product of: the Fair Market Value of a Share on the date of the Change of Control and the COC Share Amount. In the event of a 409A Compliant COC, such cash payment will be made in a lump sum within 60 days following the date on which the Change of Control occurs. In the event of a Non-409A Compliant COC, the cash payment will be paid to the Participant at the time and manner specified in Section 3 above.	

6.	Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights of a shareholder of the Company with respect to Shares subject to the PBRSRs until such Shares are actually delivered to the Participant. At the time Shares are delivered to the Participant pursuant to Section 3 or Section 5, as applicable, the Company will make a cash payment equal to the product of (i) the number of Accrued PBRSRs or the COC Share Amount, if applicable, and (ii) the aggregate dividends paid on a Share during the Three-Year Performance Period.	

7.	U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the PBRSRs. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the PBRSRs, including by withholding Shares otherwise issuable upon settlement of the PBRSRs (as determined by the Company in its sole discretion), an amount equal to the federal (including FICA), state and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the PBRSRs. The Company intends to satisfy this withholding obligation by reducing the number of Shares and/or cash to be delivered to the Participant under this Agreement in an amount sufficient to satisfy the withholding obligations due (based on the Fair Market Value of the Shares for the related PBRSRs). Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside of the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.	

8.	Section 409A. The PBRSRs are intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the PBRSRs may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The PBRSRs shall be administered consistent with Section 9.17 of the Plan.	

9.	Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the PBRSRs or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The PBRSRs and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.	

10.	No Employment Right . Neither the grant of the PBRSRs nor any action taken hereunder shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant PBRSRs hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.	

		
11.	No Assignment . A Participant’s rights and interest under the PBRSRs may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the PBRSRs or the Award Documents.	

12.	Unfunded Plan . Any Shares or other amounts owed under the PBRSRs shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.	

13.	Recoupment Policy . Any amounts paid under the PBRSRs are considered “incentive compensation” under the Company’s Recoupment Policy, in effect from time to time. The PBRSRs and any Shares or cash paid pursuant to the PBRSRs shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.	

14.	Definitions .	

(a)	“Accrued PBRSRs” means the sum of (i) the ROC Accrued PBRSRs for all ROC Performance Periods and (ii) the TSR Accrued PBRSRs for all TSR Performance Periods.	

(b)	“Company TSR” means the Company’s Total Shareholder Return for a TSR Performance Period.	

(c)	“Company’s Return on Capital” or “Company ROC” means the Company’s tax adjusted earnings from continuing operations, excluding interest, as a percentage of the sum of the Company’s average (i) debt, (ii) off-balance sheet debt and (iii) shareholders’ equity.	

(d)	“Comparator Group” means the companies listed on Exhibit A hereto.	

(e)	“First ROC Performance Period” means the period from January 1, 2016 through December 31, 2016.	

(f)	“First TSR Performance Period” means the period from January 1, 2016 through December 31, 2016.	

(g)	“Performance Period” means an ROC Performance Period or a TSR Performance Period, as applicable.	

(h)	“Proscribed Activity” means any of the following:	

(i)	the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;	

(ii)	the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;	

(iii)	the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business,	

proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

(iv)	the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;	

(v)	the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;	

(vi)	following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or	

(vii)	the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.	

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(i)	“Proscribed Period” means the period beginning on the date of termination of Participant’s	

employment and ending on the later of (i) the one year anniversary of such termination date or (ii) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.

(j)	“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.	

(k)	“ROC Accrual Percentage” means the percentage of the PBRSRs that accrues at the end of each ROC Performance Period pursuant to Section 2 based on the Company's ROC.	

(l)	“ROC Accrued PBRSRs” means, for each ROC Performance Period, the ROC Accrual Percentage for each ROC Performance Period times one-third of the ROC PBRSR Award.	

(m)	“ROC PBRSR Award” means fifty percent (50%) of the number of PBRSRs awarded as specified in the Notification.	

(n)	“ROC Performance Period” means the First ROC Performance Period, the Second ROC Performance Period, or the Third ROC Performance Period, as applicable.	

(o)	“Rolling Total Shareholder Return” means, for each of the ten (10) consecutive trading days immediately preceding the first day of the applicable TSR Performance Period, the percentage change from (i) the closing stock price on such trading date to (ii) the closing stock price on the corresponding trading date in the last ten (10) consecutive trading days of the applicable TSR Performance Period, assuming reinvestment of dividends on the ex-dividend date.	

(p)	“Second ROC Performance Period” means the period from January 1, 2017 through December 31, 2017.	

(q)	“Second TSR Performance Period” means the period from January 1, 2016 through December 31, 2017.	

(r)	“Third ROC Performance Period” means the period from January 1, 2018 through December 31, 2018.	

(s)	“Third TSR Performance Period” means the period from January 1, 2016 through December 31, 2018.	

(t)	“Three-Year Performance Period” means the period from January 1, 2016 through December 31, 2018.	

(u)	“Total Shareholder Return” means, for each TSR Performance Period, the sum of the ten (10) Rolling Total Shareholder Return calculations for the applicable TSR Performance Period, divided by ten (10).	

(v)	“TSR Accrual Percentage” means the percentage of the PBRSRs that accrues at the end of each TSR Performance Period pursuant to Section 2 based on the Company’s TSR Rank.	

(w)	“TSR Accrued PBRSRs” means, for each TSR Performance Period, the TSR Accrual Percentage for each TSR Performance Period times one-third of the TSR PBRSR Award.	

(x)	“TSR PBRSR Award” means fifty percent (50%) of the number of PBRSRs awarded as specified in the Notification.	

		
(y)	“TSR Performance Period” means the First TSR Performance Period, the Second TSR Performance Period, or the Third TSR Performance Period, as applicable.	

13 .	Other Benefits . No amount accrued or paid under the PBRSRs shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.	

Exhibit A

	
	
ARKANSAS BEST CORP	
AVIS BUDGET GROUP INC	
C. H. ROBINSON WORLDWIDE INC	
CELADON GROUP INC	
CSX CORPORATION	
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC	
FEDEX CORPORATION	
FORWARD AIR CORP	
GATX CORPORATION	
HERTZ GLOBAL HOLDINGS INC	
HUB GROUP INC	
J.B. HUNT TRANSPORT SERVICES INC	
KNIGHT TRANSPORTATION INC	
LANDSTAR SYSTEM INC	
NAVISTAR INTERNATIONAL CORP	
OLD DOMINION FREIGHT LINE INC.	
PACCAR INC	
RUSH ENTERPRISES INC	
SAIA INC	
SWIFT TRANSPORTATION CO	
TAL INTERNATIONAL GROUP INC	
TRINITY INDUSTRIES	
U-HAUL	
UNITED PARCEL SERVICE INC	
UNIVERSAL TRUCKLOAD SERVICES INC	
WERNER ENTERPRISES INC	

EXHIBIT 10.4 (aa)

PERFORMANCE-BASED CASH AWARD (TSR and ROC)
ISSUED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

2016 TERMS AND CONDITIONS

The following terms and conditions apply to the 2016 performance-based cash awards (the “PBCAs”) granted by Ryder System, Inc. (the “Company”) under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Performance-Based Cash Award Notification (the “Notification”) which references these terms and conditions. Certain terms of the PBCA, including the Participant’s target cash opportunity, are set forth in the Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the PBCAs in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.	General . Each PBCA represents the right to receive a cash payment on a future date based upon the attainment of certain financial performance goals and continued employment, on the terms and conditions set forth herein, in the Notification and in the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in any other Award Document, the terms and conditions of the Plan shall govern. It is intended that the PBCAs qualify as “performance-based compensation” for purposes of Section 162(m) of the Code.	

The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the PBCA may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of his or her PBCA and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the PBCA shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under the Plan.

2.	Financial Performance Goals .	

Fifty percent (50%) of the dollar amount specified in the Notification (the “Target PBCA”) will accrue based on the Company’s Return on Capital and fifty percent (50%) of the dollar amount specified in the Notification will accrue based on the Company’s TSR Rank (as defined in this Section 2, in each case as further described herein).

Return on Capital

With respect to each ROC Performance Period, the Company’s ROC, as finally determined by the Committee pursuant to this Section 2, will be measured annually against a Maximum ROC, Target ROC and Threshold ROC, and the right to one-third of the ROC PBCA Award will accrue for each ROC Performance Period (referred to as the ROC Accrued PBCA for the ROC Performance Period), based on the following schedule:

	
		
Company’s ROC	ROC Accrual Percentage	
Maximum ROC	125%	
Target ROC	100%	
Threshold ROC	25%	
Below Threshold ROC	0%	

For purposes of the schedule above, by March 31 of each ROC Performance Period, the Committee will determine the Maximum ROC, Target ROC and Threshold ROC for such ROC Performance Period. If the Company’s ROC falls between the measuring points on the foregoing schedule, the ROC Accrual Percentage for such ROC Performance Period will be determined proportionally between the measuring points.

As soon as practicable after the end of the applicable ROC Performance Period, the Committee will determine the attainment of the applicable performance goals, to the extent applicable, in accordance with generally accepted accounting principles (“GAAP”), provided that the Committee may exclude or include certain items from actual results in determining performance including (i) changes in accounting principle, standard or policy; (ii) changes in law or regulation; (iii) asset impairments; (iv) restructuring charges; (v) discontinued operations; and (vi) non-operational or non-recurring items, in each case, other than those included in the Target ROC for the relevant ROC Performance Period, consistent with the requirements of “performance-based compensation” under Section 162(m) of the Code, as applicable.

TSR Rank

At the end of each TSR Performance Period, the Company TSR and the Total Shareholder Return of the companies included in the Comparator Group for that TSR Performance Period will be ranked from highest to lowest, with the Company’s rank being defined as the “Company’s TSR Rank”. The right to one-third of the TSR PBCA Award will accrue for each TSR Performance Period (referred to as the TSR Accrued PBCA for the TSR Performance Period), based on the following schedule:

	
		
Company’s TSR Rank	TSR Accrual Percentage	
1 - 9	125%	
10	 120%	
11	 115%	
12	 110%	
13	 105%	
14	 100%	
15	 90%	
16	 80%	
17	 70%	
18	 60%	
19	 50%	
20	40%	
21	30%	
22 - 27	0%	

If any company in the Comparator Group does not have a stock price that is quoted on a national securities exchange during the last ten (10) trading days of the applicable TSR Performance Period, such company will be deleted from the Comparator Group effective at the beginning of such TSR Performance Period. Notwithstanding the foregoing, if any company(ies) in the Comparator Group file for bankruptcy, become insolvent or dissolve prior to the end of the applicable TSR Performance Period, such company(ies) will

be deemed to be ranked last among all companies in the Comparator Group. If the number of companies in the Comparator Group changes, the Committee will, if deemed necessary, adjust the TSR Accrual Percentages forth above, consistent with the methodology used to determine the TSR Accrual Percentages set forth above.

3.	Payment of Award . Provided that the Participant remained continuously employed through the end of the Three-Year Performance Period (but subject to Sections 4 and 5 below), a cash payment equal to the Accrued PBCA, less applicable withholding taxes, will be made to the Participant. Except as otherwise provided in Section 5 below, such payment will be made as soon as practicable after the Committee has determined the Company’s ROC Accrual Percentage for the Third ROC Performance Period and the Company’s TSR Accrual Percentage for the Third TSR Performance Period, provided that in no event shall the payment be made after March 15, 2019.	

4.	Termination of the PBCA; Forfeiture. The PBCA will be cancelled upon the termination of the Participant’s employment with the Company and its Subsidiaries as described below.	

(a)	Resignation by the Participant or Termination by the Company or a Subsidiary : Except as provided in subsection (b) or Section 5 below, upon any termination of a Participant’s employment with the Company and its Subsidiaries prior to the end of the Three-Year Performance Period, the outstanding PBCA, whether or not accrued, will be forfeited and the Participant will not have any right to any payment in respect thereof. In addition, even if a Participant remains employed through the end of the Three-Year Performance Period, if the Participant’s employment is subsequently terminated by the Company or a Subsidiary for Cause, the right to any payment shall be forfeited, and the Company shall have the right to reclaim and receive from the Participant any payment in respect of the PBCA made to the Participant pursuant to Section 3 within the one year period before the date of the Participant’s termination of employment.	

(b)	Termination by reason of Death, Disability or Retirement : Except as otherwise provided in Section 5 below, if a Participant’s employment terminates due to death, Disability or Retirement prior to the end of the Three-Year Performance Period, the Participant (or his or her Beneficiary, in the event of death) will be entitled to receive a pro-rata portion of the cash payment that would have been paid pursuant to Section 3, had the Participant remained employed through the end of the Three-Year Performance Period, based on the number of days during the Three-Year Performance Period that the Participant is considered to be an active employee as determined by the Company, payable at the time and manner specified in Section 3 above.	

(c)	Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all cash paid to the Participant pursuant to Section 3 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment.	

5.	Change of Control . Notwithstanding anything contained herein to the contrary, in the event of a Change of Control during the Three-Year Performance Period, unless otherwise determined by the Committee prior to the Change of Control, each Participant shall be entitled to receive a cash payment equal to the COC Payment Amount (as defined below); provided that, except as set forth in subsections (b) and (c) below, the Participant remains actively employed through the last day of the Three-Year Performance Period. Except as set forth in subsections (b) and (c) below, the COC Payment Amount shall be paid at the time and manner specified in Section 3 above.	

(a)	Calculation of the COC Payment Amount . The COC Payment Amount shall be equal to the sum of (i), (ii), (iii) and (iv) below:	

i.	with respect to each completed ROC Performance Period and TSR Performance	

Period at the time of the Change of Control, the sum of the ROC Accrued PBCA and the TSR Accrued PBCA for the applicable Performance Periods;

ii.	with respect to the ROC Performance Period in which the Change of Control occurs, the greater of the ROC Accrued PBCA for such ROC Performance Period (measured as though the last day of the applicable ROC Performance Period was the date immediately preceding the date of the Change of Control) or one-third of the ROC PBCA Award;	

iii.	with respect to each TSR Performance Period in which the Change of Control occurs, the greater of the TSR Accrued PBCA for such TSR Performance Period (measured as though the last day of the applicable TSR Performance Periods was the date immediately preceding the date of the Change of Control) or one-third of the TSR PBCA Award; and	

iv.	with respect to each ROC Performance Period which has not commenced as of the date of the Change of Control, one-third of the ROC PBCA Award.	

(b)	Termination without Cause or for Good Reason . If the Participant’s employment is terminated by the Company without Cause or the Participant terminates employment for Good Reason, prior to the end of the Three-Year Performance Period and upon or within 24 months following a Change of Control, the COC Payment Amount shall be paid in a lump sum within 60 days following the Participant’s employment termination date, subject to Section 9.17 of the Plan; provided that such Change of Control constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company under Section 409A of the Code and the rulings and regulations issued thereunder (any such transaction, a “409A Compliant COC”). In the event that such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), the COC Payment Amount will be paid to the Participant at the time and manner specified in Section 3 above.	

(c)	Termination due to Death, Disability or Retirement . If a Participant’s employment terminates due to death, Disability or Retirement prior to the end of the Three-Year Performance Period and upon or within 24 months following a Change of Control, the Participant (or his or her Beneficiary, in the event of death) will be entitled to receive the COC Payment Amount, which shall be paid in a lump sum within 60 days following the Participant’s employment termination date, subject to Section 9.17 of the Plan; provided that, the COC Payment Amount will be paid to the Participant at the time and manner specified in Section 3 above if the Change of Control is a Non-409A Compliant COC. If such termination occurs more than 24 months following a Change of Control, the COC Payment Amount will be pro-rated, based on the number of days during the Three-Year Performance Period that the Participant is considered to be an active employee, as determined by the Company, and will be paid at the time and manner specified in Section 3 above.	

(d)	Termination Prior to a Change of Control . To the extent (i) a Participant’s employment was terminated by the Company other than for Cause or Disability within the 12 months prior to the date on which the Change of Control occurred, (ii) during such 12 month period the Participant did not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, then upon the Change of Control, the Participant will become entitled to the COC Payment Amount. In the event of a 409A Compliant COC, such cash payment will be made in a lump sum within 60 days following the date on which the Change of Control occurs. In the event of a Non-409A Compliant COC, the cash payment will be paid to the Participant at the time and manner specified in Section 3 above.	

		
6.	U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the PBCA. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the PBCA an amount equal to the federal (including FICA), state, and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the PBCA. Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside of the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.	

7.	Section 409A. The PBCA is intended to comply with Section 409A of the Code or an exemption, and payments may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The PBCA shall be administered consistent with Section 9.17 of the Plan.	

8.	Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the PBCA or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The PBCA and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.	

9.	No Employment Right . Neither the grant of the PBCA nor any action taken hereunder shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant the PBCA hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.	

10.	No Assignment . A Participant’s rights and interest under the PBCA may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the PBCA or the Award Documents.	

11.	Unfunded Plan . Any amounts owed under the PBCA shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure payment of any earned amounts.	

12.	Recoupment Policy . Any amounts paid under the PBCA are considered “incentive compensation” under the Company’s Recoupment Policy, in effect from time to time. The PBCA and any amounts paid pursuant to the PBCA shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.	

13.	Definitions .	

(a)	“Accrued PBCA” means the sum of (i) the ROC Accrued PBCA for all ROC Performance Periods and (ii) the TSR Accrued PBCA for all TSR Performance Periods.	

(b)	“Company TSR” means the Company’s Total Shareholder Return for a TSR Performance Period.	

(c)	“Company’s Return on Capital” or “Company ROC” means the Company’s tax adjusted earnings from continuing operations, excluding interest, as a percentage of the sum of the Company’s average (i) debt, (ii) off-balance sheet debt and (iii) shareholders’ equity.	

		
(d)	“Comparator Group” means the companies listed on Exhibit A hereto.	

(e)	“First ROC Performance Period” means the period from January 1, 2016 through December 31, 2016.	

(f)	“First TSR Performance Period” means the period from January 1, 2016 through December 31, 2016.	

(g)	“Performance Period” means an ROC Performance Period or a TSR Performance Period, as applicable.	

(h)	“Proscribed Activity” means any of the following:	

(i)	the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;	

(ii)	the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;	

(iii)	the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;	

(iv)	the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;	

(v)	the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;	

(vi)	following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or	

		
(vii)	the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.	

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(i)	“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (i) the one year anniversary of such termination date or (ii) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.	

(j)	“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.	

(k)	“ROC Accrual Percentage” means the percentage of the PBCA that accrues at the end of each ROC Performance Period pursuant to Section 2 based on the Company's ROC.	

(l)	“ROC Accrued PBCA” means, for each ROC Performance Period, the ROC Accrual Percentage for each ROC Performance Period times one-third of the ROC PBCA Award.	

(m)	“ROC PBCA Award” means fifty percent (50%) of the dollar amount specified in the Notification.	

(n)	“ROC Performance Period” means the First ROC Performance Period, the Second ROC Performance Period, or the Third ROC Performance Period, as applicable.	

(o)	“Rolling Total Shareholder Return” means, for each of the ten (10) consecutive trading days immediately preceding the first day of the applicable TSR Performance Period, the percentage change from (i) the closing stock price on such trading date to (ii) the closing stock price on the corresponding trading date in the last ten (10) consecutive trading days of the applicable TSR Performance Period, assuming reinvestment of dividends on the ex-dividend date.	

		
(p)	“Second ROC Performance Period” means the period from January 1, 2017 through December 31, 2017.	

(q)	“Second TSR Performance Period” means the period from January 1, 2016 through December 31, 2017.	

(r)	“Third ROC Performance Period” means the period from January 1, 2018 through December 31, 2018.	

(s)	“Third TSR Performance Period” means the period from January 1, 2016 through December 31, 2018.	

(t)	“Three-Year Performance Period” means the period from January 1, 2016 through December 31, 2018.	

(u)	“Total Shareholder Return” means, for each TSR Performance Period, the sum of the ten (10) Rolling Total Shareholder Return calculations for the applicable TSR Performance Period, divided by ten (10).	

(v)	“TSR Accrual Percentage” means the percentage of the PBCA that accrues at the end of each TSR Performance Period pursuant to Section 2 based on the Company’s TSR Rank.	

(w)	“TSR Accrued PBCA” means, for each TSR Performance Period, the TSR Accrual Percentage for each TSR Performance Period times one-third of the TSR PBCA Award.	

(x)	“TSR PBCA Award” means fifty percent (50%) of the dollar amount specified in the Notification.	

(y)	“TSR Performance Period” means the First TSR Performance Period, the Second TSR Performance Period, or the Third TSR Performance Period, as applicable.	

13 .	Other Benefits . No amount accrued or paid under the PBCA shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.	

Exhibit A

	
	
ARKANSAS BEST CORP	
AVIS BUDGET GROUP INC	
C. H. ROBINSON WORLDWIDE INC	
CELADON GROUP INC	
CSX CORPORATION	
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC	
FEDEX CORPORATION	
FORWARD AIR CORP	
GATX CORPORATION	
HERTZ GLOBAL HOLDINGS INC	
HUB GROUP INC	
J.B. HUNT TRANSPORT SERVICES INC	
KNIGHT TRANSPORTATION INC	
LANDSTAR SYSTEM INC	
NAVISTAR INTERNATIONAL CORP	
OLD DOMINION FREIGHT LINE INC.	
PACCAR INC.	
RUSH ENTERPRISES INC.	
SAIA INC	
SWIFT TRANSPORTATION CO	
TAL INTERNATIONAL GROUP INC	
TRINITY INDUSTRIES	
U-HAUL	
UNITED PARCEL SERVICE INC	
UNIVERSAL TRUCKLOAD SERVICES INC	
WERNER ENTERPRISES INC	

EXHIBIT 10.4 (bb)

RESTRICTED STOCK RIGHTS
ISSUED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

2016 TERMS AND CONDITIONS

The following terms and conditions apply to the Restricted Stock Rights (the “RSRs”) granted in 2016 by Ryder System, Inc. (the “Company”) under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Restricted Stock Rights Award Notification (the “Notification”) for the RSRs which references these terms and conditions. Certain terms of the RSRs, including the number of Shares underlying the RSRs, are set forth in the Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the RSRs in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.	General .  Each RSR represents the right to receive one Share on a future date, on the terms and conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in any other Award Document, the terms and conditions of the Plan shall govern.	

The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the RSRs may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of his or her RSRs and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the RSRs shall be final and binding on the Participant, his or her beneficiaries and any other person      having or claiming an interest under the Plan.

2.	Delivery of Shares .  Subject to Sections 3 and 4 below, the RSRs will vest pursuant to the vesting schedule set forth in the Notification, provided the Participant is, on the relevant vesting date, and has been from the date of grant of the RSRs to the relevant vesting date, continuously employed by the Company or one of its Subsidiaries. For purposes of these terms and conditions, the Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a break in service.	

Upon vesting, the Shares subject to the vested RSRs will be transferred to an account held in the name of the Participant by the Company’s independent stock plan administrator and the Participant will receive notice of such transfer together with all relevant account details.

3.	Termination of RSRs; Forfeiture. The RSRs will be cancelled upon or following the termination of the Participant’s employment with the Company and its Subsidiaries as described below.	

(a)	Resignation by the Participant or Termination by the Company or a Subsidiary : Except as otherwise provided in subsection (b) or Section 4 below, all outstanding RSRs will be forfeited and the Participant will not have any right to delivery of Shares that did not vest prior to such termination. If the Participant’s employment is terminated by the Company or a Subsidiary	

for Cause, then the Company shall have the right to reclaim and receive from the Participant any Shares delivered to the Participant pursuant to Section 2 within the one year period before the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the equivalent after-tax value thereof (as of the date the Shares were transferred by the Participant) in cash.

(b)	Termination by Reason of Death, Disability or Retirement : Except as otherwise provided in Section 4 below, a prorated portion of the RSRs shall vest, calculated as follows: (A) the total number of RSRs awarded, multiplied by a fraction (and rounded down to the nearest whole Share), the numerator of which shall be the number of days from the date of grant of the RSRs to the date of death, Disability or Retirement, as the case may be, and the denominator of which shall be the number of days from the date of grant of the RSRs to the last scheduled vesting date for the RSRs set forth in the Notification, less (B) the number of RSRs already vested at the time of the Participant’s death, Disability or Retirement, as the case may be. Shares equal to the prorated number of RSRs that so vest will be delivered to the Participant (or his or her Beneficiary, in the event of death) within 60 days following the date of death, Disability or Retirement, as the case may be, subject to Section 9.17 of the Plan.	

(c)	Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant pursuant to Section 2 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash.	

4.	Change of Control . In the event of a Change of Control, the RSRs shall become payable as described in this Section 4, provided that the Committee may take such other actions with respect to the RSRs as it deems appropriate pursuant to Section 7 and 8 of the Plan.	

(a)	Form of Payment : The Committee may determine that the unvested RSRs will be (i) converted to and payable in units with respect to shares or other equity interests of the acquiring company or its parent or (ii) payable in cash based on the Fair Market Value of the RSRs as of the date of the Change of Control.	

(b)	Continued Employment : If the Participant continues in employment with the Company or one of its Subsidiaries through each applicable vesting date following the Change of Control, the RSRs will vest pursuant to the vesting schedule set forth in the Notification.	

(c)	Termination without Cause, for Good Reason or on Account of Death, Disability or Retirement . If the Participant’s employment is terminated by the Company without Cause, the Participant terminates employment for Good Reason, or the Participant’s employment terminates on account of death, Disability or Retirement, in each case, upon or within 24 months following a Change of Control and prior to the last vesting date set forth in the Notification, any unvested RSRs shall become fully vested upon such termination of employment and shall be paid within 60 days following the date of such termination, subject to Section 9.17 of the Plan.	

(d)	Termination Prior to a Change of Control : To the extent (i) a Participant’s employment was terminated by the Company other than for Cause or Disability within the 12 months prior to the date on which the Change of Control occurred, (ii) during such 12 month period the Participant did not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, then upon the Change of Control, the Participant will become entitled to a cash payment equal to the product of: the Fair Market Value of a	

Share on the date of the Change of Control and the number of Shares to which the Participant would otherwise have been entitled if the Participant’s employment had continued until the date of the Change of Control and the Participant’s employment had been terminated as described in subsection (c) above as of such date. In the event that the Change of Control constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company under Section 409A of the Code and the rulings and regulations issued thereunder (any such transaction, a “409A Compliant COC”), such cash payment will be made in a lump sum within 60 days following the date on which the Change of Control occurs. In the event such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), the cash payment will be distributed to the Participant on the first anniversary of the Participant’s separation from service.

5.	Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights of a shareholder of the Company with respect to Shares subject to the RSRs until such Shares are actually delivered to the Participant. If and when Shares are delivered to the Participant pursuant to Section 2, 3 or 4, as applicable, the Company will make a cash payment equal to the product of (i) the number of Shares delivered, and (ii) the aggregate dividends paid on a Share during the period from the date of grant of the award until the date the Shares are delivered.	

6.	U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes generally that may arise in connection with the RSRs. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the RSRs, including by withholding Shares otherwise issuable upon settlement of the RSRs an amount equal to the federal (including FICA), state and local income and payroll taxes required by law to be withheld with respect to the RSRs. The Company intends to satisfy this withholding obligation by reducing the number of Shares and/or cash that are to be delivered to the Participant under this Agreement in an amount sufficient to satisfy the withholding obligations due (based on the Fair Market Value of the Shares for the related RSRs). Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.	

7.	Section 409A. The RSRs are intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the RSRs may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The RSRs shall be administered consistent with Section 9.17 of the Plan.	

8.	Statute of Limitations and Conflicts of Laws . All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the RSRs or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The RSRs and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.	

9.	No Employment Right . Neither the grant of the RSRs nor any action taken hereunder shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant RSRs hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.	

10.	No Assignment . A Participant’s rights and interest under the RSRs may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void	

and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the RSRs or the Award Documents.

11.	Unfunded Plan . Any shares or other amounts owed under the RSRs shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.	

12.	Company Policies. The RSRs and any cash or Shares delivered pursuant to the RSRs shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.	

13.	Definitions .	

(a)	“Proscribed Activity” means any of the following:	

(i)	the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;	

(ii)	the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;	

(iii)	the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;	

(iv)	the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;	

(v)	the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;	

(vi)	following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors,	

successors or assigns; or

(vii)	the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.         	

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)	“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.	

(c)	“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.	

12 .	Other Benefits . No amount accrued or paid under the RSRs shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.	

EXHIBIT 10.4 (cc)

RESTRICTED STOCK UNITS
FOR
NON-EMPLOYEE DIRECTORS
ISSUED UNDER
AMENDED AND RESTATED
RYDER SYSTEM, INC. 2012 EQUITY AND INCENTIVE COMPENSATION PLAN

2016 TERMS AND CONDITIONS

The following terms and conditions apply to the Restricted Stock Units (the “RSUs”) granted in 2016 by Ryder System, Inc. (the “Company”) to the Company’s Non-Employee Directors, under the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Restricted Stock Units Award Notification Letter (the “Notification Letter”), to which these terms and conditions are appended. Certain terms of the RSUs, including the number of RSUs granted and the vesting date(s), are set forth in the Notification Letter. The terms and conditions contained herein may be amended by the Committee as permitted by the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification Letter.

1.	General . Each RSU represents the right to receive one Share on a future date on the terms and conditions set forth herein, in the Notification Letter and in the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933, have been delivered to the Participant prior to or along with delivery of the Notification Letter. In the event there is an express conflict between the provisions of the Plan and those set forth in any Award Document, the terms and conditions of the Plan shall govern.	

2.	Number of RSUs . Each Non-Employee Director who is serving as such immediately following the 2016 annual meeting of shareholders of the Company (an “Annual Meeting”), shall receive an award of RSUs immediately following each such Annual Meeting for a number of Shares equal to (i) $125,000 divided by (ii) the Fair Market Value of one Share on the day of such Annual Meeting. If a Non-Employee Director begins his or her service on the Board after an Annual Meeting but prior to December 31, 2016, on the date on which such Non-Employee Director’s service begins (“Service Date”), the Non-Employee Director shall receive an award of RSUs for a number of Shares equal to the product of (i) a quotient the numerator of which is $125,000 and the denominator of which is the Fair Market Value of one Share on the Service Date, times (ii) a quotient, the numerator of which is the total number of days between the Service Date and December 31, 2016 and the denominator of which is 365.	

3.	Vesting of RSUs .	

(a)	If the Non-Employee Director has completed one year of service on the Board as of the date of grant of the RSUs, the RSUs shall be fully vested as of the date of grant.	

(b)	If the Non-Employee Director has not completed at least one year of service on the Board as of the date of grant of the RSUs, the RSUs shall become fully vested on the date on which the Non-Employee Director completes one year of service on the Board. If the Non-Employee Director’s service on the Board ceases before the Non-Employee Director completes one year of service, upon such cessation of service, the RSUs will be forfeited, and the Non-Employee Director will not have any right to delivery of Shares hereunder. Notwithstanding the foregoing, the RSUs shall become fully vested upon the Non-Employee Director’s cessation of service on the Board if (i) the Non-Employee Director’s service is terminated by the	

Company without Cause following a Change of Control or (ii) the Non-Employee Director’s service terminates on account of Disability or death. For purposes of the Award Documents, Disability shall mean (i) a determination by the Board that the Non-Employee Director is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) a determination by the Social Security Administration that the Non-Employee Director is totally disabled.

4.	Timing of Delivery of Shares . Actual delivery of the Shares relating to RSUs will occur (or, if installment payments are elected pursuant to Section 5 below, commence) upon or as soon as practicable following, cessation of the Non-Employee Director’s service on the Board; provided that, such cessation of service constitutes a “separation from service” under Section 409A of the Code.	

Notwithstanding the foregoing, in the event that a Change of Control occurs that constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code (such transaction, a “409A Compliant COC”), all of the Shares subject to RSUs then outstanding, which are fully vested, will be delivered to the Non-Employee Director upon the occurrence of such Change of Control. In the event that such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), to the extent that the RSUs are fully vested, each RSU will be converted into a right to receive a cash payment equal to the Fair Market Value of a Share on the date on which the Change of Control occurs. Such cash payment will be distributed to the Non-Employee Director in accordance with the otherwise applicable distribution schedule set forth in the Award Documents.

5.	Form of Delivery of Shares . Subject in all cases to Section 409A of the Code and Section 9.17 of the Plan, with respect to each award of RSUs, a Non-Employee Director may irrevocably elect, by December 31 of the calendar year immediately preceding the calendar year in which the services to which the RSUs relate are performed (or, in the case of newly elected or appointed Non-Employee Directors, by the end of the day immediately preceding his appointment or election) (such date, the “Election Date”), to receive delivery of the Shares in either one lump sum, or in annual installments over a period not less than 2 years or greater than 10 years, provided that a Non-Employee Director who fails to make an irrevocable election with respect to any award by 5:00 pm on the Election Date shall be deemed to have irrevocably elected to receive delivery of the Shares subject to such award in a lump sum. Notwithstanding the foregoing, Shares deliverable by reason of a Change of Control pursuant to Section 4 shall be delivered in a lump sum .	

6.	Rights as a Shareholder; Dividend Equivalent Rights. A holder of RSUs will not have the rights of a shareholder of the Company with respect to Shares subject to the RSUs until such Shares are actually delivered. However, with respect to all RSUs held by the Non-Employee Director, once per year the Company will credit the Non-Employee Director with dividend equivalents in respect of dividends declared on Shares during the prior year, in the form of additional RSUs based on the Fair Market Value of the Shares on the dividend payment date, and such additional RSUs will be paid on the same date and subject to the same terms and conditions as applicable to the RSUs on which they were credited.	

7.	Statute of Limitations and Conflicts of Laws . All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board, officer, or employee of the Company arising out of or in connection with the RSUs or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The RSUs and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.	

8.	No Assignment . A Participant’s rights and interest under the RSUs may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void	

and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the RSUs or the Award Documents.

9.	Unfunded Plan . Any Shares or other amounts owed under the RSUs shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.	

10.	Section 409A. The RSUs are intended to comply with Section 409A of the Code, and delivery of Shares and other payments pursuant to the RSUs may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The RSUs shall be administered consistent with Section 9.17 of the Plan.	

11.	Company Policies. The RSUs and any cash or Shares delivered pursuant to the RSUs shall be subject to all applicable policies that may be implemented by the Company’s Board of Directors from time to time, including the Company’s share ownership guidelines as in effect from time to time.	

EXHIBIT 12.1

				
Ryder System, Inc. and Subsidiaries	
Ratio of Earnings to Fixed Charges	
Continuing Operations	
(Dollars in thousands)	
 	 	For the Six Months Ended June 30, 2016	

EARNINGS:	 	 	
Earnings before income taxes	 	205,487		
Fixed charges	 	95,055		
Add: Amortization of capitalized interest	 	300		
Less: Interest capitalized	 	—		
Earnings available for fixed charges (A)	 	300,842		
 	 	 	
FIXED CHARGES:	 	 	
Interest and other financial charges	 	75,267		
Portion of rents representing interest expense	 	21,788		
Total fixed charges (B)	 	97,055		
 	 	 	
RATIO OF EARNINGS TO FIXED CHARGES (A) / (B)	 	3.12x		

EXHIBIT 31.1
CERTIFICATION
I, Robert E. Sanchez, certify that:
		
1.	I have reviewed this quarterly report on Form 10-Q of Ryder System, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
			
Date:	July 27, 2016	/s/ Robert E. Sanchez	
 	 	Robert E. Sanchez
Chairman and Chief Executive Officer	

EXHIBIT 31.2
CERTIFICATION
I, Art A. Garcia, certify that:
		
1.	I have reviewed this quarterly report on Form 10-Q of Ryder System, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
			
Date:	July 27, 2016	/s/ Art A. Garcia	
 	 	Art A. Garcia
Executive Vice President and Chief Financial Officer	

EXHIBIT 32
CERTIFICATION
In connection with the Quarterly Report of Ryder System, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert E. Sanchez, President and Chief Executive Officer of the Company, and Art A. Garcia, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
		
1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	
		
/s/ Robert E. Sanchez	 	
Robert E. Sanchez
Chairman and Chief Executive Officer	 	
July 27, 2016	 	

	
		
/s/ Art A. Garcia	 	
Art A. Garcia
Executive Vice President and Chief Financial Officer	 	
July 27, 2016