(A) 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 2009 Annual Report on Form 10-K except for the accounting changes described below relating to transfers of financial assets and consolidation of VIEs, and should be read in conjunction with the Consolidated Financial Statements and notes thereto. These financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included and the disclosures herein are adequate. The operating results for interim periods are unaudited and are not necessarily indicative of the results that can be expected for a full year. Prior year amounts have been restated to conform to the current period presentation.

(B) ACCOUNTING CHANGES

     In June 2009, the Financial Accounting Standards Board (FASB) issued accounting and disclosure guidance for transfers of financial assets occurring on or after January 1, 2010. The adoption of this accounting guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.

     In June 2009, the FASB issued accounting guidance which amends the consolidation principles for variable interest entities by requiring consolidation of VIEs based on which party has control of the entity. The guidance was effective beginning January 1, 2010. The adoption of this accounting guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.

(C) ACQUISITIONS

     On February 2, 2009, we acquired the assets of Edart Leasing LLC (“Edart”), which included Edart’s fleet of approximately 1,600 vehicles and more than 340 contractual customers from Edart’s five locations in Connecticut for a purchase price of $85.2 million, of which $2.1 million and $81.3 million was paid during the six months ended June 30, 2010 and 2009, respectively. Goodwill and customer relationship intangibles related to the Edart acquisition totaled $14.7 million and $4.3 million, respectively. The combined network operates under the Ryder name, complementing our Fleet Management Solutions (FMS) business segment market coverage in the Northeast. We also acquired approximately 525 vehicles for remarketing, the majority of which have been sold.

     During the six months ended June 30, 2010 and 2009, we paid $0.3 million and $4.2 million, respectively, related to other acquisitions completed in prior years.

(D) DISCONTINUED OPERATIONS

     In 2009, we ceased Supply Chain Solutions (SCS) service operations in Brazil, Argentina, Chile and European markets. Accordingly, results of these operations, financial position and cash flows are separately reported as discontinued operations for all periods presented either in the Consolidated Condensed Financial Statements or notes thereto.

     Summarized results of discontinued operations were as follows:

		Three months ended June 30,								Six months ended June 30,
		2010				2009				2010				2009
		(In thousands)
Total revenue		$	—				30,872			$	110				59,915
Loss from discontinued operations before income taxes		$	(832	)			(3,999	)		$	(1,337	)			(8,281	)
Income tax benefit (expense)			73				(181	)			79				(1	)
Loss from discontinued operations, net of tax		$	(759	)			(4,180	)		$	(1,258	)			(8,282	)

     Loss from discontinued operations before income taxes in the second quarter and first half of 2010 included $1.0 million and $1.4 million, respectively, of losses related to adverse legal developments, professional services and administrative costs associated with our discontinued South American operations. Loss from discontinued operations before income taxes in the second quarter and first half of 2010 also included $0.2 million and $0.1 million of restructuring recoveries and other items due to subsequent refinements in prior year estimates.

     Loss from discontinued operations before income taxes in the second quarter and first half of 2009 included $3.1 million and $6.1 million, respectively, of operating losses incurred in the wind down of our South American and European operations. Loss from discontinued operations before income taxes in the second quarter of 2009 also included $0.9 million and $2.2 million, respectively, of exit-related restructuring charges and other items associated with these operations.

     The following is a summary of assets and liabilities of discontinued operations:

		June 30,				December 31,
		2010				2009
		(In thousands)
Assets:
Total current assets		$	3,771			$	3,671
Total assets		$	5,914			$	7,631
Liabilities:
Total current liabilities		$	1,125			$	7,713
Total liabilities		$	5,582			$	12,869

(E) 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. Awards under the Plans principally include at-the-money stock options, nonvested stock and cash awards. Share-based compensation expense is generally recorded in “Salaries and employee-related costs” in the Consolidated Condensed Statements of Earnings.

     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,
		2010				2009				2010				2009
		(In thousands)
Stock option and stock purchase plans		$	2,240				2,226			$	4,493				5,039
Nonvested stock			1,836				1,071				3,524				3,029
Share-based compensation expense			4,076				3,297				8,017				8,068
Income tax benefit			(1,415	)			(1,020	)			(2,741	)			(2,539	)
Share-based compensation expense, net of tax		$	2,661				2,277			$	5,276				5,529

     During each of the six months ended June 30, 2010 and 2009, approximately 900,000 stock options were granted under the Plans. These awards, which generally vest one-third each year from the date of grant, are fully vested three years from the grant date and have contractual terms of seven years. The fair value of each option award at the date of grant was estimated using a Black-Scholes-Merton option-pricing valuation model. The weighted-average fair value per option granted during the six months ended June 30, 2010 and 2009 was $8.93 and $9.23, respectively.

     During each of the six months ended June 30, 2010 and 2009, approximately 200,000 awards of restricted stock rights and restricted stock units (RSUs) were granted under the Plans. The majority of the restricted stock rights granted during the periods included a market-based vesting provision, and the remainder are time-vested awards. Employees only receive the grant of stock if Ryder’s cumulative average total shareholder return (TSR) at least meets the S&P 500 cumulative average TSR over an applicable three-year period. The fair value of the market-based restricted stock rights was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Fair value of the time-vested awards was determined and fixed on the grant date based on Ryder’s stock price on the date of grant. The weighted-average fair value per restricted stock right and RSU granted during the six months ended June 30, 2010 and 2009 was $19.73 and $18.19, respectively.

     During the six months ended June 30, 2010 and 2009, employees who received market-based restricted stock rights also received market-based cash awards. The awards have the same vesting provisions as the market-based restricted stock rights except that Ryder’s TSR must at least meet the TSR of the 33rd percentile of the S&P 500. The cash awards are accounted for as liability awards under the share-based compensation accounting guidance as the awards are based upon the performance of our common stock and are settled in cash. As a result, the liability is adjusted to reflect fair value at the end of each reporting period. The fair value of the cash awards was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. During the three months ended June 30, 2010 and 2009, we recognized $0.7 million and $0.3 million, respectively, of compensation expense related to these cash awards in addition to the share-based compensation expense reported in the previous table. During the six months ended June 30, 2010 and 2009, we recognized $0.8 million and $0.6 million, respectively, of compensation expense related to these cash awards in addition to the share-based compensation expense reported in the previous table.

     Total unrecognized pre-tax compensation expense related to share-based compensation arrangements at June 30, 2010 was $28.6 million and is expected to be recognized over a weighted-average period of approximately 1.9 years.

(F) EARNINGS PER SHARE

     We compute earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Our nonvested stock are considered participating securities since the share-based awards contain a non-forfeitable right to dividend equivalents irrespective of whether the awards ultimately vest. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.

     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,
		2010				2009				2010				2009
		(In thousands, except per share amounts)
Earnings per share — Basic:
Earnings from continuing operations		$	30,600				27,068			$	43,472				38,008
Less: Distributed and undistributed earnings allocated to nonvested stock			(432	)			(295	)			(584	)			(404	)
Earnings from continuing operations available to common shareholders — Basic		$	30,168				26,773			$	42,888				37,604
Weighted average common shares outstanding— Basic			52,044				55,344				52,362				55,291
Earnings from continuing operations per common share — Basic		$	0.58				0.48			$	0.82				0.68
Earnings per share — Diluted:
Earnings from continuing operations		$	30,600				27,068			$	43,472				38,008
Less: Distributed and undistributed earnings allocated to nonvested stock			(432	)			(295	)			(584	)			(404	)
Earnings from continuing operations available to common shareholders — Diluted		$	30,168				26,773			$	42,888				37,604
Weighted average common shares outstanding— Basic			52,044				55,344				52,362				55,291
Effect of dilutive options			217				37				120				40
Weighted average common shares outstanding— Diluted			52,261				55,381				52,482				55,331
Earnings from continuing operations per common share — Diluted		$	0.58				0.48			$	0.82				0.68
Anti-dilutive equity awards not included above			1,391				3,049				1,853				2,850

(G) RESTRUCTURING AND OTHER (RECOVERIES) CHARGES

     Restructuring and other recoveries, net of $0.2 million for the three months ended June 30, 2009 represented refinements in previous workforce reduction estimates. Restructuring and other charges, net of $2.6 million for the six months ended June 30, 2009 represented employee severance and benefit costs related to workforce reductions.

     As noted in Note (T), “Segment Reporting,” our primary measure of segment financial performance excludes, among other items, restructuring and other (recoveries) charges, net; however, the applicable portion of the restructuring and other (recoveries) charges, net that relates to each segment was as follows:

		Three months ended June 30,								Six months ended June 30,
		2010				2009				2010				2009
		(In thousands)
Fleet Management Solutions		$	—				169			$	—				1,820
Supply Chain Solutions			—				(324	)			—				601
Dedicated Contract Carriage			—				—				—				46
Central Support Services			—				1				—				131
Total		$	—				(154	)		$	—				2,598

     Activity related to restructuring reserves including discontinued operations were as follows:

										Deductions								Foreign
		December 31, 2009								Cash				Non-Cash				Translation				June 30, 2010
		Balance				Additions				Payments				Reductions(1)				Adjustment				Balance
		(In thousands)
Employee severance and benefits		$	1,070				107				785				28				(15	)			349
Contract termination costs			172				85				181				—				(17	)			59
Total		$	1,242				192				966				28				(32	)			408

     At June 30, 2010, the majority of outstanding restructuring obligations are required to be paid by year-end.

(H) REVENUE EARNING EQUIPMENT

		June 30, 2010												December 31, 2009
						Accumulated				Net Book								Accumulated				Net Book
		Cost				Depreciation				Value(1)				Cost				Depreciation				Value (1)
		(In thousands)
Held for use:
Full service lease		$	5,547,382				(2,251,288	)			3,296,094			$	5,616,102				(2,173,693	)			3,442,409
Commercial rental			1,475,169				(601,265	)			873,904				1,235,404				(577,839	)			657,565
Held for sale			299,646				(223,673	)			75,973				340,332				(261,647	)			78,685
Total		$	7,322,197				(3,076,226	)			4,245,971			$	7,191,838				(3,013,179	)			4,178,659

     At the end of 2009, we completed our annual review of residual values and useful lives of revenue earning equipment. Based on the results of our analysis, we adjusted the residual values of certain classes of revenue earning equipment effective January 1, 2010. The change in estimated residual values decreased pre-tax earnings for the three and six months ended June 30, 2010 by approximately $3.5 million and $7.0 million, respectively. In addition, in the three months ended June 30, 2010 and 2009 we recognized $1.0 million and $2.3 million, respectively, of accelerated depreciation for select vehicles that are expected to be sold by the end of this year. In the six months ended June 30, 2010 and 2009, we recognized $3.5 million and $2.3 million, respectively, of accelerated depreciation for select vehicles that are expected to be sold by the end of this year.

(I) GOODWILL

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

		Fleet				Supply				Dedicated
		Management				Chain				Contract
		Solutions				Solutions				Carriage				Total
		(In thousands)
Balance at January 1, 2010:
Goodwill		$	202,308				38,457				4,900				245,665
Accumulated impairment losses			(10,322	)			(18,899	)			—				(29,221	)
			191,986				19,558				4,900				216,444
Acquisitions			25				—				—				25
Foreign currency translation adjustment			(79	)			(104	)			—				(183	)
Balance at June 30, 2010:
Goodwill			202,254				38,353				4,900				245,507
Accumulated impairment losses			(10,322	)			(18,899	)			—				(29,221	)
		$	191,932				19,454				4,900				216,286

     We assess goodwill for impairment on April 1st of each year or more often if deemed necessary. On April 1st 2010, we completed our annual goodwill impairment test and determined there was no impairment.

(J) ACCRUED EXPENSES AND OTHER LIABILITIES

		June 30, 2010												December 31, 2009
		Accrued				Non-Current								Accrued				Non-Current
		Expenses				Liabilities				Total				Expenses				Liabilities				Total
		(In thousands)
Salaries and wages		$	60,853				—				60,853			$	45,349				—				45,349
Deferred compensation			1,625				15,422				17,047				5,068				16,970				22,038
Pension benefits			2,692				342,097				344,789				2,695				328,571				331,266
Other postretirement benefits			3,213				42,704				45,917				3,214				46,115				49,329
Employee benefits			1,353				—				1,353				2,346				—				2,346
Insurance obligations, primarily self-insurance			108,902				142,509				251,411				111,144				151,045				262,189
Residual value guarantees			2,970				1,801				4,771				2,177				1,872				4,049
Deferred rent			3,003				24,135				27,138				1,995				16,302				18,297
Deferred vehicle gains			759				1,821				2,580				790				2,259				3,049
Environmental liabilities			4,737				9,806				14,543				5,285				9,578				14,863
Asset retirement obligations			3,799				12,719				16,518				4,881				11,435				16,316
Operating taxes			73,585				—				73,585				70,370				—				70,370
Income taxes			59,677				76,710				136,387				459				73,311				73,770
Interest			26,800				—				26,800				29,123				—				29,123
Deposits, mainly from customers			30,761				7,532				38,293				29,511				7,527				37,038
Deferred revenue			8,519				5,110				13,629				9,136				5,578				14,714
Other			32,722				7,303				40,025				31,402				11,050				42,452
Total		$	425,970				689,669				1,115,639			$	354,945				681,613				1,036,558

(K) INCOME TAXES

     Uncertain Tax Positions

     We are subject to tax audits in numerous jurisdictions in the U.S. and foreign countries. Tax audits by their very nature are often complex and can require several years to complete. In the normal course of business, we are subject to challenges from the Internal Revenue Service (IRS) and other tax authorities regarding amounts of taxes due. These challenges may alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. As part of our calculation of the provision for income taxes on earnings, we recognize the tax benefit from uncertain tax positions that are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Such calculations require management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary materially from these estimates.

          The following is a summary of tax years that are no longer subject to examination:

          Federal — audits of our U.S. federal income tax returns are closed through fiscal year 2006. In the first quarter of 2009, the IRS completed their examination of our U.S. income tax returns for 2004 through 2006.

          State — for the majority of states, we are no longer subject to tax examinations by tax authorities for tax years before 2006.

          Foreign — we are no longer subject to foreign tax examinations by tax authorities for tax years before 2001 in Brazil, 2002 in Canada, 2003 in Mexico and 2007 in the U.K., which are our major foreign tax jurisdictions. In Brazil, we were assessed $14.9 million, including penalties and interest, related to the tax due on the sale of our outbound auto carriage business in 2001. We believe it is more likely than not that our tax position will ultimately be sustained and no amounts have been reserved for this matter.

     At June 30, 2010 and December 31, 2009, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $71.7 million and $69.5 million, respectively. Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $2.3 million by June 30, 2011, if audits are complete or tax years close.

          Like-Kind Exchange Program

     We have a like-kind exchange program for certain of our revenue earning equipment operating in the U.S. Pursuant to the program, we dispose of vehicles and acquire replacement vehicles in a form whereby tax gains on disposal of eligible vehicles are deferred. To qualify for like-kind exchange treatment, we exchange, through a qualified intermediary, eligible vehicles being disposed of with vehicles being acquired allowing us to generally carryover the tax basis of the vehicles sold (“like-kind exchanges”). The program is expected to result in a material deferral of federal and state income taxes. As part of the program, the proceeds from the sale of eligible vehicles are restricted for the acquisition of replacement vehicles and other specified applications. Due to the structure utilized to facilitate the like-kind exchanges, the qualified intermediary that holds the proceeds from the sales of eligible vehicles and the entity that holds the vehicles to be acquired under the program are required to be consolidated in the accompanying Consolidated Condensed Financial Statements in accordance with U.S. GAAP. At June 30, 2010, these consolidated entities had total assets, primarily revenue earning equipment, and total liabilities, primarily accounts payable, of $68.5 million. At December 31, 2009, these consolidated entities had total assets, primarily revenue earning equipment, and total liabilities, primarily accounts payable, of $28.5 million.

          Tax Law Changes

     On March 23, 2010, the U.S. enacted the Patient Protection and Affordable Care Act and on March 30, 2010, the U.S. enacted the Health Care and Education Reconciliation Act of 2010 (collectively, the “Act”). The Act will reduce certain tax benefits available to employers for providing prescription coverage to retirees among other tax law changes. We do not provide prescription coverage for our retirees, therefore, the Act had no impact on our deferred income taxes or net earnings.

     On February 19, 2009, the State of Wisconsin enacted changes to its tax system, which included mandatory unitary combined reporting. The impact of this change resulted in a favorable non-cash adjustment to deferred income taxes and increased net earnings in the six months ended June 30, 2009 by $0.5 million, or $0.01 per diluted common share.

          Effective Tax Rate

     Our effective income tax rate from continuing operations for the second quarter of 2010 was 41.4% compared with 40.3% in the same period of the prior year. The effective tax rate in the second quarter of 2010 reflects higher contingent tax accruals partially offset by the benefit of higher earnings. Our effective tax rate from continuing operations for the six months ended June 30, 2010 was 41.8% compared with 43.9% in the same period last year. The decrease in the effective tax rate was mainly due to higher non-deductible foreign losses in the first half of 2009 partially offset by higher contingent tax accruals in 2010.

(L) DEBT

		Weighted-Average
		Interest Rate
		June 30,				December 31,						June 30,				December 31,
		2010				2009				Maturities		2010				2009
												(In thousands)
Short-term debt and current portion of long-term debt:
Unsecured foreign obligations			2.14	%			6.98	%		2010		$	2,884			$	5,369
Current portion of long-term debt, including capital leases													378,025				227,248
Total short-term debt and current portion of long-term debt													380,909				232,617
Long-term debt:
U.S. commercial paper (1)			0.45	%			0.43	%		2012			379,612				191,934
Unsecured U.S. notes – Medium-term notes (1)			6.00	%			5.89	%		2010-2025			1,858,146				2,032,344
Unsecured U.S. obligations, principally bank term loans			1.55	%			1.45	%		2010-2013			106,000				132,150
Unsecured foreign obligations			4.55	%			5.22	%		2011-2012			98,939				112,782
Capital lease obligations			8.20	%			8.26	%		2010-2017			10,269				11,011
Total before fair market value adjustment													2,452,966				2,480,221
Fair market value adjustment on notes subject to hedging (2)													16,226				12,101
													2,469,192				2,492,322
Current portion of long-term debt, including capital leases													(378,025	)			(227,248	)
Long-term debt													2,091,167				2,265,074
Total debt												$	2,472,076			$	2,497,691

     We can borrow up to $875 million under a global revolving credit facility with a syndicate of thirteen lending institutions led by Bank of America N.A., Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd., Royal Bank of Scotland Plc and Wells Fargo N.A. The global credit facility matures in April 2012 and is used primarily to finance working capital and provide support for the issuance of unsecured commercial paper in the U.S. and Canada. This facility 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, 2010). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The agreement provides for annual facility fees, which range from 22.5 basis points to 62.5 basis points, and is based on Ryder’s long-term credit ratings. The current annual facility fee is 37.5 basis points, which applies to the total facility size of $875 million. 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 tangible net worth, of less than or equal to 300%. Tangible net worth, as defined in the credit facility, includes 50% of our deferred federal income tax liability and excludes the book value of our intangibles. The ratio at June 30, 2010 was 159%. At June 30, 2010, $482.3 million was available under the credit facility, net of the support for commercial paper borrowings.

     Our global revolving credit facility permits us to refinance short-term commercial paper obligations on a long-term basis. Settlement of 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. At June 30, 2010 and December 31, 2009, we classified $379.6 million and $191.9 million, respectively, of short-term commercial paper as long-term debt.

     We have a trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to a bankruptcy remote, consolidated subsidiary of Ryder, that in turn sells, on a revolving basis, an ownership interest in certain of these accounts receivable to a receivables conduit or 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 29, 2010. 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. At June 30, 2010 and December 31, 2009, no amounts were outstanding under the program. Sales of receivables under this program are accounted for as secured borrowings based on our continuing involvement in the transferred assets.

     On February 25, 2010, we filed an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission. 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.

     At June 30, 2010 and December 31, 2009, we had letters of credit and surety bonds outstanding totaling $257.6 million and $262.7 million, respectively, which primarily guarantee the payment of insurance claims.

(M) FAIR VALUE MEASUREMENTS

     The following tables present our assets and liabilities that are measured at fair value on a recurring basis and the levels of inputs used to measure fair value:

				Fair Value Measurements
				At June 30, 2010 Using
		Balance Sheet Location		Level 1				Level 2				Level 3				Total
				(In thousands)
Assets:
Investments held in Rabbi Trusts:
Cash and cash equivalents				$	3,667				—				—				3,667
U.S. equity mutual funds					6,001				—				—				6,001
Foreign equity mutual funds					1,998				—				—				1,998
Fixed income mutual funds					3,133				—				—				3,133
Investments held in Rabbi Trusts		DFL and other assets			14,799				—				—				14,799
Interest rate swap		DFL and other assets			—				16,226				—				16,226
Total assets at fair value				$	14,799				16,226				—				31,025
				Fair Value Measurements
				At December 31, 2009 Using
		Balance Sheet Location		Level 1				Level 2				Level 3				Total
				(In thousands)
Assets:
Investments held in Rabbi Trusts		DFL and other assets		$	19,686				—				—				19,686
Interest rate swap		DFL and other assets			—				12,101				—				12,101
Total assets at fair value				$	19,686				12,101				—				31,787

     The following is a description of the valuation methodologies used for these items, as well as the level of inputs used to measure fair value:

     Investments held in Rabbi Trusts — The investments primarily include mutual funds that invest in equity and fixed income securities. Shares of mutual funds were valued based on quoted market prices, which represents the net asset value of the shares and were therefore classified within Level 1 of the fair value hierarchy.

     Interest rate swap — The derivative is a pay-variable, receive-fixed interest rate swap based on the LIBOR rate and is designated as a fair value hedge. Fair value was based on a model-driven income approach using the LIBOR rate at each interest payment date, which was observable at commonly quoted intervals for the full term of the swap. Therefore, our interest rate swap was classified within Level 2 of the fair value hierarchy.

     The following tables present our assets and liabilities that are measured at fair value on a nonrecurring basis and the levels of inputs used to measure fair value:

		Fair Value Measurements												Total Losses (2)
		At June 30, 2010 Using												Three months				Six months
		Level 1				Level 2				Level 3				ended				ended
		(In thousands)
Assets held for sale:
Revenue earning equipment: (1)
Trucks		$	—				—				12,992			$	3,513			$	7,882
Tractors			—				—				20,992				2,682				6,492
Trailers			—				—				2,535				680				2,231
Total assets at fair value		$	—				—				36,519			$	6,875			$	16,605
		Fair Value Measurements												Total Losses (2)
		At June 30, 2009 Using												Three months				Six months
		Level 1				Level 2				Level 3				ended				ended
		(In thousands)
Assets held for sale:
Revenue earning equipment (1)		$	—				—				48,542			$	15,011			$	29,731
Total assets at fair value		$	—				—				48,542			$	15,011			$	29,731

     Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses to reflect changes in fair value are presented within “Depreciation expense” in the Consolidated Condensed Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (tractors, trucks, trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. 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. Therefore, our revenue earning equipment held for sale was classified within Level 3 of the fair value hierarchy.

     Fair value of total debt at June 30, 2010 and December 31, 2009 was approximately $2.62 billion and $2.60 billion, respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on rates currently available to us for debt with similar terms and remaining maturities. The carrying amounts reported in the Consolidated Condensed Balance Sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturities of these financial instruments.

(N) DERIVATIVES

     In February 2008, we issued $250 million of unsecured medium-term notes maturing in March 2013. Concurrently, we entered into an interest rate swap with a notional amount of $250 million maturing in March 2013. The swap was designated as a fair value hedge whereby we receive fixed interest rate payments in exchange for making variable interest rate payments. The differential to be paid or received is accrued and recognized as interest expense. At June 30, 2010, the interest rate swap agreement effectively changed $250 million of fixed-rate debt with an interest rate of 6.00% to LIBOR-based floating-rate debt at a rate of 2.52%. Changes in the fair value of the interest rate swap are offset by changes in the fair value of the debt instrument. Accordingly, there is no ineffectiveness related to the interest rate swap. Our swap agreement contains provisions that would require us to post collateral in the event that the swap is in a liability position exceeding certain thresholds based on our credit ratings.

     The location and amount of gains (losses) on derivative instruments and related hedged items reported in the Consolidated Condensed Statements of Earnings were as follows:

		Location of Gain (Loss)				Three months ended June 30,								Six months ended June 30,
Fair Value Hedging Relationship		Recognized in Income				2010				2009				2010				2009
						(In thousands)
Derivative: Interest rate swap		Interest expense				$	2,098				(6,802	)		$	4,125				(8,074	)
Hedged item: Fixed-rate debt		Interest expense					(2,098	)			6,802				(4,125	)			8,074
Total						$	—				—			$	—				—