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 SEPTEMBER 30, 2015
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 September 30, 2015 was 53,425,097.

					

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 nine months ended September 30, 2015 and 2014	1	
 	 	 	
 	Consolidated Condensed Statements of Comprehensive Income — Three and nine months ended September 30, 2015 and 2014	2	
 	 	 	
 	Consolidated Condensed Balance Sheets — September 30, 2015 and December 31, 2014	3	
 	 	 	
 	Consolidated Condensed Statements of Cash Flows — Nine months ended September 30, 2015 and 2014	4	
 	 	 	
 	Consolidated Condensed Statement of Shareholders' Equity — Nine months ended September 30, 2015	5	
 	 	 	
 	Notes to Consolidated Condensed Financial Statements	6	
 	 	
ITEM 2        Management’s Discussion and Analysis of Financial Condition and Results of Operations	24	
 	 	
ITEM 3        Quantitative and Qualitative Disclosures About Market Risk	48	
 	 	
ITEM 4       Controls and Procedures	48	
 	 	
PART II       OTHER INFORMATION	 	
 	 	
ITEM 2        Unregistered Sales of Equity Securities and Use of Proceeds	48	
 	 	
ITEM 5        Other Information	49	
 	 	
ITEM 6       Exhibits	49	
 	 	 	
SIGNATURES	50	

i

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

	
															
 	Three months ended September 30,	 	 	Nine months ended September 30,	
 	2015	 	2014	 	 	2015	 	2014	
 	(In thousands, except per share amounts)	
Lease and rental revenues	$	802,881		 	756,733		 	 	$	2,310,951		 	2,180,178		
Services revenue	734,803		 	732,049		 	 	2,165,677		 	2,183,175		
Fuel services revenue	131,382		 	198,368		 	 	422,522		 	619,105		
Total revenues	1,669,066		 	1,687,150		 	 	4,899,150		 	4,982,458		
 	 	 	 	 	 	 	 	 	
Cost of lease and rental	550,541		 	522,202		 	 	1,600,271		 	1,522,394		
Cost of services	606,364		 	607,530		 	 	1,792,182		 	1,839,035		
Cost of fuel services	129,562		 	194,926		 	 	408,027		 	605,744		
Other operating expenses	31,286		 	28,889		 	 	98,864		 	96,541		
Selling, general and administrative expenses	203,093		 	202,001		 	 	624,566		 	594,133		
Gains on vehicle sales, net	(29,294	)	 	(33,691	)	 	 	(92,110	)	 	(96,874	)	
Interest expense	38,986		 	36,681		 	 	114,863		 	107,948		
Miscellaneous income, net	(1,372	)	 	(996	)	 	 	(5,037	)	 	(11,206	)	
 	1,529,166		 	1,557,542		 	 	4,541,626		 	4,657,715		
Earnings from continuing operations before income taxes	139,900		 	129,608		 	 	357,524		 	324,743		
Provision for income taxes	49,089			45,713		 	 	127,470			116,001		
Earnings from continuing operations	90,811			83,895		 	 	230,054			208,742		
Loss from discontinued operations, net of tax	(192	)	 	(278	)	 	 	(1,487	)	 	(1,480	)	
Net earnings	$	90,619		 	83,617		 	 	$	228,567		 	207,262		
 	 	 	 	 	 	 	 	 	
Earnings (loss) per common share — Basic	 	 	 	 	 	 	 	 	
Continuing operations	$	1.71		 	1.60		 	 	$	4.35		 	3.96		
Discontinued operations	—		 	(0.01	)	 	 	(0.03	)	 	(0.03	)	
Net earnings	$	1.71		 	1.59		 	 	$	4.32		 	3.93		
 	 	 	 	 	 	 	 	 	
Earnings (loss) per common share — Diluted	 	 	 	 	 	 	 	 	
Continuing operations	$	1.70		 	1.58		 	 	$	4.31		 	3.92		
Discontinued operations	—		 	(0.01	)	 	 	(0.03	)	 	(0.03	)	
Net earnings	$	1.69		 	1.57		 	 	$	4.28		 	3.89		
 	 	 	 	 	 	 	 	 	
Cash dividends declared per common share	$	0.41		 	0.37		 	 	$	1.15		 	1.05		

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 September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands)	
 	 	 	 	 	 	 	 	
Net earnings	$	90,619		 	83,617		 	$	228,567		 	207,262		
 	 	 	 	 	 	 	 	
Other comprehensive loss:	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Changes in cumulative translation adjustment and other	(42,748	)	 	(46,879	)	 	(73,093	)	 	(35,198	)	
 	 	 	 	 	 	 	 	
Amortization of pension and postretirement items	6,873		 	4,658		 	20,765		 	13,986		
Income tax expense related to amortization of pension and postretirement items	(2,412	)	 	(1,603	)	 	(7,226	)	 	(4,811	)	
Amortization of pension and postretirement items, net of taxes	4,461		 	3,055		 	13,539		 	9,175		
 	 	 	 	 	 	 	 	
Change in net actuarial loss	—		 	(148	)	 	(8,526	)	 	(3,292	)	
Income tax benefit related to change in net actuarial loss	—		 	44		 	3,205		 	1,140		
Change in net actuarial loss, net of taxes	—		 	(104	)	 	(5,321	)	 	(2,152	)	
 	 	 	 	 	 	 	 	
Other comprehensive loss, net of taxes	(38,287	)	 	(43,928	)	 	(64,875	)	 	(28,175	)	
 	 	 	 	 	 	 	 	
Comprehensive income	$	52,332		 	39,689		 	$	163,692		 	179,087		
See accompanying notes to consolidated condensed financial statements.

2

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

	
							
 	September 30,
2015	 	December 31,
2014	
 	(Dollars in thousands, except per
share amount)	
Assets:	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	75,387			50,092		
Receivables, net of allowance of $17,708 and $16,388, respectively	814,160			794,864		
Inventories	64,087			66,007		
Prepaid expenses and other current assets	163,893			165,234		
Total current assets	1,117,527		 	1,076,197		
Revenue earning equipment, net of accumulated depreciation of $3,876,682 and $3,689,016 respectively	8,036,710			7,201,886		
Operating property and equipment, net of accumulated depreciation of $1,078,471 and $1,035,028, respectively	712,169			699,594		
Goodwill	390,853			393,029		
Intangible assets	60,551			66,619		
Direct financing leases and other assets	502,376			446,099		
Total assets	$	10,820,186			9,883,424		
 	 	 	 	
Liabilities and shareholders’ equity:	 	 	 	
Current liabilities:	 	 	 	
Short-term debt and current portion of long-term debt	$	305,759			36,284		
Accounts payable	550,305			560,852		
Accrued expenses and other current liabilities	511,198			513,679		
Total current liabilities	1,367,262		 	1,110,815		
Long-term debt	5,144,938			4,694,335		
Other non-current liabilities	780,415			783,342		
Deferred income taxes	1,575,507			1,475,845		
Total liabilities	8,868,122		 	8,064,337		
 	 	 	 	
Shareholders’ equity:	 	 	 	
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding,
   September 30, 2015 or December 31, 2014	—		 	—		
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding,
   September 30, 2015 — 53,425,097; December 31, 2014 — 53,039,688	26,712		 	26,520		
Additional paid-in capital	997,753		 	962,328		
Retained earnings	1,612,744		 	1,450,509		
Accumulated other comprehensive loss	(685,145	)	 	(620,270	)	
Total shareholders’ equity	1,952,064			1,819,087		
Total liabilities and shareholders’ equity	$	10,820,186			9,883,424		
See accompanying notes to consolidated condensed financial statements.

3

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

	
							
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Cash flows from operating activities from continuing operations:	 	 	 	
Net earnings	$	228,567		 	207,262		
Less: Loss from discontinued operations, net of tax	(1,487	)	 	(1,480	)	
Earnings from continuing operations	230,054		 	208,742		
Depreciation expense	838,100		 	781,367		
Gains on vehicle sales, net	(92,110	)	 	(96,874	)	
Share-based compensation expense	16,112		 	15,446		
Amortization expense and other non-cash charges, net	46,272		 	35,850		
Deferred income tax expense	111,609		 	99,418		
Changes in operating assets and liabilities:	 	 	 	
Receivables	(23,751	)	 	(37,408	)	
Inventories	1,275		 	(731	)	
Prepaid expenses and other assets	(33,334	)	 	(23,385	)	
Accounts payable	(19,506	)	 	44,976		
Accrued expenses and other non-current liabilities	(3,385	)	 	(46,357	)	
Net cash provided by operating activities from continuing operations	1,071,336		 	981,044		
 	 	 	 	
Cash flows from financing activities from continuing operations:	 	 	 	
Net change in commercial paper borrowings	184,750			(164,944	)	
Debt proceeds	1,329,810			895,733		
Debt repaid	(795,837	)		(284,811	)	
Dividends on common stock	(61,436	)	 	(55,408	)	
Common stock issued	20,397		 	38,990		
Common stock repurchased	(6,141	)	 	(92,343	)	
Excess tax benefits from share-based compensation	723		 	514		
Debt issuance costs	(7,483	)	 	(5,230	)	
Net cash provided by financing activities from continuing operations	664,783		 	332,501		
 	 	 	 	
Cash flows from investing activities from continuing operations:	 	 	 	
Purchases of property and revenue earning equipment	(2,087,294	)	 	(1,741,173	)	
Sales of revenue earning equipment	319,766		 	392,572		
Sales of operating property and equipment	1,203		 	3,091		
Acquisitions	—		 	(9,785	)	
Collections on direct finance leases	51,166		 	48,920		
Changes in restricted cash	7,781		 	10,344		
Other	—		 	(1,250	)	
Net cash used in investing activities from continuing operations	(1,707,378	)	 	(1,297,281	)	
 	 	 	 	
Effect of exchange rate changes on cash	(2,006	)	 	(1,210	)	
Increase in cash and cash equivalents from continuing operations	26,735		 	15,054		
 	 	 	 	
Decrease in cash and cash equivalents from discontinued operations	(1,440	)	 	(1,614	)	
 	 	 	 	
Increase in cash and cash equivalents	25,295		 	13,440		
Cash and cash equivalents at January 1	50,092		 	61,562		
Cash and cash equivalents at September 30	$	75,387		 	75,002		
See accompanying notes to consolidated condensed financial statements.

4

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY
(unaudited)

	
																							
 	Preferred
Stock	 	 
 
Common Stock	 	Additional
Paid-In
Capital	 	Retained
Earnings	 	Accumulated
Other
Comprehensive
Loss	 	Total	
 	Amount	 	Shares	 	Par	 								
 	(Dollars in thousands, except per share amount)	
Balance at December 31, 2014	$	—		 	53,039,688		 	$	26,520		 	962,328		 	1,450,509		 	(620,270	)	 	1,819,087		
Comprehensive income (loss)	—		 	—		 	—		 	—		 	228,567		 	(64,875	)	 	163,692		
Common stock dividends declared — $1.15 per share	—		 	—		 	—		 	—		 	(61,441	)	 	—		 	(61,441	)	
Common stock issued under employee stock option and stock purchase plans  (1)	—		 	453,555		 	227		 	20,081		 	—		 	—		 	20,308		
Benefit plan stock sales (2)	—		 	961		 	—		 	89		 	—		 	—		 	89		
Common stock repurchases	—		 	(69,107	)	 	(35	)	 	(1,215	)	 	(4,891	)	 	—		 	(6,141	)	
Share-based compensation	—		 	—		 	—		 	16,112		 	—		 	—		 	16,112		
Tax benefits from share-based compensation	—		 	—		 	—		 	358		 	—		 	—		 	358		
Balance at September 30, 2015	$	—		 	53,425,097		 	$	26,712		 	997,753		 	1,612,744		 	(685,145	)	 	1,952,064		
————————————
(1) Net of common shares delivered as payment for the exercise price or to satisfy the option holders’ withholding tax liability upon exercise of options.
(2) Represents open-market transactions of common shares by the trustee of Ryder’s deferred compensation plans.
See accompanying notes to consolidated condensed financial statements.

5

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

(A) 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 2014 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 and items referenced under "Revision of Prior Period Financial Statements") 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.

During the first quarter of 2015, our management structure changed within the supply chain business. We created the role of President of Dedicated Transportation Solutions (DTS) for the dedicated product offering which was previously within Supply Chain Solutions (SCS). We are now reporting our financial performance as follows: (1) Fleet Management Solutions (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. Prior period amounts have been recast to conform to the new presentation. This change impacted Note (P), "Segment Reporting," with no impact on consolidated revenues, net income or cash flows.

Revision of Prior Period Financial Statements

The Company periodically enters into sale and leaseback transactions to lower the total cost of funding our operations and to diversify funding among different classes of investors and among different types of funding instruments. These transactions historically resulted in a reduction of revenue earning equipment and debt on the balance sheet, as proceeds from the sale of revenue earning equipment were used to repay debt. During the second quarter of 2015, we reviewed and evaluated the structure of these transactions and determined that they should be accounted for as issuances of financial interests that do not qualify for deconsolidation. We evaluated the materiality of this revision, quantitatively and qualitatively, and concluded it was not material to any of our previously issued consolidated financial statements. However, we elected to revise previously issued financial statements to avoid inconsistencies in our financial statements. Accordingly, we revised previously reported results for the years ended December 31, 2014, 2013 and 2012 as well as previously reported results for the three and nine months ended September 30, 2014, the three and six months ended June 30, 2014, and the three months ended March 31, 2015 and 2014 in our Form 10-Q for the quarter ended June 30, 2015. The effects of this revision for the three and nine months ended September 30, 2014, and as of December 31, 2014 are presented in the tables below. Adjustments may not be additive and may have minor differences within the tables due to rounding.

The effects of this revision on our Consolidated Condensed Statements of Earnings were as follows (in millions):

																
 	Three months ended September 30, 2014	 	Nine months ended September 30, 2014	
 	As Previously Reported	Adjustment	As Revised	 	As Previously Reported	Adjustment	As Revised	
Cost of lease and rental	$	522.9		(0.7	)	522.2		 	$	1,524.0		(1.6	)	1,522.4		
Interest expense	35.9		0.8		36.7		 	106.3		1.6		107.9		
Earnings from continuing operations before income taxes	129.7		(0.1	)	129.6		 	324.8		(0.1	)	324.7		
Provision for income taxes	45.8		(0.1	)	45.7		 	116.0		—		116.0		
Earnings from continuing operations	84.0		(0.1	)	83.9		 	208.8		(0.1	)	208.7		
Net earnings	83.7		(0.1	)	83.6		 	207.3		—		207.3		

6

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

The effects of this revision on our Consolidated Condensed Statements of Comprehensive Income were as follows (in millions):

								
 	Comprehensive Income	
 	As Previously Reported	Adjustment	As Revised	
Three months ended September 30, 2014	$	39.8		(0.1	)	39.7		
Nine months ended September 30, 2014	179.1		—		179.1		

The effects of this revision on our Consolidated Balance Sheets were as follows (in millions):

								
 	December 31, 2014	
 	As Previously Reported	Adjustment	As Revised	
Revenue earning equipment, net	$	6,994.4		207.4		7,201.9		
Total assets	9,676.0		207.4		9,883.4		
Short-term debt and current portion of long-term debt	12.2		24.1		36.3		
Accrued expenses and other current liabilities	520.5		(6.8	)	513.7		
Total current liabilities	1,093.6		17.2		1,110.8		
Long-term debt	4,500.3		194.0		4,694.3		
Other non-current liabilities	786.7		(3.4	)	783.3		
Deferred income taxes	1,476.0		(0.2	)	1,475.8		
Total liabilities	7,856.5		207.8		8,064.3		
Retained earnings	1,450.9		(0.4	)	1,450.5		
Total shareholders’ equity	1,819.5		(0.4	)	1,819.1		
Total liabilities and shareholders’ equity	9,676.0		207.4		9,883.4		

The effects of this revision on the individual line items within our Consolidated Condensed Statements of Cash Flows were as follows (in millions):

								
 	Nine months ended September 30, 2014	
 	As Previously Reported	Adjustment	As Revised	
Net earnings	$	207.3		—		207.3		
Depreciation expense	770.1		11.3		781.4		
Accrued expenses and other non-current liabilities	(41.5	)	(4.9	)	(46.4	)	
Net cash provided by operating activities from continuing operations	974.7		6.3		981.0		
Debt proceeds	769.9		125.8		895.7		
Debt repaid	(278.4	)	(6.4	)	(284.8	)	
Net cash provided by financing activities from continuing operations	213.1		119.4		332.5		
Sale and leaseback of revenue earning equipment	125.8		(125.8	)	—		
Net cash used in investing activities from continuing operations	(1,171.5	)	(125.8	)	(1,297.3	)	

7

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

(B) RECENT ACCOUNTING PRONOUNCEMENTS

Accounting for Measurement Period Adjustments

On September 25, 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments , which requires an acquirer to recognize adjustments identified during the measurement period in the reporting period in which the adjustment amounts are determined. The adjustment must include the cumulative effect of the adjustment as if the accounting had been completed on the acquisition date. The update should be applied prospectively and becomes effective January 1, 2016. Early application is permitted. The adoption of ASU 2015-16 will not have an impact on our consolidated financial position, results of operations or cash flows.

Inventory Valuation

On July 22, 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory , which applies to inventory that is measured using first-in, first-out or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out. The update becomes effective January 1, 2017 and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. We are in the process of determining the effect of the standard on our consolidated financial position and results of operations.

Presentation of Debt Issuance Costs
     
On April 7, 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. On August 30, 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU 2015-03. The SEC Staff announced they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The update requires retrospective application and represents a change in accounting principle. The update becomes effective January 1, 2016. Based on the balances as of September 30, 2015 , we expect to reclassify $20.0 million of unamortized debt issuance costs from "Direct financing leases and other assets" to "Long-term debt."

Revenue Recognition

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which 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 will replace most existing revenue recognition guidance. The update was originally effective January 1, 2017. On August 12, 2015, the FASB issued ASU 2015-14 , Revenue from Contracts with Customers (Topic 606 ): Deferral of the Effective Date, which defers the effective date by one year to January 1, 2018. Early application is permitted but not before January 1, 2017. The standard permits the use of either the modified retrospective or cumulative effect transition methods. We have not yet selected a transition method. We are in the process of determining the effect of the standard on our consolidated financial position and results of operations.

8

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

(C) 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. Nonvested 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 nonvested 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 September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands)	
Stock option and stock purchase plans	$	1,948		 	2,353		 	$	6,205		 	6,831		
Nonvested stock	2,995		 	3,104		 	9,907		 	8,615		
Share-based compensation expense	4,943		 	5,457		 	16,112		 	15,446		
Income tax benefit	(1,652	)	 	(1,864	)	 	(5,395	)	 	(5,253	)	
Share-based compensation expense, net of tax	$	3,291		 	3,593		 	$	10,717		 	10,193		

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 September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands)	
Cash awards	$	197		 	389		 	$	661		 	1,655		

Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at September 30, 2015 was $24.5 million and is expected to be recognized over a weighted-average period of 1.8 years.

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

						
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
 	 	 	 	
Stock options	362		 	406		
Market-based restricted stock rights	19		 	22		
Performance-based restricted stock rights	42		 	30		
Time-vested restricted stock rights	87		 	184		
Total	510		 	642		

9

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

(D) EARNINGS PER SHARE

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

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands, except per share amounts)	
Earnings per share — Basic:	 	 	 	 	 	 	 	
Earnings from continuing operations	$	90,811		 	83,895		 	$	230,054		 	208,742		
Less: Distributed and undistributed earnings allocated to nonvested stock	(266	)	 	(275	)	 	(654	)	 	(879	)	
Earnings from continuing operations available to common shareholders — Basic	$	90,545		 	83,620		 	$	229,400		 	207,863		
 	 	 	 	 	 	 	 	
Weighted average common shares outstanding — Basic	52,888		 	52,459		 	52,770		 	52,559		
 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share — Basic	$	1.71		 	1.60		 	$	4.35		 	3.96		
 	 	 	 	 	 	 	 	
Earnings per share — Diluted:	 	 	 	 	 	 	 	
Earnings from continuing operations	$	90,811		 	83,895		 	$	230,054		 	208,742		
Less: Distributed and undistributed earnings allocated to nonvested stock	(265	)	 	(273	)	 	(649	)	 	(873	)	
Earnings from continuing operations available to common shareholders — Diluted	$	90,546		 	83,622		 	$	229,405		 	207,869		
 	 	 	 	 	 	 	 	
Weighted average common shares outstanding — Basic	52,888		 	52,459		 	52,770		 	52,559		
Effect of dilutive equity awards	445		 	515		 	476		 	487		
Weighted average common shares outstanding — Diluted	53,333		 	52,974		 	53,246		 	53,046		
 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share — Diluted	$	1.70		 	1.58		 	$	4.31		 	3.92		
 	 	 	 	 	 	 	 	
Anti-dilutive equity awards not included above	352		 	8		 	300		 	212		

10

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

(E) REVENUE EARNING EQUIPMENT

																				
 	September 30, 2015	 	December 31, 2014	
 	Cost	 	Accumulated
Depreciation	 	Net  Book
Value (1)	 	Cost	 	Accumulated
Depreciation	 	Net  Book
Value (1)	
 	(In thousands)	
Held for use:	 	
Full service lease	$	8,612,790		 	(2,699,055	)	 	5,913,735		 	$	8,008,122		 	(2,598,140	)	 	5,409,982		
Commercial rental	2,932,196		 	(924,004	)	 	2,008,192		 	2,570,081		 	(864,543	)	 	1,705,538		
Held for sale	368,406		 	(253,623	)	 	114,783		 	312,699		 	(226,333	)	 	86,366		
Total	$	11,913,392		 	(3,876,682	)	 	8,036,710		 	$	10,890,902		 	(3,689,016	)	 	7,201,886		
 ————————————
		
(1)	Revenue earning equipment, net includes vehicles acquired under capital leases of $47.5 million , less accumulated depreciation of $21.0 million , at September 30, 2015 , and $47.8 million , less accumulated depreciation of $22.5 million , at December 31, 2014 .	

At the end of 2014, 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 estimated residual values of certain classes of revenue earning equipment effective January 1, 2015. The change in estimated residual values and useful lives increased pre-tax earnings for the three and nine months ended September 30, 2015 by approximately $10.0 million and $30.0 million , respectively.

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 September 30, 2015 and December 31, 2014 , the net investment in direct financing and sales-type leases was $442.6 million and $417.0 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 upon signing of 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, based on their estimated fair values, which further mitigates our credit risk.

As of September 30, 2015 and December 31, 2014 , 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. The allowance for credit losses was $0.3 million as of September 30, 2015 and December 31, 2014 .

11

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

(F) ACCRUED EXPENSES AND OTHER LIABILITIES

																				
 	September 30, 2015	 	December 31, 2014	
 	Accrued
Expenses	 	Non-Current
Liabilities	 	Total	 	Accrued
Expenses	 	Non-Current
Liabilities	 	Total	
 	(In thousands)	
Salaries and wages	$	101,036		 	—		 	101,036		 	$	114,446		 	—		 	114,446		
Deferred compensation	2,120		 	39,221		 	41,341		 	3,209		 	37,093		 	40,302		
Pension benefits	3,644		 	440,800		 	444,444		 	3,739		 	444,657		 	448,396		
Other postretirement benefits	2,084		 	25,440		 	27,524		 	2,112		 	26,889		 	29,001		
Other employee benefits	9,059		 	9,360		 	18,419		 	7,172		 	19,276		 	26,448		
Insurance obligations (1)	134,407		 	202,258		 	336,665		 	132,246		 	189,431		 	321,677		
Environmental liabilities	3,836		 	7,177		 	11,013		 	3,877		 	8,002		 	11,879		
Operating taxes	95,311		 	—		 	95,311		 	92,330		 	—		 	92,330		
Income taxes	2,782		 	23,620		 	26,402		 	5,066		 	22,843		 	27,909		
Interest	32,460		 	—		 	32,460		 	33,509		 	—		 	33,509		
Deposits, mainly from customers	65,995		 	6,193		 	72,188		 	59,388		 	5,929		 	65,317		
Deferred revenue	13,377		 	—		 	13,377		 	11,759		 	—		 	11,759		
Acquisition holdbacks	2,134		 	—		 	2,134		 	3,817		 	2,187		 	6,004		
Other	42,953		 	26,346		 	69,299		 	41,009		 	27,035		 	68,044		
Total	$	511,198		 	780,415		 	1,291,613		 	$	513,679		 	783,342		 	1,297,021		
  ————————————
		
(1)	Insurance obligations are primarily comprised of self-insured claim liabilities.	

12

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

(G) DEBT

													
 	Weighted-Average
Interest Rate	 	 	 	 	 	 	
 	September 30,
2015	 	December 31,
2014	 	Maturities	 	September 30,
2015	 	December 31,
2014	
 	 	 	 	 	 	 	(In thousands)	
Short-term debt and current portion of long-term debt:	 	 	 	 	 	 	 	 	 	
Short-term debt	—%	 	1.30%	 		 	$	—		 	3,773		
Current portion of long-term debt	 	 	 	 	 	 	305,759		 	32,511		
Total short-term debt and current portion of long-term debt	 	 	 	 	 	 	305,759		 	36,284		
Long-term debt:	 	 	 	 	 	 	 	 	 	
U.S. commercial paper (1)	0.44%	 	0.35%	 	2020	 	461,414		 	276,694		
Global revolving credit facility	2.68%	 	1.60%	 	2020	 	43,553		 	11,190		
Unsecured U.S. notes — Medium-term notes  (1)	2.74%	 	3.29%	 	2016-2025	 	4,112,089		 	3,772,159		
Unsecured U.S. obligations	1.51%	 	0.76%	 	2018	 	50,000		 	110,500		
Unsecured foreign obligations	1.92%	 	2.01%	 	2015-2020	 	283,433		 	295,776		
Asset-backed U.S. obligations  (2)	1.81%	 	1.81%	 	2018-2022	 	448,331		 	218,137		
Capital lease obligations	1.92%	 	1.73%	 	2015-2022	 	36,083		 	37,560		
Total before fair market value adjustment	 	 	 	 	 	 	5,434,903		 	4,722,016		
Fair market value adjustment on notes subject to hedging  (3)	 	 	 	 	 	15,794		 	4,830		
 	 	 	 	 	 	 	5,450,697		 	4,726,846		
Current portion of long-term debt	 	 	 	 	 	 	(305,759	)	 	(32,511	)	
Long-term debt	 	 	 	 	 	 	5,144,938		 	4,694,335		
Total debt	 	 	 	 	 	 	$	5,450,697		 	4,730,619		
  ————————————
		
(1)	We had unamortized original issue discounts of $8.0 million and $7.9 million at September 30, 2015 and December 31, 2014 , respectively.	
		
(2)	Asset-backed U.S. obligations of $448.3 million at September 30, 2015 and $218.1 million at December 31, 2014 are related to financing transactions involving revenue earning equipment. See Note (A), General, Revision of Prior Period Financial Information for further information related to our evaluation of accounting for these transactions.	
		
(3)	The notional amount of executed interest rate swaps designated as fair value hedges was $825 million at September 30, 2015 and $600 million at December 31, 2014 .	

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 September 30, 2015 ). 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 September 30, 2015 was 215% . At September 30, 2015 , there was $694.9 million available under the credit facility, net of outstanding commercial paper borrowings.

Our global revolving credit facility enables us to refinance short-term 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. In addition, we have the intent and ability to refinance the current portion of long-term debt on a long-term basis. At September 30, 2015 , we classified $461.4 million of short-term commercial paper, $300.0 million of the current portion of long-term debt and $41 million of short-term borrowings under our global revolving credit facility as long-term debt. At December 31, 2014 , we classified $276.7 million of short-term commercial

13

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

paper, $60.0 million of trade receivables borrowings and $698.5 million of the current portion of long-term debt as long-term debt.

In September and April 2015, we received $92.9 million and $156.4 million , respectively, from financing transactions backed by a portion of our revenue earning equipment. The proceeds from these transactions were used to fund capital expenditures. We have provided end of term guarantees for the residual value of the revenue earning equipment in these transactions. The transaction proceeds, along with the end of term residual value guarantees, have been included within "asset-backed U.S. obligations" in the preceding table.

In August 2015, we issued $300 million of unsecured medium-term notes maturing in September 2020. In May 2015, we issued $300 million of unsecured medium-term notes maturing in May 2020. In February 2015, we issued $400 million of unsecured medium-term notes maturing in March 2020. The proceeds from these notes were used to payoff 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 holder 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 a committed purchaser. The subsidiary is considered a VIE and is consolidated based on our control of the entity’s activities. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in interest rates. The available proceeds that may be received under the program are limited to $175 million . If no event occurs that causes early termination, the 364 -day program will expire during October 2015. We are currently in the process of renewing the program through October 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. No amounts were outstanding under the program at September 30, 2015 . At December 31, 2014 , $60.0 million was 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.

At September 30, 2015 and December 31, 2014 , we had letters of credit and surety bonds outstanding totaling $339.3 million and $334.3 million , respectively, which primarily guarantee the payment of insurance claims.

14

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

(H) FAIR VALUE MEASUREMENTS

The assets and liabilities measured at fair value on a recurring basis consist primarily of interest rate swaps and investments held in Rabbi Trusts.  These amounts as of September 30, 2015 are not material to our consolidated financial position and operations and have not changed significantly from the amounts reported as of December 31, 2014 .  

The following tables present our assets that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement: 

												
 	Fair Value Measurements at	 	Total Losses (2)	
 	September 30, 2015	 	Three months ended September 30, 2015	 	Nine months ended September 30, 2015	
 	(In thousands)	
Assets held for sale:	 	 	 	 	 	
Revenue earning equipment: (1)	 	 	 	 	 	
Trucks	$	7,701		 	$	1,657		 	$	4,400		
Tractors	10,093		 	2,062		 	3,970		
Trailers	1,195		 	610		 	1,582		
Total assets at fair value	$	18,989		 	$	4,329		 	9,952		

	

 	Fair Value Measurements at	 	Total Losses (2)	 	
 	September 30, 2014	 	Three months ended September 30, 2014	 	Nine months ended September 30, 2014	 	
 	(In thousands)	 	
Assets held for sale:	 	 	 	 	 	 	
Revenue earning equipment: (1)	 	 	 	 	 	 	
Trucks	$	8,437		 	$	1,527		 	$	4,981		 	
Tractors	4,666		 	530		 	2,824		 	
Trailers	682		 	320		 	762		 	
Total assets at fair value	$	13,785		 	$	2,377		 	$	8,567		 	
 
 ————————————
		
(1)	Represents the portion of all revenue earning equipment held for sale that is recorded at fair value, less costs to sell.	
		
(2)	Total losses represent fair value adjustments for all vehicles held for sale throughout the period for which fair value was less than carrying value.	

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 “Other operating expenses” 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. 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.

15

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

Fair value of total debt (excluding capital lease and asset-backed U.S. obligations) at September 30, 2015 and December 31, 2014 was approximately $5.35 billion and $4.59 billion , respectively. For publicly-traded debt, estimates of fair value were based on market prices. Since our publicly-traded debt is not actively traded, the fair value measurement was classified within Level 2 of the fair value hierarchy. 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. Therefore, the fair value measurement of our other debt was 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.

(I) DERIVATIVES

We have interest rate swaps outstanding, which are designated as fair value hedges 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. 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 swaps. Therefore, our interest rate swaps were classified within Level 2 of the fair value hierarchy. The fair value amounts of the interest rate swaps are reported in the Consolidated Condensed Balance Sheets within "Prepaid expenses and other current assets," "Direct financing leases and other assets," and "Other non-current liabilities." As of September 30, 2015 , these amounts are not material to our consolidated financial position or results of operations and have not changed significantly from the amounts reported at December 31, 2014 .

The following table provides a detail of the swaps outstanding and the related hedged items as of September 30, 2015 :

	
													
 	 	Maturity date	 	Face value of medium-term notes	 	Aggregate 
notional
amount of interest rate swaps	 	Fixed interest 
rate	 	Weighted-average variable
interest rate on hedged debt
as of September 30,	
Issuance date	 		 		 		 		 	2015	 	2014	
 	 	 	 	(Dollars in thousands)	 	 	 	 	 	 	
May 2011	 	June 2017	 	$350,000	 	$150,000	 	3.50%	 	1.52%	 	1.42%	
November 2013	 	November 2018	 	$300,000	 	$100,000	 	2.45%	 	1.28%	 	1.18%	
February 2014	 	June 2019	 	$350,000	 	$100,000	 	2.55%	 	1.19%	 	1.10%	
May 2014	 	September 2019	 	$400,000	 	$100,000	 	2.45%	 	0.95%	 	0.86%	
February 2015	 	March 2020	 	$400,000	 	$150,000	 	2.65%	 	1.21%	 	—	
August 2015	 	September 2020	 	$300,000	 	$225,000	 	2.88%	 	1.52%	 	—	

The amount of gains (losses) on interest rate swap agreements designated as fair value hedges and related hedged items are reported in the Consolidated Condensed Statements of Earnings within "Interest expense." Changes in the fair value of our interest rate swaps are offset by changes in the fair value of the debt instrument. Accordingly, there is no ineffectiveness related to the interest rate swaps.

(J) SHARE REPURCHASE PROGRAMS

In December 2013, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our various employee stock, stock option and employee stock purchase plans (collectively, the employee stock plans). Under the December 2013 program, management is authorized to repurchase shares of common stock in an amount not to exceed the number of shares issued under the employee stock plans from December 1, 2013 through December 10, 2015. The December 2013 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 established prearranged written plans for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the December 2013 program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. Early in the first quarter of 2015, due to the increase in leverage, we temporarily paused anti-dilutive share repurchase activity. For the nine months ended September 30, 2015 and 2014 , we repurchased and retired 69,107 shares and 1,170,123 shares, respectively, under the program at an aggregate cost of $6.1 million and $92.3 million , respectively.

16

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

(K) 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
Credit (1)	 	Accumulated
Other
Comprehensive
Loss	
 	 	(In thousands)	
December 31, 2014	 	$	(36,087	)	 	(585,941	)	 	1,758		 	(620,270	)	
Amortization	 	—		 	14,605		 	(1,066	)	 	13,539		
Other current period change	 	(73,093	)	 	(5,321	)	 	—		 	(78,414	)	
September 30, 2015	 	$	(109,180	)	 	(576,657	)	 	692		 	(685,145	)	

	
														
 	 	Currency
Translation
Adjustments and Other	 	Net Actuarial
Loss (1)	 	Prior Service
Credit (1)	 	Accumulated
Other
Comprehensive
Loss	
 	 	(In thousands)	
December 31, 2013	 	$	35,875			(477,883	)	 	3,760		 	(438,248	)	
Amortization	 	—			11,183			(2,008	)	 	9,175		
Other current period change	 	(35,198	)		(2,043	)		(109	)	 	(37,350	)	
September 30, 2014	 	$	677		 	(468,743	)	 	1,643		 	(466,423	)	

_______________________ 

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

The loss from currency translation adjustments in the nine months ended September 30, 2015 of $73.1 million was due primarily to the weakening of the Canadian Dollar and British Pound against the U.S. Dollar.

17

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

(L) EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost/(credit) were as follows:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands)	
Pension Benefits	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
Service cost	$	3,612		 	3,297		 	$	10,805		 	9,892		
Interest cost	21,777		 	25,280		 	65,712		 	75,990		
Expected return on plan assets	(24,697	)	 	(28,900	)	 	(74,618	)	 	(86,916	)	
Amortization of:	 	 	 	 	 	 	 	
Net actuarial loss	7,665		 	5,900		 	23,137		 	17,714		
Prior service credit	(80	)	 	(445	)	 	(230	)	 	(1,340	)	
 	8,277		 	5,132		 	24,806		 	15,340		
Union-administered plans	1,772		 	3,475		 	6,057		 	7,744		
Net periodic benefit cost	$	10,049		 	8,607		 	$	30,863		 	23,084		
 	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
U.S.	$	8,746		 	5,389		 	$	26,237		 	16,190		
Non-U.S.	(469	)	 	(257	)	 	(1,431	)	 	(850	)	
 	8,277		 	5,132		 	24,806		 	15,340		
Union-administered plans	1,772		 	3,475		 	6,057		 	7,744		
 	$	10,049		 	8,607		 	$	30,863		 	23,084		
 	 	 	 	 	 	 	 	
Postretirement Benefits	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
Service cost	$	88		 	112		 	$	278		 	336		
Interest cost	270		 	356		 	829		 	1,069		
Amortization of:	 	 	 	 	 	 	 	
Net actuarial gain	(235	)	 	(181	)	 	(709	)	 	(544	)	
Prior service credit	(477	)	 	(616	)	 	(1,433	)	 	(1,844	)	
Net periodic benefit credit	$	(354	)	 	(329	)	 	$	(1,035	)	 	(983	)	
 	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
U.S.	$	(469	)	 	(460	)	 	$	(1,415	)	 	(1,379	)	
Non-U.S.	115		 	131		 	380		 	396		
 	$	(354	)	 	(329	)	 	$	(1,035	)	 	(983	)	

During the nine months ended September 30, 2015 , we contributed $29.9 million to our pension plans. In 2015 , we expect total contributions to our pension plans to be approximately $ 35 million .

18

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

(M) OTHER ITEMS IMPACTING COMPARABILITY

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands)	
Pension settlement adjustments	$	(509	)	 	1,262		 	$	(509	)	 	1,262		
Professional fees	63		 	—		 	3,843		 	—		
Acquisition transaction costs	—		 	566		 	—		 	566		
Restructuring and other charges, net and other items	$	(446	)	 	1,828		 	$	3,334		 	1,828		

During the three and nine months ended September 30, 2015, we incurred charges of $0.1 million and $3.8 million , respectively, related to professional fees associated with cost savings initiatives. During the three and nine months ended September 30, 2015, we recorded adjustments of $0.5 million to previously recorded estimated pension settlement charges related to the exit from U.S. multi-employer pension plans. These items are reflected within "Selling, general and administrative expenses" in our Consolidated Condensed Statements of Earnings.
During the three and nine months ended September 30, 2014, we recorded estimated pension settlement charges of $1.3 million for the exit of certain U.S. multi-employer pension plans. During the three and nine months ended September 30, 2014, transaction costs related to the Bullwell acquisition were $0.6 million . These items were reflected within "Selling, general and administrative expenses" in our Consolidated Condensed Statements of Earnings.

(N) SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information was as follows:

							
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Interest paid	$	110,141		 	110,192		
Income taxes paid	13,635		 	9,878		
Changes in accounts payable related to purchases of revenue earning equipment	18,307		 	3,902		
Operating and revenue earning equipment acquired under capital leases	5,956		 	3,788		

(O) MISCELLANEOUS INCOME, NET

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015		2014	
 	(In thousands)	
Gain on sales of operating property and equipment	$	1,516		 	135		 	$	1,597		 	2,725		
Gain/(loss) on foreign currency transactions	1,363		 	11		 	1,629		 	(376	)	
Rabbi trust investment (loss)/income	(1,504	)	 	(177	)	 	(318	)	 	1,400		
Insurance proceeds	—		 	—		 	314		 	756		
Contract settlement	—		 	64		 	56		 	2,972		
Other, net	(3	)	 	963		 	1,759		 	3,729		
Total	$	1,372		 	996		 	$	5,037		 	11,206		

19

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

(P) SEGMENT REPORTING

Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. During the first quarter of 2015, our management structure changed within the supply chain business. We created the role of President of DTS for the dedicated product offering which previously was within SCS. We are now reporting our financial performance as follows: (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 transportion services provided as part of an integrated, multi-service, supply chain solution to SCS customers are reported in the SCS business segment.

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

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

20

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

The following tables set forth financial information for each of our business segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three and nine months ended September 30, 2015 and 2014 . 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.

																	
 	FMS	 	DTS	 	SCS	 	Eliminations	 	Total	
 	 (in thousands)	
For the three months ended September 30, 2015	 	 	 	 	 	 	 	 	
Revenue from external customers	$	1,054,840		 	226,921		 	387,305		 	—		 	1,669,066		
Inter-segment revenue	102,738		 	—		 	—		 	(102,738	)	 	—		
Total revenue	$	1,157,578		 	226,921		 	387,305		 	(102,738	)	 	1,669,066		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	126,433		 	13,296		 	26,573		 	(11,998	)	 	154,304		
Unallocated CSS	 	 	 	 	 	 	 	 	(10,070	)	
     Non-operating pension costs  	 	 	 	 	 	 	 	 	(4,780	)	
Restructuring and other charges, net and other items (1)	 	 	 	 	 	 	 	 	446		
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	139,900		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2)	$	740,049		 	1,175		 	4,195		 	—		 	745,419		
Unallocated CSS	 	 	 	 	 	 	 	 	12,657		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	758,076		

For the three months ended September 30, 2014	 	 	 	 	 	 	 	 	
Revenue from external customers	$	1,069,333		 	227,568		 	390,249		 	—		 	1,687,150		
Inter-segment revenue	117,589		 	—		 	—		 	(117,589	)	 	—		
Total revenue	$	1,186,922		 	227,568		 	390,249		 	(117,589	)	 	1,687,150		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	120,867		 	11,850		 	24,302		 	(9,564	)	 	147,455		
Unallocated CSS	 	 	 	 	 	 	 	 	(13,564	)	
Non-operating pension costs  	 	 	 	 	 	 	 	 	(2,455	)	
Restructuring and other charges, net and other items (1)	 	 	 	 	 	 	 	 	(1,828	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	129,608		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2), (3)	$	470,552		 	432		 	7,052		 	—		 	478,036		
Unallocated CSS	 	 	 	 	 	 	 	 	7,915		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	485,951		
  ————————————
		
(1)	See Note (M), "Other Items Impacting Comparability," for additional information.	
		
(2)	Excludes revenue earning equipment acquired under capital leases.	
		
(3)	Excludes acquisition payments of $8.1 million during the three months ended September 30, 2014.	

21

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

	
																	
 	FMS	 	DTS	 	SCS	 	Eliminations	 	Total	
 	 (in thousands)	
For the nine months ended September 30, 2015	 	 	 	 	 	 	 	 	
Revenue from external customers	$	3,080,756		 	663,094		 	1,155,300		 	—		 	4,899,150		
Inter-segment revenue	313,321		 	—		 	—		 	(313,321	)	 	—		
Total revenue	$	3,394,077		 	663,094		 	1,155,300		 	(313,321	)	 	4,899,150		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	338,603		 	34,701		 	69,961		 	(35,120	)	 	408,145		
Unallocated CSS	 	 	 	 	 	 	 	 	(32,936	)	
     Non-operating pension costs	 	 	 	 	 	 	 	 	(14,351	)	
Restructuring and other charges, net and other items (1)	 	 	 	 	 	 	 	 	(3,334	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	357,524		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2)	$	2,040,334		 	2,530		 	13,752		 	—		 	2,056,616		
Unallocated CSS	 	 	 	 	 	 	 	 	30,678		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	2,087,294		

For the nine months ended September 30, 2014	 	 	 	 	 	 	 	 	
Revenue from external customers	$	3,139,721		 	677,544		 	1,165,193		 	—		 	4,982,458		
Inter-segment revenue	363,510		 	—		 	—		 	(363,510	)	 	—		
Total revenue	$	3,503,231		 	677,544		 	1,165,193		 	(363,510	)	 	4,982,458		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	311,453		 	33,534		 	55,130		 	(29,715	)	 	370,402		
Unallocated CSS	 	 	 	 	 	 	 	 	(36,518	)	
Non-operating pension costs	 	 	 	 	 	 	 	 	(7,313	)	
Restructuring and other charges, net and other items (1)	 	 	 	 	 	 	 	 	(1,828	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	324,743		
 	 	 	 	 	 	 	 	 	 	
Segment capital expenditures paid (2), (3)	$	1,661,929		 	1,090		 	14,515		 	—		 	1,677,534		
Unallocated CSS	 	 	 	 	 	 	 	 	63,639		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	1,741,173		

		
(1)	See Note (M), "Other Items Impacting Comparability," for additional information.	
		
(2)	Excludes revenue earning equipment acquired under capital leases.	
		
(3)	Excludes acquisition payments of $9.8 million during the nine months ended September 30, 2014.	

22

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

(Q) 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 where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses will not have a material effect on our consolidated financial statements.

Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing currently available information. Although we will continue to reassess our reserves and estimates 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, for matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses will not have a material effect on our consolidated 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. We successfully overturned these federal tax assessments 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.

23

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 2014 Annual Report on Form 10-K.

Ryder System, Inc. (Ryder) is a global leader in transportation and supply chain management solutions. Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. During the first quarter of 2015, our management structure changed within the supply chain business. We created the role of President of Dedicated Transportation Solutions (DTS) for the dedicated product offering which was previously within Supply Chain Solutions (SCS). Beginning with the current year, we are reporting our financial performance based on three business segments: (1) Fleet Management Solutions (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.

The Company periodically enters into sale and leaseback transactions to lower the total cost of funding our operations and to diversify funding among different classes of investors and among different types of funding instruments. The related leasebacks were historically treated as off-balance sheet operating leases and were included in our reported leverage ratios. During the second quarter of 2015, we reviewed and evaluated the structure of the leasebacks and determined that they did not qualify for deconsolidation. The prior year amounts, which were not material, have been revised to conform to the current period presentation. Refer to Note (A), "General," in the Notes to Consolidated Condensed Financial Statements for further discussion of the revision to our historical financial statements.

At the beginning of this year, we also revised the reporting of operating revenue, a non-GAAP financial measure. In addition to excluding FMS fuel services revenue and subcontracted transportation from the calculation of operating revenue, we also now exclude DTS and SCS fuel costs. Prior year amounts have been revised to conform to the current period presentation. The revisions were not material and did not impact segment earnings.

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.

24

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

Operating results were as follows:

																	
 	Three months ended September 30,		Nine months ended September 30,		Change 2015/2014	
 	2015		2014		2015		2014		Three Months	Nine Months	
 	(In thousands, except per share amounts)		 		
Total revenue	$	1,669,066			1,687,150			$	4,899,150			4,982,458			   (1)%	   (2)%	
Operating revenue (1)	1,426,465			1,344,465			4,119,369			3,902,874			   6%	   6%	

EBT	$	139,900			129,608			$	357,524			324,743			   8%	   10%	
Comparable EBT (2)	144,234			133,891			375,209			333,884			   8%	   12%	
Earnings from continuing operations	90,811			83,895			230,054			208,742			   8%	   10%	
Comparable earnings from continuing operations (2)	93,268			86,464			238,499			212,221			   8%	   12%	
Net earnings	90,619			83,617			228,567			207,262			   8%	   10%	

Earnings per common share (EPS) — Diluted											
Continuing operations	$	1.70			1.58			$	4.31			3.92			   8%	   10%	
Comparable (2)	1.74			1.63			4.47			3.98			   7%	   12%	
Net earnings	1.69			1.57			4.28			3.89			   8%	   10%	
   ————————————
		
(1)	We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our core businesses and as a measure of sales activity. FMS fuel services revenue and DTS and SCS fuel are ancillary services that we provide our customers and are impacted by fluctuations in market fuel prices.  Therefore, these items are excluded from operating revenue as 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. We also exclude subcontracted transportation from the calculation of operating revenue as this service is also typically a pass-through to our customers and therefore fluctuations result in minimal changes to our profitability.  Refer to the section titled “Non-GAAP Financial Measures” for a reconciliation of total revenue to operating revenue.	
		
(2)	Non-GAAP financial measure. We believe comparable EBT, comparable earnings and comparable earnings per diluted common share, all from continuing operations, provide useful information to investors because they exclude non-operating pension costs, which we consider to be those impacted by financial market performance and outside the operational performance of the business, and other significant items that are unrelated to our ongoing business operations. Refer to the section titled “Non-GAAP Financial Measures” for a reconciliation of EBT, net earnings and earnings per diluted common share to the comparable measures.	

Total revenue decreased 1% to $1.67 billion and operating revenue increased 6% to $1.43 billion in the third quarter of 2015. For the nine months ended September 30, 2015 , total revenue decreased 2% to $4.90 billion and operating revenue increased 6% to $4.12 billion . Total revenue declined due to lower fuel prices largely passed through to customers, partially offset by higher operating revenue. The increase in operating revenue was driven by growth in all business segments partially offset by a 200 basis point negative impact from foreign exchange in both the three and nine months ended September 30, 2015. FMS operating revenue growth was due to a larger full service lease fleet, higher prices on lease replacement vehicles, increased North American rental demand and higher rental pricing. DTS and SCS operating revenue growth was due to new business and increased volumes. EBT increased 8% in the third quarter of 2015 to $139.9 million . For the nine months ended September 30, 2015 , EBT increased 10% to $357.5 million . EBT increased from higher full service lease and commercial rental performance in FMS and new business and increased pricing in SCS and DTS. The strong EBT performance in the three and nine months ended September 30, 2015 was partially offset by a 100 basis point negative impact of foreign exchange.

25

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

CONSOLIDATED RESULTS

Lease and Rental

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Lease and rental revenues	$	802,881		 	756,733		 	$	2,310,951		 	2,180,178		 	   6%	 	   6%	
Cost of lease and rental	550,541		 	522,202		 	1,600,271		 	1,522,394		 	   5%	 	   5%	
Gross margin	252,340		 	234,531		 	710,680		 	657,784		 	   8%	 	   8%	
Gross margin %	31	%	 	31	%	 	31	%	 	30	%	 	 	 	 	

Lease and rental revenues represent full service lease and commercial rental product offerings within our FMS business segment. Revenues increased 6% in both the third quarter and the nine months ended September 30, 2015 primarily driven by higher prices on full service lease vehicles, a 6% larger average full service lease fleet and increased commercial rental revenue. Foreign exchange negatively impacted revenue growth by 200 basis points . Commercial rental revenue grew due to increased North American demand and higher rental pricing (up 2% in the third quarter and 4% in the nine months ended September 30, 2015 ).

Cost of lease and rental represents the direct costs related to lease and rental revenues. These costs are comprised of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and labor), and other costs such as licenses, insurance and operating taxes. Cost of lease and rental excludes interest costs from vehicle financing. Cost of lease and rental increased 5% in both the third quarter and nine months ended September 30, 2015 due to higher depreciation, insurance and maintenance costs from a larger average lease fleet and a 7% larger average rental fleet. Cost of lease and rental benefited by $10.0 million in the third quarter of 2015 and by $30.0 million in the nine months ended September 30, 2015 due to changes in estimated residual values and useful lives of revenue earning equipment effective January 1, 2015 . For the third quarter and nine months ended September 30, 2015, foreign exchange also reduced cost of lease and rental by 300 basis points and 200 basis points , respectively.

Lease and rental gross margin increased 8% in the third quarter of 2015 to $252.3 million and increased 8% to $710.7 million in the nine months ended September 30, 2015 . Lease and rental gross margin as a percentage of revenue remained at 31% in the third quarter and increased to 31% for the nine months ended September 30, 2015 . The increase in gross margin dollars was due to higher per-vehicle pricing as well as benefits from improved residual values. The increase in gross margin as a percentage of revenue was due to benefits from improved residual values.

Services

																		
	Three months ended September 30,		Nine months ended September 30,		Change 2015/2014	
	2015		2014		2015		2014		Three Months		Nine Months	
	(Dollars in thousands)					
Services revenue	$	734,803			732,049			$	2,165,677			2,183,175			—%		   (1)%	
Cost of services	606,364			607,530			1,792,182			1,839,035			—%		   (3)%	
Gross margin	128,439			124,519			373,495			344,140			   3%		   9%	
Gross margin %	17	%		17	%		17	%		16	%					

Services revenue represents all the revenues associated with our DTS and SCS business segments as well as contract maintenance, contract-related maintenance and fleet support services associated with our FMS business segment. Services revenue in the third quarter of 2015 was consistent with the third quarter of 2014, and decreased 1% in the nine months ended September 30, 2015 primarily due to the effects of lower fuel prices passed through to our DTS and SCS customers and foreign exchange, partially offset by new business, increased pricing, and higher volumes in our DTS and SCS business segments. Foreign exchange negatively impacted revenue growth by 300 basis points in the third quarter and 200 basis points in the nine months ended September 30, 2015.

26

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 remained consistent in the third quarter of 2015 and decreased 3% in the nine months ended September 30, 2015 due to lower fuel costs as well as lower shutdown costs in our SCS business partially offset by increased insurance costs. The decrease in cost of services in the nine months ended September 30, 2015 also reflects prior year start-up and severe winter weather-related costs, partially offset by higher compensation-related costs. For the third quarter and nine months ended September 30, 2015, foreign exchange reduced cost of services by 300 basis points and 200 basis points , respectively.

Services gross margin increased 3% to $128.4 million in the third quarter of 2015 and increased 9% to $373.5 million in the nine months ended September 30, 2015 . Services gross margin as a percentage of revenue remained at 17% in the third quarter of 2015 and increased to 17% in the nine months ended September 30, 2015 . The increase in gross margin dollars and gross margin as a percentage of revenue reflects improved operating performance and pricing in our SCS business segment. Gross margin dollars also benefited from new business in our DTS business segment. Prior year SCS gross margin was negatively impacted by start-up and shutdown costs and severe winter weather during the first quarter.

Fuel

																		
	Three months ended September 30,		Nine months ended September 30,		Change 2015/2014	
	2015		2014		2015		2014		Three Months		Nine Months	
	(Dollars in thousands)					
Fuel services revenue	$	131,382			198,368			$	422,522			619,105			   (34)%		   (32)%	
Cost of fuel services	129,562			194,926			408,027			605,744			   (34)%		   (33)%	
Gross margin	1,820			3,442			14,495			13,361			   (47)%		   8%	
Gross margin %	1	%		2	%		3	%		2	%					

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 34% in the third quarter of 2015 to $131.4 million and decreased 32% in the nine months ended September 30, 2015 to $422.5 million 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 34% in the third quarter of 2015 and decreased 33% in the nine months ended September 30, 2015 caused by lower fuel prices.

Fuel services gross margin decreased 47% to $1.8 million in the third quarter of 2015 and increased 8% to $14.5 million in the nine months ended September 30, 2015 . Fuel services gross margin as a percentage of revenue decreased to 1% in the third quarter of 2015 and increased to 3% in the nine months ended September 30, 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 market fuel costs. Fuel services gross margin was adversely affected by these price-change dynamics in the third quarter of 2015 and favorably impacted during the earlier part of the year.

																		
	Three months ended September 30,		Nine months ended September 30,		Change 2015/2014	
	2015		2014		2015		2014		Three Months		Nine Months	
	(In thousands)					
Other operating expenses	$	31,286			28,889			$	98,864			96,541			8%		2%	

Other operating expenses include costs related to our owned and leased facilities within the FMS business segment, such as facility depreciation, rent, insurance, utilities and taxes. These facilities are utilized to provide maintenance to our lease, rental, contract maintenance, contract-related maintenance and on-demand customers. Other operating expenses also include the costs associated with used vehicle sales, including write-downs of used vehicles to fair market value. Other operating expenses increased 8% to $31.3 million in the third quarter of 2015 largely due to a $2.0 million increase in write-downs on vehicles held for sale. Other operating expenses increased 2% to $98.9 million in the nine months ended September 30, 2015 due to a $1.4 million increase in write-downs on vehicles held for sale.

27

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

	
																		
	Three months ended September 30,		Nine months ended September 30,		Change 2015/2014	
	2015		2014		2015		2014		Three Months		Nine Months	
	(Dollars in thousands)					
Selling, general and administrative expenses (SG&A)	$	203,093			202,001			$	624,566			594,133			1%		5%	
Percentage of total revenue	12	%		12	%		13	%		12	%					
Percentage of operating revenue	14	%		15	%		15	%		15	%					

SG&A expenses increased 1% in the third quarter of 2015 primarily due to strategic investments in information technology and increased pension expenses, partially offset by lower compensation-related expenses and foreign exchange. SG&A expenses increased 5% in the nine months ended September 30, 2015 primarily driven by higher compensation-related expenses, including pension, strategic investments in information technology, and higher professional fees partially offset by foreign exchange. Foreign exchange reduced the growth in SG&A expenses by 200 basis points . Pension expense, which primarily impacts SG&A expenses, increased $1.4 million in the third quarter and $7.8 million in the nine months ended September 30, 2015 due to a lower asset return assumption and the adoption of new mortality assumptions at the end of 2014 that reflected improved trends in longevity. SG&A expenses as a percent of total revenue remained at 12% and as a percentage of operating revenue decreased to 14% during the third quarter of 2015. SG&A expenses as a percent of total revenue and as a percent of operating revenue increased to 13% and remained at 15% , respectively, in the nine months ended September 30, 2015 . The decrease as a percent of operating revenue in the third quarter was a result of operating revenue growth. The increase as a percent of total revenue in the nine months ended September 30, 2015 , was a result of the decline in total revenue from fluctuating fuel prices.

																	
	Three months ended September 30,		Nine months ended September 30,		Change 2015/2014	
	2015		2014		2015		2014		Three Months		Nine Months	
	(In thousands)					
Gains on vehicle sales, net	$	29,294			33,691			$	92,110			96,874		(13)%		(5)%	

Gains on vehicle sales, net decreased 13% in the third quarter of 2015 and decreased 5% in the nine months ended September 30, 2015 due to lower sales volume, partially offset by higher average proceeds per unit. Lower sales volume in 2015 (down 12% in the third quarter of 2015 and down 17% in the first nine months of 2015 ) reflects lower average used vehicle inventories during the year and, to a lesser extent, reduced market demand in the third quarter. Global average proceeds per unit increased 6% in the third quarter of 2015 reflecting increases in average truck and tractor proceeds per unit with moderating pricing toward the end of the quarter. Global average proceeds per unit increased 12% in the nine months ended September 30, 2015 reflecting increases in average truck, tractor and trailer proceeds per unit.

	
																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Interest expense	$	38,986		 	36,681		 	$	114,863		 	107,948		 	6%	 	6%	
Effective interest rate	2.9	%	 	3.1	%	 	3.0	%	 	3.1	%	 	 	 	 	

Interest expense increased 6% in both the third quarter of 2015 and the nine months ended September 30, 2015 reflecting higher average outstanding debt. The increase in average outstanding debt reflects planned higher vehicle capital spending. The lower effective interest rate in 2015 reflects the replacement of higher interest rate debt with debt issuances at lower rates.

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Miscellaneous income, net	$	1,372		 	996		 	$	5,037		 	11,206		 	38%	 	(55)%	

Refer to Note (O), "Miscellaneous Income, Net" in the Notes to Consolidated Condensed Financial Statements for detail of the components within miscellaneous income.

28

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

	
																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Provision for income taxes	$	49,089		 	45,713		 	$	127,470		 	116,001		 	7%	 	10%	
Effective tax rate from continuing operations	35.1	%	 	35.3	%	 	35.7	%	 	35.7	%	 	 	 	 	

Our effective income tax rate from continuing operations for the third quarter of 2015 was 35.1% compared with 35.3% in the same period of the prior year. Our effective income tax rate from continuing operations for the nine months ended September 30, 2015 was 35.7% , consistent with the rate in the same period of the prior year. The effective tax rate in the nine months ended September 30, 2015 benefited from tax law changes in the states of Connecticut and Texas, and the city of New York, which decreased the provision for income taxes by $1.9 million (0.5% of pre-tax earnings). The effective tax rate in the nine months ended September 30, 2014 benefited from tax law changes in the state of New York, which decreased the provision for income taxes by $1.8 million (0.5% of pre-tax earnings).

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Loss from discontinued operations, net of tax	$	(192	)	 	(278	)	 	$	(1,487	)	 	(1,480	)	 	(31)%	 	—%	

Results of discontinued operations reflect losses related to adverse legal developments and professional and administrative fees associated with our discontinued South American operations.

29

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

OPERATING RESULTS BY BUSINESS SEGMENT

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	
Fleet Management Solutions	$	1,157,578		 	1,186,922		 	$	3,394,077		 	3,503,231		 	  (2)%	 	(3)%	
Dedicated Transportation Solutions	226,921		 	227,568		 	663,094		 	677,544		 	—	 	(2)	
Supply Chain Solutions	387,305			390,249		 	1,155,300			1,165,193		 	  (1)	 	(1)	
Eliminations	(102,738	)		(117,589	)	 	(313,321	)		(363,510	)	 	  (13)	 	(14)	
Total	$	1,669,066			1,687,150		 	$	4,899,150			4,982,458		 	  (1)%	 	(2)%	
Operating Revenue:	 	 	 	 	 	 	 	 	 	 	 	
Fleet Management Solutions	$	988,424			931,889		 	$	2,846,661			2,699,726		 	  6%	 	5%	
Dedicated Transportation Solutions	184,247		 	168,694		 	526,882		 	491,856		 	  9	 	7	
Supply Chain Solutions	318,759			304,806		 	934,253			890,402		 	  5	 	5	
Eliminations	(64,965	)		(60,924	)	 	(188,427	)		(179,110	)	 	  7	 	5	
Total	$	1,426,465			1,344,465		 	$	4,119,369			3,902,874		 	  6%	 	6%	
EBT:	 	 	 	 	 	 	 	 	 	 	 	
Fleet Management Solutions	$	126,433			120,867		 	$	338,603			311,453		 	  5%	 	9%	
Dedicated Transportation Solutions	13,296		 	11,850		 	34,701		 	33,534		 	  12	 	3	
Supply Chain Solutions	26,573			24,302		 	69,961			55,130		 	  9	 	27	
Eliminations	(11,998	)		(9,564	)	 	(35,120	)		(29,715	)	 	  25	 	18	
 	154,304			147,455		 	408,145			370,402		 	  5	 	10	
Unallocated Central Support Services	(10,070	)		(13,564	)	 	(32,936	)		(36,518	)	 	  (26)	 	(10)	
Non-operating pension costs	(4,780	)		(2,455	)	 	(14,351	)		(7,313	)	 	  95	 	96	
Restructuring and other charges, net and other items	446			(1,828	)	 	(3,334	)		(1,828	)	 	NM	 	NM	
Earnings from continuing operations before income taxes	$	139,900			129,608		 	$	357,524			324,743		 	  8%	 	10%	

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, restructuring and other charges, net and other items discussed in Note (M), "Other Items Impacting Comparability," in the Notes to Consolidated Condensed Financial Statements. CSS represents those costs incurred to support all business 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 business segment and, ultimately, to hold leadership of each business segment and each operating segment within each business segment accountable for their allocated share of CSS costs. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included within the unallocated overhead remaining within CSS are the 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.

30

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 business segments:

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Equipment Contribution:	 	 	 	 	 	 	 	 	 	 	 	
    Dedicated Transportation Solutions	$	8,527		 	6,931		 	$	24,351		 	20,533		 	  23%	 	  19%	
    Supply Chain Solutions	3,471		 	2,633		 	10,769		 	9,182		 	  32	 	  17	
Total	$	11,998		 	9,564		 	$	35,120		 	29,715		 	  25%	 	  18%	

The following table provides a reconciliation of items excluded from our segment EBT measure to their classification within our Consolidated Condensed Statements of Earnings:  

																	
 	 	 	 	Three months ended September 30,	 	Nine months ended September 30,	
Description	 	Consolidated Condensed Statements of Earnings Line Item	 	2015	 	2014	 	2015	 	2014	
 	 	 	 	(In thousands)	
Non-operating pension costs	 	SG&A	 	$	(4,780	)	 	(2,455	)	 	$	(14,351	)	 	(7,313	)	
Professional fees (1)	 	SG&A	 	(63	)	 	—		 	(3,843	)	 	—		
Pension settlement adjustment (1)	 	SG&A	 	509		 	(1,262	)	 	509		 	(1,262	)	
Acquisition transaction costs (1)	 	SG&A	 	—		 	(566	)	 	—		 	(566	)	
 	 	 	 	$	(4,334	)	 	(4,283	)	 	$	(17,685	)	 	(9,141	)	
———————————
		
(1)	See Note (M), "Other Items Impacting Comparability" for additional information.	

Fleet Management Solutions

																		
  	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
  	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Full service lease	$	609,300			575,806		 	$	1,782,106			1,694,138		 	  6%	 	5%	
Contract maintenance	48,623			46,927		 	143,559			136,859		 	  4	 	5	
Contractual revenue	657,923			622,733		 	1,925,665			1,830,997		 	  6	 	5	
Commercial rental	250,601			234,231		 	694,745			646,110		 	  7	 	8	
Contract-related maintenance	59,904			56,798		 	169,585			169,425		 	  5	 	—	
Other	19,996			18,127		 	56,666			53,194		 	  10	 	7	
 Operating revenue (1)	988,424			931,889		 	2,846,661			2,699,726		 	  6	 	5	
Fuel services revenue (2)	169,154			255,033			547,416			803,505		 	  (34)	 	(32)	
Total revenue	$	1,157,578			1,186,922		 	$	3,394,077			3,503,231		 	  (2)%	 	  (3)%	
 	 	 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	126,433			120,867		 	$	338,603			311,453		 	  5%	 	  9%	
Segment EBT as a % of total revenue	10.9	%		10.2	%	 	10.0	%		8.9	%	 	  70 bps	 	110 bps	
Segment EBT as a % of operating revenue (1)	12.8	%		13.0	%	 	11.9	%		11.5	%	 	  (20) bps	 	40 bps	
————————————
		
(1)	We use operating revenue and EBT as a percent of operating revenue, non-GAAP financial measures, to evaluate the operating performance of our FMS business segment and as a measure of sales activity. FMS fuel services revenue is an ancillary service that we provide our customers and is impacted by fluctuations in market fuel prices. Therefore, this item is excluded from operating revenue as 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 market fuel costs.	
		
(2)	Includes intercompany fuel sales from FMS to DTS and 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 September 30, 2015	 	Nine months ended September 30, 2015	
 	Total	 	Operating	 	Total	 	Operating	
Organic including price and volume	7%	 	8%	 	6%	 	7%	
Fuel	(7)	 	—	 	(7)	 	—	
Foreign exchange	(2)	 	(2)	 	(2)	 	(2)	
Total (decrease)/increase	(2)%	 	6%	 	   (3)%	 	5%	

Total revenue decreased 2% in the third quarter and 3% in the nine months ended September 30, 2015 due to lower fuel prices passed through to customers. Operating revenue (revenue excluding fuel) increased 6% in the third quarter and 5% in the nine months ended September 30, 2015 as a result of organic growth primarily in the full service lease and commercial rental product lines. Foreign exchange negatively impacted both total and operating revenue growth in the third quarter of 2015 and the nine months ended September 30, 2015 by 200 basis point s in each period.

Full service lease revenue increased 6% in the third quarter and 5% in the nine months ended September 30, 2015 due to growth in the fleet size and higher prices on replacement vehicles. Foreign exchange negatively impacted full service lease revenue growth by 200 basis points in both the third quarter and the nine months ended September 30, 2015 . The average number of full service lease vehicles increased 6% from the prior year, reflecting continued strong sales activity. We expect favorable full service lease revenue comparisons to continue through the end of the year based on strong sales activity. Commercial rental revenue increased 7% in the third quarter of 2015 and 8% in the nine months ended September 30, 2015 reflecting higher North American demand and pricing (up 2% in the third quarter of 2015 and 4% in the nine months ended September 30, 2015 ). Foreign exchange negatively impacted commercial rental revenue growth by 200 basis points in both the third quarter and the nine months ended September 30, 2015 . We expect favorable commercial rental revenue comparisons to continue throughout the year based on recent trends and growth in our customer base.

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

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Rental revenue from non-lease customers (1)	$	159,912		 	141,023		 	$	420,356		 	382,983	 	13%	 	10%	
Rental revenue from lease customers (2)	$	90,689		 	93,208		 	$	274,389		 	263,127	 	(3)%	 	4%	
Average commercial rental power fleet size — in service (3),   (4)	35,500		 	32,200		 	33,400		 	30,900	 	10%	 	8%	
Commercial rental utilization — power fleet (3)	76.4	%		78.0	%		76.0	%		76.7	%	 	(160) bps	 	(70) bps	
————————————
		
(1)	Also includes extra vehicles for 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 increased 5% in the third quarter of 2015 to $126.4 million and increased 9% in the nine months ended September 30, 2015 to $338.6 million reflecting higher full service lease results and strong commercial rental performance, partially offset by lower used vehicle sales results. Higher spending on strategic investments primarily in sales and marketing and technology, in order to accelerate growth, adversely impacted FMS EBT in the three and nine months ended September 30, 2015 . Commercial rental performance improved in the third quarter and year to date 2015 as a result of increased North American demand and higher pricing. Results benefited from $10.0 million and $30.0 million of lower depreciation in the three and nine months ended September 30, 2015 , respectively, due to residual value policy changes implemented January 1, 2015 , driven by higher sales proceeds realized on used vehicles, as well as growth in average lease and rental fleet size. Used vehicle sales results decreased due to lower sales volume, partially offset by higher, but moderating, pricing compared to the prior year.

32

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

Our global fleet of owned and leased revenue earning equipment and contract maintenance vehicles is summarized as follows (number of units rounded to the nearest hundred):

													
 	 	 	 	 	 	 	Change	
 	September 30, 2015	 	December 31, 2014	 	September 30, 2014	 	Sept. 2015/Dec. 2014	 	Sept. 2015/Sept. 2014	
End of period vehicle count	 	 	 	 	 	 	 	 	 	
By type:	 	 	 	 	 	 	 	 	 	
Trucks (1)	72,900		 	68,900		 	68,700		 	  6%	 	  6%	
Tractors (2)	67,100		 	62,400		 	61,500		 	  8	 	  9	
Trailers (3) (4)	42,500		 	41,400		 	41,300		 	  3	 	  3	
Other	1,300		 	1,400		 	1,400		 	  (7)	 	  (7)	
Total	183,800		 	174,100		 	172,900		 	  6%	 	  6%	
 	 	 	 	 	 	 	 	 	 	
By ownership:	 	 	 	 	 	 	 	 	 	
Owned	182,200		 	172,300		 	171,200		 	  6%	 	  6%	
Leased	1,600		 	1,800		 	1,700		 	  (11)	 	  (6)	
Total	183,800		 	174,100		 	172,900		 	  6%	 	  6%	
 	 	 	 	 	 	 	 	 	 	
By product line:  (4)	 	 	 	 	 	 	 	 	 	
Full service lease	130,600		 	125,500		 	123,200		 	  4%	 	  6%	
Commercial rental	43,800		 	39,900		 	40,700		 	  10	 	  8	
  Service vehicles and other	3,300		 	3,200		 	3,200		 	  3	 	  3	
Active units	177,700		 	168,600		 	167,100		 	  5	 	  6	
Held for sale	6,100		 	5,500		 	5,800		 	  11	 	  5	
Total	183,800		 	174,100		 	172,900		 	  6%	 	  6%	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	41,500		 	42,400		 	41,300		 	  (2)%	 	—%	
 	 	 	 	 	 	 	 	 	 	
Quarterly average vehicle count	 	 	 	 	 	 	 	 	 	
By product line:	 	 	 	 	 	 	 	 	 	
Full service lease	129,900		 	124,200		 	123,000		 	  5%	 	  6%	
Commercial rental	43,800		 	40,400		 	40,800		 	  8	 	  7	
Service vehicles and other	3,300		 	3,200		 	3,100		 	  3	 	  6	
Active units	177,000		 	167,800		 	166,900		 	  5	 	  6	
Held for sale	5,900		 	5,600		 	6,000		 	  5	 	  (2)	
Total	182,900		 	173,400		 	172,900		 	  5%	 	  6%	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	41,400		 	41,600		 	40,200		 	—%	 	  3%	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under on-demand maintenance (5)	8,200		 	5,600		 	6,200		 	  46%	 	  32%	
 	 	 	 	 	 	 	 	 	 	
Total vehicles under service	232,500		 	220,600		 	219,300		 	  5%	 	  6%	
 	 	 	 	 	 	 	 	 	 	
Year-to-date average vehicle count	 	 	 	 	 	 	 	 	 	
By product line:	 	 	 	 	 	 	 	 	 	
Full service lease	128,000		 	123,400		 	123,100		 	  4%	 	  4%	
Commercial rental	42,100		 	39,800		 	39,600		 	  6	 	  6	
Service vehicles and other	3,200		 	3,100		 	3,100		 	  3	 	  3	
Active units	173,300		 	166,300		 	165,800		 	  4	 	  5	
Held for sale	5,800		 	6,500		 	6,800		 	  (11)	 	  (15)	
Total	179,100		 	172,800		 	172,600		 	  4%	 	  4%	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	42,600		 	39,500		 	38,800		 	  8%	 	  10%	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under on-demand maintenance (5)	16,900		 	17,000		 	13,000		 	  (1)%	 	  30%	
———————————
		
(1)	Generally comprised of Class 1 through Class 6 type vehicles with a Gross Vehicle Weight (GVW) up to 26,000 pounds.	
		
(2)	Generally comprised of over the road on highway tractors and are primarily comprised of Classes 7 and 8 type vehicles with a GVW of over 26,000 pounds.	
		
(3)	Generally comprised of dry, flatbed and refrigerated type trailers.	
		
(4)	Includes 6,500 UK trailers ( 4,300 full service lease and 2,200 commercial rental), 6,800 UK trailers ( 4,400 full service lease and 2,400 commercial rental) and 6,900 UK trailers ( 4,300 full service lease and 2,600 commercial rental) as of September 30, 2015 , December 31, 2014 , and September 30, 2014 , 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 and 18-point average, respectively, based on monthly information.  

33

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	
 	September 30,
2015	 	December 31,
2014	 	September 30,
2014	 	Sept. 2015/
Dec. 2014	 	Sept. 2015/
Sept. 2014	
Not yet earning revenue (NYE)	2,800	 	2,300	 	1,800	 	  22%	 	  56%	
No longer earning revenue (NLE):	 	 	 	 	 	 	 	 	 	
Units held for sale	6,100	 	5,500	 	5,800	 	11	 	5	
Other NLE units	3,900	 	3,000	 	3,500	 	30	 	11	
Total	12,800	 	10,800	 	11,100	 	  19%	 	  15%	

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 increased  56% compared to September 30, 2014 , due to high levels of lease sales activity. 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 September 30, 2014 , reflecting higher used vehicle inventories and an increased number of vehicles out of service, as maintenance technicians supported higher levels of fleet growth. We expect NLE levels to decline by the end of the year in conjunction with our initiatives to reduce out-of-service vehicles.

Dedicated Transportation Solutions

	
																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating revenue (1)	$	184,247		 	168,694		 	$	526,882		 	491,856		 	9%	 	7%	
Subcontracted transportation	13,657		 	17,057		 	42,817		 	56,471		 	(20)%	 	(24)%	
Fuel costs (2)	29,017		 	41,817		 	93,395		 	129,217		 	(31)%	 	(28)%	
Total revenue	$	226,921		 	227,568		 	$	663,094		 	677,544		 	—%	 	(2)%	
 	 	 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	13,296		 	11,850		 	$	34,701		 	33,534		 	12%	 	3%	
Segment EBT as a % of total revenue	5.9	%	 	5.2	%	 	5.2	%	 	4.9	%	 	70 bps	 	30 bps	
Segment EBT as a % of operating revenue (1)	7.2	%	 	7.0	%	 	6.6	%	 	6.8	%	 	20 bps	 	(20) bps	
Memo:	 	 	 	 	 	 	 	 	 	 	 	
Average fleet	7,600		 	7,200		 	7,400		 	7,000		 	6%	 	6%	
————————————
		
(1)	We use operating revenue and EBT as a percent of operating revenue, non-GAAP financial measures, to evaluate the operating performance of our DTS business segment and as a measure of sales activity. Fuel costs and subcontracted transportation are excluded from the calculation of DTS operating revenue. DTS fuel is an ancillary service we provide our customers and is impacted by fluctuations in market fuel prices.  Therefore, this item is excluded from operating revenue as 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. We also exclude subcontracted transportation from the calculation of DTS operating revenue as this service is also typically a pass-through to our customers and therefore fluctuations result in minimal changes to our profitability.	
		
(2)	Includes intercompany fuel sales from FMS to DTS.	

34

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

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

								
 	Three months ended September 30, 2015	 	Nine months ended September 30, 2015	
 	Total	 	Operating	 	Total	 	Operating	
Organic including price and volume	7%	 	9%	 	5%	 	7%	
Subcontracted transportation	(1)	 	—	 	(2)	 	—	
Fuel costs	(6)	 	—	 	(5)	 	—	
Total increase/(decrease)	—%	 	9%	 	(2)%	 	7%	

In the third quarter of 2015 , total revenue was $226.9 million , consistent with the same period of the prior year, as increased operating revenue was offset by declining fuel prices. Operating revenue (revenue excluding subcontracted transportation and fuel costs) increased 9% due to new business as well as increased pricing. DTS EBT increased 12% in the third quarter of 2015 due to the benefits of higher operating revenue partially offset by higher volumes and unfavorable self-insurance developments, which negatively impacted EBT as a percentage of operating revenue by 80 basis points.

In the nine months ended September 30, 2015 , total revenue decreased 2% primarily reflecting lower fuel and subcontracted transportation costs passed through to customers, partially offset by operating revenue growth. Operating revenue (revenue excluding subcontracted transportation and fuel costs) in the nine months ended September 30, 2015 increased 7% due to new business, increased pricing and higher volumes. We expect favorable operating revenue comparisons to continue through the end of the year. DTS EBT increased 3% in the nine months ended September 30, 2015 due to the benefits of higher operating revenue partially offset by unfavorable self-insurance developments, which negatively impacted EBT as a percentage of operating revenue by 70 basis points.

Supply Chain Solutions

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Automotive	$	118,786		 	112,045		 	$	347,284		 	344,116		 	6%	 	1%	
Technology and healthcare	62,456		 	60,652		 	185,762		 	168,059		 	3	 	11	
CPG and Retail	109,550		 	105,463		 	322,977		 	298,956		 	4	 	8	
Industrial and other	27,967		 	26,646		 	78,230		 	79,271		 	5	 	(1)	
Operating revenue (1)	318,759			304,806		 	934,253			890,402		 	5	 	5	
Subcontracted transportation	53,960			63,731		 	171,957			200,318		 	(15)	 	(14)	
Fuel costs (2)	14,586			21,712		 	49,090			74,473		 	(33)%	 	(34)%	
Total revenue	$	387,305			390,249		 	$	1,155,300			1,165,193		 	(1)%	 	(1)%	
 	 	 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	26,573			24,302		 	$	69,961			55,130		 	9%	 	27%	
Segment EBT as a % of total revenue	6.9	%		6.2	%	 	6.1	%		4.7	%	 	70 bps	 	140 bps	
Segment EBT as a % of operating revenue (1)	8.3	%		8.0	%	 	7.5	%		6.2	%	 	30 bps	 	130 bps	
Memo:	 	 	 	 	 	 	 	 		 		
Average fleet	6,100		 	5,300		 	5,800			5,500		 	15%	 	5%	
————————————
		
(1)	We use operating revenue and EBT as a percent of operating revenue, non-GAAP financial measures, to evaluate the operating performance of our SCS business segment and as a measure of sales activity. In addition to excluding subcontracted transportation from the calculation of SCS operating revenue, we will also exclude SCS fuel costs.  SCS fuel is an ancillary service we provide our customers and is impacted by fluctuations in market fuel prices.  Therefore, this item is excluded from operating revenue as 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. We also exclude subcontracted transportation from the calculation of SCS operating revenue as this service is also typically a pass-through to our customers and therefore fluctuations result in minimal changes to our profitability.	
		
(2)	Includes intercompany fuel sales from FMS to SCS.	

35

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

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

								
 	Three months ended September 30, 2015	 	Nine months ended September 30, 2015	
 	Total	 	Operating	 	Total	 	Operating	
Organic including price and volume	6%	 	9%	 	6%	 	8%	
Subcontracted transportation	(1)	 	—	 	(1)	 	—	
Fuel costs	(2)	 	—	 	(2)	 	—	
Foreign exchange	(4)	 	(4)	 	(4)	 	(3)	
Total increase/(decrease)	(1)%	 	5%	 	   (1)%	 	5%	

Total revenue decreased 1% in both the third quarter and nine months ended September 30, 2015, which primarily reflects negative impacts from foreign exchange and lower fuel costs passed through to customers, substantially offset by operating revenue growth. Operating revenue (revenue excluding subcontracted transportation and fuel costs) increased 5% in both the third quarter and the nine months ended September 30, 2015. Operating revenue growth in the third quarter of 2015 was due to new business and higher volumes, primarily in CPG/retail and technology/healthcare, and pricing increases, partially offset by a negative impact from foreign exchange. Operating revenue growth in the nine months ended September 30, 2015 was due to new business, higher volumes and pricing increases, primarily in the CPG/retail and technology/healthcare industry groups, partially offset by a negative impact from foreign exchange. We expect operating revenue comparisons to remain favorable through the end of the year, however at a lower growth rate.

SCS EBT increased 9% in the third quarter of 2015 and increased 27% in the nine months ended September 30, 2015 due to increased operating revenue. The increases in the third quarter and nine months ended September 30, 2015 were partially offset by foreign exchange and favorable insurance developments that benefited the prior year. Favorable comparisons to the prior year for the nine months ended September 30, 2015 also reflect negative impacts from severe winter weather-related costs during the first quarter of 2014.

Central Support Services

																		
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2015/2014	
 	2015	 	2014	 	2015	 	2014	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Human resources	$	4,596		 	4,536		 	$	14,976		 	14,142		 	1%	 	6%	
Finance	13,728		 	12,878		 	39,776		 	38,255		 	7	 	4	
Corporate services and public affairs	2,694		 	2,379		 	7,803		 	7,056		 	13	 	11	
Information technology	22,104		 	19,352		 	63,228		 	59,481		 	14	 	6	
Legal and safety	5,589		 	5,915		 	18,021		 	17,938		 	(6)	 	—	
Marketing	7,049		 	7,667		 	17,177		 	16,615		 	(8)	 	3	
Other	6,559		 	9,025		 	24,665		 	25,086		 	(27)	 	(2)	
Total CSS	62,319		 	61,752		 	185,646		 	178,573		 	1	 	4	
Allocation of CSS to business segments	(52,249	)	 	(48,188	)	 	(152,710	)	 	(142,055	)	 	8	 	8	
Unallocated CSS	$	10,070		 	13,564		 	$	32,936		 	36,518		 	(26)%	 	(10)%	

Total CSS costs increased 1% in the third quarter of 2015 to $62.3 million primarily due to planned investments in information technology, partially offset by lower compensation-related expenses. Total CSS costs increased 4% in the nine months ended September 30, 2015 to $185.6 million primarily due to planned investments in information technology and higher compensation-related expenses. Unallocated CSS decreased 26% in the third quarter of 2015 to $10.1 million and 10% in the nine months ended September 30, 2015 to $32.9 million due to marketing-related costs now being allocated to the business segments.

36

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 operating, financing and investing activities from continuing operations:

	
							
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Net cash provided by (used in):	 	 	 	
Operating activities	$	1,071,336		 	981,044		
Financing activities	664,783		 	332,501		
Investing activities	(1,707,378	)	 	(1,297,281	)	
Effect of exchange rate changes on cash	(2,006	)	 	(1,210	)	
Net change in cash and cash equivalents	$	26,735		 	15,054		

A detail of the individual items contributing to the cash flow changes is included in the Consolidated Condensed Statements of Cash Flows.
 
Cash provided by operating activities from continuing operations increased to $1.07 billion in the nine months ended September 30, 2015 compared with $981.0 million in 2014 , reflecting higher earnings adjusted for non-cash items and lower pension contributions. Cash provided by financing activities increased to $664.8 million in the nine months ended September 30, 2015 compared with $332.5 million in 2014 due to increased borrowing needs to fund investing activities. Cash used in investing activities increased to $1.71 billion in the nine months ended September 30, 2015 compared with $1.30 billion in 2014 primarily due to higher net capital spending and lower proceeds generated 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.” 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.” Although total cash generated and free cash flow are non-GAAP financial measures, we consider them to be important measures of comparative operating performance. We also believe total cash generated to be an important measure of total cash flows generated from our ongoing business activities. 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 shows the sources of our free cash flow computation: 

							
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Net cash provided by operating activities from continuing operations	$	1,071,336			981,044		
Sales of revenue earning equipment	319,766			392,572		
Sales of operating property and equipment	1,203			3,091		
Collections on direct finance leases	51,166			48,920		
Other	—		 	(1,250	)	
Total cash generated	1,443,471			1,424,377		
Purchases of property and revenue earning equipment	(2,087,294	)		(1,741,173	)	
Free cash flow	$	(643,823	)		(316,796	)	

37

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

The following table provides a summary of capital expenditures:

							
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Revenue earning equipment:	 	 	 	
Full service lease	$	1,509,420		 	1,224,182		
Commercial rental	513,307		 	391,472		
 	2,022,727		 	1,615,654		
Operating property and equipment	82,874		 	121,617		
Total capital expenditures (1)	2,105,601			1,737,271		
Changes in accounts payable related to purchases of revenue earning equipment	(18,307	)	 	3,902		
Cash paid for purchases of property and revenue earning equipment	$	2,087,294			1,741,173		
   ————————————
		
(1)	Capital expenditures exclude non-cash additions of approximately $6.0 million and $3.8 million during the nine months ended September 30, 2015 and 2014 , respectively, in assets held under capital leases resulting from the extension of existing operating leases and other additions.	

Capital expenditures (accrual basis) increased 21% in the nine months ended September 30, 2015 to $2.1 billion reflecting planned higher investments in the full service lease and commercial rental fleets. We continue to expect full-year 2015 accrual basis capital expenditures from continuing operations to be $2.63 billion . We expect to fund 2015 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 September 30, 2015 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 (affirmed October 2015)	

38

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

Cash and equivalents totaled $75.4 million as of September 30, 2015 , which is available to meet our needs. As of September 30, 2015 , approximately $41.2 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 September 30, 2015 , we had the following amounts available to fund operations under the following facilities:

		
 	(In millions)	
Global revolving credit facility	$695	
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 September 30, 2015 was 215% .
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 during October 2015. We are currently in the process of renewing the program through October 2016.
In February 2013, 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.

39

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:

							
 	Nine months ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Debt balance at January 1	$	4,730,619		 	4,295,179		
Cash-related changes in debt:	 	 	 	
Net change in commercial paper borrowings	184,750		 	(164,944	)	
Proceeds from issuance of medium-term notes	998,551		 	748,676		
Proceeds from issuance of other debt instruments	331,259		 	147,057		
Retirement of medium term notes	(660,000	)	 	(250,000	)	
Other debt repaid	(135,837	)	 	(34,811	)	
 	718,723		 	445,978		
Non-cash changes in debt:	 	 	 	
Fair market value adjustment on notes subject to hedging	10,964		 	(4,924	)	
Addition of capital lease obligations	5,956		 	3,792		
Changes in foreign currency exchange rates and other non-cash items	(15,565	)	 	(7,277	)	
Total changes in debt	720,078		 	437,569		
Debt balance at September 30	$	5,450,697		 	4,732,748		

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. We revised our target mix of variable-rate debt as a percentage of total debt outstanding from 25% to 45% to 20% to 40% in October 2015. The variable-rate portion of our total debt (including notional value of swap agreements) was 28% and 25% at September 30, 2015 and December 31, 2014 , respectively.
Refer to Note (G), “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 279% and 260% as of September 30, 2015 and December 31, 2014 , 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 September 30, 2015 or December 31, 2014 . Our debt to equity ratio increased as of September 30, 2015 due to increased debt to fund planned capital expenditures and the impact of foreign exchange rates.

40

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 2015 , we expect total contributions to our pension plans to be approximately $ 35 million . During the nine months ended September 30, 2015 , we contributed $29.9 million to our pension plans. Changes in interest rates and the market value of the securities held by the plans during 2015 could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and contributions in 2015 and beyond. See Note (L), “Employee Benefit Plans,” in the Notes to Consolidated Condensed Financial Statements for additional information.

Share Repurchases and Cash Dividends

Early in the first quarter of 2015, due to the increase in leverage, we temporarily paused anti-dilutive share repurchase activity for the first nine months of 2015. We do not expect to resume anti-dilutive share repurchase activity during the remainder of 2015. See Note (J), “Share Repurchase Programs,” in the Notes to Consolidated Condensed Financial Statements for a discussion of share repurchases.

In October 2015 , our Board of Directors declared a quarterly cash dividend of $0.41 per share of common stock.

RECENT ACCOUNTING PRONOUNCEMENTS

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

41

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. Specifically, we refer to comparable earnings from continuing operations before taxes, comparable earnings from continuing operations, comparable earnings per diluted common share, operating revenue, FMS operating revenue, FMS EBT as a % of operating revenue, DTS operating revenue, DTS EBT as a % of operating revenue, SCS operating revenue, SCS EBT as a % of operating revenue, total cash generated and free cash flow. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure and an explanation why management believes that presentation of the non-GAAP financial measure provides useful information to investors within the management's discussion and analysis and in the table below. 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.

The following table provides a reconciliation of GAAP earnings before taxes (EBT), earnings, and earnings per diluted shares (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 nine months ended September 30, 2015 and 2014 included certain items we do not consider indicative of our ongoing operations and have been excluded from our comparable EBT, earnings and EPS measures. The following discussion provides 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	
 	2015	 	2014	 	2015	 	2014	 	2015	 	2014	
Three months ended September 30	(In thousands, except per share amounts)	
EBT/Earnings/EPS	$	139,900		 	129,608		 	$	90,811		 	83,895		 	$	1.70		 	1.58		
Non-operating pension costs (1)	4,780		 	2,455		 	2,727		 	1,359		 	0.05		 	0.03		
Pension settlement adjustments (2)	(509	)	 	1,262		 	(309	)	 	766		 	(0.01	)	 	0.01		
Acquisition transaction costs (2)	—		 	566		 	—		 	444		 	—		 	0.01		
Professional fees (2)	63		 	—		 	39		 	—		 	—		 	—		
Comparable	$	144,234		 	133,891		 	$	93,268		 	86,464		 	$	1.74		 	1.63		
 	 	 	 	 	 	 	 	 	 	 	 	
Nine months ended September 30,	 	 	 	 	 	 	 	 	 	 	 	
EBT/Earnings/EPS	$	357,524		 	324,743		 	$	230,054		 	208,742		 	$	4.31		 	3.92		
Non-operating pension costs (1)	14,351		 	7,313		 	8,190		 	4,045		 	0.15		 	0.07		
Pension settlement adjustments (2)	(509	)	 	1,262		 	(309	)	 	766		 	(0.01	)	 	0.01		
Professional fees (2)	3,843		 	—		 	2,424		 	—		 	0.04		 	—		
Tax law change (3)	—		 	—		 	(1,860	)	 	(1,776	)	 	(0.03	)	 	(0.03	)	
Acquisition transaction costs (2)	—		 	566		 	—		 	444		 	—		 	0.01		
Comparable	$	375,209		 	333,884		 	$	238,499		 	212,221		 	$	4.47		 	3.98		
__________________
		
(1)	Includes the amortization of net actuarial loss, interest cost and expected return on plan assets components of pension and postretirement costs, which are tied to financial market performance. We consider these costs to be outside the operational performance of the business.	
		
(2)	See Note (M), "Other Items Impacting Comparability," for additional information.	
		
(3)	In the second quarter of 2015, the states of Connecticut and Texas and the city of New York enacted changes to their tax system, which decreased the provision for income taxes by $1.9 million . On March 31, 2014, the state of New York enacted changes to its tax system, which impacted net operating loss provisions and reduced the corporate income tax rate from 7.1% to 6.5% . The impact of these changes resulted in a non-cash benefit to deferred income taxes of $1.8 million .	

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

42

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 September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
 	(In thousands)	
Total revenue	$	1,669,066		 	1,687,150		 	$	4,899,150		 	4,982,458		
Fuel	(174,984	)	 	(261,897	)	 	(565,007	)	 	(822,795	)	
Subcontracted transportation	(67,617	)	 	(80,788	)	 	(214,774	)	 	(256,789	)	
Operating revenue	$	1,426,465		 	1,344,465		 	$	4,119,369		 	3,902,874		

43

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, commercial rental revenue and sales activity;	
		
•	our expectations in our DTS and SCS business segment regarding anticipated operating revenue trends;	
		
•	our expectations of the long-term residual values of revenue earning equipment;	
		
•	the anticipated levels of NLE vehicles in inventory through the end of the year;	
		
•	our expectations of operating cash flow and capital expenditures through the end of 2015 ;	
		
•	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;	
		
•	our expectations regarding the future use and availability of funding sources;	
		
•	the anticipated impact of recent accounting pronouncements; and	
		
•	the expected resumption of our anti-dilutive share repurchase program.	

44

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 or setbacks in the recovery of the freight recession 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	 	Decreases in market demand affecting the commercial rental market and used vehicle sales as well as economic conditions in the U.K.	

				
 	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	

45

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 a younger fleet and maintenance initiatives	

				
 	Ÿ	 	Our inability to successfully implement our asset management initiatives, return out of service vehicles to our fleet and maintain our fleet at normalized levels	

				
 	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	

46

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.

47

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, 2014 . Please refer to the 2014 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the third quarter of 2015 , we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the third quarter of 2015 , 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 nine months ended September 30, 2015 , 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 September 30, 2015 :

	
													
 	Total Number
of Shares
Purchased (1)	 	Average Price
Paid per Share	 	Total Number  of
Shares
Purchased as
Part of Publicly
Announced
Programs	 	Maximum
Number of
Shares That May
Yet Be
Purchased
Under the
Anti-Dilutive
Program (2)	
July 1 through July 31, 2015	—		 	$	—		 	—		 	607,615		
August 1 through August 31, 2015	72		 	80.99		 	—		 	607,615		
September 1 through September 30, 2015	150		 	82.94		 	—		 	607,615		
Total	222		 	$	82.31		 	—		 	 	
  ————————————
		
(1)	During the three months ended September 30, 2015 , we purchased an aggregate of 222 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock delivered as payment for the exercise price of options exercised or to satisfy the option holders’ 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 2013, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our various employee stock, stock option and employee stock purchase plans. Under the December 2013 program, management is authorized to repurchase shares of common stock in an amount not to exceed the number of shares issued to employees under the Company’s various employee stock, stock option and employee stock purchase plans from December 1, 2013 through December 10, 2015. The December 2013 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 2013 program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. For the three months ended September 30, 2015 , we did not repurchase any shares under this program.	

48

ITEM 6. EXHIBITS

	
				
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.	

49

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: October 22, 2015	By:	/s/ Art A. Garcia	
 	 	Art A. Garcia	
 	 	Executive Vice President and Chief Financial Officer	
 	 	(Principal Financial Officer)	
 	 	 	
Date: October 22, 2015	By:	/s/ Scott R. Allen	
 	 	Scott R. Allen	
 	 	Vice President and Controller	
 	 	(Principal Accounting Officer)	

50

EXHIBIT 12.1

									
Ryder System, Inc. and Subsidiaries	
Ratio of Earnings to Fixed Charges	
Continuing Operations	
(Dollars in thousands)	
 	 	 	 	 	 	For the Nine Months Ended September 30, 2015	 	

EARNINGS:	 	 	 	 	 	 	 	
Earnings before income taxes	 	 	 	 	 	357,524		 	
Fixed charges	 	 	 	 	 	147,682		 	
Add: Amortization of capitalized interest	 	 	 	 	 	424		 	
Less: Interest capitalized	 	 	 	 	 	—		 	
Earnings available for fixed charges (A)	 	 	 	 	 	505,630		 	
 	 	 	 	 	 	 	 	
FIXED CHARGES:	 	 	 	 	 	 	 	
Interest and other financial charges	 	 	 	 	 	115,131		 	
Portion of rents representing interest expense	 	 	 	 	 	32,551		 	
Total fixed charges (B)	 	 	 	 	 	147,682		 	
 	 	 	 	 	 	 	 	
RATIO OF EARNINGS TO FIXED CHARGES (A) / (B)	 	 	 	 	 	3.42x	 	

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:	October 22, 2015	/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:	October 22, 2015	/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 September 30, 2015 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	 	
October 22, 2015	 	

	
		
/s/ Art A. Garcia	 	
Art A. Garcia
Executive Vice President and Chief Financial Officer	 	
October 22, 2015