UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

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)

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

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

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

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

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

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

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

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

The number of shares of Ryder System, Inc. Common Stock outstanding at March 31, 2023, was 46,492,233.

RYDER SYSTEM, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

 

		Page No.
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Statements of Earnings	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Shareholders' Equity	5
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	44
ITEM 4.	Controls and Procedures	44
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	45
ITEM 1A.	Risk Factors	45
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
ITEM 6.	Exhibits	46
SIGNATURE		47

 

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited)

	Three months ended March 31,
(In millions, except per share amounts)	2023		2022
Lease & related maintenance and rental revenue	$	979	$	1,025
Services revenue	1,821		1,670
Fuel services revenue	152		159
Total revenue	2,952		2,854
Cost of lease & related maintenance and rental	674		699
Cost of services	1,607		1,450
Cost of fuel services	149		155
Selling, general and administrative expenses	363		342
Non-operating pension costs, net	10		3
Used vehicle sales, net	(72)		(113)
Interest expense	65		52
Miscellaneous income, net	(20)		—
Restructuring and other items, net	(25)		14
	2,751		2,602
Earnings from continuing operations before income taxes	201		252
Provision for income taxes	61		76
Earnings from continuing operations	140		176
Loss from discontinued operations, net of tax	(1)		—
Net earnings	$	139	$	176
Earnings (loss) per common share — Basic
Continuing operations	$	3.00	$	3.42
Discontinued operations	(0.01)		—
Net earnings	$	2.99	$	3.42
Earnings (loss) per common share — Diluted
Continuing operations	$	2.95	$	3.35
Discontinued operations	(0.01)		—
Net earnings	$	2.94	$	3.35

See accompanying Notes to Condensed Consolidated Financial Statements.

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

1

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three months ended March 31,
(In millions)	2023		2022
Net earnings	$	139	$	176
Other comprehensive income:
Changes in cumulative translation adjustment and unrealized gains from cash flow hedges	9		2
Amortization of pension and postretirement items	7		6
Income tax expense related to amortization of pension and postretirement items	(2)		(1)
Amortization of pension and postretirement items, net of taxes	5		5
Other comprehensive income, net of taxes	14		7
Comprehensive income	$	153	$	183

See accompanying Notes to Condensed Consolidated Financial Statements.

2

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited) 

(In millions, except share amounts)	March 31, 2023		December 31, 2022
Assets:
Current assets:
Cash and cash equivalents	$	253	$	267
Receivables, net	1,682		1,610
Inventories	74		78
Prepaid expenses and other current assets	251		245
Total current assets	2,260		2,200
Revenue earning equipment, net	8,253		8,190
Operating property and equipment, net of accumulated depreciation of $1,393 and $1,377	1,093		1,148
Goodwill	861		861
Intangible assets, net	288		295
Operating lease right-of-use assets	673		715
Sales-type leases and other assets	1,115		986
Total assets	$	14,543	$	14,395
Liabilities and shareholders’ equity:
Current liabilities:
Short-term debt and current portion of long-term debt	$	1,674	$	1,349
Accounts payable	980		767
Accrued expenses and other current liabilities	1,101		1,200
Total current liabilities	3,755		3,316
Long-term debt	4,666		5,003
Other non-current liabilities	1,507		1,568
Deferred income taxes	1,610		1,571
Total liabilities	11,538		11,458
Commitments and contingencies (Note 15)
Shareholders’ equity:
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding, March 31, 2023 and December 31, 2022	—		—
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding, March 31, 2023 — 46,492,233 and December 31, 2022 — 46,286,664	23		23
Additional paid-in capital	1,168		1,192
Retained earnings	2,596		2,518
Accumulated other comprehensive loss	(782)		(796)
Total shareholders’ equity	3,005		2,937
Total liabilities and shareholders’ equity	$	14,543	$	14,395

See accompanying Notes to Condensed Consolidated Financial Statements.

3

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three months ended March 31,
(In millions)	2023		2022
Cash flows from operating activities from continuing operations:
Net earnings	$	139	$	176
Less: Loss from discontinued operations, net of tax	(1)		—
Earnings from continuing operations	140		176
Depreciation expense	445		430
Used vehicle sales, net	(72)		(113)
Amortization expense and other non-cash charges, net	28		31
Non-cash lease expense	59		45
Non-operating pension costs, net and share-based compensation expense	20		14
Deferred income tax expense	42		58
Collections on sales-type leases	30		34
Changes in operating assets and liabilities:
Receivables	(7)		(64)
Inventories	4		(6)
Prepaid expenses and other assets	(26)		(15)
Accounts payable	45		13
Accrued expenses and other liabilities	(230)		(137)
Net cash provided by operating activities from continuing operations	478		466
Cash flows from investing activities from continuing operations:
Purchases of property and revenue earning equipment	(641)		(584)
Sales of revenue earning equipment	216		223
Sales of operating property and equipment	48		3
Acquisitions, net of cash acquired	—		(425)
Net cash used in investing activities from continuing operations	(377)		(783)
Cash flows from financing activities from continuing operations:
Net borrowings (repayments) of commercial paper and other	(216)		63
Debt proceeds	664		650
Debt repayments	(471)		(493)
Dividends on common stock	(35)		(34)
Common stock issued	(23)		(12)
Common stock repurchased	(45)		(300)
Other financing activities	—		(4)
Net cash used in financing activities from continuing operations	(126)		(130)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	11		(4)
Decrease in cash, cash equivalents, and restricted cash	(14)		(451)
Cash, cash equivalents, and restricted cash at beginning of period	267		673
Cash, cash equivalents, and restricted cash at end of period	$	253	$	222

See accompanying Notes to Condensed Consolidated Financial Statements.

4

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)

	Three months ended March 31, 2023
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In millions, except share amounts in thousands)	Amount		Shares	Par								Total
Balance as of January 1, 2023	$	—	46,287	$	23	$	1,192	$	2,518	$	(796)	$	2,937
Comprehensive income	—		—	—		—		139		14		153
Common stock dividends declared —$0.62 per share	—		—	—		—		(30)		—		(30)
Common stock issued under employee stock award and stock purchase plans and other (1)	—		670	—		(23)		2		—		(21)
Common stock repurchases	—		(465)	—		(12)		(33)		—		(45)
Share-based compensation	—		—	—		11		—		—		11
Balance as of March 31, 2023	$	—	46,492	$	23	$	1,168	$	2,596	$	(782)	$	3,005

	Three months ended March 31, 2022
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In millions, except share amounts in thousands)	Amount		Shares	Par								Total
Balance as of January 1, 2022	$	—	53,789	$	27	$	1,194	$	2,266	$	(689)	$	2,798
Comprehensive income	—		—	—		—		176		7		183
Common stock dividends declared —$0.58 per share	—		—	—		—		(31)		—		(31)
Common stock issued under employee stock award and stock purchase plans and other (1)	—		400	—		(12)		—		—		(12)
Common stock repurchases	—		(3,052)	(1)		(59)		(240)		—		(300)
Share-based compensation	—		—	—		11		—		—		11
Balance as of March 31, 2022	$	—	51,137	$	26	$	1,134	$	2,171	$	(682)	$	2,649

————————————

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

See accompanying Notes to Condensed Consolidated Financial Statements.

5

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. GENERAL

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder has a controlling voting interest (subsidiaries) and variable interest entities (VIE) where Ryder is determined to be the primary beneficiary in accordance with generally accepted accounting principles in the United States (GAAP). Ryder is deemed to be the primary beneficiary if we have the power to direct the activities that most significantly impact the entity’s economic performance and we share in the significant risks and rewards of the entity. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting policies described in our 2022 Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements and notes thereto. The year-end condensed balance sheet data was derived from our audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair statement have been included and the disclosures herein are adequate. The operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. Certain prior period amounts have been reclassified to conform with the current period presentation. We included "Other operating expenses" together with "Selling, general and administrative expenses" in the unaudited Condensed Consolidated Statement of Earnings. In the three months ended March 31, 2022, we previously reported certain costs in "Cost of services" that should have been included in the "Cost of fuel services" within the unaudited Condensed Consolidated Statement of Earnings. These costs were not material to any financial statement line item and we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial statements. We added the "Operating lease right-of-use assets" financial statement line to the unaudited Condensed Consolidated Balance Sheets. These assets were previously included in "Sales-type leases and other assets" in the unaudited Condensed Consolidated Balance Sheets.

We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing and leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, last mile, and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, and administrative support. Dedicated transportation services provided as part of an operationally integrated, multi-service, supply chain solution to SCS customers are primarily reported in the SCS business segment. We substantially completed the exit from our FMS Europe (primarily United Kingdom (U.K.)) business as of December 31, 2022, and we expect to complete the shutdown of operations as well as the sale of the remaining vehicles and properties by mid-2023.

6

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2. SEGMENT REPORTING

Our primary measurement of segment financial performance, defined as segment "Earnings from continuing operations before income taxes" (EBT), includes an allocation of costs from Central Support Services (CSS) and excludes Non-operating pension costs, net, intangible amortization expense, and certain other items as discussed in Note 14, "Other Items Impacting Comparability." The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation. In the first quarter of 2023, we revised our primary measure of segment financial performance to exclude intangible amortization expense. We revised the presentation of the prior period to conform to the current period presentation. This change did not have a material impact to segment results. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented.

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

	Three months ended March 31,
(In millions)	2023		2022
Revenue:
Fleet Management Solutions:
ChoiceLease	$	776	$	764
Commercial rental	304		306
SelectCare and other	182		148
FMS Europe	—		64
Fuel services revenue	241		247
Fleet Management Solutions	1,503		1,529
Supply Chain Solutions	1,201		1,089
Dedicated Transportation Solutions	454		425
Eliminations (1)	(206)		(189)
Total revenue	$	2,952	$	2,854
Earnings from continuing operations before income taxes:
Fleet Management Solutions	$	182	$	249
Supply Chain Solutions	17		43
Dedicated Transportation Solutions	29		20
Eliminations	(25)		(26)
	203		286
Unallocated Central Support Services	(15)		(16)
Intangible amortization expense (2)	(9)		(10)
Non-operating pension costs, net (3)	(10)		(3)
Other items impacting comparability, net (4)	32		(5)
Earnings from continuing operations before income taxes	$	201	$	252

————————————

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

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

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

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

During the first quarter of 2023, we identified impairment indicators primarily associated with specialized sortation and conveyor equipment used in the warehouse operations of a specific SCS customer. The impairment indicators were triggered by the credit deterioration and eventual bankruptcy of this customer in April 2023. These events resulted in a significant decline in the current forecasted operating cash flows associated with the equipment. We performed an asset impairment test under the income-based approach using a discounted cash flow method of valuation and determined we had an impairment of $30 million.

7

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Events and/or changes in circumstances may occur in the near term resulting in a change in management’s estimates of undiscounted cash flows. Any such events or changes could ultimately impact the amount of the impairment loss. In the fourth quarter of 2022, we were notified by this customer of their intent to early terminate operations at one of their distribution centers and we recorded an impairment charge of $20 million in the fourth quarter of 2022.

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

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

3. REVENUE

Disaggregation of Revenue

The following tables disaggregate our revenue recognized by primary geographical market by our reportable business segments and by industry for SCS. Refer to Note 2, "Segment Reporting," for the disaggregation of our revenue by major products/service lines.

Primary Geographical Markets

	Three months ended March 31, 2023
(In millions)	FMS		SCS		DTS		Eliminations		Total
United States	$	1,426	$	1,069	$	454	$	(196)	$	2,753
Canada	77		62		—		(10)		129
Mexico	—		70		—		—		70
Total revenue	$	1,503	$	1,201	$	454	$	(206)	$	2,952

	Three months ended March 31, 2022
(In millions)	FMS		SCS		DTS		Eliminations		Total
United States	$	1,388	$	971	$	425	$	(179)	$	2,605
Canada	77		60		—		(10)		127
Europe	64		—		—		—		64
Mexico	—		58		—		—		58
Total revenue	$	1,529	$	1,089	$	425	$	(189)	$	2,854

8

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

Industry

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

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

Lease & Related Maintenance and Rental Revenue

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

Deferred Revenue

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

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

Contracted Not Recognized Revenue

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized (contracted not recognized revenue). Contracted not recognized revenue was $2.4 billion as of March 31, 2023, and primarily includes deferred revenue and amounts for ChoiceLease maintenance revenue that will be recognized as revenue in future periods as we provide maintenance services to our customers.

4. RECEIVABLES, NET

(In millions)	March 31, 2023		December 31, 2022
Trade	$	1,468	$	1,476
Sales-type lease	137		120
Other, primarily warranty and insurance	114		55
	1,719		1,651
Allowance for credit losses and other	(37)		(41)
Receivables, net	$	1,682	$	1,610

9

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

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

	Three months ended March 31,
(In millions)	2023		2022
Balance as of beginning of period	$	41	$	31
Changes to provisions for credit losses	8		4
Write-offs and other	(12)		(7)
Balance as of end of period	$	37	$	28

5. REVENUE EARNING EQUIPMENT, NET

	Estimated Useful Lives (In Years)	March 31, 2023						December 31, 2022
(Dollars in millions)		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net
Held for use:
Trucks	3 — 7	$	5,303	$	(2,133)	$	3,170	$	5,282	$	(2,114)	$	3,168
Tractors	4 — 7.5	7,142		(3,096)		4,046		7,153		(3,153)		4,000
Trailers and other	9.5 — 12	1,615		(693)		922		1,610		(690)		920
Held for sale (1)		463		(348)		115		388		(286)		102
Total		$	14,523	$	(6,270)	$	8,253	$	14,433	$	(6,243)	$	8,190

————————————

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

Residual Value Estimate Changes

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue earning equipment for the purposes of recording depreciation expense. Reductions in estimated residual values or useful lives will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is based on vehicle class, (i.e., generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors. We have disciplines related to the management and maintenance of our vehicles designed to manage the risk associated with the residual values of our revenue earning equipment. For the three months ended March 31, 2023 and 2022, we did not adjust the estimated residual values and useful lives of existing revenue earning equipment.

Used Vehicle Sales and Valuation Adjustments

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

10

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

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

	Three months ended March 31,
(In millions)	2023		2022
Gains on vehicle sales, net (1)	$	(75)	$	(115)
Losses from valuation adjustments	3		2
Used vehicle sales, net	$	(72)	$	(113)

————————————

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

6. ACCRUED EXPENSES AND OTHER LIABILITIES

	March 31, 2023						December 31, 2022
(In millions)	Accrued Expenses		Non-Current Liabilities		Total		Accrued Expenses		Non-Current Liabilities		Total
Salaries and wages	$	131	$	—	$	131	$	259	$	—	$	259
Deferred compensation	5		86		91		5		80		85
Pension and other employee benefits	14		181		195		29		179		208
Insurance obligations, primarily self-insured	179		296		475		179		309		488
Operating taxes	137		—		137		132		—		132
Interest	41		—		41		41		—		41
Deposits, mainly from customers	81		—		81		84		—		84
Operating lease liabilities	187		506		693		191		541		732
Deferred revenue (1)	184		349		533		178		366		544
Other	142		89		231		102		93		195
Total	$	1,101	$	1,507	$	2,608	$	1,200	$	1,568	$	2,768

 ————————————

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

11

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

7. LEASES

The components of revenue from leases were as follows:

	Three months ended March 31,
(In millions)	2023		2022
Operating leases
Lease income related to ChoiceLease	$	360	$	382
Lease income related to commercial rental (1)	$	288	$	298
Sales-type leases
Interest income related to net investment in leases	$	15	$	11
Variable lease income excluding commercial rental (1)	$	72	$	74

————————————

(1)Lease income related to commercial rental includes both fixed and variable lease income. Variable lease income is approximately 15% to 20% of total commercial rental income.

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

(In millions)	March 31, 2023		December 31, 2022
Net investment in the lease — lease payment receivable	$	738	$	598
Net investment in the lease — unguaranteed residual value in assets	55		43
	793		641
Estimated loss allowance	(5)		(6)
Total	$	788	$	635

12

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

8. DEBT

	Weighted Average Interest Rate
(Dollars in millions)	March 31, 2023	Maturities	March 31, 2023		December 31, 2022
Debt:
U.S. commercial paper	5.02%	2026	$	457	$	672
Canadian commercial paper	—	2026	—		—
Trade receivables financing program	5.60%	2023	215		50
Global revolving credit facility	—	2026	—		—
Unsecured U.S. obligations	4.16%	2027	375		375
Unsecured medium-term note issued February 2018	—	2023	—		450
Unsecured medium-term note issued June 2018	3.75%	2023	450		450
Unsecured medium-term note issued October 2018	3.88%	2023	300		300
Unsecured medium-term note issued February 2019	3.65%	2024	600		600
Unsecured medium-term note issued August 2019	2.50%	2024	550		550
Unsecured medium-term note issued April 2020	4.63%	2025	400		400
Unsecured medium-term note issued May 2020	3.35%	2025	400		400
Unsecured medium-term note issued December 1995	6.95%	2025	150		150
Unsecured medium-term note issued November 2021 (1)	5.50%	2026	274		270
Unsecured medium-term note issued November 2019	2.90%	2026	400		400
Unsecured medium-term note issued February 2022 (1)	4.16%	2027	436		434
Unsecured medium-term note issued May 2022	4.30%	2027	300		300
Unsecured medium-term note issued February 2023	5.65%	2028	500		—
Unsecured foreign obligations	2.88%	2024	50		50
Asset-backed U.S. obligations (2)	3.06%	2023-2029	460		477
Finance lease obligations and other		2023-2041	43		42
			6,361		6,370
Debt issuance costs and original issue discounts			(21)		(18)
Total debt (3)			6,340		6,352
Short-term debt and current portion of long-term debt			(1,674)		(1,349)
Long-term debt			$	4,666	$	5,003

 ————————————

(1)Includes impact from the fair market values of hedging instruments on our notes, which was $39 million as of March 31, 2023, and $47 million as of December 31, 2022, and was included in "Other non-current liabilities" within the unaudited Condensed Consolidated Balance Sheets. The notional amount of interest rate swaps designated as fair value hedges was $500 million and $450 million as of March 31, 2023 and December 31, 2022, respectively.

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

(3)The unsecured medium-term notes bear semi-annual interest.

The fair value of total debt (excluding finance lease and asset-backed U.S. obligations) was approximately $5.9 billion and $5.7 billion as of March 31, 2023 and December 31, 2022, respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and our other debt were classified within Level 2 of the fair value hierarchy.

As of March 31, 2023, there was $943 million available under the global revolving credit facility. In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or equal to 300%, as defined in the credit facility agreement. As of March 31, 2023, the ratio was 156%.

On April 25, 2023, certain terms of our global revolving credit facility were amended. Pursuant to the amendment, among other items, (i) the definition of consolidated net worth was revised to exclude impacts from our exit of the FMS U.K. business,

13

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

(ii) LIBOR was replaced as an available benchmark interest rate with Term SOFR, and (iii) the maximum absolute dollar amounts for our trade receivables financing program and asset-backed financings were removed and only percentage-based maximum amounts remain.

We had letters of credit and surety bonds outstanding of $515 million and $513 million as of March 31, 2023 and December 31, 2022, respectively, which primarily guarantee the payment of insurance claims.

As of March 31, 2023, the available proceeds under the trade receivables financing program were $1 million. As of March 31, 2023, utilization of the credit facility included borrowing of $215 million and letters of credit outstanding of $84 million. On April 24, 2023, we extended the trade receivables financing program for an additional year to April 2024.

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

Three months ended March 31, 2023
(In millions)	Debt Proceeds			Debt Repayments
Medium-term notes (1)	$	499	Medium-term notes	$	450
U.S. and foreign term loans, finance lease obligations and other	165		U.S. and foreign term loans, finance lease obligations and other	21
Total debt proceeds	$	664	Total debt repaid	$	471

_______________

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

Debt proceeds were used to repay maturing debt and for general corporate purposes. If the unsecured medium-term notes are downgraded below investment grade following, or as a result of, a change in control, the note holders can require us to repurchase all or a portion of the notes at a purchase price equal to 101% of principal value plus accrued and unpaid interest.

9. SHARE REPURCHASE PROGRAMS

We maintain two share repurchase programs. The first program authorizes management to repurchase up to 2.5 million shares of common stock, issued to employees under our employee stock plans since September 1, 2021 (the "2021 Anti-Dilutive Program"). The 2021 Anti-Dilutive Program is designed to mitigate the dilutive impact of shares issued under our employee stock plans. The 2021 Anti-Dilutive Program commenced October 14, 2021 and expires October 14, 2023. In February 2023, our board of directors authorized a new discretionary share repurchase program to grant management discretion to repurchase up to 2 million shares of common stock over a period of two years (the "2023 Discretionary Program"). Share repurchases under both programs can be made from time to time using our working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of acquisitions and stock price.

During the three months ended March 31, 2023, we repurchased 0.5 million shares for $45 million under the 2021 Anti-Dilutive Program and did not repurchase any shares under the 2023 Discretionary Program. During the three months ended March 31, 2022, we did not repurchase any shares under the 2021 Anti-Dilutive Program.

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

10. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

14

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

	Three months ended March 31,
(In millions)	2023		2022
Cumulative translation adjustments	$	(224)	$	(159)
Net actuarial loss and prior service cost	(561)		(524)
Unrealized gain from cash flow hedges	3		1
Accumulated other comprehensive loss	$	(782)	$	(682)

11. EARNINGS PER SHARE

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

	Three months ended March 31,
(Dollars in millions, except per share amounts; share amounts in thousands)	2023		2022
Earnings per share — Basic: (1)
Earnings from continuing operations	$	140	$	176
Less: Distributed and undistributed earnings allocated to unvested stock	(1)		(1)
Earnings from continuing operations available to common shareholders	$	139	$	175
Weighted average common shares outstanding	46,377		51,097
Earnings from continuing operations per common share — Basic	$	3.00	$	3.42
Earnings per share — Diluted: (1)
Earnings from continuing operations	$	140	$	176
Less: Distributed and undistributed earnings allocated to unvested stock	—		—
Earnings from continuing operations available to common shareholders — Diluted	$	140	$	176
Weighted average common shares outstanding — Basic	46,377		51,097
Effect of dilutive equity awards	1,097		1,379
Weighted average common shares outstanding — Diluted	47,474		52,476
Earnings from continuing operations per common share — Diluted	$	2.95	$	3.35
Anti-dilutive equity awards not included in diluted EPS	627		461

_______________

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

15

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

12. SHARE-BASED COMPENSATION PLANS

We generally grant share-based awards in the first quarter of each year during our annual equity award process. The vesting conditions for the awards granted were consistent with prior year. The following table is a summary of the awards granted in the first quarter of 2023:

(Shares in millions)	Shares Granted	Weighted-Average Fair Market Value Per Share
Time-vested restricted stock rights	0.2	$	96.38
Performance-based restricted stock rights	0.1	101.25
Total	0.3	$	98.16

13. EMPLOYEE BENEFIT PLANS

Components of net pension expense were as follows:

	Three months ended March 31,
(In millions)	2023		2022
Company-administered plans:
Interest cost	$	22	$	16
Expected return on plan assets	(19)		(19)
Amortization of net actuarial loss and prior service cost	7		6
Net pension expense	$	10	$	3
Company-administered plans:
U.S.	$	8	$	3
Non-U.S.	2		—
Net pension expense	$	10	$	3

Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. We do not expect to contribute to our pension plans for the year 2023. We also maintain other postretirement benefit plans that are not reflected in the table above as the amount of postretirement benefit expense for such plans was not material for any period presented.

16

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

14. OTHER ITEMS IMPACTING COMPARABILITY

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

	Three months ended March 31,
(In millions)	2023		2022
FMS Europe results (1)	$	4	$	—
Gains on sale of U.K. revenue earning equipment (2)	(2)		(8)
Gains on sale of U.K. properties (3)	(5)		(1)
Commercial claims proceeds, net of fees (1)	(31)		7
Severance and other, net (1)	3		3
FMS U.K. exit	(31)		1
Other, net (1)	(1)		4
Other items impacting comparability	$	(32)	$	5

________________________

(1)Included within "Restructuring and other items, net" in our Condensed Consolidated Statements of Earnings.

(2)Included within "Used vehicle sales, net" in our Condensed Consolidated Statements of Earnings.

(3)Included within "Miscellaneous income, net" in our Condensed Consolidated Statements of Earnings.

15.  CONTINGENCIES AND OTHER MATTERS

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

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

Securities Litigation Relating to Residual Value Estimates

On May 20, 2020, a putative class action on behalf of purchasers of our securities who purchased or otherwise acquired their securities between July 23, 2015 and February 13, 2020, inclusive (Class Period), was commenced against Ryder and certain of our current and former officers in the U.S. District Court for the Southern District of Florida (the "Securities Class Action"). The complaint alleges, among other things, that the defendants misrepresented Ryder's depreciation policy and residual value estimates for its vehicles during the Class Period in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seeks to recover, among other things, unspecified compensatory damages and attorneys' fees and costs. On August 3, 2020, the State of Alaska, Alaska Permanent Fund, the City of Fort Lauderdale General Employees’ Retirement System, and the City of Plantation Police Officers Pension Fund were appointed lead plaintiffs. On October 5, 2020, the lead plaintiffs filed an amended complaint. On December 4, 2020, Ryder and the other named defendants in the case filed a Motion to Dismiss the amended complaint. On May 12, 2022, the court denied the defendants' motion to dismiss. The court entered a case management schedule on June 27, 2022, which, among other things, provides that discovery shall be completed by October 2023 and the commencement of trial in June 2024. On April 18, 2023, the parties reached an agreement in principle to resolve this action, subject to the execution of definitive settlement documentation and court approval. We expect that the settlement amount will be covered by insurance, and accordingly is not material to our financial position or results of operations.

As previously disclosed, between June 2020 and February 2, 2021, five shareholder derivative complaints were filed purportedly on behalf of Ryder against us as nominal defendant and certain of our current and former officers and our current directors. The complaints are generally based on the allegations set forth in the Securities Class Action complaint and allege

17

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

breach of fiduciary duties, unjust enrichment, and waste of corporate assets. The plaintiffs, on our behalf, are seeking an award of monetary damages and restitution to us, improvements in our corporate governance and internal procedures, and legal fees. Three of these derivative complaints were filed in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, which were then consolidated into a single action (the "State Action"). Two of the complaints were filed in U.S. District Court for the Southern District of Florida (the "Federal Actions", and together with the State Action, the "Derivative Cases"). All of the Derivative Cases were stayed (stopped) pending the resolution of the motion to dismiss the Securities Class Action described in the paragraph above. On July 18, 2022, the Federal Actions were further stayed pending the final resolution of the State Action. On July 26, 2022, the State Action was further stayed until the conclusion of summary judgment proceedings in the Securities Class Action (except that certain discovery would be permitted). We continue to believe that the claims asserted in the complaints are without merit and intend to defend against them vigorously.

16. SUPPLEMENTAL CASH FLOW INFORMATION

	Three months ended March 31,
(In millions)	2023		2022
Interest paid	$	63	$	48
Income taxes paid	$	17	$	9
Cash paid for operating lease liabilities	$	55	$	42
Right-of-use assets obtained in exchange for lease obligations:
Finance leases	$	5	$	4
Operating leases	$	14	$	49
Capital expenditures acquired but not yet paid	$	361	$	257

18

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

AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included under Item 1, as well as our audited Consolidated Financial Statements and notes thereto and related MD&A included in the 2022 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform with the current period presentation. We included "Other operating expenses" together with "Selling, general and administrative expenses" in the unaudited Condensed Consolidated Statement of Earnings. In the three months ended March 31, 2022, we previously reported certain costs in "Cost of services" that should have been included in the "Cost of fuel services" within the unaudited Condensed Consolidated Statement of Earnings. These costs were not material to any financial statement line item and we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial statements.

OVERVIEW

General

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

Business Trends

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

In our Fleet Management Solutions (FMS) North America business, used vehicle pricing declined from the historical highs of the prior year and rental utilization continued to normalize. We anticipate that market conditions for used vehicle sales and rental will continue to weaken in 2023. ChoiceLease vehicle fleet grew during the first quarter and our lease pricing initiatives are delivering improved portfolio returns. We expect to realize incremental earnings benefits as our remaining portfolio is renewed at higher returns.

In our SCS business, strong outsourcing trends in warehousing and distribution continue. Higher pricing and volumes drove strong revenue growth in SCS and DTS. SCS revenue growth also benefited from new contract wins in the prior year. Pricing adjustments and cost recovery initiatives benefited earnings in both segments, with profitability in DTS at the high end of our target range. SCS earnings in the first quarter were adversely affected by a $30 million asset impairment charge related to a customer bankruptcy. We are also seeing weaker trends in the omnichannel retail vertical. In the first quarter of 2023, DTS contract sales activity slowed, consistent with a softer freight environment. We expect the moderation in DTS contract sales activity to continue for the remainder of the year.

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

SELECTED OPERATING PERFORMANCE ITEMS

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

•Diluted EPS from continuing operations of $2.95 in the first quarter of 2023 versus $3.35 in prior year

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

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

19

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

AND RESULTS OF OPERATIONS — (Continued)

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

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

EBT and comparable EBT (a non-GAAP measure) decreased in the first quarter of 2023 primarily due to lower gains on used vehicles sold in North America and lower commercial rental results in FMS and a SCS asset impairment partially offset by higher earnings in DTS.

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

	Three months ended March 31,				Change 2023/2022
(Dollars in millions, except per share)	2023		2022		Three Months
Total revenue	$	2,952	$	2,854	3%
Operating revenue (1)	2,346		2,216		6%
Earnings from continuing operations before income taxes (EBT)	$	201	$	252	(20)%
Comparable EBT (1)	179		260		(31)%
Earnings from continuing operations	140		176		(20)%
Comparable earnings from continuing operations (1)	133		188		(29)%
Net earnings	139		176		(21)%
Comparable EBITDA (1)	628		647		(3)%
Earnings per common share (EPS) — Diluted
Continuing operations	$	2.95	$	3.35	(12)%
Comparable (1)	2.81		3.59		(22)%
Net earnings	2.94		3.35		(12)%

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

CONSOLIDATED RESULTS

Lease & Related Maintenance and Rental

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

Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenue decreased 4% in the first quarter of 2023, reflecting a 4% negative impact from the exit of the FMS U.K business.

Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and rental revenue and are comprised of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and labor), and other costs such as licenses, insurance and operating taxes. Cost of lease & related maintenance and rental excludes interest costs from vehicle financing, which are reported within "Interest expense" in our Condensed Consolidated Statements of Earnings. Cost of lease & related maintenance and rental decreased 4% in the first quarter of 2023, primarily from the exit of the FMS U.K. business.

20

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

AND RESULTS OF OPERATIONS — (Continued)

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

Services

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

Services revenue represents all the revenue associated with our SCS and DTS business segments, as well as SelectCare and fleet support services associated with our FMS business segment. Services revenue increased 9% in the first quarter of 2023, due to increases in revenue in SCS and DTS primarily driven by new business, higher volumes and increased pricing. Services revenue also increased from higher volumes in SelectCare.

Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs and maintenance costs. Cost of services increased 11% in the first quarter of 2023, from growth in revenue and a $30 million SCS asset impairment charge as a result of a customer bankruptcy.

Services gross margin and gross margin as a percentage of revenue decreased in the first quarter of 2023, due to a SCS asset impairment partially offset by higher pricing, new business, and increased volumes.

Fuel

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

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 4% in the first quarter of 2023, primarily reflecting a lower volume of gallons sold partially offset by higher fuel prices passed through to customers.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services decreased 4% in the first quarter of 2023, as a result of lower volume of gallons sold partially offset by higher fuel prices.

Fuel services gross margin and gross margin as a percentage of revenue declined in the first quarter of 2023, compared to prior year. Fuel is largely a pass-through to customers for which we realize minimal changes in margin during periods of steady market fuel prices. However, fuel services margin is impacted by sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established based on current market fuel costs. Fuel services gross margin for the first quarter of 2023, was not significantly impacted by these price change dynamics as fuel prices fluctuated during the period.

21

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

AND RESULTS OF OPERATIONS — (Continued)

Selling, General and Administrative Expenses

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

SG&A expenses increased 6% in the first quarter of 2023. The increase in SG&A expenses in the first quarter of 2023 primarily reflects higher travel and bad debt expense, strategic investments in information technology and marketing and increased compensation-related expenses. SG&A expenses as a percentage of total revenue remained at 12% for the first quarter of 2023.

Non-Operating Pension Costs, Net

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

Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. The non-operating pension costs, net increased due to higher interest expense from a higher discount rate partially offset by an increase in expected return on plan assets.

Used Vehicle Sales, net

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

Used vehicle sales, net includes gains or losses from sales of used vehicles, selling costs associated with used vehicles and write-downs of vehicles held for sale to fair market values (referred to as "valuation adjustments"). Used vehicle sales, net decreased in the first quarter of 2023, due to lower proceeds per unit on sales of used vehicles partially offset by higher volumes.

Average proceeds per unit decreased in the first quarter of 2023. The following table presents the average used vehicle pricing changes for North America compared to the prior year:

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

Interest Expense

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

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

22

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

AND RESULTS OF OPERATIONS — (Continued)

Miscellaneous Income, net

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

NM - Denotes Not Meaningful throughout the MD&A

Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income, gains on sales of operating property, foreign currency transaction remeasurement and other non-operating items. Miscellaneous income, net was $20 million in the first quarter of 2023, primarily reflecting higher gains on sales of properties.

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

Restructuring and Other Items, net

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

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

Provision for Income Taxes

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

————————————

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

Our effective tax rate on continuing operations was 30.5% in the first quarter of 2023 compared to 30.2% in the prior year. The comparable effective tax rate on continuing operations decreased to 25.5% in the first quarter of 2023 from 27.6% in the prior year. The decrease in the comparable rate reflects discrete tax benefits in the first quarter of 2023.

23

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

AND RESULTS OF OPERATIONS — (Continued)

OPERATING RESULTS BY BUSINESS SEGMENT

	Three months ended March 31,				Change 2023/2022
(In millions)	2023		2022		Three Months
Revenue:
Fleet Management Solutions	$	1,503	$	1,529	(2)%
Supply Chain Solutions	1,201		1,089		10%
Dedicated Transportation Solutions	454		425		7%
Eliminations	(206)		(189)		(9)%
Total	$	2,952	$	2,854	3%
Operating Revenue: (1)
Fleet Management Solutions	$	1,262	$	1,282	(2)%
Supply Chain Solutions	879		738		19%
Dedicated Transportation Solutions	322		296		9%
Eliminations	(117)		(100)		(17)%
Total	$	2,346	$	2,216	6%
Earnings from continuing operations before income taxes:
Fleet Management Solutions	$	182	$	249	(27)%
Supply Chain Solutions	17		43		(60)%
Dedicated Transportation Solutions	29		20		45%
Eliminations	(25)		(26)		4%
	203		286		(29)%
Unallocated Central Support Services	(15)		(16)		(6)%
Intangible amortization expense	(9)		(10)		(10)%
Non-operating pension costs (2)	(10)		(3)		233%
Other items impacting comparability, net (3)	32		(5)		NM
Earnings from continuing operations before income taxes	$	201	$	252	(20)%

————————————

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

(2)Includes the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs.

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

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

The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs. In the first quarter of 2023, we revised our primary measurement of segment financial performance to exclude intangible amortization expense. This change did not have a material impact to segment results. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain corporate costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.

Our FMS segment leases revenue earning equipment, as well as provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments.  Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment

24

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

AND RESULTS OF OPERATIONS — (Continued)

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

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

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

The decreased DTS equipment contribution in the first quarter of 2023 was related to lower proceeds on sales of used vehicles and lower utilization of the DTS vehicle fleet.

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

		Three months ended March 31,
Description	Classification	2023		2022
FMS Europe results (1)	Restructuring and other items, net	$	(4)	$	—
Gains on sale of U.K. revenue earning equipment (1)	Used vehicles sales, net	2		8
Gains on sale of U.K. properties (1)	Miscellaneous income, net	5		1
Commercial claims proceeds, net of fees (1)	Restructuring and other items, net	31		(7)
Severance and other, net (1)	Restructuring and other items, net	(3)		(3)
FMS U.K. exit (1)		31		(1)
Other, net (1)	Restructuring and other items, net	1		(4)
Other items impacting comparability, net		32		(5)
Non-operating pension costs (2)	Non-operating pension costs	(10)		(3)
		$	22	$	(8)

———————————

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

(2)Includes the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized.

25

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

AND RESULTS OF OPERATIONS — (Continued)

Fleet Management Solutions

	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022		Three Months
ChoiceLease	$	776	$	764	2%
Commercial rental (1)	304		306		(1)%
SelectCare and other	182		148		23%
FMS Europe	—		64		NM
Fuel services revenue	241		247		(2)%
FMS total revenue	$	1,503	$	1,529	(2)%
FMS operating revenue (2)	$	1,262	$	1,282	(2)%
FMS EBT	$	182	$	249	(27)%
FMS EBT as a % of FMS total revenue	12.1%		16.3%		(420) bps
FMS EBT as a % of FMS operating revenue (2)	14.4%		19.4%		(500) bps
	Twelve months ended March 31,				Change 2023/2022
	2023		2022
FMS EBT as a % of FMS total revenue	15.7%		14.5%		120 bps
FMS EBT as a % of FMS operating revenue (2)	19.1%		16.8%		230 bps

————————————

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

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

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

FMS EBT decreased 27% in the first quarter of 2023, primarily from lower gains on used vehicle sales and decreased commercial rental results. Lower North America gains reflect a 16% and 35% decrease in used truck and tractor pricing, respectively, partially offset by higher volumes. Lower commercial rental results reflect decreased utilization partially offset by a 3% increase in power fleet pricing. Rental power fleet utilization decreased to 75% from a record level of 82% in the first quarter of the prior year, on a 6% larger average power fleet.

26

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

AND RESULTS OF OPERATIONS — (Continued)

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

				Change
	March 31, 2023	December 31, 2022	March 31, 2022	Mar 2023/ Dec 2022	Mar 2023/ Mar 2022
End of period vehicle count
By type:
Trucks (1)	72,900	72,100	70,300	1%	4%
Tractors (2)	70,100	69,300	69,100	1%	1%
Trailers and other (3)	41,800	41,200	39,300	1%	6%
Total	184,800	182,600	178,700	1%	3%
By product line:
ChoiceLease	136,600	134,600	133,900	1%	2%
Commercial rental	41,100	41,800	39,800	(2)%	3%
Service vehicles and other	2,000	2,100	2,000	(5)%	—%
	179,700	178,500	175,700	1%	2%
Held for sale	5,100	4,100	3,000	24%	70%
Total	184,800	182,600	178,700	1%	3%
Memo: U.K. Vehicle Count (excluded from above)	400	1,000	12,300	(60)%	(97)%
Customer vehicles under SelectCare contracts (4)	52,600	54,600	54,500	(4)%	(3)%
Quarterly average vehicle count
By product line:
ChoiceLease	135,300	134,500	133,800	1%	1%
Commercial rental	41,200	41,800	39,300	(1)%	5%
Service vehicles and other	2,000	2,000	2,000	—%	—%
	178,500	178,300	175,100	—%	2%
Held for sale	4,600	3,700	2,700	24%	70%
Total	183,100	182,000	177,800	1%	3%
Customer vehicles under SelectCare contracts (4)	54,100	55,300	53,700	(2)%	1%
Customer vehicles under SelectCare on-demand (5)	5,200	5,800	6,300	(10)%	(17)%
Total vehicles serviced	242,400	243,200	237,800	—%	2%

————————————

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

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

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

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

(5)Comprised of the number of unique vehicles serviced under on-demand maintenance agreements for the quarterly periods. This does not represent averages for the periods. Vehicles included in the count may have been serviced more than one time during the respective period.

Note: Quarterly amounts were computed using a 6-point average based on monthly information. 

27

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

AND RESULTS OF OPERATIONS — (Continued)

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

							Change
	March 31, 2023		December 31, 2022		March 31, 2022		Mar 2023/ Dec 2022	Mar 2023/ Mar 2022
Active ChoiceLease fleet
End of period vehicle count (1)	129,100		128,400		128,700		1%	—%
Quarterly average vehicle count (1)	128,700		128,800		128,900		—%	—%
Commercial rental statistics
Quarterly commercial rental utilization - power fleet (2)	75	%	82	%	82	%	(800) bps	(700) bps

————————————

(1)Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units.

(2)Rental utilization is calculated using the number of days units are rented divided by the number of days units are available to rent based on the days in the calendar year.

Supply Chain Solutions

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

	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022		Three Months
Omnichannel retail	$	311	$	270	15%
Automotive	254		195		30%
Consumer packaged goods	218		187		17%
Industrial and other	96		86		12%
Subcontracted transportation and fuel	322		351		(8)%
SCS total revenue	$	1,201	$	1,089	10%
SCS operating revenue (1)	$	879	$	738	19%
SCS EBT	$	17	$	43	(60)%
SCS EBT as a % of SCS total revenue	1.4%		3.9%		(250) bps
SCS EBT as a % of SCS operating revenue (1)	1.9%		5.8%		(390) bps
Memo:
End of period fleet count (2)	13,500		11,600		16%
	Twelve months ended March 31,				Change 2023/2022
	2023		2022
SCS EBT as a % of SCS total revenue	4.0%		3.7%		30 bps
SCS EBT as a % of SCS operating revenue (1)	5.7%		5.4%		30 bps

————————————

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

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

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

28

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

AND RESULTS OF OPERATIONS — (Continued)

increased 19% in the first quarter of 2023, due to strong revenue growth in all industry verticals primarily reflecting new business, higher volumes and increased pricing.

SCS EBT decreased 60% in the first quarter of 2023, due to a $30 million asset impairment charge related to a customer bankruptcy. Refer to Note 2, "Segment Reporting," for additional discussion. The decrease was partially offset by revenue growth, primarily from automotive vertical performance.

Dedicated Transportation Solutions

	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022		Three Months
DTS total revenue	$	454	$	425	7%
DTS operating revenue (1)	$	322	$	296	9%
DTS EBT	$	29	$	20	45%
DTS EBT as a % of DTS total revenue	6.4%		4.7%		170 bps
DTS EBT as a % of DTS operating revenue (1)	9.0%		6.8%		220 bps
Memo:
End of period fleet count (2)	11,400		11,700		(3)%
	Twelve months ended March 31,				Change 2023/2022
	2023		2022
DTS EBT as a % of DTS total revenue	6.1%		3.6%		250 bps
DTS EBT as a % of DTS operating revenue (1)	8.8%		5.0%		380 bps

————————————

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

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

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

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

Central Support Services

	Three months ended March 31,				Change 2023/2022
(Dollars in millions)	2023		2022		Three Months
Total CSS	$	103	$	97	6%
Allocation of CSS to business segments	(88)		(81)		9%
Unallocated CSS	$	15	$	16	(6)%

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

29

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

AND RESULTS OF OPERATIONS — (Continued)

FINANCIAL RESOURCES AND LIQUIDITY

Cash Flows

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

	Three months ended March 31,
(In millions)	2023		2022
Net cash provided by (used in):
Operating activities	$	478	$	466
Investing activities	(377)		(783)
Financing activities	(126)		(130)
Effect of exchange rate changes on cash	11		(4)
Net change in cash, cash equivalents, and restricted cash	$	(14)	$	(451)
	Three months ended March 31,
(In millions)	2023		2022
Net cash provided by operating activities
Earnings from continuing operations	$	140	$	176
Non-cash and other, net	522		465
Collections on sales-type leases	30		34
Changes in operating assets and liabilities	(214)		(209)
Cash flows from operating activities from continuing operations	$	478	$	466

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

The following table shows our free cash flow computation:

	Three months ended March 31,
(In millions)	2023		2022
Net cash provided by operating activities	$	478	$	466
Sales of revenue earning equipment (1)	216		223
Sales of operating property and equipment (1)	48		3
Total cash generated (2)	742		692
Purchases of property and revenue earning equipment (1)	(641)		(584)
Free cash flow (2)	$	101	$	108

————————————

(1)Included in cash flows from investing activities.

(2)Non-GAAP financial measure. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in

this table. Refer to the "Non-GAAP Financial Measures" section of this MD&A for the reasons why management believes this measure is important to investors.

Free cash flow (a non-GAAP measure) of $101 million for the three months ended March 31, 2023, compared to $108 million in 2022, was generally unchanged as increase in cash paid for capital expenditures was largely offset by higher proceeds from the sale of operating property and equipment.

30

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

AND RESULTS OF OPERATIONS — (Continued)

The following table provides a summary of gross capital expenditures:

	Three months ended March 31,
(In millions)	2023		2022
Revenue earning equipment:
ChoiceLease	$	579	$	422
Commercial rental	177		180
	756		602
Operating property and equipment	46		60
Gross capital expenditures	802		662
Changes to liabilities related to purchases of property and revenue earning equipment	(161)		(78)
Cash paid for purchases of property and revenue earning equipment	$	641	$	584

Gross capital expenditures increased to $802 million for the three months ended March 31, 2023, primarily reflecting higher planned investments in ChoiceLease.

Financing and Other Funding Transactions

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

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

We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, volatility or disruption in the public unsecured debt market or the commercial paper market may impair our ability to access these markets or secure terms commercially acceptable to us. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements or by seeking other funding sources.

In February 2023, we issued an aggregate principal amount of $500 million unsecured medium-terms notes that mature on March 1, 2028. The notes bear interest at a rate of 5.65% per year. Refer to Note 8, "Debt," in the Notes to Condensed Consolidated Financial Statements for additional information on our global revolving credit facility, trade receivables financing program, medium-term notes, and asset-backed financing obligations.

Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings. These ratings are intended to provide guidance to investors in determining the credit risk associated with our particular securities based on current information obtained by the rating agencies from us or from other sources. Ratings are not recommendations to buy, sell or hold our debt securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Lower ratings generally result in higher borrowing costs, as well as reduced access to unsecured capital markets. A significant downgrade of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on alternative funding sources. A significant downgrade would not affect our ability to borrow amounts under our global revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.

31

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

AND RESULTS OF OPERATIONS — (Continued)

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

	Rating Summary
	Short-term	Short-term Outlook	Long-term	Long-term Outlook
Standard & Poor’s Ratings Services (1)	A2	—	BBB	Stable
Moody’s Investors Service	P2	Stable	Baa2	Stable
Fitch Ratings	F2	—	BBB+	Stable
DBRS	R-1 (Low)	Stable	A (Low)	Stable

————————————

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

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

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

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

Our debt to equity ratio was 211% and 216% as of March 31, 2023 and December 31, 2022, respectively. The debt to equity ratio represents total debt divided by total equity.

Share Repurchases and Cash Dividends

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

Refer to Note 9, "Share Repurchase Programs," in the Notes to Condensed Consolidated Financial Statements for a discussion on our share repurchase programs.

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

NON-GAAP FINANCIAL MEASURES

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

32

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

AND RESULTS OF OPERATIONS — (Continued)

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

Non-GAAP Financial Measure	Comparable GAAP Measure
Operating Revenue Measures:
Operating Revenue	Total Revenue
FMS Operating Revenue	FMS Total Revenue
SCS Operating Revenue	SCS Total Revenue
DTS Operating Revenue	DTS Total Revenue
FMS EBT as a % of FMS Operating Revenue	FMS EBT as a % of FMS Total Revenue
SCS EBT as a % of SCS Operating Revenue	SCS EBT as a % of SCS Total Revenue
DTS EBT as a % of DTS Operating Revenue	DTS EBT as a % of DTS Total Revenue
Comparable Earnings Measures:
Comparable Earnings Before Income Tax	Earnings Before Income Tax
Comparable Earnings	Earnings from Continuing Operations
Comparable Earnings Before Interest, Taxes, Depreciation      and Amortization (EBITDA)	Net Earnings
Comparable EPS	EPS from Continuing Operations
Comparable Tax Rate	Effective Tax Rate from Continuing Operations
Adjusted Return on Equity (ROE)	Not Applicable. However, non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity is provided in the following reconciliations.
Cash Flow Measures:
Total Cash Generated and Free Cash Flow	Cash Provided by Operating Activities from Continuing Operations

33

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

AND RESULTS OF OPERATIONS — (Continued)

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

Operating Revenue Measures:

Operating Revenue FMS Operating Revenue SCS Operating Revenue DTS Operating Revenue FMS EBT as a % of FMS Operating Revenue SCS EBT as a % of SCS Operating Revenue DTS EBT as a % of DTS Operating Revenue

Operating revenue is defined as total revenue for Ryder or each business segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted transportation. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, SCS EBT and DTS EBT, our primary measures of segment performance, are not non-GAAP measures. Fuel: We exclude FMS, SCS and DTS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers. Fuel revenue is impacted by fluctuations in market fuel prices and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on current market fuel costs. Subcontracted transportation: We exclude subcontracted transportation from the calculation of our operating revenue measures, as these services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability. While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS.

34

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

AND RESULTS OF OPERATIONS — (Continued)

Comparable Earnings Measures:

Comparable Earnings before Income Taxes (EBT) Comparable Earnings Comparable Earnings per Diluted Common Share (EPS) Comparable Tax Rate Adjusted Return on Equity (ROE)

Comparable EBT, Comparable Earnings and Comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs, net and (2) other items impacting comparability (as further described below). We believe these comparable earnings measures provide useful information to investors and allow for better year-over-year comparison of operating performance. Non-operating pension costs, net: Our comparable earnings measures exclude non-operating pension costs, net, which include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. We exclude non-operating pension costs, net because we consider these to be impacted by financial market performance and outside the operational performance of our business. Other Items Impacting Comparability: Our comparable and adjusted earnings measures also exclude other significant items that are not representative of our business operations as detailed in the reconciliation table below. These other significant items vary from period to period and, in some periods, there may be no such significant items. Comparable Tax Rate is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related. Adjusted ROE is defined as adjusted net earnings divided by adjusted average shareholders' equity and represents the rate of return on shareholders' investment. Other items impacting comparability described above are excluded, as applicable, from the calculation of adjusted net earnings and adjusted average shareholders' equity. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations.

35

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

AND RESULTS OF OPERATIONS — (Continued)

Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)	Comparable EBITDA is defined as net earnings, first adjusted to exclude discontinued operations and the following items, all from continuing operations: (1) non-operating pension costs, net and (2) any other items that are not representative of our business operations (these items are the same items that are excluded from comparable earnings measures for the relevant periods as described immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) amortization. We believe comparable EBITDA provides investors with useful information, as it is a standard measure commonly reported and widely used by analysts, investors and other interested parties to measure financial performance and our ability to service debt and meet our payment obligations. In addition, we believe that the inclusion of comparable EBITDA provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. Other companies may calculate comparable EBITDA differently; therefore, our presentation of comparable EBITDA may not be comparable to similarly-titled measures used by other companies. Comparable EBITDA should not be considered as an alternative to net earnings, earnings from continuing operations before income taxes or earnings from continuing operations determined in accordance with GAAP, as an indicator of our operating performance, as an alternative to cash flows from operating activities (determined in accordance with GAAP), as an indicator of cash flows, or as a measure of liquidity.
Cash Flow Measures:
Total Cash Generated Free Cash Flow	We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment. Total Cash Generated is defined as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment and (4) other cash inflows from investing activities. We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities. Free Cash Flow is defined as the net amount of cash generated from operating activities and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations. We calculate free cash flow as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment and operating property and equipment, and (3) other cash inflows from investing activities, less (4) purchases of property and revenue earning equipment. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders, after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited. * See Total Cash Generated and Free Cash Flow reconciliations in the Financial Resources and Liquidity section of Management's Discussion and Analysis.

36

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

AND RESULTS OF OPERATIONS — (Continued)

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

	Continuing Operations
	Three months ended March 31,
(In millions, except per share amount)	2023		2022
EBT	$	201	$	252
Non-operating pension costs, net	10		3
FMS U.K. exit (1)	(31)		1
Other, net (1)	(1)		4
Comparable EBT	$	179	$	260
Earnings	$	140	$	176
Non-operating pension costs, net	8		2
FMS U.K. exit (1)	(31)		1
Other, net (1)	(1)		4
Tax adjustments, net (2)	17		5
Comparable Earnings	$	133	$	188
Diluted EPS	$	2.95	$	3.35
Non-operating pension costs, net	0.17		0.04
FMS U.K. exit (1)	(0.66)		0.02
Other, net (1)	(0.01)		0.08
Tax adjustments, net (2)	0.36		0.10
Comparable EPS	$	2.81	$	3.59

————————————

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

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

Note: Amounts may not be additive due to rounding.

37

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

AND RESULTS OF OPERATIONS — (Continued)

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

	Three months ended March 31,
(In millions)	2023	2022
Effective tax rate on continuing operations (1)	30.5%	30.2%
Tax adjustments and income tax effects of non-GAAP adjustments (2)	(5.0)%	(2.6)%
Comparable effective tax rate on continuing operations (1)	25.5%	27.6%

————————————

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

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

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

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

————————————

(1)Refer to the table above in the Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Condensed Consolidated Statements of Earnings and Note 14,“Other Items Impacting Comparability” in the Notes to Condensed Consolidated Financial Statements for additional information.

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

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

	Three months ended March 31,
(In millions)	2023		2022
Total revenue	$	2,952	$	2,854
Subcontracted transportation and fuel	(606)		(638)
Operating revenue	$	2,346	$	2,216

38

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

AND RESULTS OF OPERATIONS — (Continued)

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

	Three months ended March 31,				Twelve months ended March 31,
(Dollars in millions)	2023		2022		2023		2022
FMS total revenue	$	1,503	$	1,529	$	6,301	$	5,873
Fuel services revenue	(241)		(247)		(1,108)		(818)
FMS operating revenue	$	1,262	$	1,282	$	5,193	$	5,055
FMS EBT	$	182	$	249	$	990	$	850
FMS EBT as a % of FMS total revenue	12.1%		16.3%		15.7%		14.5%
FMS EBT as a % of FMS operating revenue	14.4%		19.4%		19.1%		16.8%

————————————

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

	Three months ended March 31,				Twelve months ended March 31,
(Dollars in millions)	2023		2022		2023		2022
SCS total revenue	$	1,201	$	1,089	$	4,832	$	3,537
Subcontracted transportation and fuel	(322)		(351)		(1,437)		(1,091)
SCS operating revenue	$	879	$	738	$	3,395	$	2,446
SCS EBT	$	17	$	43	$	194	$	132
SCS EBT as a % of SCS total revenue	1.4%		3.9%		4.0%		3.7%
SCS EBT as a % of SCS operating revenue	1.9%		5.8%		5.7%		5.4%

39

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

AND RESULTS OF OPERATIONS — (Continued)

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

	Three months ended March 31,				Twelve months ended March 31,
(Dollars in millions)	2023		2022		2023		2022
DTS total revenue	$	454	$	425	$	1,815	$	1,562
Subcontracted transportation and fuel	(132)		(129)		(550)		(447)
DTS operating revenue	$	322	$	296	$	1,265	$	1,115
DTS EBT	$	29	$	20	$	111	$	56
DTS EBT as a % of DTS total revenue	6.4%		4.7%		6.1%		3.6%
DTS EBT as a % of DTS operating revenue	9.0%		6.8%		8.8%		5.0%

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

	Twelve months ended March 31,
(Dollars in millions)	2023		2022
Net earnings	$	832	$	644
Other items impacting comparability, net (1)	(121)		(13)
Income taxes (2)	339		228
Adjusted earnings before income taxes	1,050		859
Adjusted income taxes (3)	(280)		(215)
Adjusted net earnings [A]	$	770	$	644
Average shareholders’ equity	$	2,887	$	2,532
Average adjustments to shareholders’ equity (4)	(15)		(2)
Adjusted average shareholders’ equity [B]	$	2,872	$	2,530
Adjusted return on equity [A/B]	27%		25%

————————————

(1)Refer to the table below for (benefit) and charge adjustments to net earnings, net for the 12-month rolling period.

(2)Includes income taxes on discontinued operations.

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

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

Note: Amounts may not be additive due to rounding.

	Twelve months ended March 31,
(In millions)	2023		2022
FMS U.K. exit	$	(114)	$	(28)
Other, net	(7)		10
ERP implementation costs	—		5
Other items impacting comparability, net	$	(121)	$	(13)

40

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

AND RESULTS OF OPERATIONS — (Continued)

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

•our expectations in our FMS business segment regarding ChoiceLease;

•our expectations in our SCS and DTS business segments related to revenue and earnings growth and contract sales activity;

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

•the adequacy of our accounting estimates and reserves for goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, asset impairments, the valuation of our pension plans, allowance for credit losses, and self-insurance loss reserves;

•the adequacy of our fair value estimates of publicly traded debt and other debt;

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

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

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

•the anticipated impact of fuel and energy prices, interest rate movements, subcontracted transportation costs, and exchange rate fluctuations;

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

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

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

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

•our expectations regarding the benefits from our strategic investments and initiatives;

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

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

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

41

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

AND RESULTS OF OPERATIONS — (Continued)

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

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

•the anticipated impact of inflationary pressures;

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

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

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

•Market Conditions:

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

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

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

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

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

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

•Competition:

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

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

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

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

•Profitability:

◦Lower than expected sales volumes or customer retention levels.

◦Decreases in commercial rental fleet utilization and pricing.

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

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

42

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

AND RESULTS OF OPERATIONS — (Continued)

◦Decreases in volume in our omnichannel retail vertical.

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

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

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

◦Sudden changes in market fuel prices and fuel shortages.

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

◦Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives.

◦Lower than expected revenue growth due to production delays at our automotive SCS customers, primarily related to the worldwide semiconductor supply shortage.

◦The inability of an original equipment manufacturer or supplier to provide vehicles or components as originally scheduled.

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

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

◦Increased unionizing, labor strikes and work stoppages.

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

◦Our inability to manage our cost structure.

◦Our inability to limit our exposure for customer claims.

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

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

•Financing Concerns:

◦Higher borrowing costs.

◦Increased inflationary pressures.

◦Unanticipated interest rate and currency exchange rate fluctuations.

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

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

•Accounting Matters:

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

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

◦Changes in accounting rules, assumptions and accruals.

43

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

AND RESULTS OF OPERATIONS — (Continued)

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

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, we cannot provide assurance as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this Quarterly Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to Ryder’s exposures to market risks since December 31, 2022. Please refer to the 2022 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the first quarter of 2023, we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the first quarter of 2023, Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2023, 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.

44

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please refer to Note 15, "Contingencies and Other Matters," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

To our knowledge and except to the extent additional factual information disclosed in this Quarterly Report on Form 10-Q relates to such risk factors, there have been no material changes in the risk factors described in "Item 1A. Risk Factors" in our Form 10-K for the year ended December 31, 2022, filed with the SEC on February 15, 2023. Our operations could also be affected by additional risk factors that are not presently known to us or by factors that we currently consider not material to our business.

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

The following table provides information with respect to purchases we made of our common stock during the three months ended March 31, 2023:

(Dollars in millions, except per share)	Total  Number of Shares Purchased (1)	Average  Price Paid per Share		Total  Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares That May Yet Be Purchased Under the Discretionary and Anti-Dilutive Programs (2)
January 1 through January 31, 2023	60	$	83.40	—	1,574,607
February 1 through February 28, 2023	788,489	97.18		465,110	1,109,497
March 1 through March 31, 2023	195	86.08		—	1,109,497
Total	788,744	$	97.18	465,110

 ————————————

(1)During the three months ended March 31, 2023, we purchased an aggregate of 323,634 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock withheld as payment for the exercise price of options exercised or to satisfy the tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.

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

ITEM 5. OTHER INFORMATION

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

45

ITEM 6. EXHIBITS

Exhibit Number	Description
10*	First Amendment to Third Amended and Restated Global Revolving Credit Agreement, dated as of December 14, 2021, by and among Ryder System, Inc., certain Ryder subsidiaries, and the lenders and agents named therein
31.1	Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2	Certification of John J. Diez pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32	Certification of Robert E. Sanchez and John J. Diez pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C Section 1350
101.INS	XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

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

46

SIGNATURE

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

 

		RYDER SYSTEM, INC.
		(Registrant)
Date:	April 26, 2023	By:	/s/ JOHN J. DIEZ
			John J. Diez
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)
Date:	April 26, 2023	By:	/s/ CRISTINA GALLO-AQUINO
			Cristina Gallo-Aquino
			Senior Vice President and Controller
			(Principal Accounting Officer)

47