Annual Statements Open main menu

RYDER SYSTEM INC - Quarter Report: 2021 September (Form 10-Q)


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 SEPTEMBER 30, 2021
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

r-20210930_g1.jpg
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Florida59-0739250
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11690 N.W. 105th Street
Miami,Florida33178
(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 classTrading Symbol(s)Name of each exchange on which registered
Ryder System, Inc. Common Stock ($0.50 par value)RNew 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 filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 September 30, 2021 was 53,693,263.




RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
 
  Page No.
 

i

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
 
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands, except per share amounts)
Lease & related maintenance and rental revenues$1,013,968 $933,771 $2,941,084 $2,730,187 
Services revenue1,320,761 1,120,544 3,762,389 3,174,999 
Fuel services revenue124,320 96,260 359,435 301,977 
 Total revenues2,459,049 2,150,575 7,062,908 6,207,163 
Cost of lease & related maintenance and rental725,341 758,351 2,164,222 2,351,993 
Cost of services1,163,606 932,510 3,255,123 2,680,292 
Cost of fuel services116,439 92,930 340,595 291,359 
Other operating expenses32,382 30,009 99,763 93,423 
Selling, general and administrative expenses255,589 211,183 766,599 643,866 
Non-operating pension costs, net(148)7,200 (530)9,357 
Used vehicle sales, net(69,303)(12,919)(149,788)17,253 
Interest expense53,752 62,608 162,613 192,459 
Miscellaneous (income) loss, net(5,952)(10,552)(55,198)(11,830)
Restructuring and other items, net4,137 24,490 22,463 92,637 
2,275,843 2,095,810 6,605,862 6,360,809 
Earnings (loss) from continuing operations before income taxes183,206 54,765 457,046 (153,646)
Provision for (benefit from) income taxes44,547 9,680 117,235 (15,897)
Earnings (loss) from continuing operations138,659 45,085 339,811 (137,749)
Loss from discontinued operations, net of tax(605)(9,251)(1,827)(10,129)
 Net earnings (loss)$138,054 $35,834 $337,984 $(147,878)
Earnings (loss) per common share — Basic
Continuing operations$2.64 $0.86 $6.46 $(2.64)
Discontinued operations(0.01)(0.18)(0.03)(0.20)
Net earnings (loss)$2.63 $0.68 $6.43 $(2.83)
Earnings (loss) per common share — Diluted
Continuing operations$2.58 $0.85 $6.33 $(2.64)
Discontinued operations(0.01)(0.17)(0.03)(0.20)
Net earnings (loss)$2.57 $0.68 $6.30 $(2.83)
See accompanying Notes to Condensed Consolidated Financial Statements.
Note: EPS amounts may not be additive due to rounding.


1

Table of Contents



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

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands)
Net earnings (loss)$138,054 $35,834 $337,984 $(147,878)
Other comprehensive income (loss):
Changes in cumulative translation adjustment and unrealized losses from cash flow hedges(24,232)32,767 (5,741)(43,975)
Amortization of pension and postretirement items
6,974 13,796 20,941 28,946 
Income tax expense related to amortization of pension and postretirement items
(1,541)(3,300)(4,512)(6,405)
Amortization of pension and postretirement items, net of taxes5,433 10,496 16,429 22,541 
Change in net actuarial loss and prior service cost
 (89,627)116 (94,166)
Income tax (expense) benefit related to change in net actuarial loss and prior service cost
 21,286 (80)22,373 
Change in net actuarial loss and prior service cost, net of taxes
 (68,341)36 (71,793)
Other comprehensive income (loss), net of taxes(18,799)(25,078)10,724 (93,227)
Comprehensive income (loss)$119,255 $10,756 $348,708 $(241,105)
See accompanying Notes to Condensed Consolidated Financial Statements.

2

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 
September 30,
2021
December 31,
2020
 (In thousands, except
share amounts)
Assets:
Current assets:
Cash and cash equivalents$202,736 $151,294 
Receivables, net1,361,532 1,182,350 
Inventories66,831 61,191 
Prepaid expenses and other current assets208,131 200,694 
Total current assets1,839,230 1,595,529 
Revenue earning equipment, net
8,435,031 8,777,015 
Operating property and equipment, net of accumulated depreciation of $1,259,758 and $1,212,164
942,393 927,058 
Goodwill475,267 475,245 
Intangible assets, net
38,090 43,216 
Sales-type leases and other assets1,166,101 1,113,891 
Total assets$12,896,112 $12,931,954 
Liabilities and shareholders’ equity:
Current liabilities:
Short-term debt and current portion of long-term debt$1,354,821 $516,581 
Accounts payable733,400 547,389 
Accrued expenses and other current liabilities1,066,406 989,178 
Total current liabilities3,154,627 2,053,148 
Long-term debt4,632,296 6,093,655 
Other non-current liabilities1,379,688 1,403,861 
Deferred income taxes1,215,850 1,125,733 
Total liabilities10,382,461 10,676,397 
Commitments and contingencies (Note 16)
Shareholders’ equity:
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding, September 30, 2021 and December 31, 2020
 — 
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding, September 30, 2021 — 53,693,263 and December 31, 2020 — 53,732,033
26,846 26,866 
Additional paid-in capital1,177,067 1,132,954 
Retained earnings2,116,219 1,912,942 
Accumulated other comprehensive loss(806,481)(817,205)
Total shareholders’ equity2,513,651 2,255,557 
Total liabilities and shareholders’ equity$12,896,112 $12,931,954 
See accompanying Notes to Condensed Consolidated Financial Statements.
3

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

Nine months ended September 30,
20212020
(In thousands)
Cash flows from operating activities from continuing operations:
Net earnings (loss)$337,984 $(147,878)
Less: Loss from discontinued operations, net of tax(1,827)(10,129)
Earnings (loss) from continuing operations339,811 (137,749)
Depreciation expense1,349,239 1,552,318 
Used vehicle sales, net(149,788)17,253 
Amortization expense and other non-cash charges, net12,787 93,513 
Non-cash lease expense70,477 67,949 
Non-operating pension costs, net and share-based compensation expense35,469 28,376 
Deferred income tax expense (benefit)86,199 (29,875)
Collections on sales-type leases99,305 85,662 
Changes in operating assets and liabilities:
Receivables(160,454)6,646 
Inventories(5,650)20,499 
Prepaid expenses and other assets(91,147)(11,822)
Accounts payable119,144 (14,733)
Accrued expenses and other non-current liabilities(20,501)18,552 
Net cash provided by operating activities from continuing operations1,684,891 1,696,589 
Cash flows from investing activities from continuing operations:
Purchases of property and revenue earning equipment(1,427,684)(879,400)
Sales of revenue earning equipment516,466 390,767 
Sales of operating property and equipment54,606 9,918 
Other (4,298)(5,704)
Net cash used in investing activities from continuing operations(860,910)(484,419)
Cash flows from financing activities from continuing operations:
Net repayments of commercial paper and other(97,048)(499,642)
Debt proceeds 2,084,343 
Debt repayments(543,345)(2,081,434)
Dividends on common stock(91,296)(89,672)
Common stock issued23,650 3,962 
Common stock repurchased(56,652)(11,924)
Other(3,363)(9,348)
Net cash provided by (used in) financing activities from continuing operations(768,054)(603,715)
Effect of exchange rate changes on cash and cash equivalents(4,590)2,866 
Increase (decrease) in cash and cash equivalents from continuing operations51,337 611,321 
Increase (decrease) in cash and cash equivalents from discontinued operations105 (657)
Increase (decrease) in cash and cash equivalents51,442 610,664 
Cash and cash equivalents at beginning of year151,294 73,584 
Cash and cash equivalents at end of period$202,736 $684,248 
See accompanying Notes to Condensed Consolidated Financial Statements.
4

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)

Three months ended September 30, 2021
 Preferred
Stock
Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
 
 AmountSharesParTotal
 (In thousands, except share amounts)
Balance as of July 1, 2021$ 53,773,599 $26,886 $1,163,267 $2,015,743 $(787,682)$2,418,214 
Comprehensive income (loss)    138,054 (18,799)119,255 
Common stock dividends declared —$0.58 per share
    (31,947) (31,947)
Common stock issued under employee stock award and stock purchase plans and other 16,957 9 3,089   3,098 
Common stock repurchases (97,293)(49)(1,994)(5,631) (7,674)
Share-based compensation   12,705  — 12,705 
Balance as of September 30, 2021$ 53,693,263 $26,846 $1,177,067 $2,116,219 $(806,481)$2,513,651 
Three months ended September 30, 2020
 Preferred
Stock
Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
 
 AmountSharesParTotal
 (In thousands, except share amounts)
Balance as of July 1, 2020$— 53,818,841 $26,909 $1,113,883 $1,922,940 $(904,640)$2,159,092 
Comprehensive income (loss)— — — — 35,834 (25,078)10,756 
Common stock dividends declared —$0.56 per share
— — — — (30,401)— (30,401)
Common stock issued under employee stock award and stock purchase plans and other— 70,282 35 2,687 — — 2,722 
Share-based compensation— — — 8,389 — — 8,389 
Balance as of September 30, 2020$— 53,889,123 $26,944 $1,124,959 $1,928,373 $(929,718)$2,150,558 
See accompanying Notes to Condensed Consolidated Financial Statements.








5

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
Nine months ended September 30, 2021
 Preferred
Stock
Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
 
 AmountSharesParTotal
 (In thousands, except share amounts)
Balance as of January 1, 2021$ 53,732,033 $26,866 $1,132,954 $1,912,942 $(817,205)$2,255,557 
Comprehensive income (loss)    337,984 10,724 348,708 
Common stock dividends declared —$1.70 per share
    (93,611) (93,611)
Common stock issued under employee stock award and stock purchase plans and other 696,524 348 23,302   23,650 
Common stock repurchases (735,294)(368)(15,188)(41,096) (56,652)
Share-based compensation   35,999   35,999 
Balance as of September 30, 2021$ 53,693,263 $26,846 $1,177,067 $2,116,219 $(806,481)$2,513,651 
Nine months ended September 30, 2020
 Preferred
Stock
Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
 
 AmountSharesParTotal
 (In thousands, except share amounts)
Balance as of January 1, 2020$— 53,278,316 $26,639 $1,108,649 $2,177,513 $(836,491)$2,476,310 
Adoption of new accounting standard— — — — (5,077)— (5,077)
Comprehensive income (loss)— — — — (147,878)(93,227)(241,105)
Common stock dividends declared —$1.68 per share
— — — — (90,627)— (90,627)
Common stock issued under employee stock award and stock purchase plans and other— 913,905 457 3,505 — — 3,962 
Common stock repurchases— (303,098)(152)(6,214)(5,558)— (11,924)
Share-based compensation— — — 19,019 — — 19,019 
Balance as of September 30, 2020$— 53,889,123 $26,944 $1,124,959 $1,928,373 $(929,718)$2,150,558 

See accompanying Notes to Condensed Consolidated Financial Statements.

6

Table of Contents
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) required to be consolidated in accordance with generally accepted accounting principles in the United States (GAAP). The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the accounting policies described in our 2020 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. We adjusted our presentation of the revolving credit facility proceeds and repayments in the Condensed Consolidated Statements of Cash Flows for 2020 from a net basis to reflect a gross basis.

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.), Canada and the United Kingdom (U.K.); (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, last mile and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, 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.

The COVID-19 effects negatively impacted several areas of our businesses, particularly in the first half of 2020. While we are experiencing positive momentum in our businesses, any additional negative effects of the pandemic may have a further impact on our business and financial results, as well as on significant judgments and estimates, including those related to goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, the valuation of our pension plans, and allowance for credit losses.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848). This update provides optional expedients for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another rate expected to be discontinued at the end of 2021 because of reference rate reform. The update is effective for all transactions between March 12, 2020 through December 31, 2022. We continuously evaluate the impact on our consolidated financial position, results of operations, and cash flows.

Leases

In July 2021, the FASB issued ASU No. 2021-05, Lessor - Certain Leases with Variable Lease Payments (Topic 842). This update requires lessors to classify leases as operating leases if they have variable lease payments that do not depend on an index or rate and would have selling losses if they were classified as sales-type or direct financing leases. The update is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Entities are permitted to apply this amendment using the retrospective or prospective approach. We do not expect the adoption of this guidance to have a material impact on our consolidated financial position, results of operations, and cash flows.






7

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
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 18, "Segment Reporting," for the disaggregation of our revenue by major products/service lines.

Primary Geographical Markets
Three months ended September 30, 2021
FMSSCSDTSEliminationsTotal
(In thousands)
United States$1,295,617 $689,180 $380,357 $(152,014)$2,213,140 
Canada76,361 57,085  (7,991)125,455 
Europe64,362    64,362 
Mexico 56,092   56,092 
Total revenues$1,436,340 $802,357 $380,357 $(160,005)$2,459,049 

Three months ended September 30, 2020
FMSSCSDTSEliminationsTotal
(In thousands)
United States$1,167,900 $581,858 $299,680 $(127,316)$1,922,122 
Canada67,321 56,313 — (4,421)119,213 
Europe61,996 — — — 61,996 
Mexico— 47,244 — — 47,244 
Total revenues$1,297,217 $685,415 $299,680 $(131,737)$2,150,575 
Nine months ended September 30, 2021
FMSSCSDTSEliminationsTotal
(In thousands)
United States$3,756,851 $1,952,193 $1,055,575 $(436,793)$6,327,826 
Canada223,623 171,908  (20,627)374,904 
Europe199,592    199,592 
Mexico 160,586   160,586 
Total revenues$4,180,066 $2,284,687 $1,055,575 $(457,420)$7,062,908 
Nine months ended September 30, 2020
FMSSCSDTSEliminationsTotal
(In thousands)
United States$3,446,869 $1,545,715 $928,512 $(377,536)$5,543,560 
Canada198,566 150,153 — (12,624)336,095 
Europe190,196 — — — 190,196 
Mexico— 137,312 — — 137,312 
Total revenues$3,835,631 $1,833,180 $928,512 $(390,160)$6,207,163 

8

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

Our SCS business segment included revenue from the below industries:
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Automotive$303,923 $273,589 $882,977 $671,263 
Technology and healthcare103,387 103,976 310,422 279,875 
Consumer packaged goods and retail316,876 250,449 876,362 716,880 
Industrial and other78,171 57,401 214,926 165,162 
Total SCS revenues$802,357 $685,415 $2,284,687 $1,833,180 

Lease & Related Maintenance and Rental Revenues
The non-lease revenue from maintenance services related to our FMS business is recognized in "Lease & related maintenance and rental revenues" in the Condensed Consolidated Statements of Earnings. For the three months ended September 30, 2021 and 2020, we recognized $255 million and $241 million, respectively. For the nine months ended September 30, 2021 and 2020, we recognized $765 million and $719 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:
Nine months ended September 30,
20212020
(In thousands)
Balance as of beginning of period$629,739 $603,687 
Recognized as revenue during period from beginning balance(147,944)(141,677)
Consideration deferred during period, net115,562 161,460 
Foreign currency translation adjustment and other(418)(703)
Balance as of end of period$596,939 $622,767 

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 primarily includes deferred revenue and amounts for full service ChoiceLease maintenance revenue that will be recognized as revenue in future periods as we provide maintenance services to our customers. Contracted not recognized revenue excludes (1) variable consideration as it is not included in the transaction price consideration allocated at contract inception, (2) revenues from our lease component of our ChoiceLease product and commercial rental product, (3) revenues from contracts with an original duration of one year or less, including SelectCare contracts, and (4) revenue from SCS, DTS and other contracts where there are remaining performance obligations when we have the right to invoice but the revenue to be recognized in the future corresponds directly with the value delivered to the customer. Contracted not recognized revenue was $2.4 billion as of September 30, 2021.


9

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
4. RECEIVABLES, NET
September 30, 2021December 31, 2020
(In thousands)
Trade$1,198,674 $1,051,618 
Sales-type leases143,844 132,003 
Other, primarily warranty and insurance45,621 41,753 
1,388,139 1,225,374 
Allowance for credit losses and other(26,607)(43,024)
Total
$1,361,532 $1,182,350 


The following table provides a reconciliation of our allowance for credit losses and other:
Nine months ended September 30,
20212020
(In thousands)
Balance as of beginning of period$43,024 $22,761 
Changes to provisions for credit losses(5,097)35,000 
Impact of adoption of new accounting standard, write-offs, and other (1)
(11,320)(12,368)
Balance as of end of period$26,607 $45,393 
 ————————————
(1)Includes the cumulative-effect adjustment for the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), during the nine months ended September 30, 2020.


10

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
5. REVENUE EARNING EQUIPMENT, NET
 Estimated Useful LivesSeptember 30, 2021December 31, 2020
 CostAccumulated
Depreciation
Net
CostAccumulated
Depreciation
Net
 (In years)(In thousands)
Held for use:
Trucks
3 — 7
$5,151,634 $(1,993,329)$3,158,305 $5,061,266 $(1,818,594)$3,242,672 
Tractors
   4 — 7.5
7,266,726 (3,032,901)4,233,825 7,013,595 (2,853,591)4,160,004 
Trailers and other
9.5 — 12
1,816,896 (839,048)977,848 2,046,768 (804,006)1,242,762 
Held for sale304,079 (239,026)65,053 644,132 (512,555)131,577 
Total$14,539,335 $(6,104,304)$8,435,031 $14,765,761 $(5,988,746)$8,777,015 

Policy and Accelerated Depreciation
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. A reduction in estimated residual values or useful lives will result in an increase in depreciation expense over the remaining life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is established with a long-term view, which we refer to as "policy depreciation." Our policy depreciation is based on a variety of factors, including vehicle class, generally subcategories of trucks, tractors and trailers, by weight, usage and other factors; historical, current, and internal and third-party expected future market prices; expected lives of vehicles; and expected sales of used vehicles in the wholesale and retail markets. Factors that could cause actual results to materially differ from estimates, include changes in technology; changes in supply and demand; competitor pricing; regulatory requirements; driver shortages, 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.

We also assess estimates of residual values of vehicles expected to be made available for sale in the near-term (generally 12 to 24 months) based on near-term market rates and conditions and may adjust estimates of residual values for these vehicles, which we refer to as "accelerated depreciation."

During the second quarter of 2021, we completed a review of the residual values and useful lives of revenue earning equipment. Based on the results of our analysis, we primarily adjusted our residual value estimates for certain tractors and useful lives of certain classes of our revenue earning equipment, which impacted approximately 15% of our total fleet. The increase in depreciation expense in the third quarter of 2021 was not material to our results of operations.

The following table provides a summary of amounts that have been recorded for accelerated and policy depreciation related to our residual value and useful life estimate changes since 2019, as well as used vehicle sales results (rounded to the closest million):
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Accelerated depreciation$10,000 $46,000 $52,000 $202,000 
Policy depreciation66,000 67,000 187,000 186,000 
Used vehicle sales, net(69,000)(13,000)(150,000)17,000 
11

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
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. In addition, we also consider expected declines in market prices when valuing the vehicles held for sale, as well as the forecasted sales channel mix (retail/wholesale).

The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:
Valuation Adjustments
 Three months ended September 30,Nine months ended September 30,
September 30, 2021
December 31, 2020 (2)
2021202020212020
 (In thousands)
Revenue earning equipment held for sale (1):
Trucks$1,140 $3,848 $1,224 $511 $2,798 $16,962 
Tractors446 2,211 2,177 603 2,836 12,091 
Trailers and other560 4,092 1,161 819 5,036 5,404 
Total assets at fair value$2,146 $10,151 $4,562 $1,933 $10,670 $34,457 
 ————————————
(1)Reflects only the portion where net book values exceeded fair values and valuation adjustments were recorded. The net book value of assets held for sale that were less than fair value was $63 million and $121 million as of September 30, 2021 and December 31, 2020, respectively.
(2)Adjusted the presentation of the vehicles held for sale that were recorded to fair value to now exclude vehicles that previously recognized accumulated accelerated depreciation.

The components of used vehicle sales, net were as follows:
 Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Gains on vehicle sales, net$(73,865)$(14,852)$(160,458)$(17,204)
Losses from valuation adjustments4,562 1,933 10,670 34,457 
Used vehicle sales, net$(69,303)$(12,919)$(149,788)$17,253 


12

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
6. ACCRUED EXPENSES AND OTHER LIABILITIES
 September 30, 2021December 31, 2020
 Accrued
Expenses
Non-Current
Liabilities
TotalAccrued
Expenses
Non-Current
Liabilities
Total
 (In thousands)
Salaries and wages$196,383 $ $196,383 $158,122 $— $158,122 
Deferred compensation5,656 85,635 91,291 5,117 77,823 82,940 
Pension benefits3,777 253,910 257,687 3,776 265,178 268,954 
Other postretirement benefits1,381 16,890 18,271 1,381 20,245 21,626 
Other employee benefits18,751  18,751 20,599 — 20,599 
Insurance obligations (1)
183,927 306,687 490,614 169,936 292,298 462,234 
Operating taxes (2)
171,149 41,683 212,832 164,293 41,687 205,980 
Income taxes15,946 14,763 30,709 4,588 15,598 20,186 
Interest38,328  38,328 38,887 — 38,887 
Deposits, mainly from customers93,289 3,173 96,462 79,840 3,014 82,854 
Operating lease liabilities82,950 191,050 274,000 78,785 186,429 265,214 
Deferred revenue (3)
179,642 417,297 596,939 183,474 446,265 629,739 
Restructuring liabilities
2,490  2,490 7,683 — 7,683 
Other72,737 48,600 121,337 72,697 55,324 128,021 
Total$1,066,406 $1,379,688 $2,446,094 $989,178 $1,403,861 $2,393,039 
 ————————————
(1)Insurance obligations primarily represent self-insured claim liabilities.
(2)Operating taxes include the deferral of certain payroll taxes in current and non-current liabilities allowed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
(3)Refer to Note 3, "Revenue," for additional information.
13

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
7. INCOME TAXES
Effective Tax Rate

Our effective income tax rate from continuing operations for the third quarter of 2021 was an expense of 24.3% as compared to an expense of 17.7% in the third quarter of 2020 and an expense of 25.7% in the nine months ended September 30, 2021 as compared to a benefit of 10.3% in the nine months ended September 30, 2020. For the three and nine months ended September 30, 2020, the tax rate was impacted by a reduction in earnings due to depreciation charges. For the nine months ended September 30, 2020, the tax rate was also impacted by the recognition of a valuation allowance of $13 million related to our U.K. deferred tax assets and a charge of $7 million related to expiring state net operating losses.


8. LEASES
Leases as Lessor

The components of lease income were as follows:
Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands)
Operating leases
Lease income related to ChoiceLease$383,669 $387,867 $1,159,930 $1,173,094 
Lease income related to commercial rental (1)
287,612 208,489 752,994 565,404 
Sales-type leases
Interest income related to net investment in leases$10,925 $12,836 $36,380 $36,560 
Variable lease income excluding commercial rental (1)
$75,621 $73,740 $219,743 $198,129 
————————————
(1)Lease income related to commercial rental includes both fixed and variable lease income. Variable lease income is approximately 15% to 25% of total commercial rental income based on management's internal estimates.

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:
September 30, 2021December 31, 2020
 (In thousands)
Net investment in the lease — lease payment receivable$579,556 $589,120 
Net investment in the lease — unguaranteed residual value in assets45,887 44,704 
625,443 633,824 
Estimated loss allowance(4,025)(4,025)
Total$621,418 $629,799 


14

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
9. DEBT
 Weighted Average Interest Rate  
 September 30, 2021MaturitiesSeptember 30,
2021
December 31,
2020
 (In thousands)
Debt:
U.S. commercial paper
0.18%2023$166,626 $214,375 
Canadian commercial paper
0.29%202314,946 62,800 
Trade receivables financing program—%2022 — 
Global revolving credit facility
—%2023 200 
Unsecured U.S. obligations3.47%2024200,000 200,000 
Unsecured U.S. notes — Medium-term notes (1)
3.40%2022-20264,852,348 5,174,180 
Unsecured foreign obligations1.89%2022-2024161,932 254,259 
Asset-backed U.S. obligations (2)
2.59%2021-2026563,747 682,383 
Finance lease obligations and other2021-203047,185 48,418 
6,006,784 6,636,615 
Debt issuance costs and original issue discounts(19,667)(26,379)
Total debt5,987,117 6,610,236 
Short-term debt and current portion of long-term debt(1,354,821)(516,581)
Long-term debt$4,632,296 $6,093,655 
 ————————————
(1)Includes the impact from the fair market values of hedging instruments on our notes, which were not material as of September 30, 2021 and December 31, 2020. The notional amount of interest rate swaps designated as fair value hedges was $150 million as of September 30, 2021 and December 31, 2020.
(2)Asset-backed U.S. obligations are related to financing transactions backed by a portion of our revenue earning equipment.

The fair value of total debt (excluding finance lease and asset-backed U.S. obligations) was approximately $5.7 billion and $6.3 billion as of September 30, 2021 and December 31, 2020, respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and other debt were classified within Level 2 of the fair value hierarchy.

As of September 30, 2021, there was $1.2 billion available under the global 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 September 30, 2021, the ratio was 165%. We had letters of credit and surety bonds outstanding of $458 million and $519 million as of September 30, 2021 and December 31, 2020, respectively, which primarily guarantee the payment of insurance claims.

In April 2021, we extended the expiration date of the trade receivables financing program to April 2022. As of September 30, 2021, the available proceeds under the program were $300 million. In August 2021, we early redeemed $300 million aggregate principal amount outstanding of our 3.450% Medium Term Notes due November 15, 2021. This redemption did not have a material impact on our results of operations.

10. SHARE REPURCHASE PROGRAMS

In October 2021, our Board of Directors authorized two new share repurchase programs. The first program grants management discretion to repurchase up to 2.0 million shares of common stock over a period of two years, commencing on October 14, 2021 and expiring on October 14, 2023 (the "2021 Discretionary Program"). The 2021 Discretionary Program is designed to provide management with capital structure flexibility while concurrently managing objectives related to balance sheet leverage, acquisition opportunities, and shareholder returns. The second program authorizes 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 the
15

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
company's employee stock plans. The 2021 Anti-Dilutive Repurchase Program commenced on October 14, 2021 and expires on October 14, 2023. Share repurchases under both programs can be made from time to time using the company's 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 quality acquisitions and stock price.
The 2021 Anti-Dilutive Program replaces the 2019 anti-dilutive program, which was scheduled to expire in December 2021. During the nine months ended September 30, 2021 and September 30, 2020, we repurchased 735,294 shares for $57 million and 303,098 shares for $12 million, respectively, under the 2019 anti-dilutive program.


11. ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive income (loss) 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:
September 30,
20212020
 (In thousands)
Cumulative translation adjustments$(157,446)$(196,114)
Net actuarial loss and prior service cost(638,575)(716,711)
Unrealized gain (loss) from cash flow hedges(10,460)(16,893)
Accumulated other comprehensive loss$(806,481)$(929,718)


12. EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per common share from continuing operations:
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands, except per share amounts)
Earnings (loss) from continuing operations$138,659 $45,085 $339,811 $(137,749)
Less: Distributed and undistributed earnings allocated to unvested stock(662)(198)(1,599)(379)
Earnings (loss) from continuing operations available to common shareholders $137,997 $44,887 $338,212 $(138,128)
Weighted average common shares outstanding — Basic52,322 52,451 52,330 52,364 
Effect of dilutive equity awards1,192 278 1,090 — 
Weighted average common shares outstanding — Diluted53,514 52,729 53,419 52,364 
Earnings (loss) from continuing operations per common share — Basic$2.64 $0.86 $6.46 $(2.64)
Earnings (loss) from continuing operations per common share — Diluted$2.58 $0.85 $6.33 $(2.64)
Anti-dilutive equity awards not included in diluted EPS406 2,574 774 3,544 

Note: Amounts may not be additive due to rounding.
16

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
13. SHARE-BASED COMPENSATION PLANS

The following table provides information on share-based compensation expense and income tax benefit recognized:

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands)
Stock option and stock purchase plans$593 $1,052 $2,230 $3,461 
Unvested stock awards12,112 7,337 33,769 15,558 
Share-based compensation expense12,705 8,389 35,999 19,019 
Income tax benefit(1,695)(1,470)(5,208)(2,955)
Share-based compensation expense, net of tax$11,010 $6,919 $30,791 $16,064 

Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at September 30, 2021 was $54 million and is expected to be recognized over a weighted-average period of 1.9 years.

We generally grant share-based awards in the first quarter of each year during our annual equity award process. The following table is a summary of the awards granted in the annual equity award process in the first quarter of 2021:
Shares GrantedWeighted-Average
Fair Market Value
(Shares in thousands)
Time-vested restricted stock rights391$64.89 
Performance-based restricted stock rights11967.11 
Total510$65.41 

Restricted stock awards are unvested stock rights granted to employees that entitle the holder to shares of common stock as the award vests. Time-vested restricted stock rights typically vest ratably over three years regardless of company performance. The fair value of the time-vested awards is determined and fixed based on Ryder’s stock price on the date of grant.

Performance-based restricted stock rights (PBRSRs) are generally granted to executive management and include a performance-based vesting condition. PBRSRs are awarded based on various revenue, return-based and cash flow performance targets and may include a total shareholder return (TSR) modifier for certain members of management. The fair values of PBRSRs that include a TSR modifier are estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. The fair value of PBRSRs that do not include a TSR modifier is determined and fixed on the grant date based on our stock price on the date of grant. Share-based compensation expense for PBRSRs is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. PBRSRs awarded in the first quarter of 2021 contained vesting conditions based on return on equity, strategic revenue growth and free cash flow.

17

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
14. EMPLOYEE BENEFIT PLANS

Components of net pension expense were as follows:
Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands)
Company-administered plans:
Service cost$276 $2,967 $824 $8,921 
Interest cost14,496 17,463 43,514 52,348 
Expected return on plan assets(21,702)(24,304)(65,187)(72,515)
Curtailment loss 6,303  6,303 
Amortization of net actuarial loss and prior service cost7,056 7,784 21,184 23,308 
126 10,213 335 18,365 
Multi-employer plans2,586 2,769 7,766 8,346 
Net pension expense$2,712 $12,982 $8,101 $26,711 
Company-administered plans:
U.S.$2,227 $12,215 $6,680 $25,048 
Non-U.S.(2,101)(2,002)(6,345)(6,683)
126 10,213 335 18,365 
Multi-employer plans2,586 2,769 7,766 8,346 
Net pension expense$2,712 $12,982 $8,101 $26,711 

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. During the nine months ended September 30, 2021, we contributed $5 million to our pension plans. In 2021, the expected total contributions to our pension plans are approximately $7 million. 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.


15. OTHER ITEMS IMPACTING COMPARABILITY

Our primary measure of segment performance as shown in Note 18, "Segment Reporting," excludes certain items we do not believe are representative of the ongoing operations of the segment. Excluding these items from our segment measure of performance allows for better year over year comparison:
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
(In thousands)
Restructuring and other, net$4,137 $18,738 $9,742 $65,528 
ERP implementation costs 5,751 12,721 27,109 
Restructuring and other items, net4,137 24,490 22,463 92,637 
Gains on sale of properties(5,411)(3,733)(42,179)(3,733)
ChoiceLease liability insurance revenue (1)
 (4,971)(777)(21,738)
Other items impacting comparability, net$(1,274)$15,785 $(20,493)$67,166 
 ————————————
(1) Refer to Note 18, "Segment Reporting," for additional information.
Note: Amounts may not be additive due to rounding.


18

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
During the nine months ended September 30, 2021 and 2020, other items impacting comparability included:
Restructuring and other, net — For the three and nine months ended September 30, 2021, this item primarily included professional fees related to the pursuit of a discrete commercial claim. For the three and nine months ended September 30, 2020, this item primarily included expenses of $14 million and $38 million, respectively, related to our ChoiceLease liability insurance program which was discontinued in January 2020 and exited in the first quarter of 2021. For the nine months ended September 30, 2020, this item also included severance costs of $13 million for planned actions to reduce headcount primarily in our North American and U.K. FMS operations.
ERP implementation costs — This item includes costs associated with the implementation of an Enterprise Resource Planning (ERP) system. In July 2020, we went live with the first module of our ERP system for human resources. In April 2021, we went live with the financial module to replace existing core financial systems.
Gains on sale of properties We recorded gains on sale of property during the three and nine months ended September 30, 2021, primarily for certain FMS properties in the U.K. that were restructured as part of cost reduction activities in prior periods. The gain is reflected within "Miscellaneous (income) loss, net" in our Condensed Consolidated Statements of Earnings.


16.  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 reserves and estimates based on future developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and actual results may vary from our current estimates.

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, captioned Key West Policy & Fire Pension Fund v. Ryder System, Inc., et al. 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 April 7, 2021, the court held a hearing on defendants’ Motion to Dismiss, and reserved decision.

On June 26, 2020, August 6, 2020, and February 2, 2021, three shareholder derivative complaints purportedly on behalf of Ryder were filed in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, against us as nominal defendant and certain of our current and former officers and our current directors. The complaints allege breach of fiduciary duties, unjust enrichment, and waste of corporate assets. The complaints are based on the allegation set forth in the securities class action complaint. 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. These derivative cases have all been consolidated and stayed (stopped) until the Motion to Dismiss in the securities class action described above is resolved.

Also, on January 19, 2021 (as amended on March 26, 2021), and February 8, 2021, two shareholder derivative complaints purportedly on behalf of Ryder were filed in U.S. District Court for the Southern District of Florida against us as nominal defendant and certain of our current and former officers and directors. The complaints allege breach of fiduciary duties, unjust
19

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
enrichment, and waste of corporate assets. Both complaints are based on the allegation set forth in the securities class action complaint, seek similar relief on our behalf to that sought in the derivative complaints that were filed in Florida state court, and have been stayed (stopped) until the Motion to Dismiss in the securities class action is resolved.

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


17. SUPPLEMENTAL CASH FLOW INFORMATION
Nine months ended September 30,
 20212020
 (In thousands)
Interest paid$155,358 $177,426 
Income taxes paid21,177 9,918 
Right-of-use assets obtained in exchange for lease obligations:
Finance leases$12,480 $7,551 
Operating leases71,555 88,646 
Capital expenditures acquired but not yet paid$176,907 $69,981 
20

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

18. SEGMENT REPORTING

Our primary measurement of segment financial performance, defined as segment “Earnings (loss) from continuing operations before taxes” (EBT), includes an allocation of Central Support Services (CSS) and excludes non-operating pension costs, net and certain other items as discussed in Note 15, “Other Items Impacting Comparability.” 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 (loss) from continuing operations before income taxes:
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Revenue:
Fleet Management Solutions:
ChoiceLease$799,557 $788,179 $2,399,477 $2,346,546 
SelectCare127,367 128,373 394,538 390,370 
Commercial rental300,640 220,076 790,618 595,013 
Other20,017 16,738 55,734 52,496 
Fuel services revenue188,759 138,880 538,922 429,468 
ChoiceLease liability insurance revenue (1)
 4,971 777 21,738 
Fleet Management Solutions1,436,340 1,297,217 4,180,066 3,835,631 
Supply Chain Solutions802,357 685,415 2,284,687 1,833,180 
Dedicated Transportation Solutions380,357 299,680 1,055,575 928,512 
Eliminations (2)
(160,005)(131,737)(457,420)(390,160)
Total revenue$2,459,049 $2,150,575 $7,062,908 $6,207,163 
Earnings (loss) from continuing operations before taxes:
Fleet Management Solutions$186,391 $16,152 $408,244 $(202,157)
Supply Chain Solutions22,161 57,848 96,159 125,789 
Dedicated Transportation Solutions11,324 24,728 37,468 58,141 
Eliminations(21,065)(12,936)(52,525)(30,750)
198,811 85,792 489,346 (48,977)
Unallocated Central Support Services(17,027)(8,042)(53,323)(28,146)
Non-operating pension costs, net (3)
148 (7,200)530 (9,357)
Other items impacting comparability, net (4)
1,274 (15,785)20,493 (67,166)
Earnings (loss) from continuing operations before income taxes
$183,206 $54,765 $457,046 $(153,646)
————————————
(1)In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021.
(2)Represents the elimination of intercompany revenues in our FMS business segment.
(3)Refer to Note 14, "Employee Benefit Plans," for a discussion on this item.
(4)Refer to Note 15, “Other Items Impacting Comparability,” for a discussion of items excluded from our primary measure of segment performance.

21

Table of Contents
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)
The following table sets forth the capital expenditures paid for each of our segments:
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Fleet Management Solutions$498,099 $164,019 $1,369,681 $843,351 
Supply Chain Solutions21,224 6,380 44,204 26,254 
Dedicated Transportation Solutions299 290 861 1,053 
Central Support Services3,664 3,781 12,938 8,742 
Purchases of property and revenue earning equipment$523,286 $174,470 $1,427,684 $879,400 


19. SUBSEQUENT EVENTS

On October 27, 2021, we entered into a definitive agreement to acquire all the outstanding equity of Midwest Warehouse & Distribution System (Midwest), a warehousing, distribution, and transportation company based in Woodbridge, Ill. The acquisition is expected to expand our supply chain services, including multi-customer warehousing and distribution. We anticipate completing the acquisition in early November 2021 for a purchase price of approximately $275 million.
22

Table of Contents
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 2020 Annual Report on Form 10-K.

OVERVIEW
Ryder is a leading logistics and transportation company. Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. We report our financial performance 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.), Canada and the United Kingdom (U.K.); (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, last mile and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, 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 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.

Our results of operations and financial condition are influenced by a number of factors including: macroeconomic and other market conditions, including pricing and demand; used vehicle sales; customer contracting activity and retention; rental demand; maintenance costs; residual value estimates and other depreciation changes; currency exchange rate fluctuations; customer preferences; inflation; fuel and energy prices; general economic conditions; insurance costs; interest rates; labor costs; unemployment levels; tax rates; changes in accounting or regulatory requirements; and cybersecurity attacks.

Our business has, and may continue to be, impacted by the effects of the COVID-19 pandemic, particularly the current global supply chain disruption. For a detailed discussion of its impact on our results and future considerations, refer to our “Consolidated Results” and “Operating Results by Business Segment” discussions below. In addition, for a detailed description of certain risk factors that impact our business, including those related to the COVID-19 effects, refer to “Item 1A. Risk Factors” section in our 2020 Annual Report on Form 10-K.

This MD&A includes certain non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section of this MD&A for information on the non-GAAP measures, including reconciliations to the most comparable GAAP financial measure and the reasons why we believe each measure is useful to investors. In addition, this MD&A may include certain forward-looking statements regarding our outlook. These statements 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. Refer to the “Special Note Regarding Forward-Looking Statements” section in this Quarterly Report on Form 10-Q for more information.

23

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
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 September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
 (In thousands, except per share amounts)
Total revenue$2,459,049 $2,150,575 $7,062,908 $6,207,163  14% 14%
Operating revenue (1)
1,982,855 1,790,166 5,723,038 5,184,657  11% 10%
Earnings (loss) from continuing operations before income taxes (EBT)$183,206 $54,765 $457,046 $(153,646)NMNM
Comparable EBT (1)
181,784 77,750 436,023 (77,123)NMNM
Earnings (loss) from continuing operations 138,659 45,085 339,811 (137,749)NMNM
Comparable earnings (loss) from continuing operations (1)
137,458 63,821 324,786 (57,740)NMNM
Net earnings (loss)138,054 35,834 337,984 (147,878)NMNM
Comparable EBITDA (1) (2)
611,721 625,445 1,803,191 1,690,783  (2)% 7%
Earnings (loss) per common share (EPS) — Diluted
Continuing operations$2.58 $0.85 $6.33 $(2.64)NMNM
Comparable (1)
2.55 1.21 6.05 (1.11)NMNM
Net earnings (loss)2.57 0.68 6.30 (2.83)NMNM
NM - Denotes Not Meaningful throughout the MD&A
(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)Comparable EBITDA has been recast to exclude gains/losses from the sale of used vehicles.


Total revenue increased 14% in both the third quarter of 2021and for the nine months ended September 30, 2021. Operating revenue (a non-GAAP measure excluding fuel, subcontracted transportation and ChoiceLease liability insurance revenues) increased 11% in the third quarter of 2021 and 10% in the nine months ended September 30, 2021. The increases in total and operating revenue for both the third quarter and nine months ended September 30, 2021 were primarily due to higher revenue across all of our business segments as the prior year was negatively impacted by the economic slowdown from the COVID-19 effects particularly in our commercial rental (FMS) and automotive (SCS) businesses in the second quarter of 2020. Total revenue in both periods also increased from higher subcontracted transportation and fuel revenue.

EBT increased to $183 million in the third quarter of 2021 from $55 million in the prior year period. For the nine months ended September 30, 2021, EBT increased to $457 million, as compared to a loss of $154 million in the prior year period. These increases were primarily due to higher gains on used vehicles sold in 2021 and a declining impact of depreciation expense from prior residual value estimate changes, totaling $93 million and $316 million for the third quarter and nine months ended September 30, 2021, respectively. EBT also increased from higher rental performance, improved ChoiceLease results and the prior year impact from the COVID-19 effects.

The COVID-19 pandemic, particularly its effect on global supply chains, has, and will likely continue to, impact several areas of our businesses. After experiencing lower demand in our FMS business for commercial rental and used vehicles in the first half of 2020, we are now experiencing a significant increase in demand in those areas, as well as lease, due to a limited supply of vehicles caused by global supply chain disruptions. If the limited supply of vehicles continues for an extended period, we will likely continue to experience benefits in rental and used vehicle pricing and demand; however, we may experience limited rental and lease fleet growth and lower vehicle sales volumes due to limited used vehicle inventory. In our SCS business, the semiconductor supply shortage has impacted the production activity of our automotive customers, resulting in decreased demand for our services.

In addition, labor shortages, resulting in higher labor costs, have impacted all of our business segments, particularly our DTS and SCS segments. These higher labor costs as well as higher subcontracted transportation costs negatively impacted earnings in both DTS and SCS. We expect these negative impacts from labor shortages to continue through the fourth quarter of 2021.
24

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)

Overall, while supply chain disruptions and labor shortage challenges have contributed to increased demand for our services as companies seek long-term outsourcing solutions, industry-wide supply chain and labor challenges have negatively impacted a portion of our earnings. While we are experiencing positive momentum in our businesses, any additional negative effects of the pandemic may have a further impact on our business and financial results, as well as on significant judgments and estimates, including those related to prolonged labor shortages, extended disruptions in vehicle and vehicle part production, goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, the valuation of our pension plans, and allowance for credit losses.

Cash provided by operating activities remained at $1.7 billion for the nine months ended September 30, 2021 as higher net earnings were offset by higher working capital needs. Free cash flow (a non-GAAP financial measure) decreased to $829 million for the nine months ended September 30, 2021 primarily due to higher cash paid for capital expenditures, partially offset by higher proceeds from the sale of revenue earning equipment and operating property and equipment. Gross capital expenditures increased for the nine months ended September 30, 2021 primarily reflecting higher planned investments in the rental fleet.

Our debt to equity ratio was 238% and 293% as of September 30, 2021 and December 31, 2020, respectively. The decrease in debt to equity from December 31, 2020 reflects increased earnings and free cash flow. As of September 30, 2021, our debt balance decreased 9% from the prior year-end to $6.0 billion.

Adjusted return on equity (ROE) was 15.7% and (4.4)% as of September 30, 2021 and 2020, respectively. Our long-term target over the cycle is 15%. The increase in ROE is primarily due to a declining impact of depreciation expense from the residual value estimate changes and higher used vehicle sales results as well as improved commercial rental and ChoiceLease results.
25

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
CONSOLIDATED RESULTS

Lease & Related Maintenance and Rental
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Lease & related maintenance and rental revenues
$1,013,968 $933,771 $2,941,084 $2,730,187  9% 8%
Cost of lease & related maintenance and rental
725,341 758,351 2,164,222 2,351,993  (4)% (8)%
Gross margin$288,627 $175,420 $776,862 $378,194  65%NM
Gross margin %28%19%26%14%

Lease & related maintenance and rental revenues represent revenues from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenues increased 9% in the third quarter of 2021 and 8% for the nine months ended September 30, 2021 driven primarily by increases in commercial rental demand and pricing. Commercial rental revenues were negatively impacted by the COVID-19 effects in the prior year.

Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and rental revenues 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 third quarter of 2021 and 8% for the nine months ended September 30, 2021 due to declining depreciation expense impacts from prior residual value estimate changes and a smaller average lease fleet.

Lease & related maintenance and rental gross margin increased in the third quarter of 2021 and for the nine months ended September 30, 2021 primarily due to a declining impact of depreciation expense from prior residual value estimate changes, higher commercial rental pricing and utilization, and higher ChoiceLease pricing. Gross margin as a percentage of revenue increased to 28% in the third quarter of 2021 and increased to 26% in the nine months ended September 30, 2021 as a result of the lower depreciation impact, higher commercial rental and ChoiceLease revenue and improved rental utilization.

Services
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Services revenue$1,320,761 $1,120,544 $3,762,389 $3,174,999  18% 19%
Cost of services1,163,606 932,510 3,255,123 2,680,292  25% 21%
Gross margin$157,155 $188,034 $507,266 $494,707  (16)% 3%
Gross margin %12%17%13%16%

Services revenue represents all the revenues 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 18% in the third quarter of 2021 and 19% for the nine months ended September 30, 2021 due to increases in revenue in SCS and DTS from new business, higher pricing and higher volumes, partially offset by a decrease in SCS automotive business revenue as a result of supply chain disruptions on automotive production in the third quarter of 2021. For the nine months ended September 30, 2020, SCS revenue was negatively impacted by COVID-19 effects, including the negative impacts from reduced automotive activity in the second quarter of 2020.

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 25% in the third quarter and 21% for the nine months ended September 30, 2021
26

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
primarily due to the growth in revenues. Costs of services in both periods also increased due to higher labor and subcontracted transportation costs from labor shortages as well as higher insurance costs.

Services gross margin decreased 16% in the third quarter of 2021 and increased 3% for the nine months ended September 30, 2021. Gross margin as a percentage of revenue decreased to 12% in the third quarter of 2021 and decreased to 13% for the nine months ended September 30, 2021. The decreases in gross margin as a percentage of revenue reflect the impact of higher labor and subcontracted transportation costs and lower SCS automotive performance partially offset by the impact of higher revenues in SCS and DTS for the three and nine months ended September 30, 2021.

Fuel
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Fuel services revenue$124,320 $96,260 $359,435 $301,977  29% 19%
Cost of fuel services116,439 92,930 340,595 291,359  25% 17%
Gross margin$7,881 $3,330 $18,840 $10,618 NM 77%
Gross margin %6%3%5%4%

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue increased 29% in the third quarter of 2021 and 19% for the nine months ended September 30, 2021, primarily reflecting higher fuel prices passed through to customers, partially offset by less gallons sold.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services increased 25% in the third quarter of 2021 and 17% for the nine months ended September 30, 2021 as a result of higher fuel prices, partially offset by less gallons sold.

Fuel services gross margin increased in the third quarter of 2021 and for the nine months ended September 30, 2021. Fuel services gross margin as a percentage of revenue increased to 6% in the third quarter of 2021 and increased to 5% for the nine months ended September 30, 2021. 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 third quarter of 2021 and nine months ended September 30, 2021 was impacted by these price change dynamics.

Other Operating Expenses
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Other operating expenses$32,382 $30,009 $99,763 $93,423 8%7%

Other operating expenses include costs related to our owned and leased facilities within the FMS segment, such as facility depreciation, rent, purchased insurance, utilities and taxes. These facilities are utilized to provide maintenance to our ChoiceLease, commercial rental, and SelectCare customers. Other operating expenses increased in the third quarter of 2021 and for the nine months ended September 30, 2021 due to additional maintenance performed on our FMS facilities.

27

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Selling, General and Administrative Expenses
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Selling, general and administrative expenses (SG&A)
$255,589$211,183$766,599 $643,866 21%19%
Percentage of total revenue10%10%11%10%

SG&A expenses increased 21% in the third quarter of 2021 and 19% for the nine months ended September 30, 2021. The increases in SG&A expenses reflects higher incentive compensation-related expenses due to improved company performance, strategic investments primarily in technology and marketing, and higher compensation related expenses from temporary furloughs in the prior year, partially offset by lower bad debt expense. SG&A expenses as a percentage of total revenue remained at 10% for the third quarter of 2021 and increased slightly to 11% for the nine months ended September 30, 2021.

Non-Operating Pension Costs, net
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Non-operating pension costs, net$(148)$7,200 $(530)$9,357 NMNM

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 decrease in non-operating pension costs, net is primarily due to a freeze of substantially all of the remaining active participants in our pension plans in 2020.

Used Vehicle Sales, net
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
(Gains) losses on used vehicle sales, net
$(69,303)$(12,919)$(149,788)$17,253 NMNM

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 was a net gain in the third quarter of 2021 and 2020. For the nine months ended September 30, 2021, used vehicle sales, net was a net gain as compared to a net loss in the prior year period. The increase in used vehicle sales, net in both periods was primarily due to higher gains on sales of used vehicles.

Average proceeds per unit increased in the third quarter of 2021 and for the nine months ended September 30, 2021, primarily reflecting higher pricing and retail channel mix. The following table presents the used vehicle pricing changes compared to the prior year:
Proceeds per unit change 2021/2020 (1)
Three MonthsNine Months
Tractors100%62%
Trucks103%66%
————————————
(1) Represents percentage change compared to prior year period in average sales proceeds on used vehicle sales using constant currency.
28

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Interest expense
 Three months ended September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
 (In thousands)
Interest expense$53,752 $62,608 $162,613 $192,459 (14)%(16)%
Effective interest rate3.5%3.2%3.4%3.3%

Interest expense decreased 14% in the third quarter of 2021 and 16% for the nine months ended September 30, 2021 reflecting lower average outstanding debt. The decrease in average outstanding debt reflects lower borrowing needs due to lower vehicle capital spending in 2020 and increased free cash flow.

Miscellaneous (income) loss, net
 Three months ended September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
 (In thousands)
Miscellaneous (income) loss, net$(5,952)$(10,552)$(55,198)$(11,830)(44)%NM
Miscellaneous (income) loss, 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) loss, net was income of $6 million in the third quarter of 2021 compared to income of $11 million in the prior year period reflecting lower rabbi trust investment income. Miscellaneous (income) loss, net was income of $55 million for the nine months ended September 30, 2021 compared to income of $12 million in the prior year period, primarily due to higher U.K. and U.S. gains on sale of properties.

Restructuring and other items, net
Three months ended September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
 (In thousands)
Restructuring and other items, net$4,137 $24,490 $22,463 $92,637 (83)%(76)%

Refer to Note 15, "Other Items Impacting Comparability" in the Notes to Condensed Consolidated Financial Statements for a discussion of restructuring charges and other items.

Provision for (benefit from) income taxes
 Three months ended September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
 (In thousands) 
Provision for (benefit from) income taxes
$44,547 $9,680 $117,235 $(15,897)NMNM
Effective tax rate on continuing operations24.3%17.7%25.7%10.3%
Comparable tax rate on continuing operations (1)
24.4%17.9%25.5%25.1%
————————————
(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.

29

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Refer to our discussion of the changes in our provision for income taxes and effective tax rate from continuing operations in Note 7, "Income Taxes".


30

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
OPERATING RESULTS BY BUSINESS SEGMENT
 Three months ended September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
 (In thousands) 
Revenue:
Fleet Management Solutions$1,436,340 $1,297,217 $4,180,066 $3,835,631 11%9%
Supply Chain Solutions802,357 685,415 2,284,687 1,833,180 17%25%
Dedicated Transportation Solutions
380,357 299,680 1,055,575 928,512 27%14%
Eliminations(160,005)(131,737)(457,420)(390,160)(21)%(17)%
Total$2,459,049 $2,150,575 $7,062,908 $6,207,163 14%14%
Operating Revenue: (1)
Fleet Management Solutions$1,247,581 $1,153,366 $3,640,367 $3,384,425 8%8%
Supply Chain Solutions559,290 492,288 1,596,446 1,364,656 14%17%
Dedicated Transportation Solutions
271,557 233,629 764,245 698,245 16%9%
Eliminations(95,573)(89,117)(278,020)(262,669)(7)%(6)%
Total$1,982,855 $1,790,166 $5,723,038 $5,184,657 11%10%
Earnings (loss) from continuing operations before income taxes:
Fleet Management Solutions$186,391 $16,152 $408,244 $(202,157)NMNM
Supply Chain Solutions22,161 57,848 96,159 125,789 (62)%(24)%
Dedicated Transportation Solutions
11,324 24,728 37,468 58,141 (54)%(36)%
Eliminations(21,065)(12,936)(52,525)(30,750)(63)%(71)%
198,811 85,792 489,346 (48,977)NMNM
Unallocated Central Support Services
(17,027)(8,042)(53,323)(28,146)NM(89)%
Non-operating pension costs, net148 (7,200)530 (9,357)NMNM
Other items impacting comparability, net (2)
1,274 (15,785)20,493 (67,166)NMNM
Earnings (loss) from continuing operations before income taxes
$183,206 $54,765 $457,046 $(153,646)NMNM
————————————
(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)Refer to Note 15, "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 (loss) from continuing operations before income taxes” (EBT), which includes an allocation of Central Support Services (CSS), and excludes non-operating pension costs, net and certain other items as discussed in Note 15, "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 segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.

31

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
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 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 September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands)
Equipment Contribution:
Supply Chain Solutions
$8,794 $4,380 $21,839 $12,178 NM 79%
Dedicated Transportation Solutions
12,271 8,556 30,686 18,572  43% 65%
Total
$21,065 $12,936 $52,525 $30,750  63% 71%

The increase in SCS and DTS equipment contribution in the third quarter of 2021 and in the nine months ended September 30, 2021 is primarily related to higher rental demand, the declining impact associated with the prior residual value estimate changes on vehicles used to provide services to SCS and DTS as well as higher fuel margins.

Items excluded from our segment EBT measure and their classification within our Condensed Consolidated Statements of Earnings are as follows:
 Three months ended September 30,Nine months ended September 30,
DescriptionClassification2021202020212020
  (In thousands)
Restructuring and other, net (1)
Restructuring and other items, net$(4,137)$(18,738)$(9,742)$(65,528)
ERP implementation costs (1)
Restructuring and other items, net (5,751)(12,721)(27,109)
Gains on sale of properties (1)
Miscellaneous (income) loss, net5,411 3,733 42,179 3,733 
ChoiceLease liability insurance revenue (1)
Revenue 4,971 777 21,738 
Other items impacting comparability, net1,274 (15,785)20,493 (67,166)
Non-operating pension costs, net (2)
Non-operating pension costs148 (7,200)530 (9,357)
$1,422 $(22,985)$21,023 $(76,523)
———————————
(1)Refer to Note 15, “Other Items Impacting Comparability,” in the Notes to Condensed Consolidated Financial Statements for additional information.
(2)Refer to Note 14, "Employee Benefit Plans," in the Notes to Condensed Consolidated Financial Statements for additional information.


32

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Fleet Management Solutions
  Three months ended September 30,Nine months ended September 30,Change 2021/2020
  2021202020212020Three MonthsNine Months
(In thousands) 
ChoiceLease$799,557 $788,179 $2,399,477 $2,346,546  1% 2%
SelectCare127,367 128,373 394,538 390,370  (1)% 1%
Commercial rental (1)
300,640 220,076 790,618 595,013  37% 33%
Other20,017 16,738 55,734 52,496  20% 6%
Fuel services188,759 138,880 538,922 429,468  36% 25%
ChoiceLease liability insurance (2)
 4,971 777 21,738 NM (96)%
FMS total revenue$1,436,340 $1,297,217 $4,180,066 $3,835,631  11% 9%
FMS operating revenue (3)
$1,247,581 $1,153,366 $3,640,367 $3,384,425  8% 8%
FMS EBT$186,391 $16,152 $408,244 $(202,157)NMNM
FMS EBT as a % of FMS total revenue
13.0%1.2%9.8%(5.3)%NMNM
FMS EBT as a % of FMS operating revenue (3)
14.9%1.4%11.2%(6.0)%NMNM
Twelve months ended September 30,Change 2021/2020
20212020
FMS EBT as a % of FMS total revenue8.5%(5.4)%NM
FMS EBT as a % of FMS operating revenue (3)
9.7%(6.1)%NM
————————————
(1)For the three months ended September 30, 2021 and 2020, rental revenue from lease customers in place of a lease vehicle represented 30% and 32% of commercial rental revenue, respectively. For the nine months ended September 30, 2021 and 2020, rental revenue from lease customers in place of a lease vehicle represented 30% and 35% of commercial rental revenue, respectively.
(2)In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021.
(3)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 increased 11% in the third quarter of 2021and 9% for the nine months ended September 30, 2021 due to higher operating revenue (a non-GAAP measure excluding fuel and ChoiceLease liability insurance revenues) and fuel revenue. FMS operating revenue increased 8% in both the third quarter and for the nine months ended September 30, 2021 primarily due to higher commercial rental revenue.

ChoiceLease revenue increased 1% in the third quarter of 2021 and 2% for the nine months ended September 30, 2021 primarily due to higher prices, partially offset by lower revenue from a smaller fleet. Commercial rental revenue increased 37% in the third quarter and 33% in the nine months ended September 30, 2021 primarily due to higher demand and pricing. Commercial rental demand in the prior year was negatively impacted by the COVID-19 effects, primarily in the second quarter of 2020. Commercial rental pricing on average power units increased 9% in the third quarter of 2021 and 11% for the nine months ended September 30, 2021. Fuel services revenue increased 36% in the third quarter of 2021 and 25% in the nine months ended September 30, 2021 primarily reflecting higher fuel prices passed through to customers, partially offset by less gallons sold.

FMS EBT in the third quarter of 2021 increased to $186 million from $16 million in the prior year period. FMS EBT in the nine months ended September 30, 2021, increased to $408 million from a loss of $202 million in the prior year period. The increases in FMS EBT are attributed to higher gains on used vehicles sold and a declining impact of depreciation expense from prior vehicle residual value estimate changes of $93 million and $316 million for the three and nine months ended September 30, 2021, respectively. The increases in EBT also reflects higher commercial rental and ChoiceLease results. Higher commercial rental results were primarily due to higher pricing and increased utilization in 2021. Rental power fleet utilization increased to
33

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
83% from 71% in the third quarter of 2021 and increased to 79% from 64% in the nine months ended September 30, 2021. ChoiceLease results benefited from higher lease pricing with quarterly revenue per average active vehicle up 4%, partially offset by a 3% smaller quarterly average active lease fleet compared to prior year. In 2020, EBT included negative impacts from the COVID-19 effects due to lower rental demand and higher bad debt expense which was partially offset by COVID-19-related cost actions and lower medical expenses.

During the second quarter of 2021, we completed a review of the residual values and useful lives of revenue earning equipment. Prior to our review, the residual value estimates of our total fleet already reflected historically low levels, with used tractor prices only falling below those estimates in four of the last 21 years. Based on the results of our analysis, we primarily adjusted our residual value estimates for certain tractors and useful lives of certain classes of our revenue earning equipment, impacting approximately 15% of our total fleet. These estimate changes are intended to further reduce the probability of losses or need for accelerated depreciation during a potential cyclical downturn, even if tractor pricing returns to historical trough levels. The adjustment is expected to increase depreciation expense in 2021 by $18 million or approximately 1% of estimated annual depreciation expense. The impact was not material to our results of operations for the third quarter and nine months ended September 30, 2021. Refer to Note 5, "Revenue Earning Equipment, net" for further details.

Our global fleet of owned and leased revenue earning equipment and SelectCare vehicles, including vehicles under on-demand maintenance, is summarized as follows (number of units rounded to the nearest hundred):
    Change
 September 30, 2021December 31, 2020September 30, 2020Sept 2021/
Dec 2020
Sept 2021/
Sept 2020
End of period vehicle count
By type:
Trucks (1)
75,000 77,300 79,400  (3)% (6)%
Tractors (2)
71,900 73,300 75,400  (2)% (5)%
Trailers and other (3)
43,800 44,100 44,800  (1)% (2)%
Total190,700 194,700 199,600  (2)% (4)%
By product line:
ChoiceLease
144,700 149,600 150,900  (3)% (4)%
Commercial rental
40,300 35,000 35,400  15% 14%
 Service vehicles and other2,200 2,400 2,600  (8)% (15)%
187,200 187,000 188,900  —% (1)%
Held for sale
3,500 7,700 10,700  (55)% (67)%
Total190,700 194,700 199,600  (2)% (4)%
Customer vehicles under SelectCare contracts (4)
53,900 50,300 55,000  7% (2)%
Quarterly average vehicle count
By product line:
ChoiceLease145,200 150,400 152,400  (3)% (5)%
Commercial rental39,400 35,100 36,000  12% 9%
Service vehicles and other2,300 2,500 2,600  (8)% (12)%
186,900 188,000 191,000  (1)% (2)%
Held for sale3,900 9,000 12,800  (57)% (70)%
Total190,800 197,000 203,800  (3)% (6)%
Customer vehicles under SelectCare contracts (4)
53,400 52,700 56,500  1% (5)%
Customer vehicles under SelectCare on-demand (5)
6,000 6,400 6,200  (6)% (3)%
Total vehicles serviced250,200 256,100 266,500  (2)% (6)%

———————————
(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.
34

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Note: Quarterly amounts were computed using a 6-point average based on monthly information. 
The following table provides information on our global active ChoiceLease fleet (number of units rounded to nearest hundred):
Change
September 30, 2021December 31, 2020September 30, 2020Sept 2021/
Dec 2020
Sept 2021/
Sept 2020
End of period active ChoiceLease vehicle count (1)
140,000 142,300 143,400  (2)% (2)%
Quarterly average active ChoiceLease vehicle count (1)
140,200 143,100 144,100  (2)% (3)%
Quarterly revenue per active ChoiceLease vehicle (2)
$5,700 $5,700 $5,500  —% 4%
———————————
(1)Active ChoiceLease vehicles are calculated as those units currently earning revenue and excludes not yet earning or no longer earning units.
(2)Calculated based on the reported quarterly ChoiceLease revenue. Quarterly revenue per active ChoiceLease vehicle may be impacted by changes in vehicle mix.

The following table provides commercial rental statistics on our global power fleet which excludes trailers:
 Three months ended September 30,Nine months ended September 30,Change 2021/2020
 2021202020212020Three MonthsNine Months
Average commercial rental power fleet size — in service (1)
32,90030,40031,00031,7008%(2)%
Commercial rental utilization — power fleet (2)
82.8%70.8%78.7%63.7%NMNM
—————————
(1)Number of units rounded to the nearest hundred and calculated using quarterly average unit counts.
(2)Rental utilization is calculated using the number of days units are rented divided by the number of days units available to rent based on the days in a calendar year.

The following table provides a breakdown of our non-revenue earning equipment included in our end of period global fleet count (number of units rounded to nearest hundred):
    Change
September 30, 2021December 31, 2020September 30, 2020Sept 2021/
Dec 2020
Sept 2021/
Sept 2020
Not yet earning revenue (NYE)2,400 1,900 1,100 26%NM
No longer earning revenue (NLE):
Units held for sale3,500 7,700 10,700 (55)%(67)%
Other NLE units2,600 3,200 4,800 (19)%(46)%
Total NLE6,100 10,900 15,500 (44)%(61)%
Total8,500 12,800 16,600 (34)%(49)%

NYE units represent new vehicles on hand that are being prepared for deployment to a lease customer or into the rental fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. NYE units increased as compared to September 30, 2020 reflecting increased rental capital spending to meet higher rental demand as well as higher lease sales activity.

NLE units represent vehicles held for sale and vehicles for which no revenue has been earned in the previous 30 days. Accordingly, these vehicles may be temporarily out of service, being prepared for sale or awaiting redeployment. NLE units decreased 61% compared to September 30, 2020 due to a decrease in units held for sale, a lower number of vehicles being prepared for sale or redeployment and higher utilization of our rental fleet.

35

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)

Supply Chain Solutions
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands, except vehicle counts)
Automotive$167,856 $181,962 $519,577 $462,822 (8)%12%
Technology and healthcare60,807 55,285 173,041 167,901 10%3%
Consumer packaged goods and retail263,659 205,711 717,936 590,430 28%22%
Industrial and other66,968 49,330 185,892 143,503 36%30%
Subcontracted transportation214,107 172,003 606,120 409,939 24%48%
Fuel28,960 21,124 82,121 58,585 37%40%
SCS total revenue$802,357 $685,415 $2,284,687 $1,833,180 17%25%
SCS operating revenue (1)
$559,290 $492,288 $1,596,446 $1,364,656 14%17%
SCS EBT$22,161 $57,848 $96,159 $125,789 (62)%(24)%
SCS EBT as a % of SCS total revenue2.8%8.4%4.2%6.9%(560) bps(270) bps
SCS EBT as a % of SCS operating revenue (1)
4.0%11.8%6.0%9.2%(780) bps(320) bps
Memo:
End of period fleet count10,500 9,500 10,500 9,500 11%11%
Twelve months ended September 30,Change 2021/2020
20212020
SCS EBT as a % of SCS total revenue4.3%6.4% (210) bps
SCS EBT as a % of SCS operating revenue (1)
6.2%8.6% (240) 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.

SCS total revenue increased 17% in the third quarter of 2021 and 25% in the nine months ended September 30, 2021 as a result of higher operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) and subcontracted transportation. SCS operating revenue increased 14% in the third quarter of 2021 due to new business, increased volumes, and higher pricing, partially offset by the impact from supply chain disruptions on automotive production. SCS operating revenue increased 17% for the nine months ended September 30, 2021 in all industry verticals primarily due to higher volumes, new business and prior-year COVID-19 effects.

SCS EBT decreased 62% in the third quarter and 24% for the nine months ended September 30, 2021 primarily due to lower earnings in automotive, higher labor costs, and strategic investments, partially offset by earnings from new business. SCS EBT in the nine months ended September 30, 2021 was also negatively impacted by increased incentive compensation and higher medical costs.

In the prior year periods, SCS customer volumes in the automotive business significantly declined due to temporary production shutdowns beginning late in the first quarter of 2020 related to COVID-19. These operations restarted during the second quarter of 2020 and were followed by increased consumer demand in the second half of 2020. In 2021, supply chain disruptions impacted the production activity of our automotive customers through the third quarter of 2021, and is expected to continue through the fourth quarter of 2021.


36

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)

Dedicated Transportation Solutions
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
(In thousands, except vehicle counts) 
DTS total revenue$380,357 $299,680 $1,055,575 $928,512 27%14%
DTS operating revenue (1)
$271,557 $233,629 $764,245 $698,245 16%9%
DTS EBT$11,324 $24,728 $37,468 $58,141 (54)%(36)%
DTS EBT as a % of DTS total revenue
3.0%8.3%3.5%6.3%(530) bps(280) bps
DTS EBT as a % of DTS operating revenue (1)
4.2%10.6%4.9%8.3%(640) bps(340) bps
Memo:
End of period fleet count10,800 9,300 10,800 9,300 16%16%
Twelve months ended September 30,Change 2021/2020
20212020
DTS EBT as a % of DTS total revenue3.9%6.0% (210) bps
DTS EBT as a % of DTS operating revenue (1)
5.3%8.1% (280) 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.

DTS total revenue increased 27% in the third quarter of 2021 and 14% for the nine months ended September 30, 2021 primarily due to higher subcontracted transportation and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) growth. DTS operating revenue increased 16% in the third quarter of 2021 and 9% in the nine months ended September 30, 2021, primarily reflecting new business, higher volumes, and higher pricing. Revenue growth from new business was largely driven by wins from competitors and private fleet conversions.

DTS EBT decreased 54% in third quarter of 2021 and 36% for the nine months ended September 30, 2021, primarily due to higher labor, increased insurance costs and strategic investments. Labor shortages resulted in higher labor costs as well as higher subcontracted transportation costs, negatively impacting earnings. We expect the negative impacts from labor shortages to continue through the fourth quarter of 2021.


37

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Central Support Services
Three months ended September 30,Nine months ended September 30,Change 2021/2020
2021202020212020Three MonthsNine Months
 (In thousands) 
Human resources$5,539 $4,868 $17,081 $15,372 14%11%
Finance and procurement19,614 17,020 57,602 52,766 15%9%
Corporate services and public affairs
2,062 1,716 7,136 5,426 20%32%
Information technology31,621 24,138 87,286 71,788 31%22%
Legal and safety7,284 6,853 22,223 21,328 6%4%
Marketing6,253 6,861 23,003 15,791 (9)%46%
Other18,134 8,132 58,318 24,934 NMNM
Total CSS90,507 69,588 272,649 207,405 30%31%
Allocation of CSS to business segments
(73,480)(61,546)(219,326)(179,259)19%22%
Unallocated CSS$17,027 $8,042 $53,323 $28,146 NM89%

Total CSS costs increased 30% in the third quarter of 2021 and 31% for the nine months ended September 30, 2021 due to higher incentive compensation-related expenses in 2021 and continuing strategic investments in technology. Unallocated CSS costs increased to $17 million and $53 million in the third quarter of 2021 and for the nine months ended September 30, 2021 due to higher compensation-related expenses partially driven by increased incentive compensation from improved company performance in 2021.
38

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
FINANCIAL RESOURCES AND LIQUIDITY
Cash Flows
The following is a summary of our cash flows from continuing operations:
 Nine months ended September 30,
20212020
 (In thousands)
Net cash provided by (used in):
Operating activities$1,684,891 $1,696,589 
Investing activities(860,910)(484,419)
Financing activities(768,054)(603,715)
Effect of exchange rate changes on cash(4,590)2,866 
Net change in cash and cash equivalents$51,337 $611,321 
Nine months ended September 30,
20212020
(In thousands)
Net cash provided by operating activities
Earnings (loss) from continuing operations$339,811 $(137,749)
Non-cash and other, net1,404,383 1,729,534 
Collections on sales-type leases99,305 85,662 
Changes in operating assets and liabilities(158,608)19,142 
Cash flows from operating activities from continuing operations
$1,684,891 $1,696,589 

Cash provided by operating activities remained at $1.7 billion for the nine months ended September 30, 2021 reflecting higher earnings offset by higher working capital needs. Our working capital needs are primarily driven by the timing of collections of our receivables and payments of our trade payables, as well as changes in other assets and liabilities. The impact from changes in operating assets and liabilities was primarily attributed to an increase in receivables due to higher revenues and timing of collections. Cash used in investing activities increased to $861 million for the nine months ended September 30, 2021 compared with $484 million in 2020 primarily due to an increase in cash paid for capital expenditures partially offset by higher proceeds from the sale of revenue earning equipment and operating property and equipment. Cash used in financing activities was $768 million for the nine months ended September 30, 2021 compared to $604 million in 2020 due to lower borrowing needs.

The following table shows our free cash flow computation:
Nine months ended September 30,
20212020
(In thousands)
Net cash provided by operating activities$1,684,891 $1,696,589 
Sales of revenue earning equipment (1)
516,466 390,767 
Sales of operating property and equipment (1)
54,606 9,918 
Other (1)
691 — 
Total cash generated (2)
2,256,654 2,097,274 
Purchases of property and revenue earning equipment (1)
(1,427,684)(879,400)
Free cash flow (2)
$828,970 $1,217,874 
————————————
(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.


39

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Free cash flow (a non-GAAP measure) decreased to $829 million for the nine months ended September 30, 2021 from $1.2 billion in 2020 primarily due to an increase in cash paid for capital expenditures partially offset by higher proceeds from the sale of revenue earning equipment and operating property and equipment.

Capital expenditures generally represent the purchase of revenue earning equipment (trucks, tractors and trailers) within our FMS segment. These expenditures primarily support the ChoiceLease and commercial rental product lines. The level of capital required to support the ChoiceLease product line varies based on customer contract signings for replacement vehicles and growth. These contracts are long-term agreements that result in predictable cash flows typically over three to seven years for trucks and tractors and ten years for trailers. We utilize capital for the purchase of vehicles in our commercial rental product line to replenish and expand the fleet available for shorter-term use by contractual or occasional customers. Operating property and equipment expenditures primarily relate to spending on items such as vehicle maintenance facilities and equipment, computer and telecommunications equipment, investments in technologies, and warehouse facilities and equipment.

The following table provides a summary of gross capital expenditures:
 Nine months ended September 30,
 20212020
 (In thousands)
Revenue earning equipment:
ChoiceLease$807,490 $601,326 
Commercial rental582,757 73,466 
1,390,247 674,792 
Operating property and equipment105,639 90,164 
Gross capital expenditures (1)
1,495,886 764,956 
Changes in accounts payable related to purchases of property and revenue earning equipment(68,202)114,444 
Cash paid for purchases of property and revenue earning equipment$1,427,684 $879,400 
————————————
(1)Excludes approximately $12 million and $8 million of assets held under finance leases resulting from new or the extension of existing finance leases and other additions during the nine months ended September 30, 2021 and 2020.

Gross capital expenditures increased to $1.5 billion for the nine months ended September 30, 2021 reflecting higher planned investments in the rental fleet.
40

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
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 commercial paper and medium-term notes.

Cash and cash equivalents totaled $203 million as of September 30, 2021. As of September 30, 2021, approximately $150 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. If we decide to repatriate cash and cash equivalents held outside the U.S., we may be subject to additional income taxes and foreign withholding taxes. Our intent is to permanently reinvest remaining foreign amounts outside the U.S., notwithstanding a one-time repatriation associated with the acquisition of Midwest.

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, or both.

Refer to Note 9, “Debt,” in the Notes to Condensed Consolidated Financial Statements for information on our net worth covenant, global revolving credit facility, trade receivables financing program (which was extended to April 2022 during the second quarter of 2021), 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.

Our debt ratings and rating outlooks as of September 30, 2021 were as follows:
Rating Summary
 Short-termShort-term OutlookLong-termLong-term Outlook
Standard & Poor’s Ratings ServicesA2BBBPositive
Moody’s Investors ServiceP2StableBaa2Stable
Fitch RatingsF2BBB+Stable
DBRSR-1 (Low)StableA (Low)Stable

As of September 30, 2021, we had the following amounts available to fund operations under the following facilities:
(In millions)
Global revolving credit facility$1,218 
Trade receivables financing program$300 

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 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 7% and 9% as of September 30, 2021 and December 31, 2020, respectively.

Our debt to equity ratio was 238% and 293% as of September 30, 2021 and December 31, 2020, respectively. The debt to equity ratio represents total debt divided by total equity.

41

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Share Repurchases and Cash Dividends

Refer to Note 10, “Share Repurchase Programs,” in the Notes to Condensed Consolidated Financial Statements for a discussion of share repurchases.

In July 2021 and 2020, our Board of Directors declared a quarterly cash dividend of $0.58 and $0.56 per share of common stock, respectively. The dividends were paid during the third quarter of each respective year. In October 2021, our Board of Directors declared a quarterly cash dividend of $0.58 per share of common stock.

RECENT ACCOUNTING PRONOUNCEMENTS

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

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes information extracted from condensed consolidated 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 our results and liquidity discussions above. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.


42

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Specifically, we refer to the following non-GAAP financial measures in this Form 10-Q:
Non-GAAP Financial MeasureComparable GAAP Measure
Operating Revenue Measures:
Operating RevenueTotal Revenue
FMS Operating RevenueFMS Total Revenue
SCS Operating RevenueSCS Total Revenue
DTS Operating RevenueDTS Total Revenue
FMS EBT as a % of FMS Operating RevenueFMS EBT as a % of FMS Total Revenue
SCS EBT as a % of SCS Operating RevenueSCS EBT as a % of SCS Total Revenue
DTS EBT as a % of DTS Operating RevenueDTS EBT as a % of DTS Total Revenue
Comparable Earnings Measures:
Comparable Earnings (Loss) Before Income TaxEarnings (Loss) Before Income Tax
Comparable Earnings (Loss)Earnings (Loss) from Continuing Operations
Comparable Earnings Before Interest, Taxes, Depreciation
     and Amortization (EBITDA)
Net Earnings (Loss)
Comparable EPSEPS from Continuing Operations
Comparable Tax RateEffective 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 FlowCash Provided by Operating Activities




43

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Set forth in the table below is an 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 System, Inc. or each business segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted transportation, as well as (3) revenue from our ChoiceLease liability insurance program which was discontinued in early 2020. 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, which is impacted by fluctuations in market fuel prices and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on 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.

ChoiceLease liability insurance: We exclude ChoiceLease liability insurance as we announced our plan in the first quarter of 2020 to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021. We are excluding the revenues associated with this program for better comparability of our on-going operations.
44

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Comparable Earnings Measures:
Comparable Earnings (Loss) before Income Taxes (EBT)

Comparable Earnings (Loss)

Comparable Earnings (Loss) 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) any other significant items that are not representative of our business operations. 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, 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 net earnings and average shareholders' equity. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations.
45

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
Comparable EBITDA is defined as net earnings (loss), 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 (loss), earnings (loss) from continuing operations before income taxes or earnings (loss) from continuing operations determined in accordance with GAAP, as an indicator of the Company’s 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 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.

46

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
The following table provides a reconciliation of GAAP earnings (loss) before taxes (EBT), earnings (loss), and earnings (loss) per diluted share (Diluted EPS) from continuing operations to comparable EBT, comparable earnings (loss) 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 diluted EPS measures. The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Condensed Consolidated Financial Statements:
Continuing Operations
Three months ended September 30,Nine months ended September 30,
2021202020212020
 (In thousands, except per share amounts)
EBT$183,206 $54,765 $457,046 $(153,646)
Non-operating pension costs, net(148)7,200 (530)9,357 
Restructuring and other, net (1)
4,137 18,738 9,742 65,528 
ERP implementation costs (1)
 5,751 12,721 27,109 
Gains on sale of properties (1)
(5,411)(3,733)(42,179)(3,733)
ChoiceLease liability insurance revenue (1)
 (4,971)(777)(21,738)
Comparable EBT$181,784 $77,750 $436,023 $(77,123)
Earnings (loss)$138,659 $45,085 $339,811 $(137,749)
Non-operating pension costs, net(858)4,660 (2,644)4,682 
Restructuring and other, net (including ChoiceLease liability insurance results) (1)
3,696 11,186 9,480 36,223 
ERP implementation costs (1)
 4,269 9,444 20,120 
Gains on sale of properties (1)
(4,063)(3,449)(32,062)(3,449)
Tax adjustments, net (2)
24 2,070 757 22,433 
Comparable Earnings$137,458 $63,821 $324,786 $(57,740)
Diluted EPS$2.58 $0.85 $6.33 $(2.64)
Non-operating pension costs, net(0.02)0.09 (0.05)0.09 
Restructuring and other, net (including ChoiceLease liability insurance results) (1)
0.07 0.21 0.18 0.69 
ERP implementation costs (1)
 0.08 0.18 0.38 
Gains on sale of properties (1)
(0.08)(0.06)(0.60)(0.06)
Tax adjustments, net (2)
 0.04 0.01 0.43 
Comparable EPS$2.55 $1.21 $6.05 $(1.11)
————————————
(1)Refer to Note 15, “Other Items Impacting Comparability,” in the Notes to Condensed Consolidated Financial Statements for additional information.
(2)For the third quarter of 2021 and the nine months ended September 30, 2021, we recorded tax expense related to expiring state net operating losses. For the third quarter of 2020, we recorded a charge of $2 million related to a state tax law change. In addition, for the nine months ended September 30, 2020 we recorded tax expenses of $7 million and $13 million related to expiring state net operating losses and a valuation allowance on our U.K. deferred tax assets, respectively.
Note: Amounts may not be additive due to rounding.
47

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
The following table provides a reconciliation of the effective tax rate to the comparable tax rate:

Three months ended September 30,Nine months ended September 30,
2021202020212020
Effective tax rate on continuing operations (1)
24.3 %17.7 %25.7 %10.3 %
Tax adjustments and income tax effects of non-GAAP adjustments (2)
0.1 %0.2 %(0.2)%14.8 %
Comparable tax rate on continuing operations (1)
24.4 %17.9 %25.5 %25.1 %
————————————
(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 (loss) to comparable EBITDA:

Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Net earnings (loss)$138,054 $35,834 $337,984 $(147,878)
Loss from discontinued operations, net of tax605 9,251 1,827 10,129 
Provision for (benefit from) income taxes44,547 9,680 117,235 (15,897)
EBT183,206 54,765 457,046 (153,646)
Non-operating pension costs, net(148)7,200 (530)9,357 
Other items impacting comparability, net (1)
(1,274)15,785 (20,493)67,166 
Comparable EBT181,784 77,750 436,023 (77,123)
Interest expense53,752 62,608 162,613 192,459 
Depreciation443,819 496,149 1,349,239 1,552,318 
Used vehicle sales, net (2) (3)
(69,303)(12,919)(149,788)17,253 
Amortization1,669 1,857 5,104 5,876 
Comparable EBITDA(3)
$611,721 $625,445 $1,803,191 $1,690,783 
————————————
(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 15,“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 Condensed Consolidated Financial Statements for additional information.
(3)Comparable EBITDA has been recast to exclude gains/losses from the sale of used vehicles.


48

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)

The following table provides a reconciliation of total revenue to operating revenue:
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In thousands)
Total revenue$2,459,049 $2,150,575 $7,062,908 $6,207,163 
Subcontracted transportation(282,482)(212,504)(785,398)(558,492)
Fuel(193,712)(142,934)(553,695)(442,276)
ChoiceLease liability insurance revenue (1)
 (4,971)(777)(21,738)
Operating revenue$1,982,855 $1,790,166 $5,723,038 $5,184,657 
————————————
(1)In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021.

The following table provides a reconciliation of FMS total revenue to FMS operating revenue:
Three months ended September 30,Nine months ended September 30,Twelve months ended September 30,
202120202021202020212020
(In thousands)
FMS total revenue$1,436,340 $1,297,217 $4,180,066 $3,835,631 $5,514,902 $5,267,179 
Fuel (188,759)(138,880)(538,922)(429,468)(678,528)(626,924)
ChoiceLease liability insurance revenue (1)
 (4,971)(777)(21,738)(2,856)(31,345)
FMS operating revenue$1,247,581 $1,153,366 $3,640,367 $3,384,425 $4,833,518 $4,608,910 
FMS EBT$186,391 $16,152 $408,244 $(202,157)$468,444 $(282,538)
FMS EBT as a % of FMS total revenue13.0%1.2%9.8%(5.3)%8.5%(5.4)%
FMS EBT as a % of FMS operating revenue 14.9%1.4%11.2%(6.0)%9.7%(6.1)%
————————————
(1)In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021.


The following table provides a reconciliation of SCS total revenue to SCS operating revenue:
Three months ended September 30,Nine months ended September 30,Twelve months ended September 30,
202120202021202020212020
(In thousands)
SCS total revenue$802,357 $685,415 $2,284,687 $1,833,180 $2,995,927 $2,481,869 
Subcontracted transportation(214,107)(172,003)(606,120)(409,939)(790,118)(564,193)
Fuel(28,960)(21,124)(82,121)(58,585)(103,653)(86,611)
SCS operating revenue$559,290 $492,288 $1,596,446 $1,364,656 $2,102,156 $1,831,065 
SCS EBT$22,161 $57,848 $96,159 $125,789 $130,310 $158,163 
SCS EBT as a % of SCS total revenue2.8%8.4%4.2%6.9%4.3%6.4%
SCS EBT as a % of SCS operating revenue4.0%11.8%6.0%9.2%6.2%8.6%


49

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
The following table provides a reconciliation of DTS total revenue to DTS operating revenue:
Three months ended September 30,Nine months ended September 30,Twelve months ended September 30,
202120202021202020212020
(In thousands)
DTS total revenue$380,357 $299,680 $1,055,575 $928,512 $1,356,437 $1,274,919 
Subcontracted transportation(68,375)(40,501)(179,278)(148,553)(222,632)(218,097)
Fuel(40,425)(25,550)(112,052)(81,714)(138,558)(117,282)
DTS operating revenue$271,557 $233,629 $764,245 $698,245 $995,247 $939,540 
DTS EBT$11,324 $24,728 $37,468 $58,141 $52,769 $76,256 
DTS EBT as a % of DTS total revenue3.0%8.3%3.5%6.3%3.9%6.0%
DTS EBT as a % of DTS operating revenue4.2%10.6%4.9%8.3%5.3%8.1%

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 September 30,
20212020
 (In thousands)
Net earnings (loss)$363,525 $(201,404)
Other items impacting comparability, net (4)
2,720 96,361 
Income taxes (1)
114,795 (85,015)
Adjusted earnings (loss) before income taxes481,040 (190,058)
Adjusted income taxes (2)
(112,321)85,804 
Adjusted net earnings (loss) [A]
$368,719 $(104,254)
Average shareholders’ equity$2,323,529 $2,301,117 
Average adjustments to shareholders’ equity (3)
30,229 43,125 
Adjusted average shareholders’ equity [B]
$2,353,758 $2,344,242 
Adjusted return on equity [A/B]
15.7%(4.4)%
————————————
(1)Includes income taxes on discontinued operations.
(2)Represents provision for income taxes plus income taxes on other items impacting comparability.
(3)Represents the impact of other items impacting comparability, net of tax, to equity for the respective period.
(4)Refer to the table below for a composition of Other items impacting comparability, net for the 12-month rolling period:
Twelve months ended September 30,
20212020
 (In thousands)
Restructuring and other, net$20,578 $96,687 
ERP Implementation costs19,863 34,752 
Gains on sale of properties(43,864)(3,733)
Early redemption of medium-term notes8,999 — 
ChoiceLease liability insurance revenue(2,856)(31,345)
Other items impacting comparability, net$2,720 $96,361 


50

Table of Contents
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 ongoing effects of the COVID-19 pandemic, including the global supply chain disruption, on our business and financial results;
our expectations with respect to production shutdowns and its impact to our automotive business within the SCS and FMS business segments;
our expectations regarding supply and demand of vehicles and its effect on pricing;
our expectations of the long-term residual values of revenue earning equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a potential cyclical downturn;
the expected pricing for used vehicles and sales channel mix;
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, the valuation of our pension plans, and allowance for credit losses;
the adequacy of our fair value estimates of employee incentive awards under our share-based compensation plans, 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 price 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;
the size and impact of our strategic investments;
our expectations regarding the achievement of our return on equity improvement initiatives;
our expectations regarding the diminishing impact of prior residual value estimate changes on return on equity improvement;
our expectations regarding the labor shortages impact on labor and subcontracted transportation costs;
our expectations regarding the U.S. federal, state and foreign tax positions;
our expectations regarding the timing and completion of the acquisition of Midwest;
the anticipated impact of recent accounting pronouncements; and
our expectations regarding the effect of changes to systems and processes on our internal control over financial reporting.
51

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
These statements, as well as other forward-looking statements contained in this Quarterly Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors, include 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 that 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 serviced by our SCS business.
Changes in current financial, tax or regulatory requirements that could negatively impact our financial results.
Competition:
Advances in technology may impact demand for our services or may require increased investments to remain competitive.
Competition from other service providers, who 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 in which 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:
Our inability to obtain adequate profit margins for our services.
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.
Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis.
The inability of our legacy information technology systems to provide timely access to data.
Sudden changes in fuel prices and fuel shortages.
Higher prices for vehicles, diesel engines and fuel as a result of new regulations.
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.
52

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
The inability of an original equipment manufacturer or supplier to provide vehicles or components, primarily related to the worldwide semiconductor supply shortage.
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 of our SCS and DTS contracts prove to be inaccurate.
Increased unionizing, labor strikes and work stoppages.
Difficulties in attracting and retaining drivers and technicians due to driver and technician shortages, which may result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers.
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 natural occurrences.
Financing Concerns:
Higher borrowing costs.
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.
Withdrawal liability as a result of our participation in multi-employer plans.
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.
Difficulties and delays in implementing our Enterprise Resource Planning system and related processes.
Other risks detailed from time to time in our SEC filings including our 2020 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, 2020. Please refer to the 2020 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.


53

Table of Contents
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures

As of the end of the third quarter of 2021, we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the third quarter of 2021, 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 September 30, 2021, 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.


54

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please refer to Note 16, “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, 2020, filed with the SEC on February 19, 2021. Our operations could also be affected by additional risk factors that are not presently known to us or by factors that we currently consider not material to our business.


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

The following table provides information with respect to purchases we made of our common stock during the three months ended September 30, 2021:
Total Number
of Shares
Purchased (1)
Average Price
Paid per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs
Maximum
Number of
Shares That May
Yet Be
Purchased
Under the
Anti-Dilutive
Program (2)
July 1 through July 31, 202130,115 $76.45 30,000 195,001 
August 1 through August 31, 202167,426 77.08 67,293 127,708 
September 1 through September 30, 2021130 80.80  127,708 
Total97,671 $76.89 97,293 
 ————————————
(1)During the three months ended September 30, 2021, we purchased an aggregate of 378 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock withheld as payment for the exercise price of options exercised or to satisfy the employees' tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.
(2)In December 2019, our Board of Directors authorized a new share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans. Under the December 2019 program, we are authorized to repurchase up to 1.5 million shares of common stock issued to employees under our employee stock plans from December 1, 2019 to December 11, 2021. Share repurchases are made periodically in open-market transactions using the Company's working capital, and are subject to market conditions, legal requirements, and other factors. In addition, we have been granted the authority to establish prearranged written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the repurchase program.
55

Table of Contents
ITEM 6. EXHIBITS
Exhibit NumberDescription
31.1
31.2
32
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)




56

Table of Contents
SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
RYDER SYSTEM, INC.
(Registrant)
Date:October 27, 2021By:/s/ JOHN J. DIEZ
John J. Diez
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date:October 27, 2021By:/s/ CRISTINA GALLO-AQUINO
Cristina Gallo-Aquino
Senior Vice President and Controller
(Principal Accounting Officer)

57