RYDER SYSTEM INC [R] Filings

10-Q 1 r-20220331.htm 10-Q r-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022


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

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 1-4364

RYDER SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Florida

59-0739250

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11690 N.W. 105th Street

Miami,

Florida

33178

(305) 500-3726

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

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


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

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

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

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares of Ryder System, Inc. Common Stock outstanding at March 31, 2022 was 51,136,680.

RYDER SYSTEM, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS



		Page No.

PART I . FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Statements of Earnings	1

	Condensed Consolidated Statements of Comprehensive Income	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated Statements of Shareholders' Equity	5

	Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	49

ITEM 4.	Controls and Procedures	50

PART II . OTHER INFORMATION

ITEM 1.	Legal Proceedings	51

ITEM 1A.	Risk Factors	51

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51







ITEM 6.	Exhibits	52

SIGNATURE		53

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 March 31,
	2022		2021
	(In thousands, except per share amounts)
Lease & related maintenance and rental revenues	$	1,024,985	$	940,422
Services revenue	1,669,538		1,165,488
Fuel services revenue	159,339		115,712
Total revenues	2,853,862		2,221,622

Cost of lease & related maintenance and rental	698,841		730,144
Cost of services	1,446,709		999,792
Cost of fuel services	157,647		114,706
Other operating expenses	38,794		33,900
Selling, general and administrative expenses	303,215		241,742
Non-operating pension costs, net	2,787		(9)
Used vehicle sales, net	(112,994)		(28,851)
Interest expense	52,364		54,706
Miscellaneous (income) loss, net	374		(5,434)
Restructuring and other items, net	14,254		10,659
	2,601,991		2,151,355

Earnings from continuing operations before income taxes	251,871		70,267
Provision for income taxes	76,049		18,683
Earnings from continuing operations	175,822		51,584
Loss from discontinued operations, net of tax	(235)		(759)
Net earnings	$	175,587	$	50,825

Earnings (loss) per common share — Basic
Continuing operations	$	3.42	$	0.98
Discontinued operations	—		(0.01)
Net earnings	$	3.42	$	0.97

Earnings (loss) per common share — Diluted
Continuing operations	$	3.35	$	0.97
Discontinued operations	—		(0.01)
Net earnings	$	3.35	$	0.95

See accompanying Notes to Condensed Consolidated Financial Statements.

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

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RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended March 31,
	2022		2021
	(In thousands)

Net earnings	$	175,587	$	50,825

Other comprehensive income:








Changes in cumulative translation adjustment and unrealized losses from cash flow hedges	2,624		8,940

Amortization of pension and postretirement items	5,844		7,016

Income tax expense related to amortization of pension and postretirement items	(1,222)		(1,518)
Amortization of pension and postretirement items, net of taxes	4,622		5,498






Other comprehensive income, net of taxes	7,246		14,438

Comprehensive income	$	182,833	$	65,263

See accompanying Notes to Condensed Consolidated Financial Statements.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	March 31, 2022		December 31, 2021
	(In thousands, except share amounts)
Assets:
Current assets:
Cash and cash equivalents	$	221,886	$	233,961
Receivables, net	1,602,663		1,464,737
Inventories	74,827		68,677
Prepaid expenses and other current assets	212,792		693,239
Total current assets	2,112,168		2,460,614
Revenue earning equipment, net	8,390,706		8,323,039
Operating property and equipment, net of accumulated depreciation of $1,293,186 and $1,273,637	1,045,952		984,978
Goodwill	844,793		570,905
Intangible assets, net	322,120		170,205
Sales-type leases and other assets	1,520,512		1,324,582
Total assets	$	14,236,251	$	13,834,323

Liabilities and shareholders’ equity:
Current liabilities:
Short-term debt and current portion of long-term debt	$	1,559,928	$	1,333,363
Accounts payable	867,322		747,898
Accrued expenses and other current liabilities	1,127,833		1,119,602
Total current liabilities	3,555,083		3,200,863
Long-term debt	5,220,848		5,246,306
Other non-current liabilities	1,436,724		1,314,404
Deferred income taxes	1,375,255		1,274,804
Total liabilities	11,587,910		11,036,377

Commitments and contingencies (Note 16)
Shareholders’ equity:
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding, March 31, 2022 and December 31, 2021	—		—
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding, March 31, 2022 — 51,136,680 and December 31, 2021 — 53,789,036	25,568		26,896
Additional paid-in capital	1,134,143		1,194,334
Retained earnings	2,170,625		2,265,957
Accumulated other comprehensive loss	(681,995)		(689,241)
Total shareholders’ equity	2,648,341		2,797,946
Total liabilities and shareholders’ equity	$	14,236,251	$	13,834,323

See accompanying Notes to Condensed Consolidated Financial Statements.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three months ended March 31,
	2022		2021
	(In thousands)
Cash flows from operating activities from continuing operations:
Net earnings	$	175,587	$	50,825
Less: Loss from discontinued operations, net of tax	(235)		(759)
Earnings from continuing operations	175,822		51,584
Depreciation expense	429,740		461,162

Used vehicle sales, net	(112,994)		(28,851)
Amortization expense and other non-cash charges, net	31,463		15,133
Non-cash lease expense	45,131		23,250
Non-operating pension costs, net and share-based compensation expense	13,505		10,668
Deferred income tax expense	58,187		15,477
Collections on sales-type leases	33,586		30,374
Changes in operating assets and liabilities:
Receivables	(64,155)		(4,597)
Inventories	(6,078)		1,070
Prepaid expenses and other assets	(15,038)		892
Accounts payable	12,994		(25,642)
Accrued expenses and other non-current liabilities	(136,459)		(84,809)
Net cash provided by operating activities from continuing operations	465,704		465,711

Cash flows from investing activities from continuing operations:
Purchases of property and revenue earning equipment	(584,289)		(381,051)
Sales of revenue earning equipment	222,696		154,144
Sales of operating property and equipment	2,864		2,357
Acquisitions, net of cash acquired	(424,754)		—


Other	(157)		(1,412)
Net cash used in investing activities from continuing operations	(783,640)		(225,962)

Cash flows from financing activities from continuing operations:
Net borrowings (repayments) of commercial paper and other	63,482		(130,763)
Debt proceeds	649,708		—
Debt repayments	(492,851)		(114,317)
Dividends on common stock	(33,653)		(31,257)
Common stock issued	(11,952)		(1,797)
Common stock repurchased	(300,280)		(19,444)


Other	(4,122)		(519)
Net cash used in financing activities from continuing operations	(129,668)		(298,097)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(3,846)		(1,202)
Decrease in cash, cash equivalents and restricted cash from continuing operations	(451,450)		(59,550)
Increase (decrease) in cash, cash equivalents, and restricted cash from discontinued operations	11		(6)
Decrease in cash, cash equivalents, and restricted cash	(451,439)		(59,556)
Cash, cash equivalents, and restricted cash at beginning of period	673,325		151,294
Cash, cash equivalents, and restricted cash at end of period	$	221,886	$	91,738

See accompanying Notes to Condensed Consolidated Financial Statements.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)


	Three months ended March 31, 2022
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Amount		Shares	Par								Total
	(In thousands, except share amounts)
Balance as of January 1, 2022	$	—	53,789,036	$	26,896	$	1,194,334	$	2,265,957	$	(689,241)	$	2,797,946

Comprehensive income	—		—	—		—		175,587		7,246		182,833
Common stock dividends declared —$0.58 per share	—		—	—		—		(30,924)		—		(30,924)
Common stock purchased under employee stock award and stock purchase plans and other (1) (2)	—		399,914	200		(12,152)		—		—		(11,952)

Common stock repurchases	—		(3,052,270)	(1,528)		(58,757)		(239,995)		—		(300,280)
Share-based compensation	—		—	—		10,718		—		—		10,718
Balance as of March 31, 2022	$	—	51,136,680	$	25,568	$	1,134,143	$	2,170,625	$	(681,995)	$	2,648,341


	Three months ended March 31, 2021
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Amount		Shares	Par								Total
	(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	—		—	—		—		50,825		14,438		65,263
Common stock dividends declared —$0.56 per share	—		—	—		—		(30,569)		—		(30,569)
Common stock purchased under employee stock award and stock purchase plans and other (1) (2)	—		426,311	213		(2,010)		—		—		(1,797)

Common stock repurchases	—		(287,957)	(144)		(5,977)		(13,323)		—		(19,444)
Share-based compensation	—		—	—		10,677		—		—		10,677
Balance as of March 31, 2021	$	—	53,870,387	$	26,935	$	1,135,644	$	1,919,875	$	(802,767)	$	2,279,687

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

(2)Represents open-market transactions of common shares by the trustee of our deferred compensation plans.

See accompanying Notes to Condensed Consolidated Financial Statements.

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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 2021 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 report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing and leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, e-commerce and 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. In February 2022, we announced our intentions to exit the FMS United Kingdom (U.K.) business. We expect to complete the exit of the FMS U.K. business by mid-2023.

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 from March 12, 2020 through December 31, 2022. We will continue to adopt this update as alternative reference rates in relevant contracts are modified through December 31, 2022. We continuously evaluate the potential 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. On January 1, 2022 we adopted the amendment on a prospective basis and it did not have a material impact on our consolidated financial position, results of operations, and cash flows.

Business Combinations

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities - Business

Combinations (Topic 805). This update requires companies to apply Revenue from Contracts with Customers (Topic 606) to

recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

Additionally, the update clarifies that companies should apply the definition of a performance obligation in Topic 606 when

recognizing contract liabilities assumed in a business combination. The standard is effective for fiscal years beginning after

December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. We will adopt this update on January 1, 2023 and are currently evaluating the impact on our consolidated financial position, results of operations, and cash flows.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

3. SEGMENT REPORTING

Our primary measurement of segment financial performance, defined as segment “Earnings from continuing operations before income taxes” (EBT), includes an allocation of costs from Central Support Services (CSS) and excludes non-operating pension costs, net 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 from continuing operations before income taxes:


	Three months ended March 31,
	2022		2021
	(In thousands)
Revenue:
Fleet Management Solutions:
ChoiceLease	$	802,342	$	797,088

Commercial rental	313,154		223,009
SelectCare and other	166,651		148,016
Fuel services and ChoiceLease liability insurance (1)	247,081		167,372

Fleet Management Solutions	1,529,228		1,335,485
Supply Chain Solutions	1,088,542		706,700
Dedicated Transportation Solutions	424,948		320,507
Eliminations (2)	(188,856)		(141,070)
Total revenues	$	2,853,862	$	2,221,622

Earnings From Continuing Operations Before Income Taxes:
Fleet Management Solutions	$	248,199	$	63,402
Supply Chain Solutions	34,219		32,957
Dedicated Transportation Solutions	20,211		12,982
Eliminations	(26,590)		(12,274)
	276,039		97,067
Unallocated Central Support Services	(16,004)		(18,432)
Non-operating pension costs, net (3)	(2,787)		9
Other items impacting comparability, net (4)	(5,377)		(8,377)
Earnings from continuing operations before income taxes	$	251,871	$	70,267

————————————

(1)In the first quarter of 2021, we completed the previously announced exit of the extension of our liability insurance coverage for ChoiceLease customers.

(2)Represents the elimination of intercompany revenues in our FMS business segment.

(3)Refer to Note 14, "Employee Benefit Plans," for a discussion on these items.

(4)Refer to Note 15, “Other Items Impacting Comparability,” for a discussion of items excluded from our primary measure of segment performance.

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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 March 31,
	2022		2021
	(In thousands)
Fleet Management Solutions	$	551,090	$	367,708
Supply Chain Solutions	25,950		8,530
Dedicated Transportation Solutions	339		306
Central Support Services	6,910		4,507
Purchases of property and revenue earning equipment	$	584,289	$	381,051

4. 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 3, "Segment Reporting," for the disaggregation of our revenue by major products/service lines.

Primary Geographical Markets


	Three months ended March 31, 2022
	FMS		SCS		DTS		Eliminations		Total
	(In thousands)
United States	$	1,388,043	$	971,200	$	424,948	$	(179,400)	$	2,604,791
Canada	77,529		59,628		—		(9,456)		127,701
Europe (1)	63,656		—		—		—		63,656
Mexico	—		57,714		—		—		57,714

Total revenues	$	1,529,228	$	1,088,542	$	424,948	$	(188,856)	$	2,853,862

(1)Refer to Note 15, "Other Items Impacting Comparability," for further information on the exit of the FMS U.K. business.


	Three months ended March 31, 2021
	FMS		SCS		DTS		Eliminations		Total
	(In thousands)
United States	$	1,197,984	$	601,298	$	320,507	$	(136,727)	$	1,983,062
Canada	70,413		56,088		—		(4,343)		122,158
Europe	67,088		—		—		—		67,088
Mexico	—		49,314		—		—		49,314

Total revenues	$	1,335,485	$	706,700	$	320,507	$	(141,070)	$	2,221,622

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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 March 31,
	2022		2021
	(In thousands)
Consumer packaged goods and retail	$	500,298	$	273,224
Automotive	354,237		271,555
Technology and healthcare	121,322		97,085
Industrial and other	112,685		64,836
Total SCS Revenues	$	1,088,542	$	706,700

Lease & Related Maintenance and Rental Revenues

The non-lease revenue from maintenance services related to our ChoiceLease product is recognized in "Lease & related maintenance and rental revenues" in the Condensed Consolidated Statements of Earnings. For the three months ended March 31, 2022 and 2021, we recognized $257 million and $250 million, respectively.

Deferred Revenue

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


	Three months ended March 31,
	2022		2021
	(In thousands)
Balance as of beginning of period	$	593,442	$	629,739
Recognized as revenue during period from beginning balance	(59,659)		(59,031)
Consideration deferred during period, net	48,007		51,759
Foreign currency translation adjustment and other	(994)		709
Balance as of end of period	$	580,796	$	623,176

Contracted Not Recognized Revenue

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized (contracted not recognized revenue). Contracted not recognized revenue was $2.4 billion as of March 31, 2022, and 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 the lease component of our ChoiceLease product and all the revenue from the 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.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

5. RECEIVABLES, NET



	March 31, 2022		December 31, 2021
	(In thousands)
Trade	$	1,431,315	$	1,280,766
Sales-type leases	145,874		148,134
Other, primarily warranty and insurance	53,607		67,141
	1,630,796		1,496,041
Allowance for credit losses and other	(28,133)		(31,304)
Total	$	1,602,663	$	1,464,737

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


	Three months ended March 31,
	2022		2021
	(In thousands)

Balance as of beginning of period	$	31,304	$	43,024
Changes to provisions for credit losses	3,533		(1,800)
Write-offs and other	(6,704)		(4,024)
Balance as of end of period	$	28,133	$	37,200

6. REVENUE EARNING EQUIPMENT, NET


	Estimated Useful Lives	March 31, 2022						December 31, 2021
		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net
	(In years)	(In thousands)
Held for use:
Trucks	3 — 7	$	5,288,297	$	(2,089,227)	$	3,199,070	$	5,223,127	$	(2,055,135)	$	3,167,992
Tractors	4 — 7.5	7,247,049		(3,071,862)		4,175,187		7,256,002		(3,059,206)		4,196,796
Trailers and other	9.5 — 12	1,839,053		(894,753)		944,300		1,780,487		(868,820)		911,667
Held for sale		273,321		(201,172)		72,149		209,506		(162,922)		46,584
Total		$	14,647,720	$	(6,257,014)	$	8,390,706	$	14,469,122	$	(6,146,083)	$	8,323,039

Residual Value Estimate Changes

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue

earning equipment for the purposes of recording depreciation expense. Reductions in estimated residual values or useful lives

will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual

values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the

estimated residual values and useful lives of revenue earning equipment is based on vehicle class, (i.e., generally subcategories

of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market

prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. A variety of

factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales

pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology;

competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors. We have disciplines related to the management and maintenance of our vehicles designed to

manage the risk associated with the residual values of our revenue earning equipment.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

The following table provides a summary of incremental depreciation expense that has been recorded related to our previous residual value estimate changes as well as used vehicle sales results (rounded to the closest million):


	Three months ended March 31,
	2022		2021
	(In thousands)
Depreciation expense related to estimate changes	$	49,000	$	88,000

Used vehicle sales, net (1)	(113,000)		(29,000)

(1)Used vehicle sales, net in the first quarter of 2022 included $8M of gains on sales of vehicles in the U.K. Refer to Note 15, "Other Items Impacting Comparability,"

Used Vehicle Sales and Valuation Adjustments

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

The following table presents revenue earning equipment held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:


					Losses from Valuation Adjustments
					Three months ended March 31,
	March 31, 2022		December 31, 2021		2022		2021
	(In thousands)
Revenue earning equipment held for sale (1):

Trucks	$	507	$	931	$	526	$	890
Tractors	590		1,485		690		84
Trailers and other	263		1,309		280		2,047
Total assets at fair value	$	1,360	$	3,725	$	1,496	$	3,021

————————————

(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 $71 million and $43 million as of March 31, 2022 and December 31, 2021, respectively.

The components of used vehicle sales, net were as follows:


	Three months ended March 31,
	2022		2021
	(In thousands)
Gains on vehicle sales, net	$	(114,490)	$	(31,872)
Losses from valuation adjustments	1,496		3,021
Used vehicle sales, net	$	(112,994)	$	(28,851)

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

7. ACCRUED EXPENSES AND OTHER LIABILITIES


	March 31, 2022						December 31, 2021
	Accrued Expenses		Non-Current Liabilities		Total		Accrued Expenses		Non-Current Liabilities		Total
	(In thousands)
Salaries and wages	$	155,887	$	—	$	155,887	$	210,350	$	—	$	210,350




Insurance obligations (1)	186,592		303,288		489,880		186,449		311,209		497,658




Operating taxes (2)	171,496		—		171,496		165,680		—		165,680


Deposits, mainly from customers	95,153		—		95,153		94,547		—		94,547
Operating lease liabilities	152,211		384,846		537,057		100,232		255,573		355,805
Deferred revenue (3)	181,316		399,480		580,796		182,785		410,657		593,442


Other	185,178		349,110		534,288		179,559		336,965		516,524
Total	$	1,127,833	$	1,436,724	$	2,564,557	$	1,119,602	$	1,314,404	$	2,434,006

————————————

(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 4, "Revenue," for additional information.

8. LEASES

Leases as Lessor

The components of revenue from leases were as follows:


	Three months ended March 31,
	2022		2021
	(In thousands)
Operating leases
Lease income related to ChoiceLease	$	381,545	$	389,611
Lease income related to commercial rental (1)	298,135		210,284

Sales-type leases

Interest income related to net investment in leases	$	10,728	$	14,415




Variable lease income excluding commercial rental (1)	$	74,220	$	71,993

————————————

(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.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

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:


	March 31, 2022		December 31, 2021
	(In thousands)
Net investment in the lease — lease payment receivable	$	576,109	$	583,008
Net investment in the lease — unguaranteed residual value in assets	45,855		46,740

	$	621,964	629,748
Estimated loss allowance	(2,506)		(3,705)
Total	$	619,458	$	626,043

9. DEBT


	Weighted Average Interest Rate
	March 31, 2022	Maturities	March 31, 2022		December 31, 2021
			(In thousands)




Debt:
U.S. commercial paper	0.69%	2026	$	601,711	$	531,157
Canadian commercial paper	—%	2026	—		7,087
Trade receivables financing program	0.44%	2022	50,000		—
Global revolving credit facility	—%	2026	—		—
Unsecured U.S. obligations	3.41%	2024	200,000		200,000
Unsecured U.S. notes — Medium-term notes (1)	3.21%	2022-2027	5,279,035		5,149,893
Unsecured foreign obligations	2.31%	2022-2024	117,487		140,265
Asset-backed U.S. obligations (2)	2.63%	2022-2026	510,275		526,712
Finance lease obligations and other		2022-2030	44,102		44,595
			6,802,610		6,599,709
Debt issuance costs and original issue discounts			(21,834)		(20,040)
Total debt			6,780,776		6,579,669
Short-term debt and current portion of long-term debt			(1,559,928)		(1,333,363)
Long-term debt			$	5,220,848	$	5,246,306

————————————

(1)Includes the impact from the fair market values of hedging instruments on our notes, which was $21 million as of March 31, 2022 and not material as of December 31, 2021. The notional amount of the executed interest rate swaps designated as fair value hedges was $650 million and $450 million as of March 31, 2022 and December 31, 2021, respectively.

(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 $6.4 billion and $6.2 billion as of March 31, 2022 and December 31, 2021, respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and our other debt were classified within Level 2 of the fair value hierarchy.

As of March 31, 2022, there was $798 million 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 March 31, 2022, the ratio was