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Ryder System 10-Q 2009

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32
  5. Graphic
  6. Graphic
10-Q
Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
         
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
   
         
    OR    
         
o   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 LOGO)
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
     
Florida
(State or other jurisdiction of incorporation or organization)
  59-0739250
(I.R.S. Employer Identification No.)
     
11690 N.W. 105th Street
Miami, Florida 33178

(Address of principal executive offices, including zip code)
 
(305) 500-3726
(Registrant’s telephone number, including area code)
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ     NO o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o YES     o NO
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ    Accelerated filer o    Non-accelerated filer   o
(Do not check if a smaller reporting company)
  Smaller reporting company o 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) o YES      þ NO
The number of shares of Ryder System, Inc. Common Stock ($0.50 par value per share) outstanding at March 31, 2009 was 55,889,833.



 


 

RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
             
        Page No.
PART I          
   
 
       
ITEM 1          
   
 
       
           
   
Three months ended March 31, 2009 and 2008
    1  
   
 
       
           
   
March 31, 2009 and December 31, 2008
    2  
   
 
       
           
   
Three months ended March 31, 2009 and 2008
    3  
   
 
       
           
   
Three months ended March 31, 2009
    4  
   
 
       
        5  
   
 
       
ITEM 2       21  
   
 
       
ITEM 3       39  
   
 
       
ITEM 4       39  
   
 
       
PART II          
   
 
       
ITEM 2       39  
   
 
       
ITEM 6       40  
   
 
       
        41  
 EX-31.1
 EX-31.2
 EX-32

i


Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands, except per share amounts)  
 
               
Revenue
  $ 1,203,060       1,543,582  
 
           
 
               
Operating expense (exclusive of items shown separately)
    544,466       763,767  
Salaries and employee-related costs
    310,258       358,370  
Subcontracted transportation
    52,620       75,331  
Depreciation expense
    222,521       205,960  
Gains on vehicle sales, net
    (3,973 )     (12,426 )
Equipment rental
    15,607       21,526  
Interest expense
    38,807       37,428  
Miscellaneous expense, net
    418       1,617  
Restructuring and other charges (recoveries), net
    4,185       (78 )
 
           
 
    1,184,909       1,451,495  
 
           
 
               
Earnings before income taxes
    18,151       92,087  
Provision for income taxes
    11,313       36,005  
 
           
 
               
Net earnings
  $ 6,838       56,082  
 
           
 
               
Earnings per common share:
               
Basic
  $ 0.12       0.97  
 
           
 
               
Diluted
  $ 0.12       0.96  
 
           
 
               
Cash dividends per common share
  $ 0.23       0.23  
 
           
See accompanying notes to consolidated condensed financial statements.

1


Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
                 
    March 31,     December 31,  
    2009     2008  
    (Dollars in thousands, except per  
    share amount)  
Assets:
               
Current assets:
               
Cash and cash equivalents
  $ 91,574       120,305  
Receivables, net of allowance of $13,249 and $15,477, respectively
    567,014       635,376  
Inventories
    47,925       48,324  
Prepaid expenses and other current assets
    127,037       147,191  
 
           
Total current assets
    833,550       951,196  
Revenue earning equipment, net of accumulated depreciation of $2,815,230 and $2,749,654, respectively
    4,556,306       4,565,224  
Operating property and equipment, net of accumulated depreciation of $856,712 and $842,427, respectively
    542,919       546,816  
Goodwill
    217,185       198,253  
Intangible assets
    39,624       36,705  
Direct financing leases and other assets
    380,836       391,314  
 
           
Total assets
  $ 6,570,420       6,689,508  
 
           
 
               
Liabilities and shareholders’ equity:
               
Current liabilities:
               
Short-term debt and current portion of long-term debt
  $ 107,076       384,262  
Accounts payable
    256,632       295,083  
Accrued expenses and other current liabilities
    376,873       431,820  
 
           
Total current liabilities
    740,581       1,111,165  
Long-term debt
    2,740,312       2,478,537  
Other non-current liabilities
    850,682       837,280  
Deferred income taxes
    910,668       917,365  
 
           
Total liabilities
    5,242,243       5,344,347  
 
           
 
               
Shareholders’ equity:
               
Preferred stock of no par value per share — authorized, 3,800,917; none
outstanding, March 31, 2009 or December 31, 2008
           
Common stock of $0.50 par value per share — authorized, 400,000,000;
outstanding, March 31, 2009 — 55,889,833; December 31, 2008 — 55,658,059
    27,945       27,829  
Additional paid-in capital
    762,245       756,190  
Retained earnings
    1,099,349       1,105,369  
Accumulated other comprehensive loss
    (561,362 )     (544,227 )
 
           
Total shareholders’ equity
    1,328,177       1,345,161  
 
           
Total liabilities and shareholders’ equity
  $ 6,570,420       6,689,508  
 
           
See accompanying notes to consolidated condensed financial statements.

2


Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
Cash flows from operating activities:
               
Net earnings
  $ 6,838       56,082  
Depreciation expense
    222,521       205,960  
Gains on vehicle sales, net
    (3,973 )     (12,426 )
Share-based compensation expense
    4,771       3,635  
Amortization expense and other non-cash charges, net
    9,016       5,197  
Deferred income tax expense
    5,079       28,132  
Tax benefits from share-based compensation
    1       592  
Changes in operating assets and liabilities, net of acquisitions:
               
Receivables
    59,441       74,183  
Inventories
    535       (130 )
Prepaid expenses and other assets
    (5,591 )     (15,915 )
Accounts payable
    (9,257 )     (41,826 )
Accrued expenses and other non-current liabilities
    (35,586 )     (3,232 )
 
           
Net cash provided by operating activities
    253,795       300,252  
 
           
 
               
Cash flows from financing activities:
               
Net change in commercial paper borrowings
    266,089       (238,351 )
Debt proceeds
    66       453,624  
Debt repaid, including capital lease obligations
    (277,651 )     (201,726 )
Dividends on common stock
    (12,858 )     (13,414 )
Common stock issued
    1,209       35,241  
Common stock repurchased
          (93,751 )
Excess tax benefits from share-based compensation
    190       2,332  
 
           
Net cash used in financing activities
    (22,955 )     (56,045 )
 
           
 
               
Cash flows from investing activities:
               
Purchases of property and revenue earning equipment
    (252,033 )     (273,813 )
Sales of revenue earning equipment
    46,397       74,304  
Sales of operating property and equipment
    795       679  
Acquisitions
    (85,454 )     (92,830 )
Collections on direct finance leases
    21,468       17,628  
Changes in restricted cash
    11,208       23,934  
Other, net
          395  
 
           
Net cash used in investing activities
    (257,619 )     (249,703 )
 
           
 
               
Effect of exchange rate changes on cash
    (1,952 )     3,658  
 
           
Decrease in cash and cash equivalents
    (28,731 )     (1,838 )
Cash and cash equivalents at January 1
    120,305       116,459  
 
           
Cash and cash equivalents at March 31
  $ 91,574       114,621  
 
           
 
               
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest
  $ 35,311       18,026  
Income taxes, net of refunds
    4,007       7,498  
 
               
Non-cash investing activities:
               
Changes in accounts payable related to purchases of revenue earning equipment
    (27,347 )     58,617  
Revenue earning equipment acquired under capital leases
    1,949       773  
See accompanying notes to consolidated condensed financial statements.

3


Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY
(unaudited)
                                                         
                                            Accumulated        
    Preferred                     Additional             Other        
    Stock     Common Stock     Paid-In     Retained     Comprehensive        
    Amount     Shares     Par     Capital     Earnings     Loss     Total  
    (Dollars in thousands, except per share amount)  
 
                                                       
Balance at December 31, 2008
  $       55,658,059     $ 27,829       756,190       1,105,369       (544,227 )     1,345,161  
 
                                                     
 
                                                       
Components of comprehensive loss:
                                                       
Net earnings
                            6,838             6,838  
Foreign currency translation adjustments
                                  (20,877 )     (20,877 )
Net unrealized gain related to derivatives accounted for as hedges
                                  143       143  
Amortization of pension and postretirement items, net of tax
                                  3,743       3,743  
Change in net actuarial loss, net of tax
                                  (144 )     (144 )
 
                                                     
Total comprehensive loss
                                                    (10,297 )
Common stock dividends declared – $0.23 per share
                            (12,858 )           (12,858 )
Common stock issued under employee stock option and stock purchase plans (1)
          233,684       117       1,132                   1,249  
Benefit plan stock purchases (2)
          (1,910 )     (1 )     (39 )                 (40 )
Share-based compensation
                      4,771                   4,771  
Tax benefits from share-based compensation
                      191                   191  
 
                                         
Balance at March 31, 2009
  $       55,889,833     $ 27,945       762,245       1,099,349       (561,362 )     1,328,177  
 
                                         
 
(1)   Net of common shares delivered as payment for the exercise price or to satisfy the option holders’ withholding tax liability upon exercise of options.
(2)   Represents open-market transactions of common shares by the trustee of Ryder’s deferred compensation plans.
See accompanying notes to consolidated condensed financial statements.

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Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(A) INTERIM FINANCIAL STATEMENTS
     The accompanying unaudited Consolidated Condensed Financial Statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder System, Inc. has a controlling voting interest (“subsidiaries”), and variable interest entities (VIEs) required to be consolidated in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with the accounting policies described in our 2008 Annual Report on Form 10-K except for the accounting changes described below relating to earnings per share data, business combinations and certain fair value measurements, and should be read in conjunction with the Consolidated Financial Statements and notes thereto. These financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included and the disclosures herein are adequate. The operating results for interim periods are unaudited and are not necessarily indicative of the results that can be expected for a full year. Certain prior year amounts have been reclassified to conform to the current period presentation. During the fourth quarter of 2008, we decided to discontinue operations in Brazil, Argentina, and Chile during 2009 and transition out of specific Supply Chain Solutions customer contracts in Europe. These operations will be reported as part of continuing operations in our Consolidated Condensed Financial Statements until all operations cease.
(B) ACCOUNTING CHANGES
     In June 2008, the Financial Accounting Standards Board (FASB) issued Staff Position (FSP) Emerging Issues Task Force (EITF) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” This FSP provides that unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method described in Statement of Financial Accounting Standards (SFAS) No. 128, “Earnings per Share.” The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Our nonvested stock (time-vested restricted stock rights, market-based restricted stock rights and restricted stock units) are considered participating securities since the share-based awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. Upon adoption, we are required to retrospectively adjust earnings per share data to conform to the provisions in this FSP. Accordingly, we adopted the provisions of FSP EITF 03-6-1 effective January 1, 2009 and computed earnings per common share using the two-class method for all periods presented. FSP EITF 03-6-1 reduced full year 2008, 2007 and 2006 diluted earnings per common share by $0.02, $0.02 and $0.01, respectively, and had no impact on our first quarter 2008 or 2009 earnings per common share. Refer to Note (E), “Earnings per Share,” for additional disclosures.
     In December 2007, the FASB issued SFAS No. 141R, “Business Combinations.” This statement amends SFAS No. 141, “Business Combinations,” and provides revised guidance for recognizing and measuring assets acquired and liabilities assumed in a business combination. This statement also requires, among other things, that transaction costs in a business combination be expensed as incurred. SFAS No. 141R was effective for business combinations closing after January 1, 2009. Effective January 1, 2009, we adopted the provisions of SFAS No. 141R without a material impact to our Consolidated Condensed Financial Statements.
     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are to be applied prospectively, except for certain financial instruments, which should be recognized as a cumulative effect adjustment to the opening balance of retained earnings for the fiscal year in which this statement is initially applied. We adopted SFAS No. 157 on January 1, 2008 for all financial assets and liabilities and for all nonfinancial assets and liabilities recognized or disclosed at fair value in our Consolidated Condensed Financial Statements on a recurring basis (at least annually). We adopted SFAS No. 157 on January 1, 2009 for all other nonfinancial assets and liabilities, including our vehicles held for sale. The adoption of SFAS No. 157 did not have a material impact on our Consolidated Condensed Financial Statements. Refer to Note (K), “Fair Value Measurements,” for additional disclosures.

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Table of Contents

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

(unaudited)
(C) ACQUISITIONS
     Edart Leasing LLC Acquisition — On February 2, 2009, we acquired the assets of Edart Leasing LLC (“Edart”), which included Edart’s fleet of approximately 1,600 vehicles and more than 340 contractual customers from Edart’s five locations in Connecticut for a purchase price of $87.4 million, of which $81.3 million was paid as of March 31, 2009. The initial recording of the transaction was based on preliminary valuation assessments and is subject to change. As of March 31, 2009, goodwill and customer relationship intangibles related to the Edart acquisition were $18.4 million and $4.3 million, respectively. The combined network operates under the Ryder name, complementing our Fleet Management Solutions (FMS) business segment market coverage in the Northeast. We also acquired approximately 525 vehicles that will be re-marketed. The asset purchase was accounted for in accordance with SFAS No. 141R, “Business Combinations,” as an acquisition of a business.
     Transpacific Container Terminal Ltd. and CRSA Logistics Ltd. Acquisition — On December 19, 2008, we acquired the assets of Transpacific Container Terminal Ltd. and CRSA Logistics Ltd. (“CRSA”) located in Port Coquitlam, British Columbia, as well as CRSA’s operations in Hong Kong and Shanghai, China. The companies specialize in trans-Pacific, end-to-end transportation management and supply chain services primarily for Canadian retailers. This acquisition adds complementary solutions to our Supply Chain Solutions (SCS) business segment capabilities including consolidation services in key Asian hub and off-dock deconsolidation operations in Canada. The purchase price and initial recording of the transaction was based on preliminary valuation assessments and is subject to change. The purchase price was $14.6 million, of which $12.1 million. During the three months ended March 31, 2009, we made purchase price adjustments primarily related to intangible valuations, which increased goodwill by $0.8 million. The terms of the asset purchase agreement provide for up to $4 million in contingent consideration to be paid to the seller if certain financial metrics are achieved. In accordance with SFAS No. 141, contingent consideration will be accounted for as additional purchase price when the contingency is resolved.
     2008 FMS Acquisitions — During 2008, we completed a series of acquisitions in our FMS business segment, for a total purchase price of $239.6 million, of which $92.8 million was paid in the first quarter of 2008. We acquired all the assets of Gordon Truck Leasing, Gator Leasing Inc. and Lily Transportation Corporation. As of March 31, 2009, goodwill and intangible assets related to the 2008 FMS acquisitions were $56.5 million and $13.7 million, respectively. During the three months ended March 31, 2009, purchase price adjustments were not significant. The 2008 FMS acquisitions were accounted for in accordance with SFAS No. 141, as an acquisition of a business.
     During the first quarter of 2009 we paid $4.2 million related to acquisitions completed in prior years. Pro forma information for these acquisitions is not disclosed because the effects of these acquisitions are not significant.
(D) SHARE-BASED COMPENSATION PLANS
     Share-based incentive awards are provided to employees under the terms of various share-based compensation plans (collectively, the “Plans”). The Plans are administered by the Compensation Committee of the Board of Directors. Awards under the Plans principally include at-the-money stock options, nonvested stock and cash awards. Share-based compensation expense is generally recorded in “Salaries and employee-related costs” in the Consolidated Condensed Statements of Earnings.
     The following table provides information on share-based compensation expense and income tax benefits recognized during the periods:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
               
Stock option and stock purchase plans
  $ 2,813       2,255  
Nonvested stock
    1,958       1,380  
 
           
Share-based compensation expense
    4,771       3,635  
Income tax benefit
    (1,519 )     (1,293 )
 
           
Share-based compensation expense, net of tax
  $ 3,252       2,342  
 
           
     Total unrecognized pre-tax compensation expense related to share-based compensation arrangements at March 31, 2009 was $35.7 million and is expected to be recognized over a weighted-average period of approximately 2.1 years.

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

(unaudited)
     During the three months ended March 31, 2009 and 2008, approximately 900,000 and 600,000 stock options, respectively, were granted under the Plans. These awards, which generally vest one-third each year, are fully vested three years from the grant date and have contractual terms of seven years. The fair value of each option award at the date of grant was estimated using a Black-Scholes-Merton option-pricing valuation model. The weighted-average fair value of options granted during the three months ended March 31, 2009 and 2008 was $9.24 and $13.82, respectively.
     During each of the three months ended March 31, 2009 and 2008, approximately 200,000 awards of restricted stock rights were granted under the Plans. The majority of the restricted stock rights granted during the periods included a market-based vesting provision. In 2009, the provision was such that employees only receive the grant of stock if the average monthly differential between Ryder’s total shareholder return (TSR) and the S&P 500 TSR over an applicable three-year period is greater than zero. In 2008, the provision was such that employees only receive the grant of stock if Ryder’s TSR as a percentage of the S&P 500 comparable period TSR is 100% or greater over an applicable three-year period. The fair value of the market-based restricted stock rights on the grant date was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. The weighted-average fair value of market-based restricted stock rights granted during the three months ended March 31, 2009 and 2008 was $16.52 and $48.71, respectively. Stock awards granted during the three months ended March 31, 2008, also included time-vested restricted stock rights which entitle the holder to shares of common stock as the awards vest over a three-year period. The fair value of the time-vested awards is determined and fixed on the grant date based on Ryder’s stock price. The weighted-average fair value of the time-vested restricted stock rights granted during the three months ended March 31, 2008 was $57.86.
     During the three months ended March 31, 2009 and 2008, employees who received market-based restricted stock rights also received market-based cash awards. The awards will vest on the same date as the market-based restricted stock rights if Ryder’s TSR is equal to or better than the TSR of the S&P 500’s 33rd percentile over an applicable three-year period. The cash awards are accounted for as liability awards as the cash settlement amount is based upon the price of our common stock. As a result, the liability is adjusted to reflect fair value at the end of each reporting period. The fair value of the cash awards was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. During the three months ended March 31, 2009 and 2008, we recognized $0.3 million and $1.2 million, respectively, of compensation expense related to these cash awards in addition to the share-based compensation expense reported in the previous table.
(E) EARNINGS PER SHARE
     Effective January 1, 2009, we adopted FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities,” which required us to use the two-class method to calculate earnings per share. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.

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

(unaudited)
     The following table presents the calculation of basic and diluted earnings per common share:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands, except per share  
    amounts)  
 
               
Earnings per share — Basic:
               
Net earnings
  $ 6,838       56,082  
Less: Distributed and undistributed earnings allocated to nonvested stock
    (72 )     (434 )
 
           
Earnings available to common shareholders — Basic
  $ 6,766       55,648  
 
           
 
               
Weighted average common shares outstanding — Basic
    55,238       57,595  
 
           
 
               
Earnings per common share — Basic
  $ 0.12       0.97  
 
           
 
               
Earnings per share — Diluted:
               
Net earnings
  $ 6,838       56,082  
Less: Distributed and undistributed earnings allocated to nonvested stock
    (72 )     (432 )
 
           
Earnings available to common shareholders — Diluted
  $ 6,766       55,650  
 
           
 
               
Weighted average common shares outstanding — Basic
    55,238       57,595  
Effect of dilutive options
    43       378  
 
           
Weighted average common shares outstanding — Diluted
    55,281       57,973  
 
           
 
               
Earnings per common share — Diluted
  $ 0.12       0.96  
 
           
 
               
Anti-dilutive equity awards not included above
    2,651       1,124  
 
           
(F) RESTRUCTURING AND OTHER CHARGES (RECOVERIES)
     The components of restructuring and other charges (recoveries), net were as follows:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
               
Restructuring charges (recoveries), net:
               
Severance and employee-related charges (recoveries)
  $ 2,962       (78 )
Contract termination costs
    312        
 
           
 
    3,274       (78 )
 
               
Other charges, net:
               
Asset impairments
    21        
Plan implementation costs
    890        
 
           
Total
  $ 4,185       (78 )
 
           

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

(unaudited)
     As noted in Note (R), “Segment Reporting,” our primary measure of segment financial performance excludes, among other items, restructuring and other charges (recoveries), net; however, the applicable portion of the restructuring and other charges (recoveries), net that relates to each segment was as follows:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
               
Fleet Management Solutions
  $ 1,699        
Supply Chain Solutions
    2,304       (125 )
Dedicated Contract Carriage
    48        
Central Support Services
    134       47  
 
           
Total
  $ 4,185       (78 )
 
           
     Restructuring charges, net for the three months ended March 31, 2009 totaled $4.2 million and were due primarily to ongoing costs related to the restructuring plan announced in the fourth quarter of 2008. During the first quarter of 2009, we recorded a charge of $1.8 million related to exiting SCS operations in South America and Europe. These charges included $0.6 million of employee severance and benefit costs related to retention bonuses and refinements in estimates recorded in the prior year. The charges also included $0.3 million of contract termination costs and $0.9 million of plan implementation costs, mostly professional service fees. During the first quarter of 2009, we also recorded a charge of $2.4 million of employee severance and benefit costs related to workforce reductions and refinements in workforce reduction estimates from the prior year charge. We eliminated approximately 30 positions in 2009 as part of our continued cost containment initiatives.
     Activity related to restructuring reserves was as follows:
                                         
                    Deductions        
    December 31, 2008                     Non-Cash     March 31, 2009  
    Balance     Additions     Cash Payments     Reductions(1)     Balance  
    (In thousands)  
 
                                       
Employee severance and benefits
  $ 26,541       3,703       8,361       741       21,142  
Contract termination costs
    3,482       312       272             3,522  
 
                             
Total
  $ 30,023       4,015       8,633       741       24,664  
 
                             
 
(1)   Non-cash reductions represent adjustments to the restructuring reserves as actual costs were less than originally estimated.
     At March 31, 2009, the majority of outstanding restructuring obligations are required to be paid over the next nine months.
(G) REVENUE EARNING EQUIPMENT
                                                 
    March 31, 2009     December 31, 2008  
            Accumulated     Net Book             Accumulated     Net Book  
    Cost     Depreciation     Value(1)     Cost     Depreciation     Value (1)  
    (In thousands)  
 
                                               
Full service lease
  $ 5,948,410       (2,175,844 )     3,772,566     $ 5,568,162       (1,957,535 )     3,610,627  
Commercial rental
    1,423,126       (639,386 )     783,740       1,746,716       (792,119 )     954,597  
 
                                   
Total
  $ 7,371,536       (2,815,230 )     4,556,306     $ 7,314,878       (2,749,654 )     4,565,224  
 
                                   
 
(1)   Revenue earning equipment, net includes vehicles acquired under capital leases of $22.4 million, less accumulated amortization of $6.8 million, at March 31, 2009, and $20.2 million, less accumulated amortization of $5.1 million, at December 31, 2008. Amortization expense attributed to vehicles acquired under capital leases is combined with depreciation expense.

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

(unaudited)
(H) ACCRUED EXPENSES AND OTHER LIABILITIES
                                                 
    March 31, 2009     December 31, 2008  
    Accrued     Non-Current             Accrued     Non-Current        
    Expenses     Liabilities     Total     Expenses     Liabilities     Total  
    (In thousands)  
 
                                               
Salaries and wages
  $ 43,107             43,107     $ 69,697             69,697  
Deferred compensation
    1,151       15,802       16,953       1,453       18,050       19,503  
Pension benefits
    2,489       512,565       515,054       2,501       504,714       507,215  
Other postretirement benefits
    3,333       43,381       46,714       3,350       43,027       46,377  
Employee benefits
    1,415             1,415       5,185             5,185  
Insurance obligations
    106,460       162,075       268,535       109,167       164,372       273,539  
Residual value guarantees
    918       1,795       2,713       651       1,738       2,389  
Vehicle rent
    2,437       11,287       13,724       16,680       7,167       23,847  
Deferred vehicle gains
    796       2,867       3,663       808       3,120       3,928  
Environmental liabilities
    3,950       11,462       15,412       3,848       11,623       15,471  
Asset retirement obligations
    5,081       10,961       16,042       4,544       11,146       15,690  
Operating taxes
    72,441             72,441       73,280             73,280  
Income taxes
    3,673       54,090       57,763       4,183       52,700       56,883  
Restructuring
    24,513       151       24,664       29,857       166       30,023  
Interest
    36,951             36,951       34,547             34,547  
Customer deposits
    25,966             25,966       27,017             27,017  
Derivatives
    531             531       607             607  
Other
    41,661       24,246       65,907       44,445       19,457       63,902  
 
                                   
Total
  $ 376,873       850,682       1,227,555     $ 431,820       837,280       1,269,100  
 
                                   
(I) INCOME TAXES
     Effective Tax Rate
     Our effective tax rate for the first quarter of 2009 increased to 62.3% as compared to 39.1% in the same period in 2008 due mainly to non-deductible foreign operating losses and charges. The foreign operating losses included the Singapore impairment charge described in Note (Q), “Other Items Impacting Comparability.”
     Uncertain Tax Positions
     We are subject to tax audits in numerous jurisdictions in the U.S. and around the world. Tax audits by their very nature are often complex and can require several years to complete. In the normal course of business, we are subject to challenges from the Internal Revenue Service (IRS) and other tax authorities regarding amounts of taxes due. These challenges may alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. As part of our calculation of the provision for income taxes on earnings, we determine whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, we accrue the largest amount of the benefit that is more likely than not of being sustained in our Consolidated Condensed Financial Statements. Such accruals require management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary materially from these estimates.
     The following is a summary of tax years that are no longer subject to examination:
     Federal — audits of our U.S. federal income tax returns are closed through fiscal year 2006. In the first quarter of 2009, the IRS completed their examination of our U.S. income tax returns for 2004 through 2006. The statute of limitation for the 2004, 2005 and 2006 years will expire on December 31, 2009, September 15, 2009 and September 15, 2010, respectively.
     State — for the majority of states, we are no longer subject to tax examinations by tax authorities for tax years before 2004.

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

(unaudited)
     Foreign — we are no longer subject to foreign tax examinations by tax authorities for tax years before 2001 in Canada and Brazil, and 2003 and 2006 in Mexico and the U.K., respectively, which are our major foreign tax jurisdictions. In Brazil, we were assessed $10.8 million, including penalties and interest, related to the tax due on the sale of our outbound auto carriage business in 2001. We believe it is more likely than not that our tax position will ultimately be sustained and no amounts have been reserved for this matter.
     At March 31, 2009 and December 31, 2008, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $52.9 million and $51.7 million, respectively. Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $1.7 million by March 31, 2010, if audits are completed or tax years close.
     Tax Law Change
     On February 19, 2009, the State of Wisconsin enacted changes to its tax system, which included mandatory unitary combined reporting. The impact of this change resulted in a favorable non-cash adjustment to deferred income taxes and increased net earnings in the three months ended March 31, 2009 by $0.5 million, or $0.01 per diluted common share.
     Like-Kind Exchange Program
     We have a like-kind exchange program for certain of our revenue earning equipment operating in the U.S. Pursuant to the program, we dispose of vehicles and acquire replacement vehicles in a form whereby tax gains on disposal of eligible vehicles are deferred. To qualify for like-kind exchange treatment, we exchange, through a qualified intermediary, eligible vehicles being disposed of with vehicles being acquired allowing us to generally carryover the tax basis of the vehicles sold (“like-kind exchanges”). The program is expected to result in a material deferral of federal and state income taxes. As part of the program, the proceeds from the sale of eligible vehicles are restricted for the acquisition of replacement vehicles and other specified applications. Due to the structure utilized to facilitate the like-kind exchanges, the qualified intermediary that holds the proceeds from the sales of eligible vehicles and the entity that holds the vehicles to be acquired under the program are required to be consolidated in the accompanying Consolidated Condensed Financial Statements in accordance with U.S. GAAP. At March 31, 2009 and December 31, 2008, these consolidated entities had total assets of $42.1 million and $70.5 million, respectively.
     At March 31, 2009 and December 31, 2008, we had $21.3 million and $32.5 million, respectively, of restricted cash for all like-kind exchange programs included within “Prepaid expenses and other current assets” on the Consolidated Condensed Balance Sheets.

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

(unaudited)
(J) DEBT
                             
    Weighted-Average Interest Rate                
    March 31,   December 31,       March 31,     December 31,  
    2009   2008   Maturities   2009     2008  
                (In thousands)  
Short-term debt and current portion of long-term debt:
                           
Unsecured foreign obligations
  8.35%   9.03 %   2009   $ 10,542       14,635  
Trade receivables program
  1.31%   2.77 %   2009     90,000       190,000  
Current portion of long-term debt, including capital leases
                6,534       179,627  
 
                       
Total short-term debt and current portion of long-term debt
                107,076       384,262  
 
                       
 
                           
Long-term debt:
                           
U.S. commercial paper (1),(2)
  1.17%   3.63 %   2010     287,294       34,804  
Canadian commercial paper (1),(2)
  1.43%   2.80 %   2010     21,413       8,283  
Unsecured U.S. notes — Medium-term notes (1)
  5.86%   5.73 %   2009-2116     2,134,129       2,306,751  
Unsecured U.S. obligations, principally bank term loans
  3.28%   3.40 %   2010-2013     157,150       157,150  
Unsecured foreign obligations
  5.08%   5.07 %   2010-2012     116,652       120,944  
Capital lease obligations
  8.80%   9.31 %   2009-2017     13,089       11,841  
 
                       
Total before fair market value adjustment
                2,729,727       2,639,773  
Fair market value adjustment on notes subject to hedging (3)
                17,119       18,391  
 
                       
 
                2,746,846       2,658,164  
Current portion of long-term debt, including capital leases
                (6,534 )     (179,627 )
 
                       
Long-term debt
                2,740,312       2,478,537  
 
                       
Total debt
              $ 2,847,388       2,862,799  
 
                       
 
(1)   We had unamortized original issue discounts of $13.0 million and $12.0 million at March 31, 2009 and December 31, 2008, respectively.
(2)   Commercial paper borrowings are supported by the long-term revolving credit facility; therefore we have classified the commercial paper as long-term debt.
(3)   The notional amount of executed interest rate swaps designated as fair value hedges was $250.0 million at March 31, 2009 and December 31, 2008.
     We can borrow up to $870 million through a global revolving credit facility with a syndicate of twelve lenders. The credit facility matures in May 2010 and is used primarily to finance working capital and provide support for the issuance of commercial paper in the U.S. and Canada. This facility can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at March 31, 2009). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility’s current annual facility fee is 11 basis points, which applies to the total facility of $870 million, and is based on Ryder’s current credit ratings. The credit facility contains no provisions restricting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions, and certain affirmative and negative covenants. In order to maintain availability of funding, we must maintain a ratio of debt to consolidated tangible net worth, of less than or equal to 300%. Tangible net worth for purposes of the credit facility excludes intangibles and includes a portion of our deferred income tax liability. The ratio at March 31, 2009 was 190%. At March 31, 2009, $559.0 million was available under the credit facility. Foreign borrowings of $21.4 million were outstanding under the facility at March 31, 2009.
     In September 2008, we renewed our trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to Ryder Receivable Funding II, L.L.C. (RRF LLC), a bankruptcy remote, consolidated subsidiary of Ryder, that in turn may sell, on a revolving basis, an ownership interest in certain of these accounts receivable to a receivables conduit or committed purchasers. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in our unsecured debt ratings and changes in interest rates. The available proceeds that may be received under the program are limited to $250 million. If no event occurs which causes early termination, the 364-day program will expire on September 8, 2009. The program contains provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of the securitized receivables. At March 31, 2009 and December 31, 2008, $90 million and $190 million, respectively, was outstanding under the program and was included within “Short-term debt and current portion of long-term debt” on our Consolidated Condensed Balance Sheets. At March 31, 2009 and December 31, 2008, collateralized receivables under the program were $99.3 million and $209.7 million, respectively.

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

(unaudited)
     In February 2008, we issued $250 million of unsecured medium-term notes maturing in March 2013. The proceeds from the notes were used for general corporate purposes. Concurrently, we entered into an interest rate swap with a notional amount of $250 million maturing in March 2013. The swap was designated as a fair value hedge whereby we receive fixed interest rate payments in exchange for making variable interest rate payments. The differential to be paid or received is accrued and recognized as interest expense. At March 31, 2009, the interest rate swap agreement effectively changed $250 million of fixed-rate debt with an interest rate of 6.00% to LIBOR-based floating-rate debt at a rate of 3.93%. Changes in the fair value of the interest rate swap are offset by changes in the fair value of the debt instrument. Accordingly, there is no ineffectiveness related to the interest rate swap. Refer to Note (L), “Derivatives,” for changes in fair value.
     On February 27, 2007, Ryder filed an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission. The registration is for an indeterminate number of securities and is effective for three years. Under this universal shelf registration statement, we have the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock and debt securities, subject to market demand and ratings status.
(K) FAIR VALUE MEASUREMENTS
     We carry various assets and liabilities at fair value in the Consolidated Condensed Balance Sheets. The most significant assets and liabilities are vehicles held for sale, which are carried at the lower of carrying value or fair value less costs to sell, investments held in Rabbi Trusts and derivatives. SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1   Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
 
Level 2   Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3   Unobservable inputs for the asset or liability. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability.
     The following tables present the fair value of our assets and liabilities recorded at fair value on a recurring basis segregated among the appropriate levels within the fair value hierarchy:
                                 
    Fair Value Measurements        
    At March 31, 2009 Using        
    Level 1     Level 2     Level 3     Total  
    (In thousands)  
Assets:
                               
Investments held in Rabbi Trusts
  $ 15,292                   15,292  
Derivative asset
          17,119             17,119  
 
                       
Total assets at fair value
  $ 15,292       17,119             32,411  
 
                       
 
                               
Liabilities:
                               
Derivative liabilities
  $       531             531  
 
                       
Total liabilities at fair value
  $       531             531  
 
                       

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

(unaudited)
                                 
    Fair Value Measurements        
    At December 31, 2008 Using        
    Level 1     Level 2     Level 3     Total  
    (In thousands)  
Assets:
                               
Investments held in Rabbi Trusts
  $ 16,950                   16,950  
Derivative asset
          18,391             18,391  
 
                       
Total assets at fair value
  $ 16,950       18,391             35,341  
 
                       
 
                               
Liabilities:
                               
Derivative liabilities
  $       607             607  
 
                       
Total liabilities at fair value
  $       607             607  
 
                       
     The following is a description of the valuation methodologies used for these items, as well as the general classification of such items pursuant to the fair value hierarchy of SFAS No. 157:
     Investments held in Rabbi Trusts — The investments include exchange-traded equity securities and mutual funds. Fair values for these investments were based on quoted prices in active markets and were therefore classified within Level 1 of the fair value hierarchy.
     Derivative asset — The derivative is a pay-variable, receive-fixed interest rate swap based on the LIBOR rate. Fair value was based on a model-driven valuation using the LIBOR rate, which was observable at commonly quoted intervals for the full term of the swap. Therefore, our derivative asset was classified within Level 2 of the fair value hierarchy.
     Derivative liabilities — The derivatives are forward foreign currency exchange contracts used to mitigate the risk of foreign currency movements on intercompany transactions. Fair value was based on a model-driven valuation using the observable forward foreign exchange rates, which was observable at commonly quoted intervals for the full term of the contracts. Therefore, our derivative liabilities were classified within Level 2 of the fair value hierarchy.
     The following table presents the fair value of our assets and liabilities recorded at fair value on a nonrecurring basis segregated among the appropriate levels within the fair value hierarchy:
                                 
    Fair Value Measurements        
    At March 31, 2009 Using        
                            Total  
    Level 1     Level 2     Level 3     Gains (Losses)  
    (In thousands)  
Assets:
                               
Revenue earning equipment
  $             43,267     $ (12,729 )
Operating property and equipment
                10,590       (3,924 )
 
                       
Total assets at fair value
  $             53,857     $ (16,653 )
 
                       
     The following is a description of the valuation methodologies used for these items, as well as the general classification of such items pursuant to the fair value hierarchy of SFAS No. 157:
     Revenue earning equipment — Represents revenue earning equipment held for sale which is stated at the lower of carrying amount or fair value less costs to sell. At March 31, 2009, the net carrying value of revenue earning equipment held for sale was $102.6 million, of which $43.3 million was recorded at fair value less costs to sell of $0.8 million. During the three months ended March 31, 2009 and 2008, we recorded a loss to reflect changes in fair value of $12.7 million and $7.2 million, respectively, within “Depreciation expense” in the Consolidated Condensed Statements of Earnings. At December 31, 2008, the net carrying value of revenue earning equipment held for sale was $93.8 million. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (tractors, trucks, trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. Fair value was determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. Therefore, our revenue earning equipment held for sale was classified within Level 3 of the fair value hierarchy.
     Operating property and equipment — Represents a SCS facility held for use in Singapore for which the carrying amount was required to be written down to fair value of $10.6 million, resulting in an impairment loss of $3.9 million. Fair value was based on an appraisal of the facility based on observable market data and adjusted based on our projections of the real estate market in Singapore.

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

(unaudited)
Therefore, operating property and equipment is classified within Level 3 of the fair value hierarchy. Refer to Note (Q), “Other Items Impacting Comparability,” for additional information on this facility.
(L) DERIVATIVES
     At March 31, 2009 and December 31, 2008, the fair value and line item caption of derivative instruments recorded on the Consolidated Condensed Balance Sheets were as follows:
                         
    March 31, 2009     December 31, 2008  
        Fair         Fair  
Derivatives designated as hedging instruments under SFAS No. 133:   Balance Sheet Location   Value     Balance Sheet Location   Value  
    (In thousands)  
Asset derivatives:
                       
 
  Direct finance leases           Direct finance leases        
Interest rate contract
  and other assets   $ 17,119     and other assets   $ 18,391  
 
                   
 
      $ 17,119         $ 18,391  
 
                   
 
                       
Liability derivatives:
                       
Foreign exchange contracts
  Accrued expenses   $  531     Accrued expenses   $  607  
 
                   
 
      $  531         $  607  
 
                   
     The location and amount of gains (losses) on derivative instruments and related hedged items reported in the Consolidated Condensed Statements of Earnings were as follows:
                     
      Three months ended March 31,  
SFAS No. 133 Fair Value Hedging Relationship   Location of Gain (Loss) Recognized in Income   2009     2008  
        (In thousands)  
 
Derivative: Interest rate contract
  Interest expense   $ 1,272       5,941  
Hedged item: Fixed-rate debt
  Interest expense     (1,272 )     (5,941 )
 
               
Total
      $        
 
               
(M) GUARANTEES
     We have executed various agreements with third parties that contain standard indemnifications that may require us to indemnify a third party against losses arising from a variety of matters such as lease obligations, financing agreements, environmental matters, and agreements to sell business assets. In each of these instances, payment by Ryder is contingent on the other party bringing about a claim under the procedures outlined in the specific agreement. Normally, these procedures allow Ryder to dispute the other party’s claim. Additionally, our obligations under these agreements may be limited in terms of the amount and (or) timing of any claim. We have entered into individual indemnification agreements with each of our independent directors, through which we will indemnify such director acting in good faith against any and all losses, expenses and liabilities arising out of such director’s service as a director of Ryder. The maximum amount of potential future payments under these agreements is generally unlimited.
     We cannot predict the maximum potential amount of future payments under certain of these agreements, including the indemnification agreements, due to the contingent nature of the potential obligations and the distinctive provisions that are involved in each individual agreement. Historically, no such payments made by Ryder have had a material adverse effect on our business. We believe that if a loss were incurred in any of these matters, the loss would not result in a material adverse impact on our consolidated results of operations or financial position.

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

(unaudited)
     At March 31, 2009 and December 31, 2008, the maximum determinable exposure of each type of guarantee and the corresponding liability, if any, recorded on the Consolidated Condensed Balance Sheets were as follows:
                                 
    March 31, 2009     December 31, 2008  
    Maximum     Carrying     Maximum     Carrying  
    Exposure of     Amount     Exposure of     Amount  
Guarantee   Guarantee     of Liability     Guarantee     of Liability  
    (In thousands)  
 
Vehicle residual value guarantees—finance lease programs (1)
  $ 2,182       970     $ 2,332       935  
Used vehicle financing
    4,058       321       4,162       472  
Standby letters of credit
    7,641             7,778        
 
                       
Total
  $ 13,881       1,291     $ 14,272       1,407  
 
                       
 
(1)   Amounts exclude contingent rentals associated with residual value guarantees on certain vehicles held under operating leases for which the guarantees are conditioned upon disposal of the leased vehicles prior to the end of their lease term. At March 31, 2009 and December 31, 2008, Ryder’s maximum exposure for such guarantees was $184.2 million and $200.0 million, respectively, with $2.7 million and $2.4 million recorded as a liability at March 31, 2009 and December 31, 2008, respectively.
     At March 31, 2009 and December 31, 2008, we had letters of credit and surety bonds outstanding totaling $250.6 million and $249.2 million, respectively, which primarily guarantee the payment of insurance claims. Certain of these letters of credit and surety bonds guarantee insurance activities associated with insurance claim liabilities transferred in conjunction with the sale of our automotive transport business, reported as a discontinued operation in previous years. To date, the insurance claims, representing per-claim deductibles payable under third-party insurance policies, have been paid and continue to be paid by the company that assumed such liabilities. However, if all or a portion of the estimated outstanding assumed claims of approximately $7.6 million at March 31, 2009 are unable to be paid, the third-party insurers may have recourse against certain of the outstanding letters of credit provided by Ryder in order to satisfy the unpaid claim deductibles. In order to reduce our potential exposure to these claims, we have an irrevocable letter of credit from the purchaser of the business referred to above totaling $7.5 million at March 31, 2009. In April 2009, we drew upon this letter of credit. Periodically, an actuarial valuation is made in order to better estimate the amount of outstanding insurance claim liabilities.
(N) SHARE REPURCHASE PROGRAMS
     In December 2007, our Board of Directors authorized a $300 million discretionary share repurchase program over a period not to exceed two years. Additionally, our Board of Directors authorized a separate two-year anti-dilutive repurchase program. Under the anti-dilutive program, management is authorized to repurchase shares of common stock in an amount not to exceed the lesser of the number of shares issued to employees upon the exercise of stock options or through the employee stock purchase plan from the period beginning on September 1, 2007 to December 12, 2009, or 2 million shares. Share repurchases of common stock under both plans may be made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish prearranged written plans for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the December 2007 programs, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. For the three months ended March 31, 2008, we repurchased and retired 840,000 shares under the $300 million program at an aggregate cost of $49.6 million, and 750,951 shares under the anti-dilutive repurchase program at an aggregate cost of $44.2 million. Towards the end of the third quarter of 2008, we temporarily paused purchases under both programs given current market conditions. We will continue to monitor financial conditions and will resume repurchases when we believe it is prudent to do so.
(O) COMPREHENSIVE INCOME
     Comprehensive income presents a measure of all changes in shareholders’ equity except for changes resulting from transactions with shareholders in their capacity as shareholders. Our total comprehensive income presently consists of net earnings, currency translation adjustments associated with foreign operations that use the local currency as their functional currency, adjustments for derivative instruments accounted for as cash flow hedges and various pension and other postretirement benefits related items.

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

(unaudited)
     The following table provides a reconciliation of net earnings as reported in the Consolidated Condensed Statements of Earnings to comprehensive (loss) income.
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
Net earnings
  $ 6,838       56,082  
Other comprehensive (loss) income:
               
Foreign currency translation adjustments
    (20,877 )     (4,973 )
Net unrealized gain on derivative instruments
    143       6  
Amortization of transition obligation (1)
    (4 )     (6 )
Amortization of net actuarial loss (1)
    4,119       1,048  
Amortization of prior service credit (1)
    (372 )     (516 )
Change in net actuarial loss (1)
    (144 )      
 
           
Total comprehensive (loss) income
  $ (10,297 )     51,641  
 
           
 
(1)   Amounts pertain to our pension and/or postretirement benefit plans and are presented net of tax. See Note (P), “Employee Benefit Plans,” for additional information.
(P) EMPLOYEE BENEFIT PLANS
     Components of net periodic benefit cost were as follows:
                                 
    Pension Benefits     Postretirement Benefits  
    Three months ended March 31,  
    2009     2008     2009     2008  
    (In thousands)  
Company-administered plans:
                               
Service cost
  $ 5,360       7,685     $  385       387  
Interest cost
    23,080       23,337       741       691  
Expected return on plan assets
    (18,441 )     (30,689 )            
Amortization of:
                               
Transition obligation
    (6 )     (8 )            
Net actuarial loss
    6,160       1,405       216       201  
Prior service credit
    (528 )     (742 )     (58 )     (58 )
 
                       
 
    15,625       988       1,284       1,221  
Union-administered plans
    1,287       1,183              
 
                       
Net periodic benefit cost
  $ 16,912       2,171     $ 1,284       1,221  
 
                       
 
                               
Company-administered plans:
                               
U.S.
  $ 13,027       (913 )   $ 1,024       983  
Non-U.S.
    2,598       1,901       260       238  
 
                       
 
    15,625       988       1,284       1,221  
Union-administered plans
    1,287       1,183              
 
                       
 
  $ 16,912       2,171     $ 1,284       1,221  
 
                       
     Pension Contributions
     We disclosed in our 2008 Annual Report that we estimated contributions of approximately $100 million to our pension plans during 2009 including voluntary U.S. contributions of approximately $73 million. At the present time, we have decided not to make the voluntary contributions to our U.S. pension plan in light of recent changes to enacted funding laws and regulations, as well as those still being considered. Based on this decision and updates to international pension plan contributions, we now expect to contribute approximately $23 million to our pension plans during 2009. During the three months ended March 31, 2009, global contributions of $4 million had been made to our pension plans.

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

(unaudited)
     Pension and Other Postretirement Benefits Asset and Liability
     In July 2008, our Board of Directors approved an amendment to freeze the defined benefit portion of our Canadian retirement plan effective January 1, 2010 for current participants who do not meet certain grandfathering criteria. As a result, these employees will cease accruing further benefits under the defined benefit plan after January 1, 2010 and will begin receiving an enhanced benefit under the defined contribution portion of the plan. All retirement benefits earned as of January 1, 2010 will be fully preserved and will be paid in accordance with the plan and legal requirements. Employees hired after January 1, 2010 will not be eligible to participate in the Canadian defined benefit plan. The freeze of the Canadian defined benefit plan created a curtailment gain of $3.6 million (pre-tax) in the third quarter of 2008.
     Enhanced 401(k) Plan
     Effective January 1, 2008, employees who did not meet the grandfathering criteria for continued participation in U.S. pension plans are eligible to participate in a new enhanced 401(k) Savings Plan (Enhanced 401(k) Savings Plan). The Enhanced 401(k) Savings Plan provides for (i) a company contribution even if employees do not make contributions, (ii) a company match of employee contributions of eligible pay, subject to IRS limits and (iii) a discretionary company match based on our performance. Our original 401(k) Savings Plan only provided for a discretionary Ryder match based on Ryder’s performance. We did not change the savings plans available to non-pensionable employees. During the three months ended March 31, 2009 and 2008, we recognized total savings plan costs of $6.1 million and $10.0 million, respectively.
(Q) OTHER ITEMS IMPACTING COMPARABILITY
     Our primary measure of segment performance excludes certain items we do not believe are representative of the ongoing operations of the segment. We believe that excluding these items from our segment measure of performance allows for better comparison of results.
     In the fourth quarter of 2008, we were notified that a significant customer in Singapore would not renew their contract, which was set to expire in 2009. The notification triggered an analysis under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which required us to assess the recoverability of the facility used in this customer’s operation. During the fourth quarter of 2008, we recorded an impairment charge to reduce the carrying value of the facility to its fair value. Conditions in the real estate market in Singapore continued to deteriorate during the first quarter of 2009. As a result, we recorded an additional pre-tax impairment charge of $3.9 million to write-down the facility to its current fair value for the three months ended March 31, 2009. The charges were recorded within “Depreciation expense” in our Consolidated Condensed Statements of Earnings.
     During the fourth quarter of 2008, a customer in the SCS business segment in the U.K. declared bankruptcy and we determined the outstanding finance lease receivable was not recoverable. During the first quarter of 2009, we revised our estimate of recoverability and recorded a $0.2 million pre-tax benefit within “Operating expense” in our Consolidated Condensed Statements of Earnings.
(R) SEGMENT REPORTING
     Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. We operate in three reportable business segments: (1) FMS, which provides full service leasing, contract maintenance, contract-related maintenance and commercial rental of trucks, tractors and trailers to customers, principally in the U.S., Canada and the U.K.; (2) SCS, which provides comprehensive supply chain consulting including distribution and transportation services throughout North America and in South America, Europe and Asia; and (3) Dedicated Contract Carriage (DCC), which provides vehicles and drivers as part of a dedicated transportation solution in the U.S.
     Our primary measurement of segment financial performance, defined as “Net Before Taxes” (NBT), includes an allocation of CSS and excludes restructuring and other charges (recoveries), net described in Note (F), “Restructuring and Other Charges (Recoveries),” and excludes the items discussed in Note (Q), “Other Items Impacting Comparability.” CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, public affairs, information technology, health and safety, legal and corporate communications. The objective of the NBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment and each operating segment within each business segment accountable for their allocated share of CSS costs. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included among the unallocated overhead remaining within CSS are the

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

(unaudited)
costs for investor relations, public affairs and certain executive compensation. CSS costs attributable to the business segments are predominantly allocated to FMS, SCS and DCC as follows:
    Finance, corporate services, and health and safety — allocated based upon estimated and planned resource utilization;
 
    Human resources — individual costs within this category are allocated in several ways, including allocation based on estimated utilization and number of personnel supported;
 
    Information technology — principally allocated based upon utilization-related metrics such as number of users or minutes of CPU time. Customer-related project costs and expenses are allocated to the business segment responsible for the project; and
 
    Other — represents legal and other centralized costs and expenses including certain share-based incentive compensation costs. Expenses, where allocated, are based primarily on the number of personnel supported.
     Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the SCS and DCC segments. Inter-segment revenue and NBT are accounted for at rates similar to those executed with third parties. NBT related to inter-segment equipment and services billed to customers (equipment contribution) are included in both FMS and the business segment which served the customer and then eliminated (presented as “Eliminations”).
     The following tables set forth financial information for each of Ryder’s business segments and a reconciliation between segment NBT and earnings before income taxes for the three months ended March 31, 2009 and 2008. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented.
                                         
    FMS     SCS     DCC     Eliminations     Total  
    (In thousands)  
For the three months ended
                                       
March 31, 2009
                                       
Revenue from external customers
  $ 790,557       297,477       115,026             1,203,060  
Inter-segment revenue
    72,079                   (72,079 )      
 
                             
Total revenue
  $ 862,636       297,477       115,026       (72,079 )     1,203,060  
 
                             
 
                                       
Segment NBT
  $ 30,406       (1,878 )     10,267       (5,789 )     33,006  
 
                               
Unallocated CSS
                                    (6,927 )
Restructuring and other charges, net and other items(1)
                                    (7,928 )
 
                                     
Earnings before income taxes
                                  $ 18,151  
 
                                     
 
                                       
Segment capital expenditures (2),(3)
  $ 247,018       2,895       210             250,123  
 
                               
Unallocated CSS
                                    1,910  
 
                                     
Capital expenditures
                                  $ 252,033  
 
                                     
 
                                       
March 31, 2008
                                       
Revenue from external customers
  $ 992,227       414,177       137,178             1,543,582  
Inter-segment revenue
    113,384                   (113,384 )      
 
                             
Total revenue
  $ 1,105,611       414,177       137,178       (113,384 )     1,543,582  
 
                             
 
                                       
Segment NBT
  $ 91,438       8,313       11,316       (7,518 )     103,549  
 
                               
Unallocated CSS
                                    (11,540 )
Restructuring and other recoveries, net
                                    78  
 
                                     
Earnings before income taxes
                                  $ 92,087  
 
                                     
 
                                       
Segment capital expenditures (2), (3)
  $ 255,474       14,590       395             270,459  
 
                               
Unallocated CSS
                                    3,354  
 
                                     
Capital expenditures
                                  $ 273,813  
 
                                     
 
(1)   See Note (Q), “Other Items Impacting Comparability,” for a discussion of items, in addition to restructuring and other charges, net that are excluded from our primary measure of segment performance.
 
(2)   Excludes revenue earning equipment acquired under capital leases.
 
(3)   Excludes acquisition payments of $85.5 million and $92.8 million during the three months ended March 31, 2009 and 2008, respectively.

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

(unaudited)
     We have a diversified portfolio of customers across a full array of transportation and logistics solutions and across many industries. We believe this will help to mitigate the impact of adverse downturns in specific sectors of the economy. Our portfolio of full service lease and commercial rental customers is not concentrated in any one particular industry or geographic region. Our largest customer, General Motors Corporation, accounted for approximately 3% and 5% of consolidated revenue for the three months ended March 31, 2009 and 2008, respectively, and is comprised of multiple contracts within our SCS business segment in various geographic regions. GM also accounted for approximately 13% and 18% of SCS total revenue for the three months ended March 31, 2009 and 2008, respectively. At March 31, 2009 and December 31, 2008, GM trade accounts receivable were $32.3 million or 7% and $42.1 million or 8%, respectively, of our trade accounts receivable.
(S) RECENT ACCOUNTING PRONOUNCEMENTS
     In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” The FSP amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” to require disclosure about fair value of financial instruments in interim financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. We will include the disclosures required under this FSP beginning in our June 30, 2009 Consolidated Condensed Financial Statements. The adoption of FSP FAS 107-1 and APB 28-1 will have no impact on our consolidated financial position, results of operations or cash flows.
     In December 2008, the FASB issued FSP No. 132(R)-1, “Employer’s Disclosures about Postretirement Benefit Plan Assets.” This FSP requires enhanced disclosures about plan assets of a defined benefit pension or other postretirement plan including information on investment policies and strategies, major categories of plan assets and fair value measurements. The disclosures required by this FSP are effective for financial statements issued for fiscal years ending after December 15, 2009 with early adoption permitted. We will include the enhanced disclosures required under this FSP beginning in our December 31, 2009 Form 10-K. The adoption of FSP No. 132(R)-1 will have no impact on our consolidated financial position, results of operations or cash flows.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS —
THREE MONTHS ENDED MARCH 31, 2009 AND 2008
OVERVIEW
     The following discussion should be read in conjunction with the unaudited Consolidated Condensed Financial Statements and notes thereto included under Item 1. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2008 Annual Report on Form 10-K.
     Ryder System, Inc. (Ryder) is a global leader in transportation and supply chain management solutions. Our business is divided into three business segments: Fleet Management Solutions (FMS), which provides full service leasing, contract maintenance, contract-related maintenance and commercial rental of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; Supply Chain Solutions (SCS), which provides comprehensive supply chain consulting including distribution and transportation services throughout North America and in South America, Europe and Asia; and Dedicated Contract Carriage (DCC), which provides vehicles and drivers as part of a dedicated transportation solution in the U.S. We operate in highly competitive markets. Our customers select us based on numerous factors including service quality, price, technology and service offerings. As an alternative to using our services, customers may choose to provide these services for themselves, or may choose to obtain similar or alternative services from other third-party vendors. Our customer base includes enterprises operating in a variety of industries including automotive, electronics, transportation, grocery, lumber and wood products, food service, and home furnishing. During the fourth quarter of 2008, we decided to discontinue operations in Brazil, Argentina, and Chile during 2009 and transition out of specific Supply Chain Solutions customer contracts in Europe. These operations will be reported as part of continuing operations in our Consolidated Condensed Financial Statements until all operations cease.
ITEMS AFFECTING COMPARABILITY BETWEEN PERIODS
     Accounting Changes
     See Note (B), “Accounting Changes,” for a discussion of the impact of changes in accounting standards.
ACQUISITIONS
     We have completed various asset purchases in the past year, under which we acquired a company’s fleet of vehicles and contractual customers. The FMS acquisitions operate under Ryder’s name and complement our existing market coverage and service network. The results of these acquisitions have been included in our consolidated results since the dates of acquisition.
     All acquisitions during 2009 and 2008 were as follows:
                 
            Contractual    
Company Acquired   Date   Vehicles   Customers   Market
Edart Leasing LLC
  February 2, 2009   1,600   340   Northeast U.S.
Gordon Truck Leasing
  August 29, 2008   500   130   Pennsylvania
Gator Leasing, Inc.
  May 12, 2008   2,300   300   Florida
Lily Transportation Corp.
  January 11, 2008   1,600   200   Northeast U.S.
     On December 19, 2008, we completed the acquisition of substantially all of the assets of Transpacific Container Terminal Ltd. and CRSA Logistics Ltd. (CRSA) in Canada, as well as CRSA operations in Hong Kong and Shanghai, China. This strategic acquisition adds complementary solutions to our SCS capabilities including consolidation services in key Asian hubs, as well as deconsolidation operations in Vancouver, Toronto and Montreal.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
CONSOLIDATED RESULTS
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (In thousands, except per share amounts)          
 
                       
Earnings before income taxes
  $ 18,151       92,087       (80 )%
Provision for income taxes
    11,313       36,005       (69 )
 
                   
Net earnings
  $ 6,838       56,082       (88 )%
 
                   
 
                       
Per diluted common share (EPS)
  $ 0.12       0.96       (88 )%
 
                   
 
                       
Weighted-average shares outstanding — Diluted
    55,281       57,973       (5 )%
 
                   
     Earnings before income taxes in the first three months of 2009 decreased $73.9 million to $18.2 million compared with the same period in the prior year. The continued deterioration in global economic conditions in the first quarter of 2009 resulted in sharply lower earnings compared to the first quarter of 2008. Our results reflect continued declines in freight demand which has most significantly impacted our FMS business segment. In addition, automotive production volumes have reached significant lows, further impacting our SCS business segment. Earnings in the first quarter were also negatively impacted by a higher effective tax rate compared to the same period in 2008 due to non-deductible foreign operating losses and charges.
     See “Operating Results by Business Segment” for a further discussion of operating results.
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (In thousands)          
 
                       
Revenue:
                       
Fleet Management Solutions
  $ 862,636       1,105,611       (22 )%
Supply Chain Solutions
    297,477       414,177       (28 )
Dedicated Contract Carriage
    115,026       137,178       (16 )
Eliminations
    (72,079 )     (113,384 )     36  
 
                   
Total
  $ 1,203,060       1,543,582       (22 )%
 
                   
 
                       
Operating revenue (1)
  $ 1,008,064       1,171,707       (14 )%
 
                   
 
(1)   We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our businesses and as a measure of sales activity. FMS fuel services revenue net of related intersegment billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to our customers for which we realize minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time as customer pricing for fuel services is established based on market fuel costs. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as subcontracted transportation is typically a pass-through to our customers. We realize minimal changes in profitability as a result of fluctuations in subcontracted transportation. Operating revenue is also a primary internal operating metric used to measure segment performance. Refer to the section titled “Non-GAAP Financial Measures” for a reconciliation of total revenue to operating revenue.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     Total revenue decreased 22% to $1.20 billion in the first quarter of 2009 compared with the same period in 2008. The decline in total revenue was primarily due to lower fuel services revenue from lower fuel costs and gallons sold and lower operating revenue. Operating revenue decreased 14% in the first quarter of 2009 primarily due to lower automotive production volumes, an unfavorable impact from foreign exchange, lower SCS and DCC fuel revenues and lower commercial rental revenue. Operating revenue was negatively impacted by lower miles driven by existing customers and an increase in customers downsizing their lease fleets. Total revenue and operating revenue in the first quarter of 2009 both included an unfavorable foreign exchange impact of 4%, due primarily to the weakening of the Canadian dollar and British pound.
                         
    Three months ended March 31,     Change  
    2009     2008     2009/2008  
    (Dollars in thousands)          
 
Operating expense (exclusive of items shown separately)
  $ 544,466       763,767       (29)%   
Percentage of revenue
    45%       49%          
     Operating expense and operating expense as a percentage of revenue decreased in 2009 primarily as a result of lower average fuel costs. The reduction in fuel costs over the prior year was driven by the decline in fuel prices as well as a lower number of gallons purchased.
                         
    Three months ended March 31,     Change  
    2009     2008     2009/2008  
    (Dollars in thousands)          
 
                       
Salaries and employee-related costs
  $ 310,258       358,370       (13)%  
Percentage of revenue
    26%       23%          
Percentage of operating revenue
    31%       31%          
     Salaries and employee-related costs decreased in the first quarter of 2009 compared with the same period in 2008 because of lower headcount and foreign exchange impact. The lower headcount was driven by lower volumes in our SCS and DCC business segments and workforce reductions made as part of the restructuring initiatives announced in the fourth quarter of 2008. In addition, salaries and employee-related costs decreased because of lower incentive-based compensation, commissions and discretionary match into the 401(k) savings plan based on company performance. The decrease in salaries and employee-related costs was partially offset by a $14.7 million increase in pension expense caused by significant negative pension asset returns in 2008.
                         
    Three months ended March 31,     Change  
    2009     2008     2009/2008  
    (Dollars in thousands)          
 
                       
Subcontracted transportation
  $ 52,620       75,331       (30)%  
Percentage of revenue
    4%       5%          
     Subcontracted transportation expense represents freight management costs on logistics contracts for which we purchase transportation from third parties. Subcontracted transportation expense is directly impacted by whether we are acting as an agent or principal in our transportation management contracts. To the extent that we are acting as a principal, revenue is reported on a gross basis and carriage costs to third parties are recorded as subcontracted transportation expense. The impact to net earnings is the same whether we are acting as an agent or principal in the arrangement. Subcontracted transportation expense decreased in 2009 compared with the same period in 2008 as a result of decreased freight volumes in the current economic environment.
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (In thousands)          
 
                       
Depreciation expense
  $ 222,521       205,960       8 %
Gains on vehicle sales, net
    (3,973 )     (12,426 )     (68 )
Equipment rental
    15,607       21,526       (27 )
     Depreciation expense relates primarily to FMS revenue earning equipment. Depreciation expense increased in the first quarter of 2009 compared with the same period in 2008, because of $5.5 million of increased write-downs in the carrying value of vehicles

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
held for sale, the impact of recent acquisitions and an impairment charge of $3.9 million on a Singapore facility partially offset by the impact of foreign exchange rates. Revenue earning equipment held for sale is recorded at the lower of fair value less cost to sell or net carrying value. We stratify our fleet by vehicle type (tractors, trucks, trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. Fair value is determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition.
     Gains on vehicle sales, net decreased in the first quarter of 2009 compared with the same period in 2008 because of lower average pricing on vehicles sold and, to a lesser extent, a decline in the number of vehicles sold.
     Equipment rental consists primarily of rent expense for FMS revenue earning equipment under lease. The decrease in equipment rental in the first quarter of 2009 compared with the same period in 2008 reflects a reduction in the average number of leased vehicles.
                         
    Three months ended March 31,     Change  
    2009     2008     2009/2008  
    (Dollars in thousands)          
 
                       
Interest expense
  $ 38,807       37,428       4%  
Effective interest rate
    5.4%       5.4%          
     Interest expense increased in the first quarter of 2009 compared with the same period in 2008 because of higher average debt balances.
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
               
Miscellaneous expense, net
  $ 418       1,617  
     Miscellaneous expense, net consists of investment losses (income) on securities used to fund certain benefit plans, interest income, losses (gains) from sales of operating property, foreign currency transaction losses (gains), and other non-operating items. Miscellaneous expense, net decreased in the first quarter of 2009 compared with the same period in 2008, primarily due to lower losses in our investment securities over the prior year and lower foreign exchange losses.
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
               
Restructuring and other charges (recoveries), net
  $ 4,185       (78 )
     Restructuring and other charges (recoveries), net in the first three months of 2009 were primarily due to ongoing costs related to the restructuring plan initiatives announced in the fourth quarter of 2008. During the first quarter of 2009, we recorded $1.8 million related to exiting SCS operations in South America and Europe. These charges included $0.6 million of employee severance and benefit costs related to retention bonuses and refinements in estimates recorded in the prior year. The charges also included $0.3 million of contract termination costs and $0.9 million related to plan implementation costs, mostly professional service fees. We expect to exit our supply chain operations in South America and Europe by the latter half of 2009. During the first quarter of 2009, we also recorded $2.4 million related to workforce reductions and refinements in estimates of prior year charges. We eliminated approximately 30 positions in 2009 as part of our continued cost containment initiatives. The workforce reductions were substantially completed during the first quarter of 2009. We expect to realize annual savings of approximately $5 million from the 2009 workforce reductions in addition to the annual savings of approximately $38 million from the 2008 actions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
                         
    Three months ended March 31,     Change  
    2009     2008     2009/2008  
    (Dollars in thousands)          
 
                       
Provision for income taxes
  $ 11,313       36,005       (69)%   
Effective tax rate
    62.3%       39.1%          
     Our effective income tax rate for the first quarter of 2009 increased compared with the same period in 2008 due to non-deductible foreign operating losses and charges in the current year.
OPERATING RESULTS BY BUSINESS SEGMENT
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (In thousands)          
Revenue:
                       
Fleet Management Solutions
  $ 862,636       1,105,611       (22 )%
Supply Chain Solutions
    297,477       414,177       (28 )
Dedicated Contract Carriage
    115,026       137,178       (16 )
Eliminations
    (72,079 )     (113,384 )     36  
 
                   
Total
  $ 1,203,060       1,543,582       (22 )%
 
                   
 
                       
Operating Revenue:
                       
Fleet Management Solutions
  $ 692,318       746,987       (7 )%
Supply Chain Solutions
    247,147       341,999       (28 )
Dedicated Contract Carriage
    112,736       134,025       (16 )
Eliminations
    (44,137 )     (51,304 )     14  
 
                   
Total
  $ 1,008,064       1,171,707       (14 )%
 
                   
 
                       
NBT:
                       
Fleet Management Solutions
  $ 30,406       91,438       (67 )%
Supply Chain Solutions
    (1,878 )     8,313       NM  
Dedicated Contract Carriage
    10,267       11,316       (9 )
Eliminations
    (5,789 )     (7,518 )     23  
 
                   
 
    33,006       103,549       (68 )
Unallocated Central Support Services
    (6,927 )     (11,540 )     40  
Restructuring and other (charges) recoveries, net and other items
    (7,928 )     78       NM  
 
                   
Earnings before income taxes
  $ 18,151       92,087       (80 )%
 
                   
     As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as “Net Before Taxes” (NBT), which includes an allocation of Central Support Services (CSS), excludes restructuring and other charges, net, described in Note (F), “Restructuring and Other Charges (Recoveries),” and excludes the items discussed in Note (Q), “Other Items Impacting Comparability.” CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services and public affairs, information technology, health and safety, legal and corporate communications. The objective of the NBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment and each operating segment within each business segment accountable for their allocated share of CSS costs. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included within the unallocated overhead remaining within CSS are the costs for investor relations, public affairs and certain executive compensation. See Note (R), “Segment Reporting,” in the Notes to Consolidated Condensed Financial Statements for a description of how the remainder of CSS costs are allocated to the business segments.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     The following table provides a reconciliation of items excluded from our segment NBT measure to their classification within our Consolidated Condensed Statements of Earnings:
                     
    Consolidated      
    Condensed Statements of   Three months ended March 31,  
Description   Earnings Line Item (1)   2009     2008  
        (In thousands)  
 
Restructuring and other (charges) recoveries, net
  Restructuring   $ (4,185 )     78  
International asset write-off
  Operating expense     181        
International asset impairment
  Depreciation expense     (3,924 )      
 
               
Restructuring and other charges, net and other items
      $ (7,928 )     78  
 
               
 
(1)   Restructuring refers to “Restructuring and other charges (recoveries), net” on our Consolidated Condensed Statements of Earnings.
     Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to our SCS and DCC segments. Inter-segment revenue and NBT are accounted for at rates similar to those executed with third parties. NBT related to inter-segment equipment and services billed to customers (equipment contribution) are included in both FMS and the business segment which served the customer and then eliminated (presented as “Eliminations”).
     The following table sets forth equipment contribution included in NBT for our SCS and DCC business segments:
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (In thousands)          
Equipment contribution:
                       
Supply Chain Solutions
  $ 2,782       4,135       (33 )%
Dedicated Contract Carriage
    3,007       3,383       (11 )
 
                   
Total
  $ 5,789       7,518       (23 )%
 
                   
Fleet Management Solutions
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (Dollars in thousands)          
 
Full service lease
  $ 491,674       504,161       (2 )%
Contract maintenance
    41,388       40,637       2  
 
                   
Contractual revenue
    533,062       544,798       (2 )
Contract-related maintenance
    44,991       51,710       (13 )
Commercial rental
    99,210       132,738       (25 )
Other
    15,055       17,741       (15 )
 
                   
Operating revenue (1)
    692,318       746,987       (7 )
Fuel services revenue
    170,318       358,624       (53 )
 
                   
Total revenue
  $ 862,636       1,105,611       (22 )%
 
                   
 
                       
Segment NBT
  $ 30,406       91,438       (67 )%
 
                   
 
                       
Segment NBT as a % of total revenue
    3.5%       8.3%     (480) bps
 
                   
 
                       
Segment NBT as a % of operating revenue (1)
    4.4%       12.2%     (780) bps
 
                   
 
(1)   We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our FMS business segment and as a measure of sales activity. Fuel services revenue, which is directly impacted by fluctuations in market fuel prices, is excluded from our operating revenue computation as fuel is largely a pass-through to customers for which we realize minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time as customer pricing for fuel services is established based on market fuel costs.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     Total revenue decreased 22% during the first quarter of 2009 compared with the same period in 2008 due primarily to lower fuel services revenue. Fuel services revenue decreased in 2009 due to lower fuel prices and reduced fuel volumes. Operating revenue (revenue excluding fuel) decreased 7% in the first quarter of 2009 compared with the same period in 2008 as the decline in commercial rental revenue, unfavorable foreign exchange impact, lower miles driven per unit and lower number of units earning revenue more than offset the contractual revenue growth from acquisitions. Total revenue and operating revenue in the first quarter of 2009 included an unfavorable foreign exchange impact of 3% and 4%, respectively.
     Full service lease revenue decreased 2% in the first quarter of 2009 compared with the same period in 2008 reflecting a 4 percentage point unfavorable impact of foreign exchange rates. Excluding foreign exchange, full service lease revenue grew 2% as contractual revenue growth, primarily from acquisitions, was partially offset by lower variable revenue from fewer miles driven by our customers with their fleets and an increase in customer fleet downsizing actions. Contract maintenance revenue increased 2% in the first quarter of 2009 compared with the same period in 2008 due to contract sales in the prior year partially offset by lower variable revenue from fewer miles per vehicle driven by our customers. We expect similar contractual revenue comparisons to continue in the near term based on recent sales activity and the impact of the freight recession. Commercial rental revenue decreased 25% in the first quarter of 2009 compared with the same period in 2008. Weak economic conditions drove a decrease in global commercial rental demand and, to a lesser extent, contributed to a more aggressive pricing environment which led to a significant decline in revenue. We expect similar commercial rental revenue comparisons to continue in the near term based on recent market trends.
     The following table provides commercial rental statistics on our global fleet:
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (Dollars in thousands)          
 
                       
Non-lease customer rental revenue
  $ 55,993       71,817       (22 )%
 
                   
 
                       
Lease customer rental revenue (1)
  $ 43,217       60,921       (29 )%
 
                   
 
                       
Average commercial rental power fleet size – in service (2), (3)
    24,300       24,600       (1 )%
 
                   
 
                       
Commercial rental utilization – power fleet
    61.3%       68.7%     (740) bps
 
                   
 
(1)   Lease customer rental revenue is revenue from rental vehicles provided to our existing full service lease customers, generally during peak periods in their operations.
 
(2)   Number of units rounded to nearest hundred and calculated using quarterly average unit counts.
 
(3)   Fleet size excluding trailers.
     FMS NBT decreased $61.0 million in the first quarter of 2009 compared with the same period in 2008 primarily driven by the current economic slowdown and freight recession. This decrease in NBT was related to a decline in global commercial rental results, lower used vehicle sales results, higher pension expense and lower contractual business performance. These items were partially offset by cost reduction initiatives, including workforce reductions announced in the fourth quarter of 2008. Commercial rental results were impacted by weak global demand which drove lower utilization and, to a lesser extent, reduced pricing. Used vehicle sales results were also impacted by weak demand which drove lower pricing and volume, as well as higher inventory levels compared with the prior year period. Pension expense significantly increased in 2009 primarily because of poor performance in the overall stock market in 2008. Contractual business performance was adversely impacted by the protracted length and increased severity of the current freight recession which has resulted in reduced customer demand for new leases and an increased number of customers downsizing their fleets. Customers are also driving significantly fewer miles with their existing fleets, which lowers our variable revenue and fuel gallons sold.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     Our global fleet of owned and leased revenue earning equipment and contract maintenance vehicles is summarized as follows (number of units rounded to the nearest hundred):
                                         
                            Change
    March 31,     December 31,     March 31,     Mar. 2009/   Mar. 2009/
    2009     2008     2008     Dec. 2008   Mar. 2008
End of period vehicle count
                                       
 
                                       
By type:
                                       
Trucks (1)
    69,200       68,300       63,400       1 %     9 %
Tractors (2)
    52,700       51,900       50,600       2       4  
Trailers (3)
    39,300       39,900       40,200       (2 )     (2 )
Other
    3,300       3,400       7,100       (3 )     (54 )
 
                                 
Total
    164,500       163,500       161,300       1 %     2 %
 
                                 
 
                                       
By ownership:
                                       
Owned
    159,300       158,200       155,500       1 %     2 %
Leased
    5,200       5,300       5,800       (2 )     (10 )
 
                                 
Total
    164,500       163,500       161,300       1 %     2 %
 
                                 
 
                                       
By product line:
                                       
Full service lease
    121,700       120,700       116,600       1 %     4 %
Commercial rental
    30,500       32,300       34,600       (6 )     (12 )
Service vehicles and other
    2,800       2,800       3,600             (22 )
 
                                 
Active units
    155,000       155,800       154,800       (1 )      
Held for sale
    9,500       7,700       6,500       23       46  
 
                                 
Total
    164,500       163,500       161,300       1 %     2 %
 
                                 
 
                                       
Customer vehicles under contract maintenance
    36,400       35,500       32,400       3 %     12 %
 
                                 
 
                                       
Quarterly average vehicle count
                                       
 
                                       
By product line:
                                       
Full service lease
    121,100       120,600       116,100       %     4 %
Commercial rental
    31,400       33,100       34,400       (5 )     (9 )
Service vehicles and other
    2,800       2,800       3,500             (20 )
 
                                 
Active units
    155,300       156,500       154,000       (1 )     1  
Held for sale
    8,700       6,600       7,000       32       24  
 
                                 
Total
    164,000       163,100       161,000       1 %     2 %
 
                                 
 
                                       
Customer vehicles under contract maintenance
    36,000       34,900       32,000       3 %     13 %
 
                                 
 
(1)   Generally comprised of Class 1 through Class 6 type vehicles with a Gross Vehicle Weight (GVW) up to 26,000 pounds.
 
(2)   Generally comprised of over the road on highway tractors and are primarily comprised of Classes 7 and 8 type vehicles with a GVW of over 26,000 pounds.
 
(3)   Generally comprised of dry, flatbed and refrigerated type trailers.
 
Note:   Prior year vehicle counts have been reclassified to conform to current year presentation.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     The following table provides a breakdown of our non-revenue earning equipment included in our global fleet count above (number of units rounded to nearest hundred):
                                         
                            Change
    March 31     December 31,     March 31,     Mar. 2009/   Mar. 2009/
    2009     2008     2008     Dec. 2008   Mar 2008
 
                                       
Not yet earning revenue (NYE)
    1,100       1,500       2,200       (27 )%     (50 )%
No longer earning revenue (NLE):
                                       
Units held for sale
    9,500       7,700       6,500       23       46  
Other NLE units
    4,500       2,900       2,900       55       55  
 
                                 
Total
    15,100       12,100       11,600       25 %     30 %
 
                                 
     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. For 2009, the number of NYE units decreased compared with the same period in the prior year consistent with lower lease replacement activity. NLE units represent all vehicles held for sale and vehicles for which no revenue has been earned in the previous 30 days. For 2009, the number of NLE units increased compared with the prior year because of increased used vehicle inventory levels, lower rental utilization and increased customer downsizings of their lease fleets. We expect higher year over year NLE levels throughout the year.
Supply Chain Solutions
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (Dollars in thousands)          
U.S. operating revenue:
                       
Automotive
  $ 79,113       133,961       (41 )%
High-Tech and Consumer
    52,297       50,480       4  
Industrial and Other
    40,996       42,619       (4 )
 
                   
U.S. operating revenue
    172,406       227,060       (24 )
 
                   
International operating revenue:
                       
South America and Europe
    18,744       35,693       (47 )
Other
    55,997       79,246       (29 )
 
                   
International operating revenue
    74,741       114,939       (35 )
 
                   
Total operating revenue (1)
    247,147       341,999       (28 )
Subcontracted transportation
    50,330       72,178       (30 )
 
                   
Total revenue
  $ 297,477       414,177       (28 )%
 
                   
 
                       
Segment NBT
  $ (1,878)       8,313       NM  
 
                   
 
                       
Segment NBT as a % of total revenue
    (0.6)%       2.0%       (260 ) bps
 
                   
 
                       
Segment NBT as a % of total operating revenue (1)
    (0.8)%       2.4%       (320 ) bps
 
                   
 
                       
Memo: Fuel costs (2)
  $ 15,115       40,448       (63 )%
 
                   
 
(1)   We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the SCS business segment and as a measure of sales activity. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as subcontracted transportation is typically a pass-through to customers. We realize minimal changes in profitability as a result of fluctuations in subcontracted transportation. Operating revenue is also a primary internal operating metric and is used to measure segment performance.
 
(2)   Fuel costs are largely a pass-through to customers and therefore have a direct impact on revenue.
     Total revenue and operating revenue decreased 28% in the first quarter of 2009 compared with the same period in 2008 as a result of lower automotive production volumes, including several plant shutdowns, unfavorable foreign exchange impact and lower fuel volume and fuel prices. In the first quarter of 2009, both SCS total revenue and operating revenue included an unfavorable foreign currency exchange impact of 6%. We expect unfavorable revenue comparisons to continue in the near term based on automotive production volumes as well as our previously announced plan to discontinue operations in South America and Europe. At the end of 2008, we announced that we were transitioning out of our operations in Brazil, Argentina, Chile and Europe.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     Our largest customer, General Motors Corporation, accounted for approximately 13% of SCS total revenue and operating revenue, respectively, for the three months ended March 31, 2009, and is comprised of multiple contracts in various geographic regions. For the first three months of 2008, General Motors Corporation accounted for approximately 18% of SCS total revenue and operating revenue, respectively.
     SCS NBT decreased $10.2 million in the three months ended March 31, 2009 compared with the same period in 2008 because of significantly reduced North America automotive volumes which decreased NBT by $7.2 million. SCS NBT also included a loss of $3.5 million related to operations in South America and Europe which will be discontinued by year-end.
Dedicated Contract Carriage
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (Dollars in thousands)          
 
                       
Operating revenue (1)
  $ 112,736       134,025       (16 )%
Subcontracted transportation
    2,290       3,153       (27 )
 
                   
Total revenue
  $ 115,026       137,178       (16 )%
 
                   
 
                       
Segment NBT
  $ 10,267       11,316       (9 )%
 
                   
 
                       
Segment NBT as a % of total revenue
    8.9%       8.2%       70  bps
 
                   
 
                       
Segment NBT as a % of operating revenue (1)
    9.1%       8.4%       70  bps
 
                   
 
                       
Memo: Fuel costs (2)
  $ 16,029       30,771       (48 )%
 
                   
 
(1)   We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the DCC business segment and as a measure of sales activity. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as subcontracted transportation is typically a pass-through to customers. We realize minimal changes in profitability as a result of fluctuations in subcontracted transportation. Operating revenue is also a primary internal operating metric and is used to measure segment performance.
 
(2)   Fuel costs are largely a pass-through to customers and therefore have a direct impact on revenue.
     Total revenue and operating revenue decreased in the first quarter of 2009 compared with the same period in 2008 as a result of lower fuel costs pass-throughs and lower volumes. We expect similar revenue comparisons to continue in the near term due to recent sales activity.
     DCC NBT decreased 9% in the first quarter of 2009 compared with the same period in 2008 due to the decline in revenue and was partially offset by better operating performance and lower overhead spending.
Central Support Services
                         
    Three months ended March 31,     Change
    2009     2008     2009/2008
    (In thousands)          
 
Human resources
  $ 3,645       3,892       (6 )%
Finance
    12,442       13,790       (10 )
Corporate services and public affairs
    2,838       3,861       (26 )
Information technology
    12,971       13,958       (7 )
Health and safety
    1,667       1,966       (15 )
Other
    4,661       9,313       (50 )
 
                   
Total CSS
    38,224       46,780       (18 )
Allocation of CSS to business segments
    (31,297 )     (35,240 )     11  
 
                   
Unallocated CSS
  $ 6,927       11,540       (40 )%
 
                   

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     Total CSS costs in the first quarter of 2009 decreased compared with the same period in 2008 as a result of higher spending on information technology initiatives and public affairs in 2008 and the benefit of cost reduction actions. Unallocated CSS costs decreased compared with 2008 because of higher spending in 2008 on public affairs, lower incentive-based compensation and lower losses on investment securities.
FINANCIAL RESOURCES AND LIQUIDITY
Cash Flows
     The following is a summary of our cash flows from operating, financing and investing activities:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
Net cash provided by (used in):
               
Operating activities
  $ 253,795       300,252  
Financing activities
    (22,955 )     (56,045 )
Investing activities
    (257,619 )     (249,703 )
Effect of exchange rate changes on cash
    (1,952 )     3,658  
 
           
Net change in cash and cash equivalents
  $ (28,731 )     (1,838 )
 
           
     A detail of the individual items contributing to the cash flow changes is included in the Consolidated Condensed Statements of Cash Flows.
     Cash provided by operating activities decreased to $253.8 million in the three months ended March 31, 2009 compared to $300.3 million in 2008, due primarily to lower deferred income taxes caused by lower projected capital spending levels in 2009 and lower cash based earnings. Cash used in financing activities in the three months ended March 31, 2009 was $23.0 million compared to $56.0 million in 2008. In 2009, we used less cash for financing activities primarily because of net share repurchases in the prior year compared with no repurchases in the current year. The decline in cash used for financing activities was slightly offset by net debt repayments in 2009 compared to net borrowings in 2008. Cash used in investing activities increased to $257.6 million in the three months ended March 31, 2009 compared to $249.7 million in 2008 primarily due to a higher amount of restricted cash released in 2008 for our like-kind exchange programs.
     We refer to the sum of operating cash flows, proceeds from the sales of revenue earning equipment and operating property and equipment, collections on direct finance leases and other cash inflows as “total cash generated.” We refer to the net amount of cash generated from operating and investing activities (excluding changes in restricted cash and acquisitions) as “free cash flow.” Although total cash generated and free cash flow are non-GAAP financial measures, we consider them to be important measures of comparative operating performance. We also believe total cash generated to be an important measure of total cash inflows generated from our ongoing business activities. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and therefore comparability may be limited.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
     The following table shows the sources of our free cash flow computation:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
Net cash provided by operating activities
  $ 253,795       300,252  
Sales of revenue earning equipment
    46,397       74,304  
Sales of operating property and equipment
    795       679  
Collections on direct finance leases
    21,468       17,628  
Other, net
          395  
 
           
Total cash generated
    322,455       393,258  
Purchases of property and revenue earning equipment
    (252,033 )     (273,813 )
 
           
Free cash flow
  $ 70,422       119,445  
 
           
     The decline in free cash flow to $70.4 million for the three months ended March 31, 2009 compared to $119.4 million for the same period in 2008 was driven by lower earnings. Full year 2009 free cash flow is expected to improve from the previous forecast because of lower net capital expenditures, lower expected pension contributions, and reduced cash taxes due in part to recent government economic stimulus packages.
     The following table provides a summary of capital expenditures:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
       
Revenue earning equipment: (1)
               
Full service lease
  $ 205,664       248,902  
Commercial rental
    3,786       54,365  
 
           
 
    209,450       303,267  
Operating property and equipment
    15,236       29,163  
 
           
Total capital expenditures
    224,686       332,430  
Changes in accounts payable related to purchases of revenue earning equipment
    27,347       (58,617 )
 
           
Cash paid for purchases of property and revenue earning equipment
  $ 252,033       273,813  
 
           
 
(1)   Capital expenditures exclude revenue earning equipment acquired under capital leases of $1.9 million and $0.8 million during the three months ended March 31, 2009 and 2008, respectively.
     Capital expenditures (accrual basis) of $224.7 million were lower for the three months ended March 31, 2009 compared with the same period in 2008 principally as a result of the elimination of rental spending based on market demand and reduced spending on full service lease for replacement and expansion of customer fleets. The decrease in capital expenditures related to operating property and equipment reflect our investments in information technology initiatives and real estate properties in the prior year. We now anticipate reduced capital expenditures relative to the previous forecast due to lower expected levels of new lease sales and replacements.
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.
     Our ability to access unsecured debt in the capital markets is linked to both our short-term and long-term debt ratings. These ratings are intended to provide guidance to investors in determining the credit risk associated with particular Ryder securities based on current information obtained by the rating agencies from us or from other sources. Lower ratings generally result in higher borrowing costs as well as reduced access to unsecured capital markets. A significant downgrade of our short-term debt ratings would impair our ability to issue commercial paper. As a result, we would have to rely on alternative funding sources. A significant downgrade would not affect our ability to borrow amounts under our revolving credit facility described below.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
       Our debt ratings at March 31, 2009 were as follows:
             
    Short-term   Long-term   Outlook
 
Moody’s Investors Service
  P2   Baa1   Stable (reaffirmed February 2009)
Standard & Poor’s Ratings Services
  A2   BBB+   Negative (January 2009)
Fitch Ratings
  F2   A-   Stable (reaffirmed March 2009)
         Global capital and credit markets, including the commercial paper markets, have been experiencing volatility and disruption. Despite this volatility and disruption, we have continued to have access to the commercial paper markets. There is no guarantee that such markets will continue to be available to us at terms commercially acceptable to us or at all. If we cease to have access to commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements as described below and/or by seeking other funding sources. We believe that our operating cash flow, together with our revolving credit facility and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future, although there can be no assurance that continued or increased volatility and disruption in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable to us or at all.
       We can borrow up to $870 million through a global revolving credit facility with a syndicate of twelve lenders. The credit facility matures in May 2010 and is used primarily to finance working capital and provide support for the issuance of commercial paper in the U.S. and Canada. This facility can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at March 31, 2009). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility’s current annual facility fee is 11 basis points, which applies to the total facility of $870 million, and is based on Ryder’s current credit ratings. The credit facility contains no provisions restricting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions, and certain affirmative and negative covenants. In order to maintain availability of funding, we must maintain a ratio of debt to consolidated tangible net worth, as defined in the agreement, of less than or equal to 300%. The ratio at March 31, 2009 was 190%. At March 31, 2009, $559.0 million was available under the credit facility. Foreign borrowings of $21.4 million were outstanding under the facility at March 31, 2009.
       In September 2008, we renewed our trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to Ryder Receivable Funding II, L.L.C. (RRF LLC), a bankruptcy remote, consolidated subsidiary of Ryder, that in turn may sell, on a revolving basis, an ownership interest in certain of these accounts receivable to a receivables conduit or committed purchasers. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in our unsecured debt ratings and changes in interest rates. The available proceeds that may be received under the program are limited to $250 million. If no event occurs which causes early termination, the 364-day program will expire on September 8, 2009. The program contains provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of the securitized receivables. At March 31, 2009 and December 31, 2008, $90 million and $190 million, respectively, was outstanding under the program and was included within “Short-term debt and current portion of long-term debt” on our Consolidated Condensed Balance Sheet.
       Historically, we have established asset-backed securitization programs whereby we sell beneficial interests in certain long-term vehicle leases and related vehicle residuals to a bankruptcy-remote special purpose entity that in turn transfers the beneficial interest to a special purpose securitization trust in exchange for cash. The securitization trust funds the cash requirement with the issuance of asset-backed securities, secured or otherwise collateralized by the beneficial interest in the long-term vehicle leases and the residual value of the vehicles. The securitization provides us with further liquidity and access to new capital markets based on market conditions. On June 18, 2008, Ryder Funding II LP, a special purpose bankruptcy-remote subsidiary wholly-owned by Ryder, filed a registration statement on Form S-3 with the Securities and Exchange Commission for the registration of $600 million in asset-backed notes. The registration statement became effective on November 6, 2008 and allows us to access the public asset-backed securities market for three years, subject to market conditions. Based on current market conditions, we do not expect to utilize this program in the near term.
       On February 27, 2007, Ryder filed an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission. The registration is for an indeterminate number of securities and is effective for three years. Under this universal shelf registration statement, we have the capacity to offer and sell from time to time various types of securities, including common stock,

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
preferred stock and debt securities, subject to market demand and ratings status. See Note (J), “Debt,” for issuances under this registration statement.
       At March 31, 2009, we had the following amounts available to fund operations under the aforementioned facilities:
         
    (In millions)
Global revolving credit facility
$   559  
Trade receivables program
    160  
       The following table shows the movements in our debt balance:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
Debt balance at January 1
  $ 2,862,799       2,776,129  
 
           
 
               
Cash-related changes in debt:
               
Net change in commercial paper borrowings
    266,089       (238,351 )
Proceeds from issuance of medium-term notes
          250,000  
Proceeds from issuance of other debt instruments
    66       203,624  
Retirement of medium-term notes and debentures
    (173,000 )      
Other debt repaid, including capital lease obligations
    (104,651 )     (201,726 )
 
           
 
    (11,496 )     13,547  
 
               
Non-cash changes in debt:
               
Fair market value adjustment on notes subject to hedging
    (1,272 )     5,941  
Addition of capital lease obligations, including acquisitions
    1,949       1,675  
Changes in foreign currency exchange rates and other non-cash items
    (4,592 )     (806 )
 
           
Total changes in debt
    (15,411 )     20,357  
 
           
 
               
Debt balance at March 31
  $ 2,847,388       2,796,486  
 
           
       In accordance with our funding philosophy, we attempt to match the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our assets. We utilize both fixed-rate and variable-rate debt to achieve this match and generally target a mix of 25% — 45% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total obligations (including notional value of swap agreements) was 31% at March 31, 2009 and 26% at December 31, 2008.
       Ryder’s leverage ratios and a reconciliation of on-balance sheet debt to total obligations were as follows:
                                 
    March 31,     % to     December 31,     % to  
    2009     Equity     2008     Equity  
    (Dollars in thousands)  
 
On-balance sheet debt
  $ 2,847,388       214%       2,862,799       213%  
Off-balance sheet debt—PV of minimum lease payments and guaranteed residual values under operating leases for vehicles (1)
    148,093               163,039          
 
                           
Total obligations
  $ 2,995,481       226%       3,025,838       225%  
 
                           
 
(1)   Present value (PV) does not reflect payments Ryder would be required to make if we terminated the related leases prior to the scheduled expiration dates.
       On-balance sheet debt to equity consists of balance sheet debt divided by total equity. Total obligations to equity represents balance sheet debt plus the present value of minimum lease payments and guaranteed residual values under operating leases for vehicles, discounted based on our incremental borrowing rate at lease inception, all divided by total equity. Although total obligations is a non-GAAP financial measure, we believe that total obligations is useful as it provides a more complete analysis of our existing financial obligations and helps better assess our overall leverage position.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
       Our long-term target percentage of total obligations to equity is 250% to 300% while maintaining a strong investment grade rating. We believe this leverage range is appropriate for our business due to the liquidity of our vehicle portfolio and because of the substantial revenue component that is supported by long-term customer contracts related to those vehicles.
Off-Balance Sheet Arrangements
       We periodically enter into sale-leaseback transactions in order to lower the total cost of funding our operations, to diversify our funding among different classes of investors and to diversify our funding among different types of funding instruments. These sale-leaseback transactions are often executed with third-party financial institutions that are not deemed to be variable interest entities (VIEs). In general, these sale-leaseback transactions result in a reduction in revenue earning equipment and debt on the balance sheet, as proceeds from the sale of revenue earning equipment are primarily used to repay debt. Accordingly, sale-leaseback transactions will result in reduced depreciation and interest expense and increased equipment rental expense. These leases contain limited guarantees by us of the residual values of the leased vehicles (residual value guarantees) that are conditioned upon disposal of the leased vehicles prior to the end of their lease term. The amount of future payments for residual value guarantees will depend on the market for used vehicles and the condition of the vehicles at time of disposal. See Note (M), “Guarantees,” in the Notes to Consolidated Condensed Financial Statements for additional information. We did not enter into any sale-leaseback transactions during the three months ended March 31, 2009 or 2008.
Pension Information
       The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. We review pension assumptions regularly and we may from time to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. We disclosed in our 2008 Annual Report that we estimated contributions of approximately $100 million to our pension plans during 2009 including voluntary U.S. contributions of approximately $73 million. At the present time, we have decided not to make the voluntary contributions to our U.S. pension plan in light of recent changes to enacted funding laws and regulations, as well as those still being considered. Based on this decision and updates to international pension plan contributions, we now expect to contribute approximately $23 million to our pension plans during 2009. During the three months ended March 31, 2009, global contributions of $4 million had been made to our pension plans. Changes in interest rates and the market value of the securities held by the plans during 2009 could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and required contributions in 2010 and beyond. See Note (P), “Employee Benefit Plans,” in the Notes to Consolidated Condensed Financial Statements for additional information.
Share Repurchases and Cash Dividends
       As discussed in Note (N), “Share Repurchase Programs,” in December 2007, our Board of Directors authorized a $300 million discretionary share repurchase program over a period not to exceed two years. Additionally, our Board of Directors authorized a separate two-year anti-dilutive repurchase program. For the three months ended March 31, 2009, no repurchases were made under the $300 million program or the anti-dilutive repurchase program. The timing and amount of repurchase transactions is determined based on management’s evaluation of market conditions, share price and other factors. Towards the end of the third quarter of 2008, we temporarily paused purchases under both programs given current market conditions. We will continue to monitor financial conditions and will resume repurchases when we believe it is prudent to do so.
       In February 2009, our Board of Directors declared a quarterly cash dividend of $0.23 per share of common stock.
RECENT ACCOUNTING PRONOUNCEMENTS
       See Note (S), “Recent Accounting Pronouncements,” in the Notes to Consolidated Condensed Financial Statements for a discussion of recent accounting pronouncements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
NON-GAAP FINANCIAL MEASURES
       This Quarterly Report on Form 10-Q includes information extracted from consolidated condensed financial information but not required by generally accepted accounting principles (GAAP) to be presented in the financial statements. Certain of this information are considered “non-GAAP financial measures” as defined by SEC rules. Specifically, we refer to operating revenue, salaries and employee-related costs as a percentage of operating revenue, FMS operating revenue, FMS NBT as a % of operating revenue, SCS operating revenue, SCS NBT as a % of operating revenue, DCC operating revenue, DCC NBT as a % of operating revenue, total cash generated, free cash flow, total obligations and total obligations to equity. As required by SEC rules, we provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and an explanation why management believes that presentation of the non-GAAP financial measure provides useful information to investors. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP.
       The following table provides a numerical reconciliation of total revenue to operating revenue which was not provided within the MD&A discussion:
                 
    Three months ended March 31,  
    2009     2008  
    (In thousands)  
 
Total revenue
  $ 1,203,060       1,543,582  
Fuel services and subcontracted transportation revenue (1)
    (222,938 )     (433,955 )
Fuel eliminations
    27,942       62,080  
 
           
Operating revenue
  $ 1,008,064       1,171,707  
 
           
 
(1)   Includes intercompany fuel sales.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
FORWARD-LOOKING STATEMENTS
       Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Quarterly Report on Form 10-Q contains forward-looking statements including, but not limited to, statements regarding:
  our expectations as to anticipated revenue and earnings trends and the future impact of current economic conditions, particularly the freight recession and automotive volume declines;
 
  our ability to successfully achieve the operational goals that are the basis of our business strategies, including offering competitive pricing, diversifying our customer base, optimizing asset utilization, leveraging the expertise of our various business segments, serving our customers’ global needs and expanding our support services;
 
  impact of losses from conditional obligations arising from guarantees;
 
  our expectations of the long-term residual values of revenue earning equipment;
 
  number of NLE vehicles in inventory, and the size of our commercial rental and full service lease fleet, for the remainder of the year;
 
  the anticipated timing of the recognition of pre-tax compensation expense;
 
  our expectations of free cash flow and capital expenditures for 2009;
 
  the adequacy of our accounting estimates and reserves for pension expense, depreciation and residual value guarantees, self-insurance reserves, goodwill impairment, accounting changes and income taxes;
 
  our ability to fund all of our operations for the foreseeable future through internally generated funds and outside funding sources;
 
  the anticipated impact of fuel price fluctuations;
 
  our expectations as to future pension expense and estimated contributions;
 
  our expectations regarding the ultimate resolution of a disputed foreign tax assessment;
 
  the anticipated deferral of tax gains on disposal of eligible revenue earning equipment pursuant to our vehicle like-kind exchange program;
 
  our expectations regarding the effect of the adoption of recent accounting pronouncements;
 
  our expectations regarding the terms, timing and integration plans of recent acquisitions;
 
  our expectations regarding the timing and impact of our plans to exit Supply Chain operations in South America and Europe;
 
  our ability to access unsecured debt in the capital markets and our beliefs regarding the reliability of the participants to our contractual lending agreements;
 
  our expectations regarding the future use and availability of funding sources; and
 
  the appropriateness of our long-term target leverage range.
       These statements, as well as other forward-looking statements contained in this Quarterly Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors include, but are not limited to, the following:
  Market Conditions:
  o   Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services, lower profit margins, increased levels of bad debt and reduced access to credit
 
  o   More significant decrease in freight demand which would more severely impact both our transactions and variable-based contractual business
 
  o   Changes in our customers’ operations, financial condition or business environment that may limit their need for, or ability to purchase, our services
 
  o   Changes in market conditions affecting the commercial rental market or the sale of used vehicles
 
  o   Less than anticipated growth rates in the markets in which we operate
 
  o   Changes in current financial, tax or regulatory requirements that could negatively impact the leasing market
  Competition:
  o   Competition from other service providers, some of which have greater capital resources or lower capital costs
 
  o   Continued consolidation in the markets in which we operate which may create large competitors with greater financial resources

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
  o   Our inability to maintain current pricing levels due to customer acceptance or competition
  Profitability:
  o   Our inability to obtain adequate profit margins for our services
 
  o   Lower than expected customer volumes or retention levels
 
  o   Loss of key customers in our SCS and DCC business segments
 
  o   Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis
 
  o   The inability of our business segments to create operating efficiencies
 
  o   Sudden changes in fuel prices and fuel shortages
 
  o   Our inability to successfully implement our asset management initiatives
 
  o   Increased unionizing, labor strikes and work stoppages
 
  o   Our inability to manage our cost structure
 
  o   Our inability to limit our exposure for customer claims
  Financing Concerns:
  o   Higher borrowing costs and possible decreases in available funding sources caused by an adverse change in our debt ratings
 
  o   Unanticipated interest rate and currency exchange rate fluctuations
 
  o   Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates
 
  o   Increased instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit
  Accounting Matters:
  o   Impact of unusual items resulting from ongoing evaluations of business strategies, asset valuations, acquisitions, divestitures and our organizational structure
 
  o   Reductions in residual values or useful lives of revenue earning equipment
 
  o   Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory changes affecting pension estimates, accruals and expenses
 
  o   Increases in healthcare costs resulting in higher insurance costs
 
  o   Changes in accounting rules, assumptions and accruals
 
  o   Impact of actual insurance claim and settlement activity compared to historical loss development factors used to project future development
 
  o   Additional adverse issues or developments relating to our Brazilian operations
  Other risks detailed from time to time in our SEC filings
       The risks included here are not exhaustive. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this Quarterly Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events or otherwise.

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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, 2008. Please refer to the 2008 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
       As of the end of the first quarter of 2009, 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 Rules 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the first quarter of 2009, Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective.
Changes in Internal Controls over Financial Reporting
       During the three months ended March 31, 2009, there were no changes in Ryder’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
       The following table provides information with respect to purchases we made of our common stock during the three months ended March 31, 2009:
                                         
                            Maximum     Approximate  
                    Total Number of     Number of     Dollar Value  
                    Shares     Shares That May     That  
                    Purchased as     Yet Be     May Yet Be  
    Total Number             Part of Publicly     Purchased Under     Purchased Under  
    of Shares     Average Price     Announced     the Anti-Dilutive     the Discretionary  
    Purchased(1)     Paid per Share     Program     Program(2)     Program (3)  
 
January 1 through January 31, 2009
    1,290     $ 38.21             636,564     $ 130,400,437  
February 1 through February 28, 2009
    16,946       32.17             636,564       130,400,437  
March 1 through March 31, 2009
    1,280       21.05             636,564       130,400,437  
 
                                 
Total
    19,516     $ 31.84                        
 
                                 
 
(1)   During the three months ended March 31 2009, we purchased an aggregate of 19,516 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock delivered as payment for the exercise price of options exercised or to satisfy the option holders’ tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our common stock, one of the investment options available under the plans.
 
(2)   In December 2007, our Board of Directors authorized a two-year anti-dilutive share repurchase program. Under the anti-dilutive program, management is authorized to repurchase shares of common stock in an amount not to exceed the lesser of the number of shares issued to employees upon the exercise of stock options or through the employee stock purchase plan for the period beginning on September 1, 2007 to December 12, 2009, or 2 million shares. Share repurchases of common stock may be made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish a prearranged written plan for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the anti-dilutive program, which allows for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. During the three months ended March 31, 2009, no repurchases were made under this program. Towards the end of the third quarter of 2008, we temporarily paused purchases under this program given current market conditions. We will continue to monitor financial conditions and will resume repurchases when we believe it is prudent to do so.
 
(3)   In December 2007, our Board of Directors also authorized a $300 million discretionary share repurchase program over a period not to exceed two years. Share repurchases of common stock may be made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish a prearranged written plan for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the $300 million discretionary program, which allows for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. During the three months ended March 31, 2009, no repurchases were made under this program. Towards the end of the third quarter of 2008, we temporarily paused purchases under this program given current market conditions. We will continue to monitor financial conditions and will resume repurchases when we believe it is prudent to do so.

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ITEM 6. EXHIBITS
     
31.1
  Certification of Gregory T. Swienton pursuant to Rule 13a-14(a) or Rule 15d-14(a).
 
   
31.2
  Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a).
 
   
32
  Certification of Gregory T. Swienton and Robert E. Sanchez pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350.

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SIGNATURES
       Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  RYDER SYSTEM, INC.
(Registrant)
 
 
Date: April 22, 2009  By:   /s/ Robert E. Sanchez    
    Robert E. Sanchez   
    Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer) 
 
 
 
 
Date: April 22, 2009  By:   /s/ Art A. Garcia    
    Art A. Garcia
Senior Vice President and Controller
(Principal Accounting Officer) 
 

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