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OFFON

RYDER SYSTEM, INC.

(R)
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RYDER SYSTEM : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

07/28/2021 | 04:28pm EDT
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements and notes thereto included under
Item 1, as well as our audited Consolidated Financial Statements and notes
thereto and related MD&A included in the 2020 Annual Report on Form 10-K.

OVERVIEW

Ryder is a leading logistics and transportation company. Our operating segments
are aggregated into reportable business segments based upon similar economic
characteristics, products, services, customers and delivery methods. We report
our financial performance based on three business segments: (1) Fleet Management
Solutions (FMS), which provides full service leasing and leasing with flexible
maintenance options, commercial rental and maintenance services of trucks,
tractors and trailers to customers principally in the United States (U.S.),
Canada and the United Kingdom (U.K.); (2) Supply Chain Solutions (SCS), which
provides integrated logistics solutions, including distribution management,
dedicated transportation, transportation management, last mile and professional
services in North America; and (3) Dedicated Transportation Solutions (DTS),
which provides turnkey transportation solutions in the U.S. that includes
dedicated vehicles, drivers, management, and administrative support. Dedicated
transportation services provided as part of an operationally integrated,
multi-service, supply chain solution to SCS customers are primarily reported in
the SCS business segment.

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

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

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

This MD&A includes certain non-GAAP financial measures. Refer to the "Non-GAAP
Financial Measures" section of this MD&A for information on the non-GAAP
measures, including reconciliations to the most comparable GAAP financial
measure and the reasons why we believe each measure is useful to investors. In
addition, this MD&A may include certain forward-looking statements regarding our
outlook. These statements are based on our current plans and expectations and
are subject to risks, uncertainties and assumptions. We caution readers that
certain important factors could cause actual results and events to differ
significantly from those expressed. Refer to the "Special Note Regarding
Forward-Looking Statements" section in this Quarterly Report on Form 10-Q for
more information.

                                       22

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

                    AND RESULTS OF OPERATIONS - (Continued)
The following discussion provides a summary of financial highlights that are
discussed in more detail throughout our MD&A and within the Notes to Condensed
Consolidated Financial Statements:
                                        Three months ended June 30,                     Six months ended June 30,                          Change 2021/2020
                                         2021                     2020                  2021                   2020              Three Months              Six Months
                                                        (In thousands, except per share amounts)
Total revenue                   $     2,382,237$ 1,895,282$    4,603,859$ 4,056,588                26%                      13%
Operating revenue (1)                 1,922,820                1,623,244               3,740,183            3,394,491                18%                      10%

Earnings (loss) from continuing
operations before income taxes
(EBT)                           $       203,573$   (94,777)$      273,840$  (208,411)                NM                       NM
Comparable EBT (1)                      175,604                  (64,049)                254,239             (154,873)                NM                       NM
Earnings (loss) from continuing
operations                              149,568                  (73,705)                201,152             (182,834)                NM                

NM

Comparable earnings (loss) from
continuing operations (1)               129,138                  (49,457)                187,328             (121,561)                NM                       NM
Net earnings (loss)                     149,105                  (74,099)                199,930             (183,712)                NM                       NM
Comparable EBITDA (1) (2)               624,055                  547,644               1,191,470            1,065,339                14%                      12%

Earnings (loss) per common
share (EPS) - Diluted
Continuing operations           $          2.78              $     (1.41)         $         3.75          $     (3.50)                NM                       NM
Comparable (1)                             2.40                    (0.95)                   3.49                (2.33)                NM                       NM
Net earnings (loss)                        2.77                    (1.42)                   3.73                (3.52)                NM                       NM


NM - Denotes Not Meaningful throughout the MD&A
(1)Non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures"
section of this MD&A for reconciliations of the most comparable GAAP measure to
the non-GAAP financial measure and the reasons why management believes this
measure is important to investors.
(2)Comparable EBITDA has been recast to exclude gains/losses from the sale of
used vehicles.


Total revenue increased 26% and 13% in the second quarter of 2021 and the six
months ended June 30, 2021, respectively. Operating revenue (a non-GAAP measure
excluding fuel, subcontracted transportation and ChoiceLease liability insurance
revenues) increased 18% and 10% in the second quarter of 2021 and the six months
ended June 30, 2021, respectively. The increases in total and operating revenue
for both the second quarter and six months ended June 30, 2021 were primarily
due to higher revenue across all of our business segments as the prior year was
negatively impacted by the economic slowdown from the COVID-19 effects
particularly in our commercial rental (FMS) and automotive (SCS) businesses.
Total revenue in both periods also increased from higher subcontracted
transportation and fuel revenue.

EBT increased to earnings of $204 million in the second quarter of 2021, as
compared to a loss of $95 million in the prior year period. For the six months
ended June 30, 2021, EBT increased to earnings of $274 million, as compared to a
loss of $208 million in the prior year period. These increases were primarily
due to a declining impact of depreciation expense from prior residual value
estimate changes and higher gains on used vehicles sold in 2021, totaling
$131 million and $223 million for the second quarter and six months ended June
30, 2021, respectively. EBT also increased from higher rental performance,
improved ChoiceLease results and the prior year impact from the COVID-19
effects.

The COVID-19 effects negatively impacted several areas of our businesses,
particularly in the first half of 2020. In our FMS business segment, we
experienced lower demand for commercial rental and declines in the used vehicle
market through the second quarter of 2020. In our SCS business segment, we
experienced temporary shutdowns in the automotive industry, which restarted
their operations during the second quarter of 2020. This was followed by
increased consumer demand in the second half of 2020, particularly in the fourth
quarter, which helped contribute to a worldwide semiconductor supply shortage in
early 2021, as semiconductor suppliers were unable to rapidly reallocate
production to respond to demand across multiple industries, particularly the
automotive industry. The semiconductor shortage impacted the production activity
of our automotive SCS customers in the first half of 2021 and is causing delayed
deliveries of new vehicles in our FMS business.



                                       23

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

                    AND RESULTS OF OPERATIONS - (Continued)
While we are experiencing positive momentum in our businesses, any additional
negative effects of the pandemic may have a further impact on our business and
financial results, as well as on significant judgments and estimates, including
those related to goodwill and other asset impairments, residual values and other
depreciation assumptions, deferred income taxes and annual effective tax rates,
variable revenue considerations, the valuation of our pension plans, and
allowance for credit losses.

Cash provided by operating activities remained at $1.1 billion for the six
months ended June 30, 2021 as higher net earnings were offset by higher working
capital needs. Free cash flow (a non-GAAP financial measure) decreased slightly
to $602 million for the six months ended June 30, 2021 primarily due to higher
cash paid for capital expenditures, partially offset by higher proceeds from the
sale of revenue earning equipment and operating property and equipment. Gross
capital expenditures increased for the six months ended June 30, 2021 primarily
reflecting higher planned investments in the rental fleet.

Our debt to equity ratio was 258% and 293% as of June 30, 2021 and December 31,
2020, respectively. As of June 30, 2021, our debt balance decreased 6% from the
prior year-end to $6.2 billion.

Adjusted return on equity (ROE) was 12.2% and (9.8)% as of June 30, 2021 and
2020, respectively. Our interim target is 11% and long-term target over the
cycle is 15%. The increase in ROE is primarily due to a declining impact of
depreciation expense from the residual value estimate changes and higher used
vehicle sales results, as well as commercial rental business recovery and higher
lease pricing.
                                       24

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

                    AND RESULTS OF OPERATIONS - (Continued)

CONSOLIDATED RESULTS

Lease & Related Maintenance and Rental

                                 Three months ended June 30,                  Six months ended June 30,                          Change 2021/2020
                                   2021                  2020                 2021                   2020              Three Months              Six Months
                                                              (In thousands)
Lease & related maintenance
and rental revenues          $      986,694$ 868,660$    1,927,116$ 1,796,416                14%                       7%
Cost of lease & related
maintenance and rental              708,737            775,350               1,438,881            1,593,642                (9)%                    (10)%
Gross margin                 $      277,957$  93,310$      488,235$   202,774                 NM                       NM
Gross margin %                      28%                  11%                   25%                   11%



Lease & related maintenance and rental revenues represent revenues from our
ChoiceLease and commercial rental product offerings within our FMS business
segment. Revenues increased 14% in the second quarter of 2021 and 7% for the six
months ended June 30, 2021 driven by increases in commercial rental and
ChoiceLease revenue. Commercial rental revenues were negatively impacted by the
COVID-19 effects in the prior year.

Cost of lease & related maintenance and rental represents the direct costs
related to lease & related maintenance and rental revenues and are comprised of
depreciation of revenue earning equipment, maintenance costs (primarily repair
parts and labor), and other costs such as licenses, insurance and operating
taxes. Cost of lease & related maintenance and rental excludes interest costs
from vehicle financing, which are reported within "Interest Expense" in our
Condensed Consolidated Statements of Earnings. Cost of lease & related
maintenance and rental decreased 9% in the second quarter of 2021 and 10% for
the six months ended June 30, 2021 due to declining depreciation expense impacts
from prior residual value estimate changes. Both the second quarter and six
months ended June 30, 2020 benefited from lower maintenance and other costs due
to less activity as a result of the COVID-19 effects.

Lease & related maintenance and rental gross margin increased in the second
quarter of 2021 and for the six months ended June 30, 2021 primarily due to a
declining impact of depreciation expense from prior residual value estimate
changes, higher commercial rental pricing and utilization, and higher
ChoiceLease pricing and mileage revenue. Gross margin as a percentage of revenue
increased to 28% in the second quarter of 2021 and increased to 25% in the six
months ended June 30, 2021 as a result of the lower depreciation impact, higher
commercial rental and ChoiceLease revenue and higher rental utilization.

Services

                                      Three months ended June 30,                   Six months ended June 30,                          Change 2021/2020
                                        2021                   2020                 2021                   2020              Three Months              Six Months
                                                                   (In thousands)
Services revenue                 $      1,276,140$ 942,267$    2,441,628$ 2,054,455                35%                      19%
Cost of services                        1,091,725            793,353               2,091,517            1,747,782                38%                      20%
Gross margin                     $        184,415$ 148,914$      350,111$   306,673                24%                      14%
Gross margin %                           14%                   16%                   14%                   15%



Services revenue represents all the revenues associated with our SCS and DTS
business segments, as well as SelectCare and fleet support services associated
with our FMS business segment. Services revenue increased 35% in the second
quarter of 2021 and 19% for the six months ended June 30, 2021 due to increases
in revenue in SCS and DTS from new business and higher volumes. In the prior
year, SCS revenue was negatively impacted by reduced automotive activity in the
second quarter of 2020 due to the COVID-19 effects.

Cost of services represents the direct costs related to services revenue and is
primarily comprised of salaries and employee-related costs, subcontracted
transportation (purchased transportation from third parties), fuel, vehicle
liability costs and maintenance costs. Cost of services increased 38% in the
second quarter and 20% for the six months ended June 30, 2021
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (Continued)
primarily due to the growth in revenues. Costs of services in both periods also
increased due to higher labor and subcontracted transportation costs from a
tight driver labor market, primarily in our DTS business, and higher insurance
and medical costs.

Services gross margin increased 24% in the second quarter of 2021 and increased
14% for the six months ended June 30, 2021. Gross margin as a percentage of
revenue decreased to 14% in both the second quarter of 2021 and for the six
months ended June 30, 2021. The decreases in gross margin as a percentage of
revenue reflects the impact of higher labor and subcontracted transportation
costs, partially offset by higher revenue and operating performance in SCS and
higher revenue in DTS for the three and six months ended June 30, 2021.

Fuel
                                       Three months ended June 30,                 Six months ended June 30,                         Change 2021/2020
                                          2021                 2020                 2021                  2020             Three Months              Six Months
                                                                   (In thousands)
Fuel services revenue              $       119,403$ 84,355$      235,115$ 205,717                42%                      14%
Cost of fuel services                      109,450            77,980                 224,156            198,429                40%                      13%
Gross margin                       $         9,953          $  6,375$       10,959$   7,288                56%                       NM
Gross margin %                             8%                   8%                   5%                    4%



Fuel services revenue represents fuel services provided to our FMS customers.
Fuel services revenue increased 42% in the second quarter of 2021 and 14% for
the six months ended June 30, 2021, primarily reflecting higher fuel prices
passed through to customers and higher gallons sold. Fuel gallons sold in the
prior year were negatively impacted by the COVID-19 effects.

Cost of fuel services includes the direct costs associated with providing our
customers with fuel. These costs include fuel, salaries and employee-related
costs of fuel island attendants and depreciation of our fueling facilities and
equipment. Cost of fuel services increased 40% in the second quarter of 2021 and
13% for the six months ended June 30, 2021 as a result of higher fuel prices and
higher gallons sold.

Fuel services gross margin increased in the second quarter of 2021 and for the
six months ended June 30, 2021. Fuel services gross margin as a percentage of
revenue remained at 8% in the second quarter of 2021 and increased to 5% for the
six months ended June 30, 2021. Fuel is largely a pass-through to customers for
which we realize minimal changes in margin during periods of steady market fuel
prices. However, fuel services margin is impacted by sudden increases or
decreases in market fuel prices during a short period of time, as customer
pricing for fuel is established based on trailing market fuel costs. Fuel
services gross margin for the second quarter of 2021 and six months ended June
30, 2021 was not significantly impacted by these price change dynamics.

Other Operating Expenses

                                         Three months ended June 30,               Six months ended June 30,                        Change 2021/2020
                                           2021                 2020                 2021                2020             Three Months              Six Months
                                                                    (In thousands)
Other operating expenses             $       33,481$ 29,849$      67,381$ 63,414                12%                       6%



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

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

                    AND RESULTS OF OPERATIONS - (Continued)

Selling, General and Administrative Expenses

                                    Three months ended June 30,                 Six months ended June 30,                         Change 2021/2020
                                   2021                  2020                    2021                  2020             Three Months              Six Months
                                                                (In thousands)

Selling, general and administrative expenses (SG&A) $ 269,268 $ 208,564 $ 511,010$ 432,683

                29%                      

18%

Percentage of total revenue         11%                   11%                     11%                  11%



SG&A expenses increased 29% in the second quarter of 2021 and 18% for the six
months ended June 30, 2021. The increases in SG&A expenses reflects higher
incentive compensation-related expenses due to improved company performance,
strategic investments primarily in technology and marketing, and higher
compensation related expenses from temporary furloughs in the prior year
partially offset by lower bad debt expense. SG&A expenses as a percentage of
total revenue remained at 11% for both the second quarter of 2021 and the six
months ended June 30, 2021.

Non-Operating Pension Costs, net

                                 Three months ended June 30,             Six months ended June 30,                       Change 2021/2020
                                   2021               2020                2021                2020             Three Months              Six Months
                                                           (In thousands)
Non-operating pension costs,
net                            $     (373)$    936$       (382)$  2,157                 NM                       NM


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

Used Vehicle Sales, net
                             Three months ended June 30,              Six months ended June 30,                        Change 2021/2020
                               2021               2020                 2021                 2020             Three Months              Six Months
                                                        (In thousands)
(Gains) losses on used
vehicle sales, net         $  (51,634)$  9,488$      (80,485)$ 30,172                 NM                       NM



Used vehicle sales, net includes gains or losses from sales of used vehicles,
selling costs associated with used vehicles and write-downs of vehicles held for
sale to fair market values (referred to as "valuation adjustments"). Used
vehicle sales, net was a net gain in the second quarter and six months ended
June 30, 2021 as compared to a net loss in the prior year periods due to higher
gains on sales of used vehicles and lower valuation adjustments.

Average proceeds per unit in the second quarter of 2021 and for the six months
ended June 30, 2021 increased reflecting higher pricing. The following table
presents the used vehicle pricing changes compared with the prior year:
                 Proceeds per unit change 2021/2020 (1)
              Three Months                       Six Months

Tractors           73%                              47%
Trucks             72%                              54%

------------

(1) Represents percentage change compared to prior year period in average sales proceeds on used vehicle sales using constant currency.

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

                    AND RESULTS OF OPERATIONS - (Continued)

Interest expense

                                  Three months ended June 30,                Six months ended June 30,                         Change 2021/2020
                                    2021                 2020                 2021                  2020             Three Months              Six Months
                                                              (In thousands)
Interest expense              $       54,155$ 67,285$      108,861$ 129,851               (20)%                     (16)%
Effective interest rate             3.4%                 3.3%                 3.4%                  3.2%



Interest expense decreased 20% in the second quarter of 2021 and 16% for the six
months ended June 30, 2021 reflecting lower average outstanding debt, partially
offset by a higher portion of fixed rate debt. The decrease in average
outstanding debt reflects lower borrowing needs due to lower vehicle capital
spending in 2020 and increased free cash flow.

Miscellaneous (income) loss, net

                                      Three months ended June 30,                 Six months ended June 30,                        Change 2021/2020
                                         2021                 2020                 2021                 2020             Three Months              Six Months
                                                                  (In thousands)

Miscellaneous (income) loss, net $ (43,812)$ (9,946)

  $      (49,246)$ (1,278)                NM                       

NM



Miscellaneous (income) loss, net consists of investment income on securities
used to fund certain benefit plans, interest income, gains on sales of operating
property, foreign currency transaction remeasurement and other non-operating
items. Miscellaneous (income) loss, net was income of $44 million and $49
million in the second quarter of 2021 and for the six months ended June 30, 2021
primarily due to higher gains on sale of properties in the U.K..

Restructuring and other items, net

                                      Three months ended June 30,               Six months ended June 30,                        Change 2021/2020
                                         2021                2020                 2021                2020             Three Months              Six Months
                                                                 (In thousands)

Restructuring and other items, net $ 7,667$ 37,200$ 18,326$ 68,147

               (79)%                    (73)%



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

Provision for (benefit from) income taxes

                                    Three months ended June 30,                 Six months ended June 30,                        Change 2021/2020
                                      2021                  2020                 2021                 2020             Three Months              Six Months
                                                                (In thousands)
Provision for (benefit from)
income taxes                    $       54,005$ (21,072)$      72,688$ (25,577)                NM                       

NM

Effective tax rate from
continuing operations                 26.5%                22.2%                26.5%                12.3%
Comparable tax rate on
continuing operations (1)             26.5%                22.8%                26.3%                21.5%


------------

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

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

                    AND RESULTS OF OPERATIONS - (Continued)

Refer to our discussion of the changes in our provision for income taxes and effective tax rate from continuing operations in Note 7, "Income Taxes".

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

                    AND RESULTS OF OPERATIONS - (Continued)

OPERATING RESULTS BY BUSINESS SEGMENT

                                            Three months ended June 30,                     Six months ended June 30,                          Change 2021/2020
                                             2021                     2020                  2021                   2020              Three Months              Six Months
                                                                         (In thousands)
Revenue:
Fleet Management Solutions          $     1,408,241$ 1,198,177$    2,743,726$ 2,538,414                18%                       8%
Supply Chain Solutions                      775,630                  519,318               1,482,330            1,147,765                49%                      29%
Dedicated Transportation Solutions          354,711                  293,944                 675,218              628,832                21%                       7%
Eliminations                               (156,345)                (116,157)               (297,415)            (258,423)              (35)%                    (15)%
Total                               $     2,382,237$ 1,895,282$    4,603,859$ 4,056,588                26%                      13%
Operating Revenue: (1)
Fleet Management Solutions          $     1,224,673$ 1,073,515$    2,392,786$ 2,231,059                14%                       7%
Supply Chain Solutions                      534,558                  405,057               1,037,156              872,368                32%                      19%
Dedicated Transportation Solutions          255,849                  227,931                 492,688              464,616                12%                       6%
Eliminations                                (92,260)                 (83,259)               (182,447)            (173,552)              (11)%                     (5)%
Total                               $     1,922,820$ 1,623,244$    3,740,183$ 3,394,491                18%                      10%

Earnings (loss) from continuing
operations before income taxes:
Fleet Management Solutions          $       158,451$  (103,735)$      221,853$  (218,309)                NM                       NM
Supply Chain Solutions                       41,041                   36,916                  73,998               67,941                11%                       9%
Dedicated Transportation Solutions           13,162                   21,233                  26,144               33,413               (38)%                    (22)%
Eliminations                                (19,186)                  (7,745)                (31,460)             (17,814)                NM                     (77)%
                                            193,468                  (53,331)                290,535             (134,769)                NM                       NM
Unallocated Central Support
Services                                    (17,864)                 (10,718)                (36,296)             (20,104)              (67)%                    (81)%
Non-operating pension costs                     373                     (936)                    382               (2,157)                NM                       NM
Other items impacting
comparability, net (2)                       27,596                  (29,792)                 19,219              (51,381)                NM                       NM
Earnings (loss) from continuing
operations before income taxes      $       203,573$   (94,777)$      273,840$  (208,411)                NM                       NM


------------
(1)Non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures"
section of this MD&A for reconciliations of the most comparable GAAP measure to
the non-GAAP financial measure and the reasons why management believes this
measure is important to investors.
(2)Refer to Note 15, "Other Items Impacting Comparability," and below for a
discussion of items excluded from our primary measure of segment performance.
As part of management's evaluation of segment operating performance, we define
the primary measurement of our segment financial performance as segment
"Earnings (loss) from continuing operations before income taxes" (EBT), which
includes an allocation of Central Support Services (CSS), and excludes
non-operating pension costs, net and certain other items as discussed in Note
15, "Other Items Impacting Comparability," in the Notes to Condensed
Consolidated Financial Statements. CSS represents those costs incurred to
support all business segments, including finance and procurement, corporate
services, human resources, information technology, public affairs, legal,
marketing, and corporate communications.

The objective of the EBT measurement is to provide clarity on the profitability
of each segment and, ultimately, to hold leadership of each business segment
accountable for their allocated share of CSS costs. Segment results are not
necessarily indicative of the results of operations that would have occurred had
each segment been an independent, stand-alone entity during the periods
presented. Certain costs are not attributable to any segment and remain
unallocated in CSS, including costs for investor relations, public affairs and
certain executive compensation.

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

                    AND RESULTS OF OPERATIONS - (Continued)
Our FMS segment leases revenue earning equipment, as well as provides rental
vehicles, fuel, maintenance and other ancillary services to the SCS and DTS
segments. Inter-segment EBT allocated to SCS and DTS includes earnings related
to equipment used in providing services to SCS and DTS customers. EBT related to
inter-segment equipment and services billed to SCS and DTS customers (equipment
contribution) are included in both FMS and the segment that served the customer
and then eliminated upon consolidation (presented as "Eliminations").

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

                                Three months ended June 30,             Six months ended June 30,                       Change 2021/2020
                                   2021              2020                 2021                2020            Three Months              Six Months
                                                           (In thousands)
Equipment Contribution:
Supply Chain Solutions         $   7,822$  3,238$      13,045$  7,798                NM                      67%
Dedicated Transportation
Solutions                         11,364             4,507                 18,415            10,016                NM                      84%
Total                          $  19,186$  7,745$      31,460$ 17,814                NM                      77%



The increase in SCS and DTS equipment contribution in the second quarter of 2021
and the six months ended June 30, 2021 is primarily related to the declining
impact associated with the prior residual value estimate changes on vehicles
used to provide services to SCS and DTS customers and higher rental and fuel
activity.

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

                                                                               Three months ended June 30,                 Six months ended June 30,
            Description                            Classification                2021                  2020                 2021                 2020
                                                                                                           (In thousands)
Restructuring and other, net (1)           Restructuring and other items,  

$ (2,577)$ (26,168)$ (5,605)$ (46,789)

                                                         net

ERP implementation costs (1)               Restructuring and other items,          (5,090)           (11,032)               (12,721)           (21,358)
                                                         net

                                            Miscellaneous (income) loss,           35,263
Gains on sale of properties (1)                          net                                               -                 36,768                  -
ChoiceLease liability insurance                        Revenue
revenue (1)                                                                             -              7,409                    777             16,767
Other items impacting comparability, net                                           27,596            (29,792)                19,219            (51,381)

Non-operating pension costs, net (2) Non-operating pension costs

          373               (936)                   382             (2,157)
                                                                           $       27,969$ (30,728)$      19,601$ (53,538)


-----------

(1)Refer to Note 15, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated Financial Statements for additional information. (2)Refer to Note 14, "Employee Benefit Plans," in the Notes to Condensed Consolidated Financial Statements for additional information. Note: Amounts may not be additive due to rounding.

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

                    AND RESULTS OF OPERATIONS - (Continued)

Fleet Management Solutions

                                          Three months ended June 30,                       Six months ended June 30,                            Change 2021/2020
                                           2021                     2020                    2021                    2020               Three Months               Six Months
                                                                        (In thousands)
ChoiceLease                       $       802,832$   766,161$       1,599,920$ 1,558,367                  5%                        3%
SelectCare                                136,503                  125,851                    267,171              261,997                  8%                        2%
Commercial rental (1)                     266,969                  169,171                    489,978              374,937                 58%                        31%
Other                                      18,369                   12,332                     35,717               35,758                 49%                        -%
Fuel services                             183,568                  117,253                    350,163              290,588                 57%                        21%
ChoiceLease liability insurance
(2)                                             -                    7,409                        777               16,767                  NM                       (95)%
FMS total revenue                 $     1,408,241$ 1,198,177$       2,743,726$ 2,538,414                 18%                        8%

FMS operating revenue (3)         $     1,224,673$ 1,073,515$       2,392,786$ 2,231,059                 14%                        7%

FMS EBT                           $       158,451$  (103,735)         $         221,853          $  (218,309)                 NM                        NM

FMS EBT as a % of FMS total
revenue                                   11.3%                    (8.7)%                   8.1%                   (8.6)%                   NM                        NM

FMS EBT as a % of FMS operating
revenue (3)                               12.9%                    (9.7)%                   9.3%                   (9.8)%                   NM                        NM

                                                                                          Twelve months ended June 30,               Change 2021/2020
                                                                                            2021                    2020
FMS EBT as a % of FMS total revenue                                                         5.5%                   (7.6)%                   NM
FMS EBT as a % of FMS operating revenue (3)                                                 6.3%                   (8.8)%                   NM


------------

(1)For the three months ended June 30, 2021 and 2020, rental revenue from lease
customers in place of a lease vehicle represented 29% and 34% of commercial
rental revenue, respectively. For the six months ended June 30, 2021 and 2020,
rental revenue from lease customers in place of a lease vehicle represented 30%
and 37% of commercial rental revenue, respectively.
(2)In the first quarter of 2020, we announced our plan to exit the extension of
our liability insurance coverage for ChoiceLease customers. The exit of this
program was completed in the first quarter of 2021.
(3)Non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures"
section of this MD&A for reconciliations of the most comparable GAAP measure to
the non-GAAP financial measure and the reasons why management believes this
measure is important to investors.

FMS total revenue increased 18% to $1.4 billion in the second quarter of 2021
and increased 8% to $2.7 billion for the six months ended June 30, 2021 due to
higher operating revenue and fuel revenue. FMS operating revenue increased 14%
to $1.2 billion in the second quarter and 7% to $2.4 billion for the six months
ended June 30, 2021 primarily due to higher commercial rental and ChoiceLease
revenue.

ChoiceLease revenue increased 5% in the second quarter of 2021 and 3% for the
six months ended June 30, 2021 primarily due to higher prices on new vehicles,
higher mileage-based revenue due to prior year impacts of the COVID-19 effects,
and partially offset by lower revenue from a smaller fleet. SelectCare revenue
increased 8% in the second quarter of 2021and 2% for the six months ended June
30, 2021 due to higher volumes. Commercial rental revenue increased 58% in the
second quarter and 31% in the six months ended June 30, 2021 primarily due to
higher demand and pricing. Commercial rental demand in the prior year was
negatively impacted by the COVID-19 effects. Commercial rental pricing increased
13% in the second quarter of 2021 and increased 11% for the six months ended
June 30, 2021. Fuel services revenue increased 57% in the second quarter of 2021
and 21% in the six months ended June 30, 2021 primarily reflecting higher fuel
costs passed through to customers and higher gallons sold.

FMS EBT in the second quarter of 2021 increased to earnings of $158 million from
a loss of $104 million in the prior year period. FMS EBT in the six months ended
June 30, 2021, increased to earnings of $222 million from a loss of $218 million
in the prior year period. The increase reflects lower depreciation expense of
$131 million and $223 million in the three and six months ended June 30, 2021,
respectively, resulting primarily from prior residual value estimate changes,
including higher used vehicle
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (Continued)
sales results. The increase in EBT also reflects higher commercial rental and
ChoiceLease results. Higher commercial rental results were primarily due to
higher pricing and increased utilization on a smaller average power fleet in
2021. Rental power fleet utilization increased to 80% from 56% in the second
quarter of 2021 and, increased to 76% from 60% in the six months ended June 30,
2021. ChoiceLease results benefited from higher lease pricing and increased
miles driven, partially offset by a smaller lease fleet. In 2020, EBT included
negative impacts from the COVID-19 effects due to lower rental demand and higher
bad debt expense which was partially offset by COVID-19-related cost actions and
lower medical expenses.

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


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

                                                                                                                                               Change
                                                                                                                                  June 2021/            June 2021/
                                                June 30, 2021            December 31, 2020             June 30, 2020               Dec 2020              June 2020
End of period vehicle count
By type:
Trucks (1)                                               75,400                   77,300                        82,800               (2)%                  (9)%
Tractors (2)                                             72,000                   73,300                        79,400               (2)%                  (9)%
Trailers and other (3)                                   43,400                   44,100                        45,800               (2)%                  (5)%

Total                                                   190,800                  194,700                       208,000               (2)%                  (8)%

By product line:
ChoiceLease                                             146,200                  149,600                       154,600               (2)%                  (5)%
Commercial rental                                        38,000                   35,000                        36,800                9%                    3%
 Service vehicles and other                               2,300                    2,400                         2,600               (4)%                  (12)%
                                                        186,500                  187,000                       194,000                -%                   (4)%
Held for sale                                             4,300                    7,700                        14,000               (44)%                 (69)%
Total                                                   190,800                  194,700                       208,000               (2)%                  (8)%

Customer vehicles under SelectCare
contracts (4)                                            52,900                   50,300                        54,900                5%               

(4)%


Quarterly average vehicle count
By product line:
ChoiceLease                                             146,900                  150,400                       156,900               (2)%                  (6)%
Commercial rental                                        36,700                   35,100                        38,200                5%                   (4)%
Service vehicles and other                                2,300                    2,500                         2,700               (8)%                  (15)%
                                                        185,900                  188,000                       197,800               (1)%                  (6)%
Held for sale                                             5,100                    9,000                        13,100               (43)%                 (61)%
Total                                                   191,000                  197,000                       210,900               (3)%                  (9)%

Customer vehicles under SelectCare
contracts (4)                                            53,200                   52,700                        55,200                1%               

(4)%

Customer vehicles under SelectCare
on-demand (5)                                             6,400                    6,400                         6,900                -%                   (7)%
Total vehicles serviced                                 250,600                  256,100                       273,000               (2)%                  (8)%


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

                    AND RESULTS OF OPERATIONS - (Continued)

-----------

(1)Generally comprised of Class 1 through Class 7 type vehicles with a Gross
Vehicle Weight (GVW) up to 33,000 pounds.
(2)Generally comprised of over the road on highway tractors and are primarily
comprised of Class 8 type vehicles with a GVW of over 33,000 pounds.
(3)Generally comprised of dry, flatbed and refrigerated type trailers.
(4)Excludes customer vehicles under SelectCare on-demand contracts.
(5)Comprised of the number of unique vehicles serviced under on-demand
maintenance agreements for the quarterly periods. This does not represent
averages for the periods. Vehicles included in the count may have been serviced
more than one time during the respective period.
Note: Quarterly amounts were computed using a 6-point average based on monthly
information.
The following table provides information on our global active ChoiceLease fleet
(number of units rounded to nearest hundred):
                                                                                                                          Change
                                                               December 31,                                  June 2021/            June 2021/
                                         June 30, 2021             2020              June 30, 2020            Dec 2020              June 2020

End of period active ChoiceLease
vehicle count (1)                             141,000             142,300                 144,900               (1)%                  (3)%

Quarterly average active ChoiceLease
vehicle count (1)                             141,400             143,100                 146,600               (1)%                  (4)%
Quarterly revenue per active
ChoiceLease vehicle (2)                $        5,700$    5,700$        5,200                -%                    10%


-----------

(1)Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units. (2)Calculated based on the reported quarterly ChoiceLease revenue.

The following table provides commercial rental statistics on our global power fleet which excludes trailers:

                                         Three months ended June 30,                        Six months ended June 30,                            Change 2021/2020
                                      2021                        2020                  2021                        2020               Three Months              Six Months

Average commercial rental power
fleet size - in service (1)          30,600                      31,300                30,000                      32,300                  (2)%                     (7)%
Commercial rental utilization -
power fleet (2)                       79.6%                       55.9%                 76.4%                       60.3%                   NM                       NM


---------
(1)Number of units rounded to the nearest hundred and calculated using quarterly
average unit counts.
(2)Rental utilization is calculated using the number of days units are rented
divided by the number of days units available to rent based on the days in a
calendar year.

The following table provides a breakdown of our non-revenue earning equipment
included in our end of period global fleet count (number of units rounded to
nearest hundred):
                                                                                                                              Change
                                                                                                                 June 2021/            June 2021/
                                        June 30, 2021         December 31, 2020          June 30, 2020            Dec 2020              June 2020
Not yet earning revenue (NYE)                  2,400                    1,900                   1,500                26%                   60%

No longer earning revenue (NLE):
Units held for sale                            4,300                    7,700                  14,000               (44)%                 (69)%
Other NLE units                                2,500                    3,200                   8,500               (22)%                 (71)%
Total NLE                                      6,800                   10,900                  22,500               (38)%                 (70)%
Total                                          9,200                   12,800                  24,000               (28)%                 (62)%



NYE units represent new vehicles on hand that are being prepared for deployment
to a lease customer or into the rental fleet. Preparations include activities
such as adding lift gates, paint, decals, cargo area and refrigeration
equipment. NYE units increased 60% compared to June 30, 2020 reflecting
increased rental capital spending to meet higher rental demand.

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

                    AND RESULTS OF OPERATIONS - (Continued)
NLE units represent vehicles held for sale and vehicles for which no revenue has
been earned in the previous 30 days. Accordingly, these vehicles may be
temporarily out of service, being prepared for sale or awaiting redeployment.
NLE units decreased 70% compared to June 30, 2020 due to a decrease in units
held for sale, a lower number of vehicles being prepared for sale or
redeployment and higher utilization of our rental fleet.


Supply Chain Solutions

                                  Three months ended June 30,                    Six months ended June 30,                            Change 2021/2020
                                    2021                  2020                   2021                    2020               Three Months               Six Months
                                                     (In thousands, except vehicle counts)

Automotive                    $      179,849$ 109,119          $         351,721          $   280,860                 65%                       25%
Technology and healthcare             57,529             54,950                    112,234              112,616                  5%                     

-%

Consumer packaged goods and
retail                               233,791            196,683                    454,277              384,719                 19%                       18%
Industrial and other                  63,389             44,305                    118,924               94,173                 43%                       26%
Subcontracted transportation         211,879            102,208                    392,013              237,936                  NM                       65%
Fuel                                  29,193             12,053                     53,161               37,461                  NM                       42%
SCS total revenue             $      775,630$ 519,318$       1,482,330$ 1,147,765                 49%                       29%

SCS operating revenue (1) $ 534,558$ 405,057 $

     1,037,156          $   872,368                 32%                       19%

SCS EBT                       $       41,041$  36,916          $          73,998          $    67,941                 11%                        9%
SCS EBT as a % of SCS total
revenue                             5.3%                  7.1%                   5.0%                    5.9%                (180) bps                  (90) bps
SCS EBT as a % of SCS
operating revenue (1)               7.7%                  9.1%                   7.1%                    7.8%                (140) bps                  (70) bps

Memo:
End of period fleet count             10,000              9,800                     10,000                9,800                  2%                        2%

                                                                               Twelve months ended June 30,               Change 2021/2020
                                                                                 2021                    2020
SCS EBT as a % of SCS total revenue                                              5.8%                    5.6%                  20 bps
SCS EBT as a % of SCS operating revenue (1)                                      8.2%                    7.5%                  70 bps


------------

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


SCS total revenue increased 49% in the second quarter and 29% in the six months
ended June 30, 2021 as a result of higher operating revenue (a non-GAAP measure
excluding fuel and subcontracted transportation) and subcontracted
transportation. SCS operating revenue increased 32% and 19% in the second
quarter and six months ended June 30, 2021, respectively, as a result of higher
automotive revenues, reflecting increased volumes and prior-year COVID-19
effects. SCS operating revenue also increased due to new business and higher
volumes across other industries.

SCS EBT increased 11% in the second quarter and 9% for the six months ended June
30, 2021 primarily due to revenue growth in the automotive business, partially
offset by strategic investments in marketing and technology, as well as
increased incentive compensation and medical costs.

In the prior year periods, SCS customer volumes in the automotive business
significantly declined due to temporary production shutdowns beginning late in
the first quarter of 2020 related to COVID-19. These operations restarted during
the second quarter of 2020 and were followed by increased consumer demand in the
second half of 2020, which helped contribute to
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (Continued)
a worldwide semiconductor supply shortage in early 2021. This supply shortage
impacted the production activity of our automotive customers in the first half
of 2021.


Dedicated Transportation Solutions

                               Three months ended June 30,                 Six months ended June 30,                          Change 2021/2020
                                 2021                  2020                 2021                  2020              Three Months               Six Months
                                                (In thousands, except vehicle counts)
DTS total revenue          $      354,711$ 293,944$      675,218$ 628,832                 21%                        7%

DTS operating revenue (1)  $      255,849$ 227,931$      492,688$ 464,616                 12%                        6%

DTS EBT                    $       13,162$  21,233$       26,144$  33,413                (38)%                     (22)%
DTS EBT as a % of DTS
total revenue                    3.7%                  7.2%                 3.9%                  5.3%               (350) bps                 (140) bps

DTS EBT as a % of DTS
operating revenue (1)            5.1%                  9.3%                 5.3%                  7.2%               (420) bps                 (190) bps

Memo:

End of period fleet count          10,400              9,300                  10,400              9,300                 12%                       12%

                                                                          Twelve months ended June 30,            Change 2021/2020
                                                                            2021                  2020
DTS EBT as a % of DTS total revenue                                         5.2%                  5.2%                 - bps
DTS EBT as a % of DTS operating revenue (1)                                 6.9%                  7.3%                (40) bps


------------

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


DTS total revenue increased 21% in the second quarter of 2021 and 7% for the six
months ended June 30, 2021 due to higher subcontracted transportation and
operating revenue (a non-GAAP measure excluding fuel and subcontracted
transportation) growth. DTS operating revenue increased 12% in the second
quarter of 2021 and 6% in the six months ended June 30, 2021, primarily
reflecting new business and higher volumes. Revenue growth from new business can
be largely attributed to wins from competitors and private fleet conversions.

DTS EBT decreased 38% in second quarter of 2021 and 22% for the six months ended
June 30, 2021, primarily due to increased labor costs resulting from a tight
driver labor market, higher insurance costs, and strategic investments.



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

                    AND RESULTS OF OPERATIONS - (Continued)

Central Support Services

                                     Three months ended June 30,                Six months ended June 30,                       Change 2021/2020
                                       2021                 2020                 2021                 2020            Three Months              Six Months
                                                                (In thousands)
Human resources                  $        5,954$  4,651$      11,542$  10,504                28%                     10%
Finance and procurement                  19,092            16,358                 37,988             35,597                17%                      7%
Corporate services and public
affairs                                   3,378             1,726                  5,074              3,710                96%                     37%
Information technology                   29,246            22,285                 55,665             47,650                31%                     17%
Legal and safety                          7,507             6,661                 14,939             14,624                13%                      2%
Marketing                                 7,629             3,655                 16,750              8,930                NM                      88%
Other                                    20,778             8,600                 40,184             16,802                NM                       NM
Total CSS                                93,584            63,936                182,142            137,817                46%                     32%
Allocation of CSS to business
segments                                (75,720)          (53,218)              (145,846)          (117,713)               42%                     24%
Unallocated CSS                  $       17,864$ 10,718$      36,296$  20,104                67%                     81%



Total CSS costs increased 46% in the second quarter of 2021 and increased 32%
for the six months ended June 30, 2021 due to higher incentive
compensation-related expenses in 2021 and continuing strategic investments in
technology and marketing. Unallocated CSS costs increased to $18 million and $36
million in the second quarter of 2021 and for the six months ended June 30, 2021
due to higher incentive compensation-related expenses in 2021 due to improved
performance.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (Continued)
FINANCIAL RESOURCES AND LIQUIDITY
Cash Flows
The following is a summary of our cash flows from continuing operations:
                                                                         Six months ended June 30,
                                                                         2021                   2020
                                                                               (In thousands)
Net cash provided by (used in):
Operating activities                                               $    1,131,233$ 1,098,785
Investing activities                                                     (533,408)            (492,266)
Financing activities                                                     (478,971)             154,732
Effect of exchange rate changes on cash                                    (2,369)              (3,022)
Net change in cash and cash equivalents                            $      116,485$   758,229

                                                                         Six months ended June 30,
                                                                         2021                   2020
                                                                               (In thousands)
Net cash provided by operating activities
Earnings (loss) from continuing operations                         $      201,152$  (182,834)
Non-cash and other, net                                                   950,869            1,182,891
Collections on sales-type leases                                           62,778               54,724
Changes in operating assets and liabilities                               (83,566)              44,004

Cash flows from operating activities from continuing operations $ 1,131,233$ 1,098,785




Cash provided by operating activities remained at $1.1 billion for the six
months ended June 30, 2021 reflecting higher earnings offset by higher working
capital needs. Our working capital needs are primarily driven by the timing of
collections of our receivables and payments of our trade payables, as well as
changes in other assets and liabilities. The impact from changes in operating
assets and liabilities was primarily due to an increase in receivables due to
higher revenues and timing of collections. Cash used in investing activities
increased to $533 million for the six months ended June 30, 2021 compared with
$492 million in 2020 primarily due to an increase in cash paid for capital
expenditures partially offset by higher proceeds from the sale of revenue
earning equipment and operating property and equipment. Cash provided by (used
in) financing activities was ($479) million for the six months ended June 30,
2021 compared to $155 million in 2020 due to lower borrowing needs.

The following table shows our free cash flow computation:

                                                                     Six months ended June 30,
                                                                     2021                   2020
                                                                           (In thousands)
Net cash provided by operating activities                      $    1,131,233$ 1,098,785
Sales of revenue earning equipment (1)                                330,277              214,189

Sales of operating property and equipment (1)                          44,409                4,231

Other (1)                                                                 691                    -
Total cash generated (2)                                            1,506,610            1,317,205
Purchases of property and revenue earning equipment (1)              (904,399)            (704,930)
Free cash flow (2)                                             $      602,211$   612,275


------------

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

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

                    AND RESULTS OF OPERATIONS - (Continued)
Free cash flow (a non-GAAP measure) decreased slightly to $602 million for the
six months ended June 30, 2021 from $612 million in 2020 primarily due to an
increase in cash paid for capital expenditures partially offset by higher
proceeds from the sale of revenue earning equipment and operating property and
equipment.

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

The following table provides a summary of gross capital expenditures:

Six months ended June 30,

                                                                          2021                   2020
                                                                                (In thousands)
Revenue earning equipment:
ChoiceLease                                                         $      501,053$   463,744
Commercial rental                                                          397,092               69,414
                                                                           898,145              533,158
Operating property and equipment                                            64,886               63,671
Gross capital expenditures (1)                                             963,031              596,829

Changes in accounts payable related to purchases of property and revenue earning equipment

                                                  (58,632)             108,101

Cash paid for purchases of property and revenue earning equipment $ 904,399$ 704,930

------------

(1)Gross capital expenditures excluded approximately $6 million during the six months ended June 30, 2021 and 2020 of assets held under finance leases resulting from new or the extension of existing finance leases and other additions.

Gross capital expenditures increased 61% to $963 million for the six months ended June 30, 2021 reflecting higher planned investments in the rental fleet.

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

                    AND RESULTS OF OPERATIONS - (Continued)

Financing and Other Funding Transactions


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

Cash and cash equivalents totaled $268 million as of June 30, 2021. As of
June 30, 2021, approximately $101 million was held outside the U.S. and is
available to fund operations and other growth of non-U.S. subsidiaries. If we
decide to repatriate cash and cash equivalents held outside the U.S., we may be
subject to additional income taxes and foreign withholding taxes. However, our
intent is to permanently reinvest these foreign amounts outside the U.S. and our
current plans do not demonstrate a need to repatriate these foreign amounts to
fund our U.S. operations.

We believe that our operating cash flows, together with our access to the public
unsecured bond market, commercial paper market and other available debt
financing, will be adequate to meet our operating, investing and financing needs
in the foreseeable future. However, there can be no assurance that volatility
and disruption in the public unsecured debt market or the commercial paper
market would not impair our ability to access these markets on terms
commercially acceptable to us or at all. If we cease to have access to public
bonds, commercial paper and other sources of unsecured borrowings, we would meet
our liquidity needs by drawing upon contractually committed lending agreements
and/or by seeking other funding sources.

Refer to Note 9, "Debt," in the Notes to Condensed Consolidated Financial
Statements for information on our net worth covenant, global revolving credit
facility, trade receivables program (which was extended to April 2022 during the
second quarter of 2021), medium-term notes, and asset-backed financing
obligations.

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

Our debt ratings and rating outlooks as of June 30, 2021 were as follows:

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


As of June 30, 2021, we had the following amounts available to fund operations under the following facilities:

                                     (In millions)

Global revolving credit facility $ 1,319 Trade receivables program

           $          300



In accordance with our funding philosophy, we attempt to align the aggregate
average remaining re-pricing life of our debt with the aggregate average
remaining re-pricing life of our assets. We utilize both fixed-rate and
variable-rate debt to achieve this alignment and generally target a mix of 20% -
40% variable-rate debt as a percentage of total debt outstanding. The
variable-rate portion of our total debt (including notional value of swap
agreements) was 6% and 9% as of June 30, 2021 and December 31, 2020,
respectively.

Our debt to equity ratio was 258% and 293% as of June 30, 2021 and December 31,
2020, respectively. The debt to equity ratio represents total debt divided by
total equity.

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

                    AND RESULTS OF OPERATIONS - (Continued)

Share Repurchases and Cash Dividends

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


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

RECENT ACCOUNTING PRONOUNCEMENTS

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

NON-GAAP FINANCIAL MEASURES


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


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

                    AND RESULTS OF OPERATIONS - (Continued)

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

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

Cash Flow Measures: Total Cash Generated and Free Cash Flow Cash Provided by Operating Activities






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

                    AND RESULTS OF OPERATIONS - (Continued)
Set forth in the table below is an overview of each non-GAAP financial measure
and why management believes that the presentation of each non-GAAP financial
measure provides useful information to investors.
Operating Revenue Measures:
Operating Revenue               Operating revenue is defined as total 

revenue for Ryder System, Inc.

                                or each business segment (FMS, SCS and DTS) excluding any (1) fuel
FMS Operating Revenue           and (2) subcontracted transportation, as well as (3) revenue from
                                our ChoiceLease liability insurance program which was discontinued
SCS Operating Revenue           in early 2020. We believe operating revenue provides useful
                                information to investors as we use it to evaluate the operating
DTS Operating Revenue           performance of our core businesses and as a measure of sales
                                activity at the consolidated level for Ryder System, Inc., as well
                                as for each of our business segments. We also use segment EBT as a
FMS EBT as a % of FMS Operating percentage of segment operating revenue for each business segment
Revenue                         for the same reason. Note: FMS EBT, SCS EBT and DTS EBT, our primary
                                measures of segment performance, are not non-GAAP measures.
SCS EBT as a % of SCS Operating
Revenue                         Fuel: We exclude FMS, SCS and DTS fuel from 

the calculation of our

                                operating revenue measures, as fuel is an ancillary service that we
DTS EBT as a % of DTS Operating provide our customers, which is impacted by fluctuations in market
Revenue                         fuel prices and the costs are largely a pass-through to our
                                customers, resulting in minimal changes in our profitability during
                                periods of steady market fuel prices. However, profitability may be
                                positively or negatively impacted by rapid changes in market fuel
                                prices during a short period of time, as customer pricing for fuel
                                services is established based on trailing market fuel costs.

                                Subcontracted transportation: We exclude subcontracted
                                transportation from the calculation of our operating revenue
                                measures, as these services are also

typically a pass-through to our

                                customers and, therefore, fluctuations result in minimal changes to
                                our profitability. While our SCS and DTS business segments
                                subcontract certain transportation services to third party
                                providers, our FMS business segment does not engage in subcontracted
                                transportation and, therefore, this item is not applicable to FMS.

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


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

                    AND RESULTS OF OPERATIONS - (Continued)
Comparable Earnings Measures:
Comparable Earnings (Loss) before Comparable EBT, comparable earnings and comparable EPS are defined,
Income Taxes (EBT)                respectively, as GAAP EBT, earnings and EPS, all from continuing
                                  operations, excluding (1) non-operating pension costs, net and (2)
Comparable Earnings (Loss)        any other significant items that are not representative of our
                                  business operations. We believe these comparable earnings measures
Comparable Earnings (Loss) per    provide useful information to investors and allow for better
Diluted Common Share (EPS)        year-over-year comparison of operating performance.

Comparable Tax Rate               Non-operating pension costs, net: Our comparable earnings measures
                                  exclude non-operating pension costs, which include the amortization
Adjusted Return on Equity (ROE)   of net actuarial loss and prior service cost, interest cost and
                                  expected return on plan assets components of pension and
                                  postretirement benefit costs, as well as any significant charges
                                  for settlements or curtailments if recognized. We exclude
                                  non-operating pension costs, net because we consider these to be
                                  impacted by financial market performance and outside the
                                  operational performance of our business.

                                  Other Items Impacting Comparability: Our comparable and adjusted
                                  earnings measures also exclude other

significant items that are not

                                  representative of our business operations as detailed in the
                                  reconciliation table below. These other significant items vary from
                                  period to period and, in some periods, there may be no such
                                  significant items.

                                  Comparable tax rate is computed using the same methodology as the
                                  GAAP provision for income taxes. Income tax effects of non-GAAP
                                  adjustments are calculated based on the marginal tax rates to which
                                  the non-GAAP adjustments are related.

                                  Adjusted ROE is defined as adjusted net earnings divided by
                                  adjusted average shareholders' equity and represents the rate of
                                  return on shareholders' investment. Other items impacting
                                  comparability described above are

excluded, as applicable, from the

                                  calculation of net earnings and average shareholders' equity. We
                                  use adjusted ROE as an internal measure of how effectively we use
                                  the owned capital invested in our operations.


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

                    AND RESULTS OF OPERATIONS - (Continued)
Comparable Earnings Before Interest,   Comparable EBITDA is defined as net earnings (loss), first adjusted
Taxes, Depreciation and Amortization   to exclude discontinued operations and the following items, all
(EBITDA)                               from continuing operations: (1) 

non-operating pension costs, net

                                       and (2) any other items that are not 

representative of our business

                                       operations (these items are the same 

items that are excluded from

                                       comparable earnings measures for the 

relevant periods as described

                                       immediately above) and then adjusted 

further for (1) interest

                                       expense, (2) income taxes, (3) 

depreciation, (4) used vehicle sales

                                       results and (5) amortization.

                                       We believe comparable EBITDA 

provides investors with useful

                                       information, as it is a standard 

measure commonly reported and

                                       widely used by analysts, investors 

and other interested parties to

                                       measure financial performance and 

our ability to service debt and

                                       meet our payment obligations. In 

addition, we believe that the

                                       inclusion of comparable EBITDA 

provides consistency in financial

                                       reporting and enables analysts and 

investors to perform meaningful

                                       comparisons of past, present and 

future operating results. Other

                                       companies may calculate comparable 

EBITDA differently; therefore,

                                       our presentation of comparable 

EBITDA may not be comparable to

                                       similarly-titled measures used by 

other companies.


                                       Comparable EBITDA should not be 

considered as an alternative to net

                                       earnings (loss), earnings (loss) 

from continuing operations before

                                       income taxes or earnings (loss) from continuing operations
                                       determined in accordance with GAAP, as an indicator of the
                                       Company's operating performance, as an alternative to cash flows
                                       from operating activities

(determined in accordance with GAAP), as

                                       an indicator of cash flows, or as a measure of liquidity.
Cash Flow Measures:
Total Cash Generated                   We consider total cash generated and 

free cash flow to be important

                                       measures of comparative operating performance, as our principal
Free Cash Flow                         sources of operating liquidity are cash from operations and
                                       proceeds from the sale of revenue earning equipment.

                                       Total Cash Generated is defined as

the sum of (1) net cash provided

                                       by operating activities, (2) net cash provided by the sale of
                                       revenue earning equipment, (3) net cash provided by the sale of
                                       operating property and equipment and (4) other cash inflows from
                                       investing activities. We believe total cash generated is an
                                       important measure of total cash

flows generated from our ongoing

                                       business activities.

                                       Free Cash Flow is defined as the net 

amount of cash generated from

                                       operating activities and investing 

activities (excluding

                                       acquisitions) from continuing 

operations. We calculate free cash

                                       flow as the sum of (1) net cash 

provided by operating activities,

                                       (2) net cash provided by the sale of 

revenue earning equipment and

                                       operating property and equipment, 

and (3) other cash inflows from

                                       investing activities, less (4) 

purchases of property and revenue

                                       earning equipment. We believe free cash flow provides investors
                                       with an important perspective on the cash available for debt
                                       service and for shareholders, after making capital investments
                                       required to support ongoing business

operations. Our calculation of

                                       free cash flow may be different from 

the calculation used by other

                                       companies and, therefore, 

comparability may be limited.


                                       * See Total Cash Generated and Free 

Cash Flow reconciliations in

                                       the Financial Resources and 

Liquidity section of Management's

                                       Discussion and Analysis.



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

Continuing Operations

                                                        Three months ended June 30,                    Six months ended June 30,
                                                         2021                  2020                    2021                    2020
                                                                         (In thousands, except per share amounts)
EBT                                                $      203,573$  (94,777)$     273,840$ (208,411)
Non-operating pension costs, net                             (373)                936                   (382)                   2,157
Restructuring and other, net (1)                            2,577              26,168                  5,605                   46,789
ERP implementation costs (1)                                5,090              11,032                 12,721                   21,358

Gains on sale of properties (1)                           (35,263)                  -                (36,768)                       -

ChoiceLease liability insurance revenue (1)                     -              (7,409)                  (777)                 (16,767)
Comparable EBT                                     $      175,604$  (64,049)$     254,239$ (154,873)

Earnings (loss)                                    $      149,568$  (73,705)$     201,152$ (182,834)
Non-operating pension costs, net                           (1,031)                (79)                (1,786)                      21
Restructuring and other, net (including
ChoiceLease liability insurance results) (1)                3,204              16,139                  5,784                   25,037
ERP implementation costs (1)                                3,779               8,188                  9,444                   15,852

Gains on sale of properties (1)                           (26,812)                  -                (27,999)                       -

Tax adjustments, net (2)                                      430                   -                    733                   20,363
Comparable Earnings                                $      129,138$  (49,457)$     187,328$ (121,561)

Diluted EPS                                        $         2.78          $    (1.41)$        3.75$    (3.50)
Non-operating pension costs, net                            (0.02)                  -                  (0.03)                       -
Restructuring and other, net (including
ChoiceLease liability insurance results) (1)                 0.06                0.30                   0.10                     0.48
ERP implementation costs (1)                                 0.07                0.16                   0.18                     0.30

Gains on sale of properties (1)                             (0.50)                  -                  (0.52)                       -

Tax adjustments, net (2)                                     0.01                   -                   0.01                     0.39
Comparable EPS                                     $         2.40          $    (0.95)$        3.49$    (2.33)


------------

(1)Refer to Note 15, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated Financial Statements for additional information. (2)Refer to the reconciliation of the comparable provision for income taxes table below for information on adjustments related to tax matters. Note: Amounts may not be additive due to rounding.

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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 the provision for income taxes and effective tax rate to the comparable provision for income taxes and comparable tax rate:

                                               Three months ended June 30,                  Six months ended June 30,
                                                 2021                 2020                 2021                      2020
                                                                             (In thousands)
Provision for (benefit from) income taxes  $     54,005$ (21,072)$     72,688$ (25,577)
Tax adjustments, net (2)                           (430)                  -                  (733)                 (20,363)
Income tax effects of non-GAAP adjustments
(1)                                              (7,109)              6,480                (5,044)                  12,628

Comparable provision for (benefit from)
income taxes (1)                           $     46,466$ (14,592)$     66,911$ (33,312)

Effective tax rate on continuing
operations (3)                                     26.5   %            22.2  %               26.5   %                 12.3  %
Tax adjustments and income tax effects of
non-GAAP adjustments (1) (2)                          -   %             0.6  %               (0.2)  %                  9.2  %
Comparable tax rate on continuing
operations (1) (3)                                 26.5   %            22.8  %               26.3   %                 21.5  %


------------
(1)The comparable provision for income taxes is computed using the same
methodology as the GAAP provision of income taxes. Income tax effects of
non-GAAP adjustments are calculated based on the marginal tax rates to which the
non-GAAP adjustments are related.
(2)In the second quarter and six months ended June 30, 2021, we recorded tax
expense related to expiring state net operating losses. For the six months ended
June 30, 2020 we recorded tax expenses of $7 million and $13 million related to
expiring state net operating losses and a valuation allowance on our U.K.
deferred tax assets, respectively.
(3)The effective tax rate on continuing operations and comparable tax rate are
based on EBT and comparable EBT, respectively, found on the previous page.


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

                                                      Three months ended June 30,                  Six months ended June 30,
                                                        2021                  2020                 2021                   2020
                                                                                   (In thousands)
Net earnings (loss)                               $      149,105          $ 

(74,099) $ 199,930$ (183,712) Loss from discontinued operations, net of tax

                                                          463                394                   1,222                  878
Provision for (benefit from) income taxes                 54,005            (21,072)                 72,688              (25,577)
EBT                                                      203,573            (94,777)                273,840             (208,411)
Non-operating pension costs, net                            (373)               936                    (382)               2,157
Other items impacting comparability, net
(1)                                                      (27,596)            29,792                 (19,219)              51,381
Comparable EBT                                           175,604            (64,049)                254,239             (154,873)
Interest expense                                          54,155             67,285                 108,861              129,851
Depreciation                                             444,259            532,947                 905,420            1,056,171
Used vehicle sales, net (2) (3)                          (51,634)             9,488                 (80,485)              30,172
Amortization                                               1,671              1,973                   3,435                4,018
Comparable EBITDA(3)                              $      624,055          $ 

547,644 $ 1,191,470$ 1,065,339

------------

(1)Refer to the table above in the Operating Results by Segment for a discussion
on items excluded from our comparable measures and their classification within
our Condensed Consolidated Statements of Earnings and Note 15,"Other Items
Impacting Comparability" in the Notes to Condensed Consolidated Financial
Statements for additional information.
(2)Refer to Note 5, "Revenue Earning Equipment, net," in the Notes to Condensed
Consolidated Financial Statements for additional information.
(3)Comparable EBITDA has been recast to exclude gains/losses from the sale of
used vehicles.


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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 total revenue to operating
revenue:
                                                          Three months ended June 30,                     Six months ended June 30,
                                                           2021                     2020                  2021                   2020
                                                                                       (In thousands)
Total revenue                                     $     2,382,237

$ 1,895,282$ 4,603,859$ 4,056,588 Subcontracted transportation

                             (271,644)                (144,035)               (502,915)            (345,988)
Fuel                                                     (187,773)                (120,594)               (359,984)            (299,342)
ChoiceLease liability insurance revenue (1)                     -                   (7,409)                   (777)             (16,767)
Operating revenue                                 $     1,922,820$ 1,623,244$    3,740,183$ 3,394,491


------------
(1)In the first quarter of 2020, we announced our plan to exit the extension of
our liability insurance coverage for ChoiceLease customers. The exit of this
program was completed in the first quarter of 2021.

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

                                         Three months ended June 30,                     Six months ended June 30,                      Twelve months ended June 30,
                                          2021                     2020                  2021                   2020                     2021                      2020
                                                                                               (In thousands)
FMS total revenue                $     1,408,241$ 1,198,177
       $    2,743,726$ 2,538,414$     5,375,779$ 5,367,308
Fuel                                    (183,568)                (117,253)               (350,163)            (290,588)                (628,649)                 (686,713)
ChoiceLease liability insurance
revenue (1)                                    -                   (7,409)                   (777)             (16,767)                  (7,827)                  (35,466)
FMS operating revenue            $     1,224,673$ 1,073,515$    2,392,786$ 2,231,059$     4,739,303$ 4,645,129

FMS EBT                          $       158,451$  (103,735)$      221,853$  (218,309)$       298,205$  (407,240)
FMS EBT as a % of FMS total
revenue                                  11.3%                    (8.7)%                 8.1%                  (8.6)%                    5.5%                     (7.6)%
FMS EBT as a % of FMS operating
revenue                                  12.9%                    (9.7)%                 9.3%                  (9.8)%                    6.3%                     (8.8)%


------------
(1)In the first quarter of 2020, we announced our plan to exit the extension of
our liability insurance coverage for ChoiceLease customers. The exit of this
program was completed in the first quarter of 2021.


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

                                        Three months ended June 30,                  Six months ended June 30,                      Twelve months ended June 30,
                                          2021                  2020                 2021                   2020                     2021                      2020
                                                                                               (In thousands)
SCS total revenue                   $      775,630$ 519,318$    1,482,330$ 1,147,765$     2,878,985$ 2,414,054
Subcontracted transportation              (211,879)          (102,208)               (392,013)            (237,936)                (748,014)                 (529,104)
Fuel                                       (29,193)           (12,053)                (53,161)             (37,461)                 (95,816)                  (92,462)
SCS operating revenue               $      534,558$ 405,057$    1,037,156$   872,368$     2,035,155$ 1,792,488

SCS EBT                             $       41,041$  36,916$       73,998$    67,941$       165,997$   134,910
SCS EBT as a % of SCS total revenue       5.3%                  7.1%                 5.0%                   5.9%                     5.8%               

5.6%

SCS EBT as a % of SCS operating
revenue                                   7.7%                  9.1%                 7.1%                   7.8%                     8.2%                      7.5%




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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 DTS total revenue to DTS operating revenue:

                                         Three months ended June 30,                 Six months ended June 30,                     Twelve months ended June 30,
                                           2021                  2020                 2021                  2020                    2021                      2020
                                                                                               (In thousands)
DTS total revenue                    $      354,711$ 293,944$      675,218$ 628,832$     1,275,760$ 1,334,450
Subcontracted transportation                (59,765)           (41,827)               (110,902)          (108,052)                (194,758)                 (253,809)
Fuel                                        (39,097)           (24,186)                (71,628)           (56,164)                (123,684)                 (127,015)
DTS operating revenue                $      255,849$ 227,931$      492,688$ 464,616$       957,318$   953,626

DTS EBT                              $       13,162$  21,233$       26,144$  33,413$        66,173$    70,018
DTS EBT as a % of DTS total revenue        3.7%                  7.2%                 3.9%                  5.3%                    5.2%                

5.2%

DTS EBT as a % of DTS operating
revenue                                    5.1%                  9.3%                 5.3%                  7.2%                    6.9%                      7.3%


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

                                                           Twelve months ended June 30,
                                                              2021                  2020
                                                                  (In thousands)

Net earnings (loss) (12-month rolling period) $ 261,392

     $  (328,702)
Other items impacting comparability, net (4)                  19,779        

91,935

Income taxes (1)                                              79,930        

(94,417)

Adjusted earnings (loss) before income taxes                 361,101        

(331,184)

Adjusted income taxes (2)                                    (80,094)       

94,076

Adjusted net earnings (loss) [A]                     $       281,007

$ (237,108)


Average shareholders' equity                         $     2,252,610$ 2,392,550
Average adjustments to shareholders' equity (3)               44,961        

28,386

Adjusted average shareholders' equity [B]            $     2,297,571

$ 2,420,936


Adjusted return on equity [A/B]                               12.2%         

(9.8)%

------------

(1)Includes income taxes on discontinued operations.
(2)Represents provision for income taxes plus income taxes on other items
impacting comparability.
(3)Represents the impact of other items impacting comparability, net of tax, to
equity for the respective period.
(4)Refer to the table below for a composition of Other items impacting
comparability, net for the 12-month rolling period:
                                                          Twelve months ended June 30,
                                                               2021                    2020
                                                                 (In thousands)
     Restructuring and other, net                  $        35,179$ 92,274
     ERP Implementation costs                               25,614                    35,127

     Gains on sale of properties                           (42,186)                        -
     Early redemption of medium-term notes                   8,999                         -
     ChoiceLease liability insurance revenue                (7,827)                  (35,466)
     Other items impacting comparability, net      $        19,779$ 91,935




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

                    AND RESULTS OF OPERATIONS - (Continued)
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements (within the meaning of the Federal Private Securities
Litigation Reform Act of 1995) are statements that relate to expectations,
beliefs, projections, future plans and strategies, anticipated events or trends
concerning matters that are not historical facts. These statements are often
preceded by or include the words "believe," "expect," "intend," "estimate,"
"anticipate," "will," "may," "could," "should" or similar expressions. This
Quarterly Report contains forward-looking statements including, statements
regarding:
•our expectations regarding the COVID-19 effects on our business and financial
results including revenue and cash flow;
•our expectations in our FMS business segment regarding anticipated ChoiceLease
revenue, fleet growth and earnings and commercial rental revenue and demand;
•our expectations in our SCS and DTS business segments regarding anticipated
operating revenue, trends, earnings, sales activity and growth rates;
•our expectations of the long-term residual values of revenue earning equipment;
•the expected pricing for used vehicles and vehicle replacement parts;
•our expectations of the impact of a potential cyclical downturn, including the
probability of incurring losses or having to incur accelerated depreciation;
•our expectations of cash flow from operating activities, free cash flow, and
capital expenditures through the end of 2021;
•the adequacy of our accounting estimates and reserves for pension expense,
compensation expense and employee benefit plan obligations, depreciation and
residual value guarantees, goodwill impairment, accounting changes, and income
taxes;
•our expected future contractual cash obligations and commitments;
•the adequacy of our fair value estimates of employee incentive awards under our
share-based compensation plans, publicly traded debt and other debt;
•our ability to fund all of our operating, investing and financial needs for the
foreseeable future through internally generated funds and outside funding
sources;
•our expected level of use and availability of outside funding sources,
anticipated future payments under debt and lease agreements, and risk of losses
resulting from counterparty default under hedging and derivative agreements;
•the anticipated impact of fuel price and exchange rate fluctuations;
•our expectations as to return on pension plan assets, future pension expense
and estimated contributions;
•our expectations regarding the scope and anticipated outcomes with respect to
certain claims, proceedings and lawsuits;
•the ultimate disposition of estimated environmental liabilities;
•our ability to access commercial paper and other available debt financing in
the capital markets;
•the size and impact of our strategic investments;
•our expectations regarding the achievement of our return on equity improvement
initiatives;
•our expectations regarding the diminishing impact of prior residual value
estimate changes on return on equity improvement;
•our expectations regarding maintenance costs and the benefits of maintenance
cost initiatives;
•our expectations regarding the benefits of terminating lease insurance;
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                    AND RESULTS OF OPERATIONS - (Continued)
•our expectations regarding the adequacy of credit reserves;
•the status of our unrecognized tax benefits related to the U.S. federal, state
and foreign tax positions;
•our estimates for self-insurance loss reserves;
•our expectations regarding losses under guarantees;
•our expectation on the realizability of our deferred tax assets; and
•our expectations regarding the completion and ultimate outcome of certain tax
audits.
These statements, as well as other forward-looking statements contained in this
Quarterly Report, are based on our current plans and expectations and are
subject to risks, uncertainties and assumptions. We caution readers that certain
important factors could cause actual results and events to differ significantly
from those expressed in any forward-looking statements. These risk factors,
include the following:
•Market Conditions:
•Changes in general economic and financial conditions in the U.S. and worldwide
leading to decreased demand for our services and products, lower profit margins,
increased levels of bad debt and reduced access to credit and financial markets.
•Decreases in freight demand that would impact both our transactional and
variable-based contractual business.
•Changes in our customers' operations, financial condition or business
environment that may limit their demand for, or ability to purchase, our
services and products.
•Decreases in market demand affecting the commercial rental market and used
vehicle sales as well as global economic conditions.
•Volatility in customer volumes and shifting customer demand in the industries
serviced by our SCS business.
•Changes in current financial, tax or regulatory requirements that could
negatively impact our financial results.
•Competition:
•Advances in technology may impact demand for our services or may require
increased investments to remain competitive.
•Competition from other service providers, who may have greater capital
resources or lower capital costs, or from our customers, who may choose to
provide services themselves.
•Continued consolidation in the markets in which we operate, which may create
large competitors with greater financial resources.
•Our inability to maintain current pricing levels due to economic conditions,
demand for services, customer acceptance or competition.
•Profitability:
•Our inability to obtain adequate profit margins for our services.
•Lower than expected sales volumes or customer retention levels.
•Decreases in commercial rental fleet utilization and pricing.
•Lower than expected used vehicle sales pricing levels and fluctuations in the
anticipated proportion of retail versus wholesale sales.
•Loss of key customers in our SCS and DTS business segments.
•Our inability to adapt our product offerings to meet changing consumer
preferences on a cost-effective basis.
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                    AND RESULTS OF OPERATIONS - (Continued)
•The inability of our legacy information technology systems to provide timely
access to data.
•Sudden changes in fuel prices and fuel shortages.
•Higher prices for vehicles, diesel engines and fuel as a result of new
regulations.
•Higher than expected maintenance costs and lower than expected benefits
associated with our maintenance initiatives.
•Lower than expected revenue growth due to production delays at our automotive
SCS customers, primarily related to the worldwide semiconductor supply shortage.
•The inability of an OEM or supplier to provide vehicles or components,
primarily related to the worldwide semiconductor supply shortage.
•Our inability to successfully execute our strategic returns and asset
management initiatives, maintain our fleet at normalized levels and right-size
our fleet in line with demand.
•Our key assumptions and pricing structure of our SCS and DTS contracts prove to
be inaccurate.
•Increased unionizing, labor strikes and work stoppages.
•Difficulties in attracting and retaining drivers and technicians due to driver
and technician shortages, which may result in higher costs to procure drivers
and technicians and higher turnover rates affecting our customers.
•Our inability to manage our cost structure.
•Our inability to limit our exposure for customer claims.
•Unfavorable or unanticipated outcomes in legal or regulatory proceedings or
uncertain positions.
•Business interruptions or expenditures due to severe weather or natural
occurrences.
•Financing Concerns:
•Higher borrowing costs.
•Unanticipated interest rate and currency exchange rate fluctuations.
•Negative funding status of our pension plans caused by lower than expected
returns on invested assets and unanticipated changes in interest rates.
•Withdrawal liability as a result of our participation in multi-employer plans.
•Instability in U.S. and worldwide credit markets, resulting in higher borrowing
costs and/or reduced access to credit.
•Accounting Matters:
•Reductions in residual values or useful lives of revenue earning equipment.
•Increases in compensation levels, retirement rate and mortality resulting in
higher pension expense; regulatory changes affecting pension estimates, accruals
and expenses.
•Changes in accounting rules, assumptions and accruals.
•Difficulties and delays in implementing our Enterprise Resource Planning system
and related processes.
•Other risks detailed from time to time in our SEC filings including our 2020
Annual Report on Form 10-K and in "Item 1A.-Risk Factors" of this Quarterly
Report.
New risk factors emerge from time to time and it is not possible for management
to predict all such risk factors or to assess the impact of such risk factors on
our business. As a result, we cannot provide assurance as to our future results
or achievements. You
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                    AND RESULTS OF OPERATIONS - (Continued)

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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