UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

		
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016
OR

		
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	
FOR THE TRANSITION PERIOD FROM                      TO                     
Commission File Number: 1-4364

RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)

	
		
Florida	59-0739250	
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)	
 	 	
11690 N.W. 105th Street	 	
Miami, Florida 33178	(305) 500-3726	
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)	
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ         NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ         NO ¨

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

	
				
Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company  ¨	
 	(Do not check if a smaller reporting company)	 	

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  ¨ YES    þ NO

The number of shares of Ryder System, Inc. Common Stock ($0.50 par value per share) outstanding at September 30, 2016 was 53,468,413.

					

RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS

	

 	 	Page No.  	
 	 	
PART I       FINANCIAL INFORMATION	 	
 	 	
ITEM 1       Financial Statements (unaudited)	 	
 	 	 	
 	Consolidated Condensed Statements of Earnings — Three and nine months ended September 30, 2016 and 2015	1	
 	 	 	
 	Consolidated Condensed Statements of Comprehensive Income — Three and nine months ended September 30, 2016 and 2015	2	
 	 	 	
 	Consolidated Condensed Balance Sheets — September 30, 2016 and December 31, 2015	3	
 	 	 	
 	Consolidated Condensed Statements of Cash Flows — Nine months ended September 30, 2016 and 2015	4	
 	 	 	
 	Notes to Consolidated Condensed Financial Statements	5	
 	 	
ITEM 2        Management’s Discussion and Analysis of Financial Condition and Results of Operations	19	
 	 	
ITEM 3        Quantitative and Qualitative Disclosures About Market Risk	45	
 	 	
ITEM 4       Controls and Procedures	45	
 	 	
PART II       OTHER INFORMATION	 	
 	 	
ITEM 2        Unregistered Sales of Equity Securities and Use of Proceeds	45	
 	 	
ITEM 6       Exhibits	46	
 	 	 	
SIGNATURE	47	

i

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

	
														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands, except per share amounts)	
Lease and rental revenues	$	803,006		 	802,881		 	$	2,369,147		 	2,310,951		
Services revenue	801,004		 	734,803		 	2,345,922		 	2,165,677		
Fuel services revenue	120,408		 	131,382		 	342,765		 	422,522		
Total revenues	1,724,418		 	1,669,066		 	5,057,834		 	4,899,150		
 	 	 	 	 	 	 	 	
Cost of lease and rental	557,901		 	550,541		 	1,665,693		 	1,600,271		
Cost of services	658,793		 	606,364		 	1,936,636		 	1,792,182		
Cost of fuel services	116,904		 	129,562		 	331,283		 	408,027		
Other operating expenses	27,997		 	26,957		 	85,944		 	88,912		
Selling, general and administrative expenses	198,805		 	203,093		 	632,466		 	624,566		
Gains on used vehicles, net	(1,873	)	 	(24,965	)	 	(33,002	)	 	(82,158	)	
Interest expense	37,440		 	38,986		 	112,597		 	114,863		
Miscellaneous income, net	(3,247	)	 	(1,372	)	 	(10,968	)	 	(5,037	)	
 	1,592,720		 	1,529,166		 	4,720,649		 	4,541,626		
Earnings from continuing operations before income taxes	131,698		 	139,900		 	337,185		 	357,524		
Provision for income taxes	46,560			49,089		 	121,820		 	127,470		
Earnings from continuing operations	85,138			90,811		 	215,365		 	230,054		
Loss from discontinued operations, net of tax	(386	)	 	(192	)	 	(1,069	)	 	(1,487	)	
Net earnings	$	84,752		 	90,619		 	$	214,296		 	228,567		
 	 	 	 	 	 	 	 	
Earnings (loss) per common share — Basic	 	 	 	 	 	 	 	
Continuing operations	$	1.60		 	1.71		 	$	4.05		 	4.35		
Discontinued operations	(0.01	)	 	—		 	(0.02	)	 	(0.03	)	
Net earnings	$	1.60		 	1.71		 	$	4.03		 	4.32		
 	 	 	 	 	 	 	 	
Earnings (loss) per common share — Diluted	 	 	 	 	 	 	 	
Continuing operations	$	1.59		 	1.70		 	$	4.02		 	4.31		
Discontinued operations	(0.01	)	 	—		 	(0.02	)	 	(0.03	)	
Net earnings	$	1.59		 	1.69		 	$	4.00		 	4.28		
 	 	 	 	 	 	 	 	
Cash dividends declared per common share	$	0.44		 	0.41		 	$	1.26		 	1.15		

See accompanying notes to consolidated condensed financial statements.

Note: EPS amounts may not be additive due to rounding

1

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

    

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
 	 	 	 	 	 	 	 	
Net earnings	$	84,752		 	90,619		 	$	214,296		 	228,567		
 	 	 	 	 	 	 	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Currency translation adjustment and other	(19,296	)	 	(42,748	)	 	(37,874	)	 	(73,093	)	
 	 	 	 	 	 	 	 	
Amortization of pension and postretirement items	7,171		 	6,873		 	22,040		 	20,765		
Income tax expense related to amortization of pension and postretirement items	(2,667	)	 	(2,412	)	 	(7,854	)	 	(7,226	)	
Amortization of pension and postretirement items, net of tax	4,504		 	4,461		 	14,186		 	13,539		
 	 	 	 	 	 	 	 	
Change in net actuarial loss and prior service cost	—		 	—		 	(17,367	)	 	(8,526	)	
Income tax benefit related to change in net actuarial loss and prior service cost	—		 	—		 	6,345		 	3,205		
Change in net actuarial loss and prior service cost, net of taxes	—		 	—		 	(11,022	)	 	(5,321	)	
 	 	 	 	 	 	 	 	
Other comprehensive loss, net of taxes	(14,792	)	 	(38,287	)	 	(34,710	)	 	(64,875	)	
 	 	 	 	 	 	 	 	
Comprehensive income	$	69,960		 	52,332		 	$	179,586		 	163,692		
See accompanying notes to consolidated condensed financial statements.

2

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)

	
							
 	September 30,
2016	 	December 31,
2015	
 	(Dollars in thousands, except per
share amount)	
Assets:	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	74,994			60,945		
Receivables, net of allowance of $14,911 and $15,560, respectively	856,763			835,489		
Inventories	67,335			63,725		
Prepaid expenses and other current assets	138,467			138,143		
Total current assets	1,137,559		 	1,098,302		
Revenue earning equipment, net	8,274,832			8,184,735		
Operating property and equipment, net of accumulated depreciation of $1,116,439 and $1,083,604, respectively	740,375			714,970		
Goodwill	387,730			389,135		
Intangible assets, net of accumulated amortization of $50,145 and $45,736, respectively	49,994			55,192		
Direct financing leases and other assets	518,283			510,246		
Total assets	$	11,108,773			10,952,580		
 	 	 	 	
Liabilities and shareholders’ equity:	 	 	 	
Current liabilities:	 	 	 	
Short-term debt and current portion of long-term debt	$	1,055,146			634,530		
Accounts payable	457,843			502,373		
Accrued expenses and other current liabilities	516,862			543,352		
Total current liabilities	2,029,851		 	1,680,255		
Long-term debt	4,464,495			4,868,097		
Other non-current liabilities	817,232			829,595		
Deferred income taxes	1,700,154			1,587,522		
Total liabilities	9,011,732		 	8,965,469		
 	 	 	 	
Shareholders’ equity:	 	 	 	
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding,
September 30, 2016 or December 31, 2015	—		 	—		
Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding,
September 30, 2016 — 53,468,413; December 31, 2015 — 53,490,603	26,734		 	26,745		
Additional paid-in capital	1,022,307		 	1,006,021		
Retained earnings	1,795,445		 	1,667,080		
Accumulated other comprehensive loss	(747,445	)	 	(712,735	)	
Total shareholders’ equity	2,097,041			1,987,111		
Total liabilities and shareholders’ equity	$	11,108,773			10,952,580		
See accompanying notes to consolidated condensed financial statements.

3

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

							
 	Nine months ended September 30,	
 	2016	 	2015	
 	(In thousands)	
Cash flows from operating activities from continuing operations:	 	 	 	
Net earnings	$	214,296		 	228,567		
Less: Loss from discontinued operations, net of tax	(1,069	)	 	(1,487	)	
Earnings from continuing operations	215,365		 	230,054		
Depreciation expense	878,173		 	828,148		
Gains on used vehicles, net	(33,002	)	 	(82,158	)	
Share-based compensation expense	13,870		 	16,112		
Amortization expense and other non-cash charges, net	49,869		 	46,272		
Deferred income tax expense	109,191		 	111,609		
Changes in operating assets and liabilities:	 	 	 	
Receivables	(69,169	)	 	(23,751	)	
Inventories	(3,524	)	 	1,275		
Prepaid expenses and other assets	(24,241	)	 	(33,334	)	
Accounts payable	68,599		 	(19,506	)	
Accrued expenses and other non-current liabilities	(20,387	)	 	(3,385	)	
Net cash provided by operating activities from continuing operations	1,184,744		 	1,071,336		
 	 	 	 	
Cash flows from financing activities:	 	 	 	
Net change in commercial paper borrowings and revolving credit facilities	73,597			184,750		
Debt proceeds	298,254			1,329,810		
Debt repaid	(340,707	)		(795,837	)	
Dividends on common stock	(67,651	)	 	(61,436	)	
Common stock issued	9,626		 	20,397		
Common stock repurchased	(25,658	)	 	(6,141	)	
Excess tax benefits from share-based compensation and other items	(1,685	)	 	723		
Debt issuance costs	(1,012	)	 	(7,483	)	
Net cash (used in) provided by financing activities	(55,236	)	 	664,783		
 	 	 	 	
Cash flows from investing activities:	 	 	 	
Purchases of property and revenue earning equipment	(1,511,359	)	 	(2,087,294	)	
Sales of revenue earning equipment	331,720		 	319,766		
Sales of operating property and equipment	6,623		 	1,203		
Collections on direct finance leases and other items	60,229		 	51,166		
Changes in restricted cash	4,203		 	7,781		
Net cash used in investing activities	(1,108,584	)	 	(1,707,378	)	
 	 	 	 	
Effect of exchange rate changes on cash	(5,567	)	 	(2,006	)	
Increase in cash and cash equivalents from continuing operations	15,357		 	26,735		

Decrease in cash and cash equivalents from discontinued operations	(1,308	)	 	(1,440	)	
 	 	 	 	
Increase in cash and cash equivalents	14,049		 	25,295		
Cash and cash equivalents at January 1	60,945		 	50,092		
Cash and cash equivalents at September 30	$	74,994		 	75,387		
See accompanying notes to consolidated condensed financial statements.

4

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

1. GENERAL

Interim Financial Statements

The accompanying unaudited Consolidated Condensed Financial Statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder has a controlling voting interest (subsidiaries) and variable interest entities (VIEs) required to be consolidated in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with the accounting policies described in our 2015 Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements and notes thereto. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included and the disclosures herein are adequate. The operating results for interim periods are unaudited and are not necessarily indicative of the results that can be expected for a full year.

Beginning in 2016, we reclassified the losses from fair value adjustments on our used vehicles from "Other operating expenses" to "Gains on used vehicles, net" within the Consolidated Condensed Statement of Earnings. Prior year amounts have been reclassified to conform to the current period presentation.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Cash Flows

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-15, Statement of Cash Flows, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The guidance will be effective January 1, 2018, with early adoption permitted. The standard is to be adopted on a retrospective basis. We do not expect this standard to have a material impact on the presentation of our consolidated cash flows.

Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The standard applies to financial instruments including, but not limited to, trade and other receivables, held-to-maturity debt securities, loans and net investments in leases. The standard requires estimating expected credit losses over the remaining life of an instrument or a portfolio of instruments with similar risk characteristics based on relevant information about past events, current conditions and reasonable forecasts. The initial estimate of and the subsequent changes in expected credit losses will be recognized as credit loss expense through current earnings and will be reflected as an allowance for credit losses offsetting the carrying value of the financial instrument(s) on the balance sheet. The standard is effective January 1, 2020, with early adoption as of January 1, 2019 permitted. The standard is to be applied using a modified retrospective transition method. We do not expect this standard to have a material impact on our consolidated financial position, results of operations or cash flows.

Share-Based Payments

In March 2016, the FASB issued ASU No. 2016-09, Stock Compensation, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance will be effective January 1, 2017. We do not expect this standard to have a material impact on our consolidated financial position, results of operations or cash flows.

5

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

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The standard is effective January 1, 2019, with early adoption permitted. The standard is to be applied using a modified retrospective transition method. We are evaluating the impact on our consolidated financial position, results of operations and cash flows.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which together with related, subsequently issued guidance, requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU is effective January 1, 2018, and will replace most existing revenue recognition guidance. The standard permits the use of either the modified retrospective or cumulative effect transition methods. We are evaluating transition methods and the impact on our consolidated financial position and results of operations.

Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which required an entity to present debt issuance costs as a direct reduction from the carrying amount of the related debt liability on the balance sheet. We adopted this guidance on January 1, 2016 and reclassified $15 million from other assets to long-term debt in our December 31, 2015 balance sheet. Other than the change in presentation within the Consolidated Condensed Balance Sheets, this accounting guidance did not impact our consolidated financial position, results of operations or cash flows.

3. REVENUE EARNING EQUIPMENT

	
																				
 	September 30, 2016	 	December 31, 2015	
 	Cost	 	Accumulated
Depreciation	 	Net  Book
Value (1)	 	Cost	 	Accumulated
Depreciation	 	Net  Book
Value (1)	
 	(In thousands)	
Held for use:	 	
Full service lease	$	9,460,749		 	(2,979,195	)	 	6,481,554		 	$	8,839,941		 	(2,723,605	)	 	6,116,336		
Commercial rental	2,529,929		 	(893,545	)	 	1,636,384		 	2,811,715		 	(907,412	)	 	1,904,303		
Held for sale	503,160		 	(346,266	)	 	156,894		 	496,634		 	(332,538	)	 	164,096		
Total	$	12,493,838		 	(4,219,006	)	 	8,274,832		 	$	12,148,290		 	(3,963,555	)	 	8,184,735		
 
————————————
		
(1)	Revenue earning equipment, net includes vehicles acquired under capital leases of $42.9 million , less accumulated depreciation of $21.6 million , at September 30, 2016 , and $47.5 million , less accumulated depreciation of $22.2 million , at December 31, 2015 .	

We lease revenue earning equipment to customers for periods typically ranging from three to seven years for trucks and tractors and up to ten years for trailers. The majority of our leases are classified as operating leases. However, some of our revenue earning equipment leases are classified as direct financing leases and, to a lesser extent, sales-type leases. As of September 30, 2016 and December 31, 2015 , the net investment in direct financing and sales-type leases was $418 million and $438 million , respectively. Our direct financing lease customers operate in a wide variety of industries, and we have no significant customer concentrations in any one industry. We assess credit risk for all of our customers including those who lease equipment under direct financing leases prior to signing a full service lease contract. For those customers who are designated as high risk, we typically require deposits to be paid in advance in order to mitigate our credit risk. Additionally, our receivables are collateralized by the vehicles which further mitigates our credit risk.

6

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

As of September 30, 2016 and December 31, 2015 , the amount of direct financing lease receivables past due was not significant, and there were no impaired receivables. Accordingly, we do not believe there is a material risk of default with respect to the direct financing lease receivables.

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value are recognized at the time they arrive at our used truck centers and are presented within “Gains on used vehicles, net ” in the Consolidated Condensed Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For a certain population of our revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. These vehicles held for sale were classified within Level 3 of the fair value hierarchy.

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

	
																					
 	 	 	Total Losses (2)	
 	September 30,	 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Assets held for sale:	 	 	 	 	 	 	 	 	 	 	 	
Revenue earning equipment (1) :	 	 	 	 	 	 	 	 	 	 	 	
Trucks	$	17,091		 	7,701		 	$	2,528		 	1,657		 	$	6,842		 	4,400		
Tractors	61,480		 	10,093		 	7,985		 	2,062		 	22,073		 	3,970		
Trailers	2,563		 	1,195		 	1,152		 	610		 	2,589		 	1,582		
 	 	 	 	 	 	 	 	 	 	 	 	
Total assets at fair value	$	81,134		 	18,989		 	$	11,665		 	4,329		 	$	31,504		 	9,952		
 ————————————
		
(1)	Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where net book values exceeded fair values and fair value adjustments were recorded. The net book value of assets held for sale not exceeding fair value was $75.8 million and $145.1 million as of September 30, 2016 and 2015 , respectively.	
		
(2)	Total losses represent fair value adjustments for all vehicles reclassified to held for sale throughout the period for which fair value was less than carrying value.	

For the three and nine months ended September 30, 2016 and 2015 , the components of gains on used vehicles, net were as follows:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Gains on vehicle sales, net	$	(13,538	)	 	(29,294	)	 	$	(64,506	)	 	(92,110	)	
Losses from fair value adjustments	11,665		 	4,329		 	31,504		 	9,952		
Gains on used vehicles, net	$	(1,873	)	 	(24,965	)	 	$	(33,002	)	 	(82,158	)	

7

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

4.  ACCRUED EXPENSES AND OTHER LIABILITIES

	
																				
 	September 30, 2016	 	December 31, 2015	
 	Accrued
Expenses	 	Non-Current
Liabilities	 	Total	 	Accrued
Expenses	 	Non-Current
Liabilities	 	Total	
 	(In thousands)	
Salaries and wages	$	88,592		 	—		 	88,592		 	$	99,032		 	—		 	99,032		
Deferred compensation	2,874		 	44,702		 	47,576		 	2,252		 	41,691		 	43,943		
Pension benefits	3,808		 	466,721		 	470,529		 	3,790		 	484,892		 	488,682		
Other postretirement benefits	1,634		 	19,536		 	21,170		 	1,624		 	20,002		 	21,626		
Other employee benefits	23,843		 	5,040		 	28,883		 	8,956		 	9,706		 	18,662		
Insurance obligations (1)	140,528		 	221,254		 	361,782		 	157,014		 	213,256		 	370,270		
Environmental liabilities	3,839		 	5,911		 	9,750		 	3,791		 	6,554		 	10,345		
Operating taxes	96,813		 	—		 	96,813		 	101,649		 	—		 	101,649		
Income taxes	444		 	23,467		 	23,911		 	3,378		 	22,366		 	25,744		
Interest	37,128		 	—		 	37,128		 	31,218		 	—		 	31,218		
Customer deposits	62,035		 	4,688		 	66,723		 	61,869		 	5,085		 	66,954		
Deferred revenue	14,556		 	—		 	14,556		 	13,038		 	—		 	13,038		
Restructuring liabilities (2)	2,391		 	—		 	2,391		 	12,333		 	—		 	12,333		
Other	38,377		 	25,913		 	64,290		 	43,408		 	26,043		 	69,451		
Total	$	516,862		 	817,232		 	1,334,094		 	$	543,352		 	829,595		 	1,372,947		
  ————————————
		
(1)	Insurance obligations primarily represent claims for which we are self-insured.	
		
(2)	The reduction in restructuring liabilities from December 31, 2015 principally represents cash payments for employee termination costs. The majority of the balance remaining in restructuring liabilities is expected to be paid by the end of 2016.	

8

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

5.  DEBT

													
 	Weighted-Average
Interest Rate	 	 	 	 	 	 	
 	September 30,
2016	 	December 31,
2015	 	Maturities	 	September 30,
2016	 	December 31,
2015	
 	 	 	 	 	 	 	(In thousands)	
Short-term debt and current portion of long-term debt:	 	 	 	 	 	 	 	 	 	
Short-term debt	0.92%	 	2.26%	 		 	$	133,713		 	35,947		
Current portion of long-term debt	 	 	 	 	 	 	921,433		 	598,583		
Total short-term debt and current portion of long-term debt	 	 	 	 	 	1,055,146		 	634,530		
Long-term debt:	 	 	 	 	 	 	 	 	 	
U.S. commercial paper (1)	0.76%	 	0.55%	 	2020	 	490,685		 	547,130		
Global revolving credit facility	2.06%	 	2.31%	 	2020	 	60,885		 	25,291		
Unsecured U.S. notes — Medium-term notes  (1)	2.91%	 	2.84%	 	2016-2025	 	4,113,583		 	4,112,519		
Unsecured U.S. obligations	2.09%	 	1.73%	 	2018	 	50,000		 	50,000		
Unsecured foreign obligations	1.74%	 	1.92%	 	2017-2020	 	248,376		 	275,661		
Asset-backed U.S. obligations  (2)	1.77%	 	1.81%	 	2016-2022	 	395,898		 	434,001		
Capital lease obligations	3.18%	 	3.31%	 	2016-2023	 	25,818		 	32,054		
Total before fair market value adjustment	 	 	 	 	 	 	5,385,245		 	5,476,656		
Fair market value adjustment on notes subject to hedging  (3)	 	 	 	 	 	14,213		 	5,253		
Debt issuance costs (4)	 	 	 	 	 	 	(13,530	)	 	(15,229	)	
 	 	 	 	 	 	 	5,385,928		 	5,466,680		
Current portion of long-term debt	 	 	 	 	 	 	(921,433	)	 	(598,583	)	
Long-term debt	 	 	 	 	 	 	4,464,495		 	4,868,097		
Total debt	 	 	 	 	 	 	$	5,519,641		 	5,502,627		
  ————————————
		
(1)	Amounts are net of aggregate unamortized original issue discounts of $6.8 million and $7.7 million at September 30, 2016 and December 31, 2015 , respectively.	
		
(2)	Asset-backed U.S. obligations are related to financing transactions involving revenue earning equipment.	
		
(3)	The notional amount of executed interest rate swaps designated as fair value hedges was $825 million at September 30, 2016 and December 31, 2015 .	
		
(4)	See Note 2 , " Recent Accounting Pronouncements ," for further discussion of the presentation of debt issuance costs.	

We maintain a $1.2 billion global revolving credit facility with a syndicate of twelve lending institutions led by Bank of America N.A., Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Mizuho Corporate Bank, Ltd., Royal Bank of Canada, Lloyds Bank Plc, U.S. Bank National Association and Wells Fargo Bank, N.A. The facility matures in January 2020. The agreement provides for annual facility fees which range from 7.5 basis points to 25 basis points based on Ryder's long-term credit ratings. The annual facility fee is currently 10 basis points , which applies to the total facility size of $1.2 billion .

The credit facility is used primarily to finance working capital but can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at September 30, 2016 ). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility contains no provisions limiting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions and certain affirmative and negative covenants.

In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or equal to 300% . Net worth, as defined in the credit facility, represents shareholders' equity excluding any accumulated other comprehensive income or loss associated with our pension and other postretirement plans. The ratio at September 30, 2016 was 206% . At September 30, 2016 , there was $514.4 million available under the credit facility.

9

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

Our global revolving credit facility enables us to refinance short-term obligations on a long-term basis. Short-term commercial paper obligations not expected to require the use of working capital are classified as long-term as we have both the intent and ability to refinance on a long-term basis. In addition, we have the intent and ability to refinance the current portion of certain long-term debt on a long-term basis. At September 30, 2016 , we classified $490.7 million of short-term commercial paper, $349.9 million of current debt obligations and $60.9 million of short-term borrowings under our global revolving credit facility as long-term. At December 31, 2015 , we classified $547.1 million of short-term commercial paper, $300.0 million of current debt obligations and $25.3 million of short-term borrowings under our global revolving credit facility as long-term.

In February 2016, we issued $300 million of unsecured medium-term notes maturing in November 2021. The proceeds from these notes were used to pay off maturing debt and for general corporate purposes. If these notes are downgraded below investment grade following, and as a result of, a change in control, the note holders can require us to repurchase all or a portion of the notes at a purchase price equal to 101% of principal value plus accrued and unpaid interest.

We have a trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to a bankruptcy remote, consolidated subsidiary of Ryder, that in turn sells, on a revolving basis, an ownership interest in certain of these accounts receivable to a committed purchaser. The subsidiary is considered a VIE and is consolidated based on our control of the entity’s activities. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in interest rates. The available proceeds that may be received under the program are limited to $175 million . The program was renewed in October 2016. If no event occurs which causes early termination, the 364 -day program will expire on October 23, 2017. The program contains provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of the collateralized receivables. Sales of receivables under this program are accounted for as secured borrowings based on our continuing involvement in the transferred assets. No amounts were outstanding under the program at September 30, 2016 or December 31, 2015 .

At September 30, 2016 and December 31, 2015 , we had letters of credit and surety bonds outstanding totaling $338.9 million and $345.7 million , respectively, which primarily guarantee the payment of insurance claims.

The fair value of total debt (excluding capital lease and asset-backed U.S. obligations) at September 30, 2016 and December 31, 2015 was approximately $5.21 billion and $5.06 billion , respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and other debt were classified within Level 2 of the fair value hierarchy. The carrying amounts reported in the Consolidated Condensed Balance Sheets for “Cash and cash equivalents,” “Receivables, net” and “Accounts payable” approximate fair value because of the immediate or short-term maturities of these financial instruments.

In February 2016, Ryder filed an automatic shelf registration statement on Form S-3 with the SEC. The registration is for an indeterminate number of securities and is effective for three years. Under this universal shelf registration statement, we have the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock and debt securities, subject to market demand and ratings status.

10

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

6.  DERIVATIVES

From time to time, we enter into interest rate derivatives to manage our fixed and variable interest rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. We assess the risk that changes in interest rates will have either on the fair value of debt obligations or on the amount of future interest payments by monitoring changes in interest rate exposures and by evaluating hedging opportunities. We regularly monitor interest rate risk attributable to both our outstanding or forecasted debt obligations as well as any offsetting hedge positions. This risk management process involves the use of analytical techniques, including cash flow sensitivity analyses, to estimate the expected impact of changes in interest rates on our future cash flows.
 
As of September 30, 2016 , we had interest rate swaps outstanding which are designated as fair value hedges for certain debt obligations, with a total notional value of $825 million and maturities through 2020 . Interest rate swaps are measured at fair value on a recurring basis using Level 2 fair value inputs. The fair value of these interest rate swaps was approximately $14.2 million and $5.4 million  as of September 30, 2016 and December 31, 2015 , respectively. The amounts are presented in "Direct financing leases and other assets" in our Consolidated Condensed Balance Sheets. Changes in the fair value of our interest rate swaps were offset by changes in the fair value of the hedged debt instruments. Accordingly, there was no ineffectiveness related to the interest rate swaps.

7.  SHARE REPURCHASE PROGRAMS

In December 2015, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans (the program).  Under the program, management is authorized to repurchase (i) up to 1.5 million shares of common stock, the sum of which will not exceed the number of shares issued to employees under the Company’s employee stock plans from December 1, 2015 to December 9, 2017,  plus (ii) 0.5 million shares issued to employees that were not repurchased under the Company’s previous share repurchase program.  The program limits aggregate share repurchases to no more than 2 million shares of Ryder common stock.  Share repurchases of common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish prearranged written plans for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. 

During the nine months ended September 30, 2016 and September 30, 2015 , we repurchased 379,896 shares for $25.7 million and 69,107 shares for $6.1 million , respectively.

8. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following summary sets forth the components of accumulated other comprehensive loss, net of tax:

														
 	 	Currency
Translation
Adjustments and Other	 	Net Actuarial
Loss (1)	 	Prior Service (Cost)/
Credit (1)	 	Accumulated
Other
Comprehensive
Loss	
 	 	(In thousands)	
December 31, 2015	 	$	(136,020	)	 	(576,993	)	 	278		 	(712,735	)	
Amortization	 	—		 	14,052		 	134		 	14,186		
Other current period change	 	(37,874	)	 	(5,495	)	 	(5,527	)	 	(48,896	)	
September 30, 2016	 	$	(173,894	)	 	(568,436	)	 	(5,115	)	 	(747,445	)	

11

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

	
														
 	 	Currency
Translation
Adjustments and Other	 	Net Actuarial
Loss (1)	 	Prior Service
Credit (1)	 	Accumulated
Other
Comprehensive
Loss	
 	 	(In thousands)	
December 31, 2014	 	$	(36,087	)	 	(585,941	)	 	1,758		 	(620,270	)	
Amortization	 	—		 	14,605		 	(1,066	)	 	13,539		
Other current period change	 	(73,093	)	 	(5,321	)	 	—		 	(78,414	)	
September 30, 2015	 	$	(109,180	)	 	(576,657	)	 	692		 	(685,145	)	
_______________________ 
		
(1)	These amounts are included in the computation of net pension expense. See Note 11 , " Employee Benefit Plans ," for further information.	

The loss from currency translation adjustments in the nine months ended September 30, 2016 of $37.9 million was primarily due to the weakening of the British Pound against the U.S. Dollar, partially offset by the strengthening of the Canadian Dollar against the U.S. Dollar. The loss from currency translation adjustments in the nine months ended September 30, 2015 of $73.1 million was due to the weakening of the Canadian Dollar and British Pound against the U.S. Dollar.

9. EARNINGS PER SHARE

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

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands, except per share amounts)	
Earnings per share — Basic:	 	 	 	 	 	 	 	
Earnings from continuing operations	$	85,138		 	90,811		 	$	215,365		 	230,054		
Less: Earnings allocated to unvested stock	(261	)	 	(266	)	 	(674	)	 	(654	)	
Earnings from continuing operations available to common shareholders — Basic	$	84,877		 	90,545		 	$	214,691		 	229,400		
 	 	 	 	 	 	 	 	
Weighted average common shares outstanding — Basic	52,953		 	52,888		 	53,029		 	52,770		
 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share — Basic	$	1.60		 	1.71		 	$	4.05		 	4.35		
 	 	 	 	 	 	 	 	
Earnings per share — Diluted:	 	 	 	 	 	 	 	
Earnings from continuing operations	$	85,138		 	90,811		 	$	215,365		 	230,054		
Less: Earnings allocated to unvested stock	(260	)	 	(265	)	 	(672	)	 	(649	)	
Earnings from continuing operations available to common shareholders — Diluted	$	84,878		 	90,546		 	$	214,693		 	229,405		
 	 	 	 	 	 	 	 	
Weighted average common shares outstanding — Basic	52,953		 	52,888		 	53,029		 	52,770		
Effect of dilutive equity awards	338		 	445		 	315		 	476		
Weighted average common shares outstanding — Diluted	53,291		 	53,333		 	53,344		 	53,246		
 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share — Diluted	$	1.59		 	1.70		 	$	4.02		 	4.31		
 	 	 	 	 	 	 	 	
Anti-dilutive equity awards not included above	653		 	352		 	836		 	300		

12

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

10. SHARE-BASED COMPENSATION PLANS

Share-based incentive awards are provided to employees under the terms of various share-based compensation plans (collectively, the “Plans”). The Plans are administered by the Compensation Committee of the Board of Directors and principally include at-the-money stock options, unvested stock and cash awards. Unvested stock awards include grants of market-based, performance-based and time-vested restricted stock rights. Under the terms of our Plans, dividends are not paid unless the stock award vests. Upon vesting, the amount of the dividends paid is equal to the aggregate dividends declared on common shares during the period from the grant date of the award until the date the shares underlying the award are delivered.

The following table provides information on share-based compensation expense and income tax benefits recognized during the periods:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Stock option and stock purchase plans	$	1,633		 	1,948		 	$	5,410		 	6,205		
Unvested stock	2,237		 	2,995		 	8,460		 	9,907		
Share-based compensation expense	3,870		 	4,943			13,870			16,112		
Income tax benefit	(1,321	)	 	(1,652	)	 	(4,691	)	 	(5,395	)	
Share-based compensation expense, net of tax	$	2,549		 	3,291			$	9,179			10,717		

The following table is a summary of compensation expense recognized for market-based cash awards in addition to the share-based compensation expense reported in the previous table:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Cash awards	$	119		 	197		 	$	447		 	661		

Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at September 30, 2016 was $21.2 million and is expected to be recognized over a weighted-average period of 1.8 years.

The following table is a summary of the awards granted under the Plans during the periods presented:

						
 	Nine months ended September 30,	
 	2016	 	2015	
 	(Shares in thousands)	
Stock options	513		 	362		
Market-based restricted stock rights	34		 	19		
Performance-based restricted stock rights	45		 	42		
Time-vested restricted stock rights	129		 	87		
Total	721			510		

13

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

11.  EMPLOYEE BENEFIT PLANS

Components of net pension expense were as follows:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Pension Benefits	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
Service cost	$	2,660		 	3,612		 	$	9,065		 	10,805		
Interest cost	22,754		 	21,777		 	72,086		 	65,712		
Expected return on plan assets	(22,601	)	 	(24,697	)	 	(68,353	)	 	(74,618	)	
Amortization of:	 	 	 	 	 	 	 	
Net actuarial loss	7,324		 	7,665		 	23,889		 	23,137		
Prior service cost/(credit)	320		 	(80	)	 	3,060		 	(230	)	
 	10,457		 	8,277		 	39,747		 	24,806		
Union-administered plans	2,493		 	1,772		 	7,221		 	6,057		
Net pension expense	$	12,950		 	10,049		 	$	46,968		 	30,863		
 	 	 	 	 	 	 	 	
Company-administered plans:	 	 	 	 	 	 	 	
U.S.	$	10,952		 	8,746		 	$	41,389		 	26,237		
Non-U.S.	(495	)	 	(469	)	 	(1,642	)	 	(1,431	)	
 	10,457		 	8,277		 	39,747		 	24,806		
Union-administered plans	2,493		 	1,772		 	7,221		 	6,057		
Net pension expense	$	12,950		 	10,049		 	$	46,968		 	30,863		

During the second quarter of 2016, we determined that certain pension benefit improvements made in 2009 had not been fully reflected in our projected benefit obligation. Because the amounts were not material to our consolidated financial statements in any individual period, and the cumulative amount is not material to 2016 results, we recognized a one-time, non-cash charge of $7.7 million in "Selling, general and administrative expenses" and a $12.8 million pre-tax increase to “Accumulated other comprehensive loss” in our second quarter 2016 consolidated condensed financial statements to correctly state the pension benefit obligation and account for these 2009 benefit improvements.

During the third quarter of 2015, we recorded adjustments of $0.5 million to previously recorded, estimated pension settlement charges related to the exit from U.S. multi-employer pension plans.

During the nine months ended September 30, 2016 , we contributed $65.3 million to our pension plans. In 2016 , the expected total contributions to our pension plans are approximately $ 80 million . We also maintain other postretirement benefit plans that are not reflected in the above table. The amount of postretirement benefit expense was not material for the three or nine months ended September 30, 2016 .

14

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

12.   OTHER MATTERS

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

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

Although we discontinued our South American operations in 2009, we continue to be party to various federal, state and local legal proceedings involving labor matters, tort claims and tax assessments. We have established loss provisions for any matters where we believe a loss is probable and can be reasonably estimated. Other than with respect to the matters discussed below, we believe that such losses will not have a material effect on our consolidated condensed financial statements.

In Brazil, various matters related to income taxes and social contribution taxes, as well as tax credits used to offset those taxes, were assessed by the Revenue Department for the 1997, 1998, 2004, 2005 and 2006 tax years. When available and appropriate, we have entered into various amnesty programs offered by the Brazilian tax authorities to settle some of these assessments at a discount and continue to evaluate these when offered.  Payments to resolve open matters through these amnesty programs were not material and were reflected as costs in discontinued operations.  Open matters, combined, total approximately $4 million in assessments, penalties and interest and are pending at various levels of the administrative tax courts.  We believe it is more likely than not that our position will ultimately be sustained either in these administrative courts or in actions before the judicial courts, if required.

13.  SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information was as follows:

							
 	Nine months ended September 30,	
 	2016	 	2015	
 	(In thousands)	
Interest paid	$	100,903		 	110,141		
Income taxes paid	12,250		 	13,635		
Changes in accounts payable related to purchases of revenue earning equipment	(107,177	)	 	18,307		
Operating and revenue earning equipment acquired under capital leases	947		 	5,956		

15

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

14.  SEGMENT REPORTING

Our primary measurement of segment financial performance, defined as segment “Earnings Before Tax” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes non-operating pension costs and certain professional fees associated with cost savings initiatives. Fleet Management Solutions (FMS) EBT, Dedicated Transportation Solutions (DTS) EBT and Supply Chain Solutions (SCS) EBT are our primary measures of segment performance. CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, public affairs, information technology, health and safety, 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 segment accountable for their allocated share of CSS costs. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.

Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the DTS and SCS segments. Inter-segment revenue and EBT are accounted for at rates similar to those executed with third parties. EBT related to inter-segment equipment and services billed to customers (equipment contribution) are included in both FMS and the segment which served the customer and then eliminated (presented as “Eliminations”).  

The following tables set forth financial information for each of our segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three and nine months ended September 30, 2016 and 2015 . 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.

16

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

	
																	
 	FMS	 	DTS	 	SCS	 	Eliminations	 	Total	
 	(In thousands)	
For the three months ended September 30, 2016	 	 	 	 	 	 	 	 	
Revenue from external customers	$	1,046,599		 	260,921		 	416,898		 	—		 	1,724,418		
Inter-segment revenue	108,412		 	—		 	—		 	(108,412	)	 	—		
Total revenue	$	1,155,011		 	260,921		 	416,898		 	(108,412	)	 	1,724,418		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	112,282		 	17,587		 	30,954		 	(12,606	)	 	148,217		
Unallocated CSS	 	 	 	 	 	 	 	 	(9,313	)	
     Non-operating pension costs  	 	 	 	 	 	 	 	 	(7,206	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	131,698		
 	 	 	 	 	 	 	 	 	 	
   Segment capital expenditures paid (1)	$	375,779		 	1,060		 	8,181		 	—		 	385,020		
Unallocated CSS capital expenditures paid	 	 	 	 	 	 	 	 	6,157		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	391,177		

For the three months ended September 30, 2015	 	 	 	 	 	 	 	 	
Revenue from external customers	$	1,054,840		 	226,921		 	387,305		 	—		 	1,669,066		
Inter-segment revenue	102,738		 	—		 	—		 	(102,738	)	 	—		
Total revenue	$	1,157,578		 	226,921		 	387,305		 	(102,738	)	 	1,669,066		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	126,433		 	13,296		 	26,573		 	(11,998	)	 	154,304		
Unallocated CSS	 	 	 	 	 	 	 	 	(10,070	)	
Non-operating pension costs  	 	 	 	 	 	 	 	 	(4,780	)	
Other items (2)	 	 	 	 	 	 	 	 	446		
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	139,900		
 	 	 	 	 	 	 	 	 	 	
  Segment capital expenditures paid (1)	$	740,049		 	1,175		 	4,195		 	—		 	745,419		
Unallocated CSS capital expenditures paid	 	 	 	 	 	 	 	 	12,657		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	758,076		
  ————————————
		
(1)	Excludes revenue earning equipment acquired under capital leases.	
		
(2)	Consists of pension-related adjustments and certain professional fees associated with cost savings initiatives.	

17

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

	
																	
 	FMS	 	DTS	 	SCS	 	Eliminations	 	Total	
 	(In thousands)	
For the nine months ended September 30, 2016	 	 	 	 	 	 	 	 	
Revenue from external customers	$	3,086,144		 	764,025		 	1,207,665		 	—		 	5,057,834		
Inter-segment revenue	318,308		 	—		 	—		 	(318,308	)	 	—		
Total revenue	$	3,404,452		 	764,025		 	1,207,665		 	(318,308	)	 	5,057,834		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	306,387		 	48,327		 	79,121		 	(37,116	)	 	396,719		
Unallocated CSS	 	 	 	 	 	 	 	 	(30,193	)	
     Non-operating pension costs	 	 	 	 	 	 	 	 	(21,691	)	
Pension-related adjustments (1)	 	 	 	 	 	 	 	 	(7,650	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	337,185		
 	 	 	 	 	 	 	 	 	 	
  Segment capital expenditures paid (2)	$	1,438,104		 	1,940		 	52,643		 	—		 	1,492,687		
Unallocated CSS capital expenditures paid	 	 	 	 	 	 	 	 	18,672		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	1,511,359		

For the nine months ended September 30, 2015	 	 	 	 	 	 	 	 	
Revenue from external customers	$	3,080,756		 	663,094		 	1,155,300		 	—		 	4,899,150		
Inter-segment revenue	313,321		 	—		 	—		 	(313,321	)	 	—		
Total revenue	$	3,394,077		 	663,094		 	1,155,300		 	(313,321	)	 	4,899,150		
 	 	 	 	 	 	 	 	 	 	
Segment EBT	$	338,603		 	34,701		 	69,961		 	(35,120	)	 	408,145		
Unallocated CSS	 	 	 	 	 	 	 	 	(32,936	)	
Non-operating pension costs	 	 	 	 	 	 	 	 	(14,351	)	
Other items (3)	 	 	 	 	 	 	 	 	(3,334	)	
Earnings from continuing operations before income taxes	 	 	 	 	 	 	 	 	$	357,524		
 	 	 	 	 	 	 	 	 	 	
  Segment capital expenditures paid (2)	$	2,040,334		 	2,530		 	13,752		 	—		 	2,056,616		
Unallocated CSS capital expenditures paid	 	 	 	 	 	 	 	 	30,678		
Capital expenditures paid	 	 	 	 	 	 	 	 	$	2,087,294		
  ————————————
		
(1)	During the second quarter of 2016, we determined that certain pension benefit improvements made in 2009 were not fully reflected in our projected benefit obligation. We recognized a charge of $7.7 million related to these benefit improvements.	
		
(2)	Excludes revenue earning equipment acquired under capital leases.	
		
(3)	Consists of pension-related adjustments and certain professional fees associated with cost savings initiatives.	

18

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

OVERVIEW

The following discussion should be read in conjunction with the unaudited Consolidated Condensed Financial Statements and notes thereto included under Item 1. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2015 Annual Report on Form 10-K.

Ryder System, Inc. (Ryder) is a global leader in transportation and supply chain management solutions. We report our financial performance based on three segments: (1) FMS, which provides full service leasing, commercial rental, contract maintenance, and contract-related maintenance of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) DTS, which provides vehicles and drivers as part of a dedicated transportation solution in the U.S.; and (3) SCS, which provides comprehensive supply chain solutions including distribution and transportation services in North America and Asia. Dedicated transportation services provided as part of an integrated, multi-service, supply chain solution to SCS customers are 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 automotive, industrial, food and beverage service, consumer packaged goods (CPG), transportation and warehousing, technology and healthcare, retail, housing, business and personal services, and paper and publishing.

This Management’s Discussion and Analysis (MD&A) includes certain non-GAAP financial measures.  Please refer to the “Non-GAAP Financial Measures” section of this MD&A for information on the non-GAAP measures included in the MD&A, reconciliations to the most comparable GAAP financial measure and the reasons why we believe each measure is useful to investors.

19

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

Operating results were as follows:

																			
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	Nine Months	
 	(In thousands, except per share amounts)	 	 	 	
Total revenue	$	1,724,418		 	1,669,066		 	$	5,057,834		 	4,899,150		 	   3	 %	   3	 %	
Operating revenue (1)	1,468,293		 	1,426,465		 	4,324,019		 	4,119,369		 	   3	 %	   5	 %	

EBT	$	131,698		 	139,900		 	$	337,185		 	357,524		 	   (6	)%	   (6	)%	
Comparable EBT (2)	138,904		 	144,234		 	366,526		 	375,209		 	   (4	)%	   (2	)%	
Earnings from continuing operations	85,138		 	90,811		 	215,365		 	230,054		 	   (6	)%	   (6	)%	
Comparable earnings from continuing operations (2)	89,354		 	93,268		 	232,835		 	238,499		 	   (4	)%	   (2	)%	
Net earnings	84,752		 	90,619		 	214,296		 	228,567		 	   (6	)%	   (6	)%	

Earnings per common share (EPS) — Diluted		 		 	 	 	 	 			 	
Continuing operations	$	1.59		 	1.70		 	$	4.02		 	4.31		 	   (6	)%	   (7	)%	
Comparable (2)	1.67		 	1.74		 	4.35		 	4.47		 	   (4	)%	   (3	)%	
Net earnings	1.59		 	1.69		 	4.00		 	4.28		 	   (6	)%	   (7	)%	
   ————————————
		
(1)	Non-GAAP financial measure. Refer to the“Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue and the reasons why management believes this measure is important to investors.	
		
(2)	Non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section for a reconciliation of EBT, net earnings and earnings per diluted common share to the comparable measures and the reasons why management believes these measures are important to investors.	

Total revenue and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 3% in the third quarter of 2016 . For the nine months ended September 30, 2016 , total revenue increased 3% and operating revenue increased 5% . Total revenue and operating revenue growth in both periods was due to growth in the full service lease fleet and higher prices on replacement vehicles in FMS and new business, increased volumes and higher pricing in SCS and DTS. These increases were partially offset by lower demand in the commercial rental product line and negative impacts from foreign exchange. Increased total revenue was also partially offset by lower fuel costs passed through to customers.

EBT decreased 6% in both the third quarter of 2016 and nine months ended September 30, 2016 , reflecting lower used vehicle and commercial rental results, partially offset by higher full service lease results in FMS, lower insurance costs in DTS and increased pricing, new business and increased volumes in DTS and SCS. The 2016 EBT decrease in the nine months ended September 30, 2016, also reflects a $7.7 million pension charge related to certain 2009 pension benefit improvements that were not fully reflected in our pension benefit obligation. EBT was negatively impacted by foreign exchange in the three and nine months ended September 30, 2016 , by 100 basis points.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

CONSOLIDATED RESULTS

Lease and Rental

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Lease and rental revenues	$	803,006		 	802,881		 	$	2,369,147		 	2,310,951		 	—	 %	 	   3	 %	
Cost of lease and rental	557,901		 	550,541		 	1,665,693		 	1,600,271		 	   1	 %	 	   4	 %	
Gross margin	245,105		 	252,340		 	703,454		 	710,680		 	   (3	)%	 	   (1	)%	
Gross margin %	31	%	 	31	%	 	30	%	 	31	%	 	 	 	 	

Lease and rental revenues represent full service lease and commercial rental product offerings within our FMS segment. Revenues were approximately $803 million in the third quarter of 2016 , consistent with the third quarter of 2015 . For 2016, higher full service lease revenue, driven by growth in the average full service lease fleet and higher prices on replacement vehicles, was offset by lower commercial rental revenue reflecting lower demand and a negative impact from foreign exchange. Revenues increased 3% in the nine months ended September 30, 2016 , primarily driven by a larger average full service lease fleet and higher prices on replacement vehicles, partially offset by lower commercial rental revenue reflecting lower demand and a negative impact from foreign exchange. Foreign exchange negatively impacted revenue growth by 100 basis points in both periods.

Cost of lease and rental represents the direct costs related to lease and rental revenues. These costs consist 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 and rental excludes interest costs from vehicle financing. Cost of lease and rental increased 1% in the third quarter and 4% in the nine months ended September 30, 2016 , primarily due to higher depreciation and maintenance costs from a larger average lease fleet, partially offset by lower depreciation on a smaller average rental fleet ( 13% lower in the third quarter and 6% lower in the nine months ended September 30, 2016 ). Cost of lease and rental benefited by approximately $9 million in the third quarter of 2016 and $26 million in the nine months ended September 30, 2016 , due to changes in estimated residual values effective January 1, 2016 . Foreign exchange also reduced cost of lease and rental by 100 basis points in both periods.

Lease and rental gross margin decreased 3% in the third quarter and 1% in the nine months ended September 30, 2016 . Lease and rental gross margin as a percentage of revenue remained at 31% in the third quarter and decreased to 30% in the nine months ended September 30, 2016 . The decrease in gross margin dollars in the third quarter of 2016 and the nine months ended September 30, 2016 was due to lower commercial rental demand, partially offset by higher prices on lease replacement vehicles and lease fleet growth, as well as benefits from improved residual values. The decrease in gross margin as a percentage of revenue in the nine months ended September 30, 2016 , reflects lower commercial rental fleet utilization, partially offset by benefits from improved residual values.

Services

																				
	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
	(Dollars in thousands)	 			 	 	
Services revenue	$	801,004		 	734,803		 	$	2,345,922		 	2,165,677		 	   9	%	 	   8	%	
Cost of services	658,793		 	606,364		 	1,936,636		 	1,792,182		 	   9	%	 	   8	%	
Gross margin	142,211		 	128,439		 	409,286		 	373,495		 	   11	%	 	   10	%	
Gross margin %	18	%	 	17	%	 	17	%	 	17	%	 	 	 	 	

Services revenue represents all the revenues associated with our DTS and SCS segments, as well as contract maintenance, contract-related maintenance and fleet support services associated with our FMS segment. Services revenue increased 9% in the third quarter and 8% in the nine months ended September 30, 2016 , due to new business, increased volumes and higher pricing in the DTS and SCS segments. The contract-related maintenance and contract maintenance product lines benefited from growth in fleet size, and contract-related maintenance revenue also increased from higher volumes. These increases were partially offset

21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

by lower fuel prices passed through to our DTS and SCS customers. Foreign exchange also negatively impacted revenue growth by 200 basis points in both periods.

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) and maintenance costs. Cost of services increased 9% in the third quarter of 2016 and 8% in the nine months ended September 30, 2016 due to higher volumes, partially offset by lower fuel and insurance costs. Foreign exchange reduced cost of services by 100 basis points in both periods.

Services gross margin increased 11% in the third quarter and 10% in the nine months ended September 30, 2016 . Services gross margin as a percentage of revenue increased to 18% in the third quarter and remained at 17% in the nine months ended September 30, 2016 . The increase in gross margin dollars reflects benefits from higher pricing, new business and higher volumes in our DTS and SCS segments. Increased gross margin dollars also benefited from growth in the full service lease fleet size, higher volumes in the contract-related business and growth in the contract maintenance fleet.

Fuel

																				
	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
	(Dollars in thousands)	 			 	 	
Fuel services revenue	$	120,408		 	131,382		 	$	342,765		 	422,522		 	   (8	)%	 	   (19	)%	
Cost of fuel services	116,904		 	129,562		 	331,283		 	408,027		 	   (10	)%	 	   (19	)%	
Gross margin	3,504		 	1,820		 	11,482		 	14,495		 	   93	 %	 	   (21	)%	
Gross margin %	3	%	 	1	%	 	3	%	 	3	%	 	 	 	 	

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 8% in the third quarter and 19% in the nine months ended September 30, 2016 , due to lower fuel prices passed through to customers.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services decreased 10% in the third quarter and 19% in the nine months ended September 30, 2016 , as a result of lower fuel prices.

Fuel services gross margin increased 93% in the third quarter and decreased 21% in the nine months ended September 30, 2016 . Fuel services gross margin as a percentage of revenue increased to 3% in the third quarter and remained at 3% in the nine months ended September 30, 2016 , compared to the same periods of 2015. 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 was favorably impacted by these price change dynamics during the third quarter of 2016 and the earlier part of 2015, and adversely impacted during the third quarter of 2015 .

																				
	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
	(In thousands)	 			 	 	
Other operating expenses	$	27,997		 	26,957		 	$	85,944		 	88,912		 	4	%	 	(3	)%	

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 lease, rental, contract maintenance and fleet support services customers. Other operating expenses increased slightly to $28.0 million in the third quarter and decreased to $85.9 million in the nine months ended September 30, 2016 , due to lower utility costs for FMS facilities.

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

	
																				
	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
	(Dollars in thousands)	 			 	 	
Selling, general and administrative expenses (SG&A)	$	198,805		 	203,093		 	$	632,466		 	624,566		 	(2	)%	 	1	%	
Percentage of total revenue	12	%	 	12	%	 	13	%	 	13	%	 	 	 	 	

SG&A expenses decreased 2% in the third quarter and increased 1% in the nine months ended September 30, 2016 . The decrease in the third quarter is primarily due to lower compensation-related expenses and marketing-related costs and foreign exchange, partially offset by increased information technology costs and pension expense. The increase in the nine months ended September 30, 2016 is primarily due to increased pension expense and information technology costs, partially offset by lower compensation-related expenses, professional fees and foreign exchange. Foreign exchange reduced the growth in SG&A expenses by 100 basis points . Pension expense, which primarily impacts SG&A expenses, increased $2.9 million in the third quarter and $16.1 million in the nine months ended September 30, 2016 , due to the impact of a lower asset return assumption and a higher discount rate. Pension expense in the nine months ended September 30, 2016 , also increased due to a one-time charge of $7.7 million in the second quarter to reflect pension benefit improvements made in 2009 that were not fully reflected in our pension benefit obligation.

	
																				
	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
	(Dollars in thousands)	 		 	 	
Gains on used vehicles, net	$	1,873		 	24,965		 	$	33,002		 	82,158		 	(92	)%	 	(60	)%	

Gains on used vehicles, net includes gains from sales of used vehicles as well as the selling costs associated with used vehicles and write-downs of vehicles to fair market values. Gains on used vehicles, net decreased to $1.9 million in the third quarter and $33.0 million in the nine months ended September 30, 2016 , primarily due to a drop in the market value of tractors which has resulted in lower gains on sales of used vehicles and higher fair market value write-downs. Global average proceeds per unit in the third quarter decreased from the prior year reflecting a 13% decrease in tractor proceeds per unit, partially offset by a 2% increase in truck proceeds per unit. Global proceeds per unit in the nine months ended September 30, 2016 , decreased from the prior year reflecting a 12% decrease in tractor proceeds per unit, partially offset by a 1% increase in truck proceeds per unit in the nine months ended September 30, 2016 .

	
																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Interest expense	$	37,440		 	38,986		 	$	112,597		 	114,863		 	(4	)%	 	(2	)%	
Effective interest rate	2.7	%	 	2.9	%	 	2.7	%	 	3.0	%	 	 	 	 	

Interest expense decreased 4% in the third quarter and 2% in the nine months ended September 30, 2016 , reflecting a lower effective interest rate, partially offset by higher average outstanding debt. The lower effective interest rate in 2016 reflects the replacement of higher interest rate debt with debt issuances at lower rates. The increase in average outstanding debt reflects planned vehicle capital spending.

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Miscellaneous income, net	$	3,247		 	1,372		 	$	10,968		 	5,037		 	137	%	 	118	%	
  
Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income,
gains from sales of operating property, foreign currency transaction gains and other non-operating items. The increase in the third quarter and nine months ended September 30, 2016 , is primarily driven by increased rabbi trust investment income.

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

	
																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Provision for income taxes	$	46,560		 	49,089		 	$	121,820		 	127,470		 	(5	)%	 	(4	)%	
Effective tax rate from continuing operations	35.4	%	 	35.1	%	 	36.1	%	 	35.7	%	 	 	 	 	

Provision for income taxes decreased 5% in the third quarter and 4% in the nine months ended September 30, 2016 . The decrease in the provision for income taxes reflects lower taxable earnings, partially offset by a slightly higher effective income tax rate.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

OPERATING RESULTS BY SEGMENT

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	
Fleet Management Solutions	$	1,155,011		 	1,157,578		 	$	3,404,452		 	3,394,077		 	—	 %	 	—	 %	
Dedicated Transportation Solutions	260,921		 	226,921		 	764,025		 	663,094		 	  15		 	  15		
Supply Chain Solutions	416,898			387,305		 	1,207,665		 	1,155,300		 	  8		 	  5		
Eliminations	(108,412	)		(102,738	)	 	(318,308	)	 	(313,321	)	 	  6		 	  2		
Total	$	1,724,418			1,669,066		 	$	5,057,834		 	4,899,150		 	  3	 %	 	  3	 %	
Operating Revenue: (1)				 	 	 	 				 			
Fleet Management Solutions	$	997,903			988,424		 	$	2,955,466		 	2,846,661			  1	 %	 	  4	 %	
Dedicated Transportation Solutions	196,648			184,247		 	581,213		 	526,882			  7		 	  10		
Supply Chain Solutions	345,453			318,759		 	999,427		 	934,253			  8		 	  7		
Eliminations	(71,711	)		(64,965	)	 	(212,087	)	 	(188,427	)		  10		 	  13		
Total	$	1,468,293			1,426,465		 	$	4,324,019		 	4,119,369			  3	 %	 	  5	 %	
EBT:	 	 	 	 	 	 	 	 	 	 			
Fleet Management Solutions	$	112,282			126,433		 	$	306,387		 	338,603		 	  (11	)%	 	  (10	)%	
Dedicated Transportation Solutions	17,587		 	13,296		 	48,327		 	34,701		 	  32		 	  39		
Supply Chain Solutions	30,954			26,573		 	79,121		 	69,961		 	  16		 	  13		
Eliminations	(12,606	)		(11,998	)	 	(37,116	)	 	(35,120	)	 	  5		 	  6		
 	148,217			154,304			396,719			408,145		 	  (4	)	 	  (3	)	
Unallocated Central Support Services	(9,313	)		(10,070	)	 	(30,193	)	 	(32,936	)	 	  (8	)	 	  (8	)	
Non-operating pension costs	(7,206	)		(4,780	)	 	(21,691	)	 	(14,351	)	 	  51		 	  51		
Other items	—			446		 	(7,650	)	 	(3,334	)	 	NM		 	NM		
Earnings from continuing operations before income taxes	$	131,698			139,900			$	337,185			357,524		 	  (6	)%	 	  (6	)%	
   ————————————
		
(1)	Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue, and segment total revenue to segment operating revenue, as well as the reasons why management believes these measures are important to investors.	

As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as “Earnings Before Taxes” (EBT) from continuing operations, which includes an allocation of Central Support Services (CSS), and excludes non-operating pension costs and other items discussed in Note 14 , " Segment Reporting ," in the Notes to Consolidated Condensed Financial Statements. CSS represents those costs incurred to support all segments, including human resources, finance, corporate services and public affairs, information technology, health and safety, 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 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.

Inter-segment revenue and EBT are accounted for at rates similar to those executed with third parties. EBT related to inter-segment equipment and services billed to customers as well as the net gains on sale of this equipment (equipment contribution) and inter-segment fuel services are included in FMS, DTS and SCS and then eliminated (presented as “Eliminations” in the table above). Prior year amounts have been revised to conform to the current period presentation.

25

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Equipment Contribution:	 	 	 	 	 	 	 	 	 	 	 	
    Dedicated Transportation Solutions	$	8,047		 	8,527		 	$	24,214		 	24,351		 	  (6	)%	 	  (1	)%	
    Supply Chain Solutions	4,559		 	3,471		 	12,902		 	10,769		 	  31		 	  20		
Total	$	12,606		 	11,998		 	$	37,116		 	35,120		 	  5	 %	 	  6	 %	

The decrease in DTS equipment contribution is primarily driven by lower net gains on sales of vehicles previously used in DTS operations, partially offset by higher volumes. The increase in SCS equipment contribution is primarily driven by higher volumes.

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

																	
 	 	 	 	Three months ended September 30,	 	Nine months ended September 30,	
Description	 	Classification	 	2016	 	2015	 	2016	 	2015	
 	 	 	 	(In thousands)	
Non-operating pension costs	 	SG&A	 	$	(7,206	)	 	(4,780	)	 	$	(21,691	)	 	(14,351	)	
Pension-related adjustments (1)	 	SG&A	 	—		 	509		 	(7,650	)	 	509		
Professional fees (2)	 	SG&A	 	—		 	(63	)	 	—		 	(3,843	)	
 	 	 	 	$	(7,206	)	 	(4,334	)	 	$	(29,341	)	 	(17,685	)	
———————————
		
(1)	See Note 11 , “ Employee Benefit Plans ,” in the Notes to Consolidated Condensed Financial Statements for a discussion of adjustments.	
		
(2)	Charges related to professional fees associated with cost savings initiatives.	

Fleet Management Solutions

																				
  	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
  	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 		 	 	
Full service lease	$	649,208			609,300		 	$	1,918,419		 	1,782,106		 	  7	 %	 	  8	 %	
Contract maintenance	50,186			48,623		 	151,489		 	143,559		 	  3		 	  6		
Contractual revenue	699,394			657,923		 	2,069,908		 	1,925,665		 	  6		 	  7		
Commercial rental	216,592			250,601		 	636,028		 	694,745		 	  (14	)	 	  (8	)	
Contract-related maintenance	62,907			59,904		 	189,861		 	169,585		 	  5		 	  12		
Other	19,010			19,996		 	59,669		 	56,666		 	  (5	)	 	  5		
Fuel services revenue	157,108			169,154		 	448,986		 	547,416		 	  (7	)	 	  (18	)	
FMS total revenue	$	1,155,011			1,157,578			$	3,404,452			3,394,077		 	—	 %	 	—	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
 FMS operating revenue (1)	$	997,903			988,424		 	$	2,955,466		 	2,846,661		 	  1		 	  4		
 	 	 	 	 	 	 	 	 	 	 			
FMS EBT	$	112,282			126,433		 	$	306,387		 	338,603		 	  (11	)%	 	  (10	)%	
FMS EBT as a % of FMS total revenue	9.7	%		10.9	%	 	9.0	%	 	10.0	%	 	  (120) bps	 	  (100) bps	
FMS EBT as a % of FMS operating revenue (1)	11.3	%		12.8	%	 	10.4	%	 	11.9	%	 	  (150) bps	 	  (150) bps	
————————————
		
(1)	Non-GAAP financial measures. Reconciliations of FMS total revenue to FMS operating revenue, FMS EBT as a % of FMS total revenue to FMS EBT as a % of FMS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.	

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table summarizes the components of the change in FMS revenue on a percentage basis versus the prior year:

												
 	Three months ended September 30, 2016	 	Nine months ended September 30, 2016	
 	Total	 	Operating (1)	 	Total	 	Operating (1)	
Organic, including price and volume	2	 %	 	2	 %	 	4	 %	 	5	 %	
Fuel	(1	)	 	—		 	(3	)	 	—		
Foreign exchange	(1	)	 	(1	)	 	(1	)	 	(1	)	
Net increase	—	 %	 	1	 %	 	—	 %	 	4	 %	
   ————————————
		
(1)	Non-GAAP financial measure. A reconciliation of FMS total revenue to FMS operating revenue as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.	

FMS total revenue remained at $1.16 billion in the third quarter and increased slightly to $3.40 billion in the nine months ended September 30, 2016 due to higher FMS operating revenue (a non-GAAP measure excluding fuel), largely offset by a decline in fuel services revenue and negative impacts from foreign exchange. FMS operating revenue increased 1% in the third quarter and 4% in the nine months ended September 30, 2016 as a result of organic growth, primarily in the full service lease product line, partially offset by lower commercial rental revenue. In the third quarter and nine months ended September 30, 2016 , foreign exchange negatively impacted both total and operating revenue growth by 100 basis point s.

Full service lease revenue increased 7% in the third quarter and 8% in the nine months ended September 30, 2016 , reflecting a larger average fleet size and higher prices on replacement vehicles. Foreign exchange negatively impacted full service lease revenue growth by 100 basis points in both the third quarter and the nine months ended September 30, 2016 . We expect favorable full service lease revenue comparisons to continue through the end of the year based on sales activity. Commercial rental revenue decreased 14% in the third quarter and 8% in the nine months ended September 30, 2016 due to lower demand. We expect unfavorable commercial rental revenue comparisons through the end of the year based on a weaker demand environment. Contract-related maintenance revenue increased 5% in the third quarter and 12% in the nine months ended September 30, 2016 , reflecting favorable impacts from growth in the full service lease fleet and higher volumes.

The following table provides commercial rental statistics on our global fleet:  

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Rental revenue from non-lease customers	$	141,836		 	159,912		 	$	397,305		 	420,356		 	(11	)%	 	(5	)%	
Rental revenue from lease customers (1)	$	74,756		 	90,689		 	$	238,723		 	274,389		 	(18	)%	 	(13	)%	
Average commercial rental power fleet size — in service (2),   (3)	30,900		 	35,500		 	31,700		 	33,400		 	(13	)%	 	(5	)%	
Commercial rental utilization — power fleet (2)	76.7	%		76.4	%	 	73.9	%	 	76.0	%	 	30 bps	 	(210) bps	
————————————
		
(1)	Represents revenue from rental vehicles provided to our existing full service lease customers, generally in place of a lease vehicle.	
		
(2)	Number of units rounded to nearest hundred and calculated using quarterly average unit counts.	
		
(3)	Excluding trailers.	

FMS EBT decreased 11% in the third quarter and 10% in the nine months ended September 30, 2016 , reflecting lower used vehicle and commercial rental results, partially offset by higher full service lease results. Used vehicle results decreased due to lower tractor pricing as well as lower sales volume in third quarter . Commercial rental results declined from lower demand in both periods. The commercial rental results for the nine months ended September 30, 2016 , were also negatively impacted by a 210 basis point decline in utilization. Full service lease results benefited from growth in the average lease fleet size. Full service lease and commercial rental results benefited from approximately $9 million of lower depreciation in the third quarter and $26 million in the nine months ended September 30, 2016 , due to residual value changes implemented January 1, 2016 .

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

															
 	 	 	 	 	 	 	Change	
 	September 30, 2016	 	December 31, 2015	 	September 30, 2015	 	Sept. 2016/Dec. 2015	 	Sept. 2016/Sept. 2015	
End of period vehicle count	 	 	 	 	 	 	 	 	 	
By type:	 	 	 	 	 	 	 	 	 	
Trucks (1)	73,500		 	72,800		 	72,900		 	  1	 %	 	  1	 %	
Tractors (2)	68,600		 	68,700		 	67,100		 	—		 	  2		
Trailers (3), (4)	42,300		 	42,400		 	42,500		 	—		 	—		
Other	1,200		 	1,300		 	1,300		 	  (8	)	 	  (8	)	
Total	185,600		 	185,200		 	183,800		 	—	 %	 	  1	 %	
 	 	 	 	 	 	 	 	 	 	
By ownership:	 	 	 	 	 	 	 	 	 	
Owned	184,100		 	184,700		 	182,200		 	—	 %	 	  1	 %	
Leased	1,500		 	500		 	1,600		 	  200		 	  (6	)	
Total	185,600		 	185,200		 	183,800		 	—	 %	 	  1	 %	
 	 	 	 	 	 	 	 	 	 	
By product line:  (4)	 	 	 	 	 	 	 	 	 	
Full service lease	136,600		 	131,800		 	130,600		 	  4	 %	 	  5	 %	
Commercial rental	38,000		 	42,100		 	43,800		 	  (10	)	 	  (13	)	
  Service vehicles and other	3,500		 	3,300		 	3,300		 	  6		 	  6		
Active units	178,100		 	177,200		 	177,700		 	  1		 	—		
Held for sale	7,500		 	8,000		 	6,100		 	  (6	)	 	  23		
Total	185,600		 	185,200		 	183,800		 	—	 %	 	  1	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	49,300		 	46,700		 	41,500		 	  6	 %	 	  19	 %	

Quarterly average vehicle count	 	 	 	 	 	 	 	 	 	
By product line:	 	 	 	 	 	 	 	 	 	
Full service lease	135,100		 	131,100		 	129,900		 	  3	 %	 	  4	 %	
Commercial rental	38,300		 	43,200		 	43,800		 	  (11	)	 	  (13	)	
Service vehicles and other	3,300		 	3,300		 	3,300		 	—		 	—		
Active units	176,700		 	177,600		 	177,000		 	  (1	)	 	—		
Held for sale	8,700		 	6,900		 	5,900		 	  26		 	  47		
Total	185,400		 	184,500		 	182,900		 	—	 %	 	  1	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	49,600		 	45,500		 	41,400		 	  9	 %	 	  20	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under on-demand maintenance (5)	8,000		 	7,200		 	8,200		 	  11	 %	 	  (2	)%	
 	 	 	 	 	 	 	 	 	 	
Total vehicles under service	243,000		 	237,200		 	232,500		 	  2	 %	 	  5	 %	

Year-to-date average vehicle count	 	 	 	 	 	 	 	 	 	
By product line:	 	 	 	 	 	 	 	 	 	
Full service lease	133,800		 	128,800		 	128,000		 	  4	 %	 	  5	 %	
Commercial rental	39,600		 	42,400		 	42,100		 	  (7	)	 	  (6	)	
Service vehicles and other	3,400		 	3,200		 	3,200		 	  6		 	  6		
Active units	176,800		 	174,400		 	173,300		 	  1		 	  2		
Held for sale	8,600		 	6,100		 	5,800		 	  41		 	  48		
Total	185,400		 	180,500		 	179,100		 	  3	 %	 	  4	 %	
 	 	 	 	 	 	 	 	 	 	
Customer vehicles under contract maintenance	49,000		 	43,300		 	42,600		 	  13	 %	 	  15	 %	
Customer vehicles under on-demand maintenance (5)	22,700		 	20,000		 	16,900		 	NM		 	  34	 %	
———————————
		
(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)	Includes 5,400 UK trailers ( 3,500 full service lease and 1,900 commercial rental), 6,100 UK trailers ( 3,900 full service lease and 2,200 commercial rental) and 6,500 UK trailers ( 4,300 full service lease and 2,200 commercial rental) as of September 30, 2016 , December 31, 2015 , and September 30, 2015 , respectively.	
		
(5)	Comprised of the number of unique vehicles serviced under on-demand maintenance agreements for the quarterly and year-to-date 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 and year-to-date amounts were computed using a 6-point and 18-point average, respectively, based on monthly information.  

28

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table provides a breakdown of our non-revenue earning equipment included in our global fleet count (number of units rounded to nearest hundred):

												
 	 	 	 	 	 	 	Change	
 	September 30,
2016	 	December 31,
2015	 	September 30,
2015	 	Sept. 2016/Dec. 2015	 	Sept. 2016/Sept. 2015	
Not yet earning revenue (NYE)	1,900	 	2,800	 	2,800	 	  (32	)%	 	  (32	)%	
No longer earning revenue (NLE):	 	 	 	 	 	 	 	 	 	
Units held for sale	7,500	 	8,000	 	6,100	 	(6	)	 	23		
Other NLE units	5,000	 	3,300	 	3,900	 	52		 	28		
Total	14,400	 	14,100	 	12,800	 	  2	 %	 	  13	 %	

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 decreased compared to September 30, 2015 , reflecting lower lease fleet growth and the redeployment of used vehicles to fulfill lease sales. 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 increased compared to September 30, 2015 primarily due to higher used vehicle inventories and a higher number of units being prepared for sale. We expect NLE levels to remain around current levels through the end of the year.

Dedicated Transportation Solutions

	
																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
DTS total revenue	$	260,921		 	226,921		 	$	764,025			663,094		 	15	%	 	15	%	
 	 	 	 	 	 	 	 	 	 	 	 	
DTS operating revenue (1)	$	196,648			184,247			$	581,213			526,882		 	7	%	 	10	%	
 	 	 	 	 	 	 	 	 	 	 	 	
DTS EBT	$	17,587		 	13,296		 	$	48,327		 	34,701		 	32	%	 	39	%	
DTS EBT as a % of DTS total revenue	6.7	%	 	5.9	%	 	6.3	%	 	5.2	%	 	80 bps	 	110 bps	
DTS EBT as a % of DTS operating revenue (1)	8.9	%	 	7.2	%	 	8.3	%	 	6.6	%	 	170 bps	 	170 bps	
 	 	 	 	 	 	 	 	 	 	 	 	
Memo:	 	 	 	 	 	 	 	 	 	 	 	
Average fleet	8,300		 	7,900		 	8,200		 	7,700		 	5	%	 	6	%	
————————————
		
(1)	Non-GAAP financial measures. Reconciliations of DTS total revenue to DTS operating revenue, DTS EBT as a % of DTS total revenue to DTS EBT as a % of DTS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.	

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table summarizes the components of the change in DTS revenue on a percentage basis versus the prior year:

												
 	Three months ended September 30, 2016	 	Nine months ended September 30, 2016	
 	Total	 	Operating (1)	 	Total	 	Operating (1)	
Organic, including price and volume	16	 %	 	7	%	 	18	 %	 	10	%	
Fuel	(1	)	 	—		 	(3	)	 	—		
Net increase	15	 %	 	7	%	 	15	 %	 	10	%	
   ————————————
		
(1)	Non-GAAP financial measure. A reconciliation of DTS total revenue to DTS operating revenue, as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.	

In the third quarter of 2016 , DTS total revenue increased 15% reflecting organic growth, partially offset by lower fuel prices passed through to our customers. DTS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 7% due to increased volumes, new business and higher pricing. DTS EBT increased 32% in the third quarter of 2016 , primarily due to increased revenue.

In the nine months ended September 30, 2016 , DTS total revenue increased 15% reflecting organic growth, partially offset by lower fuel prices passed through to our customers. DTS operating revenue increased 10% due to new business, increased volumes and higher pricing. We expect DTS total revenue and DTS operating revenue comparisons to remain favorable through the end of the year; however, at a lower growth rate. DTS EBT increased 39% in the nine months ended September 30, 2016 , due to increased revenue.

Supply Chain Solutions

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Automotive	$	140,785		 	118,786		 	$	407,083		 	347,284		 	19	 %	 	17	 %	
Technology and healthcare	61,425		 	62,456		 	177,138		 	185,762		 	(2	)	 	(5	)	
CPG and Retail	110,840		 	109,550		 	324,814		 	322,977		 	1		 	1		
Industrial and other	32,403		 	27,967		 	90,392		 	78,230		 	16		 	16		
Subcontracted transportation	56,089			53,960		 	162,743		 	171,957		 	4		 	(5	)	
Fuel (1)	15,356			14,586		 	45,495		 	49,090		 	5		 	(7	)	
SCS total revenue	$	416,898			387,305			$	1,207,665			1,155,300		 	8	 %	 	5	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
SCS operating revenue (2)	$	345,453			318,759			$	999,427			934,253		 	8	 %	 	7	 %	
 	 	 	 	 	 	 	 	 	 	 			
SCS EBT	$	30,954			26,573		 	$	79,121		 	69,961		 	16	 %	 	13	 %	
SCS EBT as a % of SCS total revenue	7.4	%		6.9	%	 	6.6	%	 	6.1	%	 	50 bps	 	50 bps	
SCS EBT as a % of SCS operating revenue (2)	9.0	%		8.3	%	 	7.9	%	 	7.5	%	 	70 bps	 	40 bps	
 	 	 	 	 	 	 	 	 	 	 	 	
Memo:	 	 	 	 	 	 	 	 		 	 	
Average fleet	7,400		 	6,500		 	7,100		 	6,300		 	14	 %	 	13	 %	
————————————
		
(1)	Includes intercompany fuel sales from FMS to SCS.	
		
(2)	Non-GAAP financial measures. Reconciliations of SCS total revenue to SCS operating revenue, SCS EBT as a % of SCS total revenue to SCS EBT as a % of SCS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.	

 

30

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table summarizes the components of the change in SCS revenue on a percentage basis versus the prior year:

												
 	Three months ended September 30, 2016	 	Nine months ended September 30, 2016	
 	Total	 	Operating (1)	 	Total	 	Operating (1)	
Organic, including price and volume	9	 %	 	9	 %	 	7	 %	 	9	 %	
Foreign exchange	(1	)	 	(1	)	 	(2	)	 	(2	)	
Net increase	8	 %		8	 %		5	 %		7	 %	
————————————
		
(1)	Non-GAAP financial measure. A reconciliation of SCS total revenue to SCS operating revenue, as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.	

In the third quarter of 2016 , SCS total revenue increased 8% as growth in SCS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) was partially offset by a negative impact from foreign exchange. SCS operating revenue increased 8% in the third quarter of 2016 , primarily due to new business and increased volumes, partially offset by a negative impact from foreign exchange. SCS EBT increased 16% in the third quarter of 2016 due to the benefits of higher revenue.

In the nine months ended September 30, 2016 , SCS total revenue increased 5% , as growth in SCS operating revenue was partially offset by a negative impact from foreign exchange. SCS operating revenue increased 7% due to new business, increased volumes and higher pricing, partially offset by a negative impact from foreign exchange. We expect SCS total revenue and SCS operating revenue comparisons to remain favorable through the end of the year; however, at a lower growth rate. SCS EBT increased 13% in the nine months ended September 30, 2016 , due to higher pricing, new business and increased volumes.

Central Support Services

																				
 	Three months ended September 30,	 	Nine months ended September 30,	 	Change 2016/2015	
 	2016	 	2015	 	2016	 	2015	 	Three Months	 	Nine Months	
 	(Dollars in thousands)	 	 	 	 	
Human resources	$	4,184		 	4,596		 	$	12,968		 	14,976		 	(9	)%	 	(13	)%	
Finance	15,143		 	15,269		 	44,267		 	44,317		 	(1	)	 	—		
Corporate services and public affairs	2,471		 	2,694		 	7,463		 	7,803		 	(8	)	 	(4	)	
Information technology	20,466		 	22,104		 	60,369		 	63,228		 	(7	)	 	(5	)	
Legal and safety	5,711		 	5,974		 	17,798		 	18,406		 	(4	)	 	(3	)	
Marketing	4,336		 	7,049		 	14,220		 	17,177		 	(38	)	 	(17	)	
Other	4,949		 	6,172		 	19,550		 	24,278		 	(20	)	 	(19	)	
Total CSS	57,260		 	63,858			176,635			190,185		 	(10	)	 	(7	)	
Allocation of CSS to business segments	(47,947	)		(53,788	)	 	(146,442	)	 	(157,249	)		(11	)	 	(7	)	
Unallocated CSS	$	9,313			10,070			$	30,193			32,936			(8	)%	 	(8	)%	

Total CSS costs decreased 10% and 7% in the third quarter and nine months ended September 30, 2016 , respectively, due to lower compensation-related expenses and lower marketing-related and information technology costs. Unallocated CSS decreased 8% in both the third quarter and the nine months ended September 30, 2016 , primarily due to lower compensation-related expenses.

31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

FINANCIAL RESOURCES AND LIQUIDITY
 
Cash Flows
 
The following is a summary of our cash flows from continuing operations:

	
							
 	Nine months ended September 30,	
 	2016	 	2015	
 	(In thousands)	
Net cash provided by (used in):	 	 	 	
Operating activities	$	1,184,744		 	1,071,336		
Financing activities	(55,236	)	 	664,783		
Investing activities	(1,108,584	)	 	(1,707,378	)	
Effect of exchange rates on cash	(5,567	)	 	(2,006	)	
Net change in cash and cash equivalents	$	15,357		 	26,735		
 
Cash provided by operating activities increased to $1.18 billion in the nine months ended September 30, 2016 , compared with $1.07 billion in 2015 , due to higher earnings adjusted for non-cash items, primarily depreciation, and working capital improvements, partially offset by higher pension contributions. Cash used in financing activities was $55.2 million in the nine months ended September 30, 2016 , compared with cash provided from financing activities of $664.8 million in 2015 , due to lower borrowing needs. Cash used in investing activities decreased to $1.11 billion in the nine months ended September 30, 2016 , compared with $1.71 billion in 2015 , primarily due to lower payments for capital expenditures.
 
Our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment. We refer to the sum of operating cash flows, proceeds from the sale of revenue earning equipment and operating property and equipment, collections on direct finance leases and other investing cash inflows from continuing operations as “total cash generated”, a non-GAAP financial measure. We refer to the net amount of cash generated from operating and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations as “free cash flow”, also a non-GAAP financial measure.
 
The following table shows our free cash flow computation:

							
 	Nine months ended September 30,	
 	2016	 	2015	
 	(In thousands)	
Net cash provided by operating activities from continuing operations	$	1,184,744			1,071,336		
Sales of revenue earning equipment (1)	331,720			319,766		
Sales of operating property and equipment (1)	6,623			1,203		
Collections on direct finance leases and other items (1)	60,229			51,166		
Total cash generated (2)	1,583,316			1,443,471		
Purchases of property and revenue earning equipment (1)	(1,511,359	)		(2,087,294	)	
Free cash flow (2)	$	71,957			(643,823	)	
 	 	 	 	
Memo:	 	 	 	
Net cash (used in) provided by financing activities	$	(55,236	)	 	664,783		
Net cash used in investing activities	$	(1,108,584	)	 	(1,707,378	)	
    
———————————
		
(1)	Included in cash flows from investing activities.	
		
(2)	Non-GAAP financial measures. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in this table. Refer to the “Non-GAAP Financial Measures” section of this MD&A for the reasons why management believes these measures are important to investors.	

32

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table provides a summary of capital expenditures:

							
 	Nine months ended September 30,	
 	2016	 	2015	
 	(In thousands)	
Revenue earning equipment:	 	 	 	
Full service lease	$	1,223,141		 	1,509,420		
Commercial rental	79,204		 	513,307		
 	1,302,345		 	2,022,727		
Operating property and equipment	101,837		 	82,874		
Total capital expenditures	1,404,182			2,105,601		
Changes in accounts payable related to purchases of revenue earning equipment	107,177		 	(18,307	)	
Cash paid for purchases of property and revenue earning equipment	$	1,511,359			2,087,294		
   
Capital expenditures decreased 33% to $1.40 billion in the nine months ended September 30, 2016 , reflecting planned lower investments in our commercial rental and lease fleet. We expect full-year 2016 capital expenditures to be approximately $2 billion . We expect to fund 2016 capital expenditures primarily with internally generated funds and additional debt financing.

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 debt financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements and bank credit facilities. Our principal sources of financing are issuances of commercial paper and medium-term notes.

Our ability to access unsecured debt in the capital markets is 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 particular Ryder securities based on current information obtained by the rating agencies from us or from other sources. Lower ratings generally result in higher borrowing costs, as well as reduced access to unsecured capital markets. A significant downgrade of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on alternative funding sources. A significant downgrade would not affect our ability to borrow amounts under our revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.

Our debt ratings and rating outlooks at September 30, 2016 , were as follows:

						
 	Rating Summary	 	 	
 	Short-Term	 	Long-Term	 	Outlook	
Fitch Ratings	F-2	 	A-	  	Stable	
Standard & Poor’s Ratings Services	A-2	 	BBB	  	Positive	
Moody’s Investors Service	P-2	 	Baa1	  	Stable	
 
Cash and equivalents totaled $75 million as of September 30, 2016 . As of September 30, 2016 , approximately $45 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 equivalents held outside the U.S., we may be subject to additional U.S. 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 unanticipated 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 as described below and/or by seeking other funding sources.

33

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

As of September 30, 2016 , we had the following amounts available to fund operations under the following facilities:

		
 	(In millions)	
Global revolving credit facility	$514	
Trade receivables program	$175	
 
See Note 5 , " Debt ", in the Notes to Consolidated Condensed Financial Statements for a discussion of these debt facilities.

The following table shows the movements in our debt balance:

							
 	Nine months ended September 30,	
 	2016	 	2015	
 	(In thousands)	
Debt balance at January 1	$	5,502,627		 	4,717,524		
Cash-related changes in debt:	 	 	 	
Net change in commercial paper borrowings	73,597		 	184,750		
Proceeds from issuance of medium-term notes	298,254		 	998,551		
Proceeds from issuance of other debt instruments	—		 	331,259		
Retirement of medium term notes	(300,000	)	 	(660,000	)	
Other debt repaid	(40,707	)	 	(135,837	)	
Debt issuance costs paid	(622	)	 	(3,395	)	
 	30,522		 	715,328		
Non-cash changes in debt:	 	 	 	
Fair value adjustment on notes subject to hedging	8,960		 	10,964		
Addition of capital lease obligations	948		 	5,956		
Changes in foreign currency exchange rates and other non-cash items	(23,416	)	 	(15,565	)	
Total changes in debt	17,014		 	716,683		
Debt balance at September 30	$	5,519,641		 	5,434,207		

In accordance with our funding philosophy, we attempt to match the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our assets. We utilize both fixed-rate and variable-rate debt to achieve this match and generally target a mix of 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 32% and 30% as of September 30, 2016 and December 31, 2015 , respectively.
Refer to Note 5 , “ Debt ,” in the Notes to Consolidated Condensed Financial Statements for further discussion around the global revolving credit facility, the trade receivables program, the issuance of medium-term notes under our shelf registration statement, asset-backed financing obligations and debt maturities.
Ryder’s debt to equity ratios were 263% and 277% as of September 30, 2016 and December 31, 2015 , respectively. The debt to equity ratio represents total debt divided by total equity.

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

Pension Information

The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. We review pension assumptions regularly and we may, from time to time, make voluntary contributions to our pension plans, which exceed the amounts required by statute. In 2016 , the expected total contributions to our pension plans are approximately $ 80 million . During the nine months ended September 30, 2016 , we contributed $65.3 million to our pension plans. Changes in interest rates and the market value of the securities held by the plans during 2016 could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and contributions in 2016 and beyond. See Note 11 , “ Employee Benefit Plans ,” in the Notes to Consolidated Condensed Financial Statements for additional information.

Share Repurchases and Cash Dividends

See Note 7 , “ Share Repurchase Programs ,” in the Notes to Consolidated Condensed Financial Statements for a discussion of share repurchases.

In October 2016 , our Board of Directors declared a quarterly cash dividend of $0.44 per share of common stock.

RECENT ACCOUNTING PRONOUNCEMENTS

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

  

35

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes information extracted from consolidated condensed financial information but not required by generally accepted accounting principles (GAAP) to be presented in the financial statements. Certain 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 the management's discussion and analysis or in this non-GAAP financial measures section. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.
Specifically, we refer to the following non-GAAP financial measures in this Form 10-Q:

				
Non-GAAP Financial Measure	Comparable GAAP Measure	Reconciliation in Section Entitled	Page	
Operating Revenue Measures :	 	 	 	
Operating Revenue	Total Revenue	MD&A - Non-GAAP Financial Measures section	39	
FMS Operating Revenue	FMS Total Revenue	MD&A - Non-GAAP Financial Measures section	40	
DTS Operating Revenue	DTS Total Revenue	MD&A - Non-GAAP Financial Measures section	40	
SCS Operating Revenue	SCS Total Revenue	MD&A - Non-GAAP Financial Measures section	40	
FMS EBT as a % of FMS Operating Revenue	FMS EBT as a % of FMS Total Revenue	MD&A - Operating Results by Segment, Fleet Management Solutions section	40	
DTS EBT as a % of DTS Operating Revenue	DTS EBT as a % of DTS Total Revenue	MD&A - Operating Results by Segment, Dedicated Transportation Solutions section	40	
SCS EBT as a % of SCS Operating Revenue	SCS EBT as a % of SCS Total Revenue	MD&A - Operating Results by Segment, Supply Chain Solutions section	40	
Comparable Earnings Measures :	 	 	 	
Comparable Earnings Before Income Tax	Earnings Before Income Tax
	MD&A, Non-GAAP Financial Measures section	39	
Comparable Earnings
	Earnings from Continuing Operations			
Comparable EPS	EPS from Continuing Operations			
Cash Flow Measures :	 	 	 	
Total Cash Generated and Free Cash Flow	Cash Provided by Operating Activities	MD&A - Financial Resources and Liquidity, Cash Flows section	32	

36

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

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

					
 	Operating Revenue Measures :	 	 	 	
 	Operating Revenue
FMS Operating Revenue
DTS Operating Revenue
SCS Operating Revenue
FMS EBT as a % of FMS Operating Revenue
DTS EBT as a % of DTS Operating Revenue
SCS EBT as a % of SCS Operating Revenue	Operating revenue is defined as total revenue for Ryder System, Inc. or each business segment (FMS, DTS and SCS), respectively, excluding any (1) fuel and (2) subcontracted transportation. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, DTS EBT and SCS EBT, our primary measures of segment performance, are not non-GAAP measures.
Fuel : We exclude FMS, DTS and SCS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers, which is impacted by fluctuations in market fuel prices, and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on trailing market fuel costs.
Subcontracted transportation : We also 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 DTS and SCS 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.	
 	Comparable Earnings Measures :	 	 	 	
 	Comparable earnings before income tax (EBT)
Comparable Earnings
Comparable earnings per diluted common share (EPS)
	Comparable EBT, comparable earnings and comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs and (2) any other significant items that are not representative of our business operations. We believe these comparable earnings measures provide useful information to investors and allow for better year-over-year comparison of operating performance.
Non-Operating Pension Costs : Our comparable earnings measures exclude non-operating pension costs, which include the amortization of net actuarial loss, interest cost and expected return on plan assets components of pension and postretirement costs. We exclude non-operating pension costs because we consider these to be impacted by financial market performance and outside the operational performance of our business.
Other Significant Items : Our comparable earnings measures also exclude other significant items that are not representative of our business operations. These other significant items vary from period to period and, in some periods, there may be no such significant items. In this reporting period, we exclude the following other significant items from our comparable earnings measures in this Form 10-Q:
___ (1) Pension-related adjustments  (in the year to date 2016, third quarter 2015 and year to date 2015). In the second quarter of 2016, it was determined that certain pension benefit improvements made in 2009 were not fully reflected in our projected benefit obligation, resulting in a charge to reflect those pension benefits. Additionally, in the third quarter of 2015, we recognized a benefit from lower than anticipated settlement charges to exit multi-employer pension plans.
      (2) Professional fees  (in the third quarter and year to date 2015). These charges represent professional fees associated with the assessment of potential cost savings initiatives.
___ (3) A benefit from a tax law change  (in the year to date 2015). In the second quarter of 2015, the states of Connecticut and Texas and the city of New York enacted changes to their tax systems, which decreased Ryder's provision for income taxes in each jurisdiction.
Calculation of comparable tax rate : The comparable provision for income taxes 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 statutory tax rates of the jurisdictions to which the non-GAAP adjustments relate.

 			

37

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

	
				
Cash Flow Measures :	 	 	 	
Total Cash Generated
Free Cash Flow
	We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
Total Cash Generated : 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 and (3) operating property and equipment, (4) collections on direct finance leases and (5) 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 : We refer to the net amount of cash generated from operating activities and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations as “free cash flow”. 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 (3) operating property and equipment, (4) collections on direct finance leases and (5) other cash inflows from investing activities, less (6) 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.	

38

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table provides a reconciliation of GAAP earnings before taxes (EBT), earnings, and earnings per diluted share (EPS) from continuing operations to comparable EBT, earnings and EPS from continuing operations, which was not provided within the MD&A discussion.

EBT, earnings and diluted EPS from continuing operations in the nine months ended September 30, 2016 and 2015 , included certain items we do not consider indicative of our business operations and have been excluded from our comparable EBT, earnings and 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 Consolidated Condensed Financial Statements:

	
																					
 	EBT	 	Earnings	 	Diluted EPS	
 	2016	 	2015	 	2016	 	2015	 	2016	 	2015	
Three months ended September 30,	(In thousands, except per share amounts)	
EBT/Earnings/EPS	$	131,698		 	139,900		 	$	85,138		 	90,811		 	$	1.59		 	1.70		
Non-operating pension costs	7,206		 	4,780		 	4,216		 	2,727		 	0.08		 	0.05		
Pension-related adjustments	—		 	(509	)	 	—		 	(309	)	 	—		 	(0.01	)	
Professional fees	—		 	63		 	—		 	39		 	—		 	—		
Comparable EBT/ Earnings/ EPS	$	138,904		 	144,234		 	$	89,354		 	93,268		 	$	1.67		 	1.74		
 	 	 	 	 	 	 	 	 	 	 	 	
Nine months ended September 30,	 	 	 	 	 	 	 	 	 	 	 	
EBT/Earnings/EPS	$	337,185		 	357,524		 	$	215,365		 	230,054		 	$	4.02		 	4.31		
Non-operating pension costs	21,691		 	14,351		 	12,653		 	8,190		 	0.24		 	0.15		
Pension-related adjustments	7,650		 	(509	)	 	4,817		 	(309	)	 	0.09		 	(0.01	)	
Professional fees	—		 	3,843		 	—		 	2,424		 	—		 	0.04		
Tax law change	—		 	—		 	—		 	(1,860	)	 	—		 	(0.03	)	
Comparable EBT/ Earnings/ EPS	$	366,526		 	375,209		 	$	232,835		 	238,499		 	$	4.35		 	4.47		

The following table provides a reconciliation of the provision for income taxes to the comparable provision for income taxes:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(Dollars in thousands)	
Provision for income taxes (1)	$	(46,560	)	 	(49,089	)	 	$	(121,820	)	 	(127,470	)	
Income tax effects of non-GAAP adjustments (1)	(2,990	)	 	(1,877	)	 	(11,871	)	 	(7,380	)	
Tax law change (1)	—		 	—		 	—		 	(1,860	)	
Comparable provision for income taxes (1)	$	(49,550	)	 	(50,966	)	 	$	(133,691	)	 	(136,710	)	
———————————
		
(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 statutory tax rates of the jurisdictions to which the non-GAAP adjustments related.	

The following table provides a reconciliation of total revenue to operating revenue, which was not provided within the MD&A discussion:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
Total revenue	$	1,724,418		 	1,669,066		 	$	5,057,834		 	4,899,150		
Fuel	(162,293	)	 	(174,984	)	 	(464,176	)	 	(565,007	)	
Subcontracted transportation	(93,832	)	 	(67,617	)	 	(269,639	)	 	(214,774	)	
Operating revenue	$	1,468,293		 	1,426,465		 	$	4,324,019		 	4,119,369		

39

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

The following table provides a reconciliation of FMS total revenue to FMS operating revenue, which was not provided within the MD&A discussion:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
FMS total revenue	$	1,155,011		 	1,157,578		 	$	3,404,452		 	3,394,077		
Fuel (1)	(157,108	)	 	(169,154	)	 	(448,986	)	 	(547,416	)	
FMS operating revenue	$	997,903		 	988,424		 	$	2,955,466		 	2,846,661		
 	 	 	 	 	 	 	 	
FMS EBT	$	112,282		 	126,433		 	$	306,387		 	338,603		
FMS EBT as a % of FMS total revenue	9.7	%	 	10.9	%	 	9.0	%	 	10.0	%	
FMS EBT as a % of FMS operating revenue	11.3	%	 	12.8	%	 	10.4	%	 	11.9	%	
————————————
		
(1)	Includes intercompany fuel sales from FMS to DTS and SCS.	

The following table provides a reconciliation of DTS total revenue to DTS operating revenue, which was not provided within the MD&A discussion:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
DTS total revenue	$	260,921		 	226,921		 	$	764,025		 	663,094		
Subcontracted transportation	(37,743	)	 	(13,657	)	 	(106,896	)	 	(42,817	)	
Fuel (1)	(26,530	)	 	(29,017	)	 	(75,916	)	 	(93,395	)	
DTS operating revenue	$	196,648		 	184,247		 	$	581,213		 	526,882		
 	 	 	 	 	 	 	 	
DTS EBT	$	17,587		 	13,296		 	$	48,327		 	34,701		
DTS EBT as a % of DTS total revenue	6.7	%	 	5.9	%	 	6.3	%	 	5.2	%	
DTS EBT as a % of DTS operating revenue	8.9	%	 	7.2	%	 	8.3	%	 	6.6	%	
————————————
		
(1)	Includes intercompany fuel sales from FMS to DTS.	

The following table provides a reconciliation of SCS total revenue to SCS operating revenue, which was not provided within the MD&A discussion:

														
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2016	 	2015	 	2016	 	2015	
 	(In thousands)	
SCS total revenue	$	416,898		 	387,305		 	$	1,207,665		 	1,155,300		
Subcontracted transportation	(56,089	)	 	(53,960	)	 	(162,743	)	 	(171,957	)	
Fuel (1)	(15,356	)	 	(14,586	)	 	(45,495	)	 	(49,090	)	
SCS operating revenue	$	345,453		 	318,759		 	$	999,427		 	934,253		
 	 	 	 	 	 	 	 	
SCS EBT	$	30,954		 	26,573		 	$	79,121		 	69,961		
SCS EBT as a % of SCS total revenue	7.4	%	 	6.9	%	 	6.6	%	 	6.1	%	
SCS EBT as a % of SCS operating revenue	9.0	%	 	8.3	%	 	7.9	%	 	7.5	%	
————————————
		
(1)	Includes intercompany fuel sales from FMS to SCS.	

40

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

FORWARD-LOOKING STATEMENTS

Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Quarterly Report on Form 10-Q contains forward-looking statements including, but not limited to, statements regarding:

•	our expectations in our FMS business segment regarding anticipated full service lease and commercial rental revenue and demand;	
		
•	our expectations in our DTS and SCS business segments regarding anticipated operating revenue trends and growth rates;	
		
•	our expectations of the long-term residual values of revenue earning equipment;	
		
•	the anticipated decline in NLE vehicles in inventory through the end of the year;	
		
•	our expectations of operating cash flow and capital expenditures through the end of 2016 ;	
		
•	the adequacy of our accounting estimates and reserves for pension expense, compensation expense and employee benefit plan obligations, depreciation and residual value guarantees and income taxes;	
		
•	the anticipated timing of payment of restructuring liabilities;	
		
•	the adequacy of our fair value estimates of employee incentive awards under our share-based compensation plans, publicly traded debt and other debt;	
		
•	our beliefs regarding the default risk of our direct financing lease receivables;	
		
•	our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources;	
		
•	the anticipated impact of fuel price fluctuations;	
		
•	our expectations as to return on pension plan assets, future pension expense and estimated contributions;	
		
•	our expectations regarding the scope, anticipated outcomes and the adequacy of our loss provisions with respect to certain claims, proceedings and lawsuits;	
		
•	our expectations about the need to repatriate foreign cash to the U.S.;	
		
•	our ability to access commercial paper and other available debt financing in the capital markets;	
		
•	our expectations regarding the future use and availability of funding sources; and	
		
•	the anticipated impact of recent accounting pronouncements.	

41

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

These statements, as well as other forward-looking statements contained in this Quarterly Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors include, but are not limited to, the following:

•	Market Conditions:	

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

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

				
 	Ÿ	 	Changes in our customers’ operations, financial condition or business environment that may limit their need for, or ability to purchase, our services	

				
 	Ÿ	 	Further decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions	

				
 	Ÿ	 	Volatility in customer volumes and shifting customer demand in the industries serviced by our SCS business	

				
 	Ÿ	 	Changes in current financial, tax or regulatory requirements that could negatively impact the leasing market	
		
•	Competition:	

				
 	Ÿ	 	Advances in technology may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments	

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

				
 	Ÿ	 	Continued consolidation in the markets in which we operate which may create large competitors with greater financial resources	

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

42

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

•	Profitability:	

				
 	Ÿ	 	Our inability to obtain adequate profit margins for our services	

				
 	Ÿ	 	Lower than expected sales volumes or customer retention levels	

				
 	Ÿ	 	Lower full service lease sales activity	

				
 	Ÿ	 	Decreases in commercial rental fleet utilization and pricing	

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

				
 	Ÿ	 	Loss of key customers in our DTS and SCS business segments	

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

				
 	Ÿ	 	The inability of our legacy information technology systems to provide timely access to data	

				
 	Ÿ	 	Sudden changes in fuel prices and fuel shortages	

				
 	Ÿ	 	Higher prices for vehicles, diesel engines and fuel as a result of new environmental standards	

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

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

				
 	Ÿ	 	Our inability to redeploy vehicles and prepare vehicles for sale in a cost-efficient manner	

				
 	Ÿ	 	Our key assumptions and pricing structure of our DTS and SCS contracts prove to be invalid	

				
 	Ÿ	 	Increased unionizing, labor strikes and work stoppages	

				
 	Ÿ	 	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	

				
 	Ÿ	 	Our inability to manage our cost structure	

				
 	Ÿ	 	Our inability to limit our exposure for customer claims	

				
 	Ÿ	 	Unfavorable or unanticipated outcomes in legal proceedings or uncertain positions	

				
 	Ÿ	 	Business interruptions or expenditures due to severe weather or natural occurrences	

43

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)

		
•	Financing Concerns:	

				
 	Ÿ	 	Higher borrowing costs and possible decreases in available funding sources caused by an adverse change in our debt ratings	

				
 	Ÿ	 	Unanticipated interest rate and currency exchange rate fluctuations	

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

				
 	Ÿ	 	Withdrawal liability as a result of our participation in multi-employer plans	

				
 	Ÿ	 	Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit	
		
•	Accounting Matters:	

				
 	Ÿ	 	Impact of unusual items resulting from ongoing evaluations of business strategies, asset valuations, acquisitions, divestitures and our organizational structure	

				
 	Ÿ	 	Reductions in residual values or useful lives of revenue earning equipment	

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

				
 	Ÿ	 	Increases in health care costs resulting in higher insurance costs	

				
 	Ÿ	 	Changes in accounting rules, assumptions and accruals	

				
 	Ÿ	 	Impact of actual insurance claim and settlement activity compared to historical loss development factors used to project future development	
		
•	Other risks detailed from time to time in our SEC filings	

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this Quarterly Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events or otherwise.

44

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to Ryder’s exposures to market risks since December 31, 2015 . Please refer to the 2015 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the third quarter of 2016 , we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the third quarter of 2016 , Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Controls over Financial Reporting

During the nine months ended September 30, 2016 , there were no changes in Ryder’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.

PART II. OTHER INFORMATION

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

The following table provides information with respect to purchases we made of our common stock during the three months ended September 30, 2016 :

	
													
 	Total Number
of Shares
Purchased (1)	 	Average Price
Paid per Share	 	Total Number  of
Shares
Purchased as
Part of Publicly
Announced
Programs	 	Maximum
Number of
Shares That May
Yet Be
Purchased
Under the
Anti-Dilutive
Program (2)	
July 1 through July 30, 2016	—		 	$	—		 	—		 	1,678,282		
August 1 through August 31, 2016	58,178		 	64.59		 	58,178		 	1,620,104		
September 1 through September 30, 2016	2,083		 	67.23		 	—		 	1,620,104		
Total	60,261		 	$	64.68		 	58,178		 	 	
  ————————————
		
(1)	During the three months ended September 30, 2016 , we purchased an aggregate of 60,261 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock withheld as payment for the exercise price of options exercised or to satisfy the employees' tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.	
		
(2)	In December 2015, our Board of Directors authorized a new share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans.  Under the December 2015 program, management is authorized to repurchase (i) up to 1.5 million shares of common stock, the sum of which will not exceed the number of shares issued to employees under the Company’s employee stock plans from December 1, 2015 to December 9, 2017  plus (ii) 0.5 million shares issued to employees that were not purchased under the Company’s previous share repurchase program. The December 2015 program limits aggregate share repurchases to no more than 2 million shares of Ryder common stock.  Share repurchases of common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish prearranged written plans for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the December 2015 program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. 	

45

ITEM 6. EXHIBITS

	
				
3.2		 	By-Laws of Ryder System, Inc., as amended through February 22, 2016*	
 	 	 	
12.1		 	Calculation of Ratio of Earnings to Fixed Charges	
 	 	 	
31.1		 	Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a)	
 	 	
31.2		 	Certification of Art A. Garcia pursuant to Rule 13a-14(a) or Rule 15d-14(a)	
 	 	
32		 	Certification of Robert E. Sanchez and Art A. Garcia pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350	

* By-Laws are filed with this Form 10-Q to correct a typographical error in the previously filed By-Laws.

46

SIGNATURE

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

	
			
 	RYDER SYSTEM, INC.	
 	(Registrant)	
 	 	 	
Date: October 25, 2016	By:	/s/ Art A. Garcia	
 	 	Art A. Garcia	
 	 	Executive Vice President and Chief Financial Officer	
 	 	(Principal Financial & Accounting Officer)	

47

EXHIBIT 3.2

                            

By-Laws

of Ryder System, Inc.

Revision Adopted December 8, 1975
Effective January 1, 1976
Amended April 30, 1976
Amended December 14, 1979
Amended February 22, 1980
Amended June 26, 1981
Amended December 16, 1982
Amended May 4, 1984
Amended October 25, 1984
Amended November 8, 1985
Amended February 28, 1986
Amended December 12, 1986
Amended December 18, 1987
Amended June 22, 1990
Amended February 21, 1992
Amended November 23, 1993
Amended February 18, 1999
Amended July 29, 1999
Amended December 14, 2000
Amended February 16, 2001
Amended October 10, 2008
Amended December 15, 2009
Amended May 3, 2013
Amended May 2, 2014
Amended May 1, 2015
Amended February 22, 2016

TABLE OF CONTENTS
Page

ARTICLE I	Name                                  1	

ARTICLE II	Offices                                  1	

ARTICLE III	Corporate Seal                              1	

ARTICLE IV	Stockholders                              2	

ARTICLE V	Directors                                  22	

ARTICLE VI	Officers                                  28	

ARTICLE VII	Stock Certificates                              31	

ARTICLE VIII	Depositories and Checks                          33	

ARTICLE IX	Fiscal Year                                  33	

ARTICLE X	Dividends                                  33	

ARTICLE XI	Waiver of Notice                              33	

ARTICLE XII	Indemnification of and Advance to Officers, Directors,	
Employees and Agents                          34

ARTICLE XIII	By-Law Amendment                          37	

ARTICLE XIV	Continuing Effect of By-Law Provisions                  38	

BY-LAWS
OF
RYDER SYSTEM, INC.

ARTICLE I
Name
The name of this Corporation is RYDER SYSTEM, INC.
ARTICLE II
Offices
Section 1.      Principal Florida Office
The principal office of the Corporation in the State of Florida shall be in Miami, Dade County, Florida.
Section 2.      Other Offices
The Corporation may also have offices in such other places, both within and without the State of Florida, as the Board of Directors or the Chairman of the Board may from time to time designate or as the business of the Corporation may require. The registered office of the Corporation, required by applicable law to be maintained in the State of Florida may be, but need not be, identical with the Corporation’s principal office in the State of Florida, and the address of the registered office may be changed from time to time by the Board of Directors or the Chairman of the Board.
ARTICLE III
Corporate Seal
The corporate seal shall be circular in form and have inscribed thereon the following: “Ryder System, Inc., Incorporated Florida 1955”.

ARTICLE IV
Stockholders
Section 1.      Meetings of Stockholders
a.      Annual Meeting
The annual meeting of stockholders of the Corporation shall be held at such time and place, within or without the State of Florida, as may be designated by the Board of Directors, at which meeting, in accordance with the Restated Articles of Incorporation and these By-Laws, the stockholders shall elect members of the Board of Directors and transact such other business as lawfully may come before it.
b.      Special Meetings
(1)      Special meetings of the stockholders may be called by the holders of record of not less than one-tenth of all the shares outstanding and entitled to vote at such meeting or by the Board of Directors; and such meetings shall be held at such time and place, within or without the State of Florida, as may be designated by the Board of Directors.
(2)      Before a stockholder may request or demand that a special meeting of the stockholders be held for any purpose, the following procedure must be satisfied:
(A)      Any stockholder seeking to request or demand, or to have the stockholders request or demand, a special meeting shall first, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date, pursuant to Section 3.b. of Article V of these By-Laws, for the purpose of determining the stockholders entitled to request the special meeting. The Board of Directors shall promptly, but in all events within 10 days after the date upon which such a request is received, fix such a record date. Every request to fix a record date for determining the stockholders entitled to request a special meeting shall be in writing and shall set forth the purpose or purposes for which the special meeting is requested, the name and address, as they appear in the Corporation’s books, of each stockholder making the request and the class and number of shares of the Corporation which are owned of record by each such stockholder, and shall bear the signature and date of signature of each such stockholder.
In the event of the delivery to the Corporation of any request(s) or demand(s) by stockholders with respect to a special meeting, and/or any related revocation or revocations, the Corporation

2

shall engage nationally recognized independent inspectors of elections for the purpose of performing a prompt ministerial review of the validity of the request(s), demand(s) and/or revocation(s).
(B)      No request or demand with respect to calling a special meeting of stockholders shall constitute a valid and effective stockholder request or demand for a special meeting (i) unless (A) within 60 days of the record date established in accordance with subsection b(2)(A) of this Section, written requests or demands signed by stockholders of record representing a sufficient number of shares as of such record date to request or demand a special meeting pursuant to subsection b(1) of this Section are delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation and (B) each request or demand is made in accordance with and contains the information required by Section 5.b of this Article IV and (ii) until such date as the independent inspectors engaged in accordance with this subsection b(2) certify to the Corporation that the requests or demands delivered to the Corporation in accordance with clause (i) of this subsection b(2)(B) represent at least the minimum number of shares that would be necessary to request such a meeting pursuant to subsection b(1) of this Section.
(3)      If the Corporation determines that a stockholder or stockholders have satisfied the notice, information and other requirements specified in subsection b(2)(B)(i) of this Section, then the Board of Directors shall adopt a resolution calling a special meeting of the stockholders and fixing a record date, pursuant to Section 3.b. of Article V, for the purpose of determining the stockholders entitled to notice of and to vote at such special meeting. Notice of such special meeting shall be provided in accordance with Section 1.c. of this Article IV, provided that such notice shall be given within 60 days (or such longer period as from time to time may be permitted by law) after the date the request(s) or demand(s) for such special meeting is (are) delivered to the Corporation in accordance with subsection b(2)(B)(i) of this Section.
(4)      In fixing a meeting date for the special meeting of stockholders, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding the request, and any plan of the Board of Directors to call a special or annual meeting of stockholders for the conduct of related business, provided that such meeting date shall be within 120 days (or such longer period as may from time to time be permitted by law) after the date the request(s) or demand(s) for such special meeting is (are) delivered to the Corporation in accordance with subsection b(2)(B)(i) of this Section.
(5)      Nothing contained in this Section 1.b. shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any request or

3

demand or revocation thereof, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto).
c.      Notice of Meetings
Except as otherwise permitted by law, notice of all meetings of stockholders stating the time and place, and, in the case of special meetings, the purpose or purposes for which the meeting is called, shall be given, by mailing, or by transmitting by electronic mail or any other type of electronic transmission, or by any other method permitted by law, to each stockholder entitled to vote (or by a single written notice to stockholders who share an address if they consent, or are deemed to consent, to a single notice) no less than ten days nor more than sixty days before the date set for such meeting. Such notice shall be deemed to be delivered (1) when deposited in the United States mail addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid, or (2) at the time the notice is electronically transmitted to the stockholder in a manner authorized by the stockholder if such authorization is required by law, or (3) at such other time as provided by law with respect to other methods of giving such notice as are permitted by law.
d.      Preparation of Voting List of Stockholders
The Secretary shall prepare and make, or cause to be prepared and made, at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, with the address of and the number and class and series, if any, of shares held by each stockholder as such information appears on the stock transfer books of the Corporation. Such list shall be kept on file at the principal place of business of the Corporation, shall be open to the examination of any stockholder during normal business hours for said ten day period (or such shorter time as exists between the record date and the meeting) upon receipt by the Secretary of a written request to make such an examination, and shall be produced and kept at the time and place of the meeting, and any adjournment thereof, subject to the inspection of any stockholder who may be present.
Section 2.      Quorum and Vote of Stockholders
a.      Quorum and General Voting Requirements
The holders of a majority of the voting power of the total number of shares outstanding and entitled to vote, present in person or represented by proxy thereat, shall constitute a quorum at a meeting of stockholders for the transaction of business, except as otherwise provided by law or by the Restated Articles of Incorporation. If, however, a quorum does not exist at a meeting, the holders of a majority of the shares

4

present or represented and entitled to vote at such meeting may adjourn the meeting from time to time, without notice other than by announcement at the meeting, until holders of the requisite number of shares entitled to vote shall be present. Except as otherwise required by law, at any such adjourned meeting at which a quorum exists, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business in accordance with these By-Laws until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
For purposes of this Section 2, shares entitled to vote on any matter presented for action by stockholders at a meeting, present in person or represented by proxy thereat, shall be counted for purposes of establishing a quorum for the transaction of all business at a meeting.
If a quorum is present, action on a matter (other than the election of directors) shall be approved by the stockholders of the Corporation if the matter receives the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the total number of shares outstanding and entitled to vote on such matter, unless the matter is one upon which, by express provision of law a greater vote is required or from time to time permitted by action of the Board of Directors, or by the Restated Articles of Incorporation or these By-Laws a greater or different vote is required, in any which case such express provision shall govern and control the requisite vote requirement. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.”
b.      Election of Directors
At a meeting where a quorum is present, directors shall be elected by a majority of the votes cast with respect to that director by the holders of the shares represented in person or by proxy and entitled to be voted in the election of directors; provided that if the number of persons to be considered by the stockholders for election as a director exceeds the number of directors to be elected, with such determination thereof to be made by the Secretary of the Corporation as of the close of the notice of nomination periods set forth in Section 5 of this Article IV, directors shall be elected by the vote of a plurality of the votes cast by the holders of the shares represented in person or by proxy and entitled to be voted in the election of directors; further provided that all persons considered for election (other than those recommended for nomination by or at the direction of the Board of Directors or any duly authorized committee thereof) shall have met all applicable requirements and procedures in being placed in nomination and considered for election, including without limitation the requirements set forth in these By-Laws and in all applicable laws, rules and regulations. For purposes of this subsection 2.b., votes cast means votes “for” a director or “withheld” with respect to a director.

5

Section 3.      Voting by Stockholders
Each stockholder entitled to vote at any meeting may do so in person or by proxy appointed by instrument signed or otherwise authorized by the stockholder or by the stockholder’s attorney-in-fact in writing or in any other manner permitted by law.
Section 4.      Stockholder Action
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.
Section 5.      Notice of Stockholder Business and Director Nominations
a.      Annual Meetings of Stockholders
(1)      General . Nominations of persons for election to the Board of Directors and the proposal of any other business to be considered by the stockholders of the Corporation may be made at any annual meeting of stockholders, only (i) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (ii) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) by any stockholder of the Corporation who (A) is a stockholder of record at the time of the giving of the notice provided for in this Section 5 and at the time of the annual meeting, (B) is entitled to vote at the annual meeting for the election of directors or the proposal, as applicable, and (C) complies with the notice procedures set forth in this Section 5 and the other requirements of these By-Laws as to such business or nomination. Clause (C) of this Section 5(a)(1) shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of meeting) before an annual meeting of stockholders.
(2)      Timely Notice . Without qualification or limitation, for any nominations or any other business to be properly brought before an annual meeting by a stockholder of the Corporation pursuant to Section 5(a)(1)(C) hereof, the stockholder previously must have given timely notice thereof in proper written form (as more fully described in Section 5(a)(3) hereof) to the Secretary of the Corporation and any such other business must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation, not earlier than the opening of business on the 120th day prior and not later than the close of business on the 90th day

6

prior to the first anniversary of the date of the Corporation’s immediately preceding annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such first anniversary date, notice by the stockholder to be timely must be so delivered or received not earlier than the opening of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Corporation; provided, however, Section 5(g)(4) shall govern timeliness of nominations submitted pursuant to a Proxy Access Notice pursuant to such Section 5(g). In no event shall any adjournment or postponement of an annual meeting or the public announcement thereof commence a new time period (or extend any time period) for the giving of notice by a stockholder as described above.
In addition, to be considered timely, a stockholder’s notice to the Secretary of the Corporation shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation, not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these By-Laws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or under any other provision of the By-Laws or enable or be deemed to permit a stockholder who has previously submitted notice hereunder or under any other provision of the By-Laws to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and or resolutions proposed to be brought before a meeting of the stockholders.
(3)      Notice in Proper Written Form . To be in proper written form, a stockholder’s notice to the Secretary of the Corporation (whether given pursuant to Section 5(a) or Section 5(b) or Section 5(g) hereof) must set forth in writing:
(A)      as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:

7

(i)      the name and address of such stockholder as they appear on the Corporation’s books, and of such beneficial owner, if any;
(ii)      (a)      the class or series and number of shares of the Corporation which are, directly or indirectly, owned of record and/or owned beneficially by the stockholder and such beneficial owner, if any, and a representation that the stockholder and beneficial owner, if any, will notify the Corporation in writing of the class or series and number of such shares owned of record and beneficially as of the record date for the meeting, promptly following the later of the record date and the date notice of the record date is first publicly announced;
(b)      any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder and beneficial owner, if any, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation;
(c)      any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder and beneficial owner, if any, has a right to vote any shares of any security of the Corporation;
(d)      any short interest in any security of the Corporation (for purposes hereof, a person or entity shall be deemed to have a short interest in a security if such person or entity directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);
(e)      any rights to dividends on the shares of the Corporation owned beneficially by such stockholder and beneficial owner, if any, that are separated or separable from the underlying shares of the Corporation;
(f)      any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such

8

stockholder and beneficial owner, if any, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; and
(g)      any performance-related fees (other than an asset-based fee) that such stockholder and beneficial owner, if any, is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by such stockholder’s and beneficial owner’s, if any, affiliates, any person or entity with whom such stockholder and beneficial owner, if any, is acting in concert or members of such stockholder’s and beneficial owner’s, if any, immediate family sharing the same household;
(iii)      any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;
(iv)      a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such annual meeting on the matter proposed and intends to appear in person or by proxy at such meeting to propose such nomination or other business; and
(v)      if the stockholder intends to solicit proxies in support of such stockholder’s proposal, a representation to that effect.
(B)      if the notice relates to any business that the stockholder proposes to bring before the meeting other than a nomination of a director or directors:
(i)      a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting, any material interest of such stockholder and beneficial owner, if any, on whose behalf the business is being proposed and of each of their respective affiliates or associates or others acting in concert therewith, if any, in such business and, in the event that such business includes a proposal to amend the By-Laws of the Corporation, the language of the proposed amendment; and

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(ii)      a description of all agreements, arrangements and understandings between such stockholder and/or beneficial owner, if any, and any other person or persons (including the names of such persons) in connection with the proposal of such business by such stockholder.
(C)      If the stockholder proposes to nominate a person for election or reelection to the Board of Directors, as to each person whom the stockholder proposes to nominate for election or reelection to the Board of Directors:
(i)      all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and
(ii)      a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated by the Securities and Exchange Commission under Regulation S-K (or any successor rule or regulation) if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such “registrant”; and
(D) If the stockholder proposes to nominate a person for election or reelection to the Board of Directors, with respect to each nominee for election or reelection to the Board of Directors, the notice must also include a completed and signed nominee questionnaire, representation and agreement, as required by Section 6 of this Article IV. Information regarding a nominee for director provided by a stockholder pursuant to this Section 5 shall include such information as may be necessary to enable the Board of Directors to make an informed determination as to whether such nominee, if elected, would be an “independent director” as defined in the rules and regulations of the New York Stock Exchange or any other stock exchange on which

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the Corporation’s Common Stock is listed or quoted, or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
(4)      Notwithstanding anything in paragraph (a)(2) above to the contrary, in the event that the number of directors to be elected to the Board of Directors at an annual meeting of stockholders is increased in accordance with Article V, Section 2 hereof and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board of Directors made by the Corporation at least 90 days prior to the first anniversary of the date of the immediately preceding annual meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation; provided, however, Section 5(g)(4) shall govern timeliness of nominations submitted pursuant to a Proxy Access Notice pursuant to such Section 5(g).
(5)      For purposes of this Section 5, “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended; provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership.
b.      Special Meetings of Stockholders .
Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders only (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation who (a) is a stockholder of record at the time of the giving of notice provided for in this Section 5 and at the time of the special meeting, (b) is entitled to vote at the meeting for the election of directors and (c) complies with the notice procedures set forth in this Section 5 as to such nomination. In the event a special meeting of stockholders is properly called by the Corporation for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Sections 5(a)(2) and 5(a)(3) hereof with respect to any nomination (including the completed and signed questionnaire, representation and agreement required by Section 5(a)(3)(D) hereof) shall be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the

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Corporation, at the principal executive offices of the Corporation not earlier than the opening of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement of the date of such special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting is first made by the Corporation. In no event shall any adjournment or postponement of a special meeting or the public announcement thereof commence a new time period (or extend any time period) for the giving of notice by a stockholder as described above.
In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof.
c.      If the notice requirements set forth in this Section 5 are satisfied by a stockholder and such stockholder’s nominee or proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for the applicable meeting of stockholders and such stockholder does not appear or send a qualified representative to present such nominee or proposal at such meeting, the Corporation need not present such nominee or proposal for a vote at such meeting notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 5, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission (as defined in the Florida Business Corporation Act, as amended) delivered by such stockholder to the Secretary of the Corporation (in the case of a writing, delivered in person or by facsimile, or sent by U.S. certified mail and received, at the principal executive offices of the Corporation) to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable printed reproduction of such writing or electronic transmission, at the meeting of stockholders.
d.      Only such persons as are nominated in accordance with the procedures set forth in this Article IV, Section 5 or are chosen to fill any vacancy occurring in the Board of Directors in accordance with Article V, Section 1 shall be eligible to serve as directors and only such business shall be conducted at a meeting of

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stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Article IV, Section 5. Except as otherwise provided by law, the Restated Articles of Incorporation or these By-Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Article IV, Sections 5-6, as applicable, and, if any proposed nomination or business is not in compliance with this Article IV, Sections 5-6, to declare that such defective proposal or nomination shall be disregarded.
e.      For purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Services, Associated Press or comparable national news service, in a document publicly filed or furnished by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder, or posted on the Corporation’s website.
f.      Notwithstanding the provisions of this Section 5, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder, and all applicable rules and requirements of the New York Stock Exchange (the “NYSE”) or, if the Corporation’s shares are not listed on the NYSE, the applicable rules and requirements of the primary securities exchange or quotation system on which the Corporation’s shares are listed or quoted, in each case with respect to the matters set forth in this Section 5; provided, however, that any references in these By-Laws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Section 5(a)(1)(C) or Section 5(b) hereof. Nothing in this Section 5 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (ii) of the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation if and to the extent provided for under law, the Restated Articles of Incorporation or these By-Laws.
g.      Inclusion of Stockholder Director Nominations in the Corporation’s Proxy Materials.
(1)      Subject to the terms and conditions set forth in these By-Laws, the Corporation shall include in its proxy materials for an annual meeting of stockholders held after the 2016 annual meeting the name, together with the Required Information (as defined below), of any person nominated for election (a “Stockholder Nominee”) to the Board of Directors by one or more Eligible Stockholders (as defined below) that satisfies the requirements of this Section 5(g), and expressly elects at the time of providing the written

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notice required by this Section 5(g) (a “Proxy Access Notice”) to have its nominee included in the Corporation’s proxy materials pursuant to this Section 5(g).
(2)      For the purposes of this Section 5(g):
(A)      “Voting Stock” shall mean outstanding shares of capital stock of the Corporation entitled to vote generally for the election of directors;
(B)      “Constituent Holder” shall mean any stockholder, collective investment fund included within a Qualifying Fund (as defined below) or beneficial holder whose stock ownership is counted for the purposes of qualifying as holding the Proxy Access Request Required Shares (as defined below) or qualifying as an Eligible Stockholder; and
(C)      a stockholder (including any Constituent Holder) shall be deemed to “own” only those outstanding shares of Voting Stock as to which the stockholder itself (or such Constituent Holder itself) possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit and risk of loss on) such shares. The number of shares calculated in accordance with the foregoing clauses (a) and (b) shall be deemed not to include (and to the extent any of the following arrangements have been entered into by affiliates of the stockholder (or of any Constituent Holder), shall be reduced by) any shares (x) sold by such stockholder or Constituent Holder (or any of either’s affiliates) in any transaction that has not been settled or closed, including any short sale, (y) borrowed by such stockholder or Constituent Holder (or any of either’s affiliates) for any purposes or purchased by such stockholder or Constituent Holder (or any of either’s affiliates) pursuant to an agreement to resell, or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or Constituent Holder (or any of either’s affiliates), whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of Voting Stock, in any such case which instrument or agreement has, or is intended to have, or if exercised by either party thereto would have, the purpose or effect of (i) reducing in any manner, to any extent or at any time in the future, such stockholder’s or Constituent Holder’s (or either’s affiliates) full right to vote or direct the voting of any such shares, and/or (ii) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such shares by such stockholder or Constituent Holder (or either’s affiliate), other than any such arrangements solely involving an exchange listed multi-industry market index fund in which Voting Stock represents at the time of entry into such arrangement less than 10% of the proportionate value of such index. A stockholder (including any Constituent Holder) shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder itself (or such Constituent Holder itself) retains the right to instruct how the shares are voted with

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respect to the election of directors and the right to direct the disposition thereof and possesses the full economic interest in the shares. A stockholder’s (including any Constituent Holder’s) ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares and retained the unrestricted right to recall such shares upon giving no more than five days’ notice or delegated any voting power over such shares by means of a proxy, power of attorney or other instrument or arrangement and such delegation is revocable at any time by the stockholder (and otherwise “owned” as defined herein) through the annual meeting. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings.
(3)      For purposes of this Section 5(g), the “Required Information” that the Corporation will include in its proxy statement is (1) the information concerning the Stockholder Nominee and the Eligible Stockholder that the Corporation determines is required to be disclosed in the Corporation’s proxy statement by the regulations promulgated under the Exchange Act; and (2) if the Eligible Stockholder so elects, a Statement (as defined below). The Corporation shall also include the name of the Stockholder Nominee in its proxy card. For the avoidance of doubt, and any other provision of these By-Laws notwithstanding, the Corporation may in its sole discretion solicit against, and include in the proxy statement its own statements or other information relating to, any Eligible Stockholder and/or Stockholder Nominee, including any information provided to the Corporation with respect to the foregoing.
(4)      To be timely, a stockholder’s Proxy Access Notice must be delivered to the Secretary of the Corporation not less than 120 days nor more than 150 days prior to the first anniversary of the date the corporation issued its definitive proxy statement for the preceding year’s annual meeting. In no event shall any adjournment or postponement of an annual meeting or the public announcement thereof commence a new time period (or extend any time period) for the giving of notice by a stockholder as described above.
(5)      The maximum number of Stockholder Nominees (including Stockholder Nominees that were submitted by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 5(g) but either are subsequently withdrawn or that the Board of Directors decides to nominate as a nominee of the Board of Directors or otherwise appoint to the Board) appearing in the Corporation’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (x) 2 and (y) the largest whole number that does not exceed 20% of the number of directors in office as of the last day on which a Proxy Access Notice may be delivered in accordance with the methods prescribed for delivery of notice in this Section 5(g) (such greater number, the “Permitted Number”); provided, however, that the Permitted Number shall be reduced by:

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(A)      the number of directors in office or director candidates that in either case will be included in the Corporation’s proxy materials with respect to such annual meeting as an unopposed (by the Corporation) nominee pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of Voting Stock, by such stockholder or group of stockholders, from the Corporation), other than any such director referred to in this Section 5(g)(5)(A) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) annual terms; and
(B)      the number of directors in office that will be included in the Corporation’s proxy materials with respect to such annual meeting for whom access to the Corporation’s proxy materials was previously requested or provided pursuant to this Section 5(g), other than any such director referred to in this Section 5(g)(5)(B) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) annual terms; provided, further, that in the event the Board of Directors resolves to reduce the size of the Board of Directors effective on or prior to the date of the annual meeting, the Permitted Number shall be calculated based on the number of directors in office as so reduced.
An Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy statement pursuant to this Section 5(g) shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy statement and include such specified rank in its Proxy Access Notice. If the number of Stockholder Nominees pursuant to this Section 5(g) for an annual meeting of stockholders exceeds the Permitted Number, then the highest ranking qualifying Stockholder Nominee from each Eligible Stockholder will be selected by the Corporation for inclusion in the proxy statement until the Permitted Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Eligible Stockholder’s Proxy Access Notice. If the Permitted Number is not reached after the highest ranking Stockholder Nominee from each Eligible Stockholder has been selected, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.
(6)      An “Eligible Stockholder” is one or more stockholders of record who own and have owned, or are acting on behalf of one or more beneficial owners who own and have owned (in each case as defined above), in each case continuously for at least 3 years as of both the date that the Proxy Access Notice is delivered to the Corporation pursuant to this Section 5(g), and as of the record date for determining stockholders eligible to vote at the annual meeting, at least 3% of the aggregate voting power of the Voting Stock (the “Proxy Access Request Required Shares”), and who continue to own the Proxy Access Request Required Shares at all times between the date such Proxy Access Notice is delivered to the Corporation and

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the date of the applicable annual meeting, provided that the aggregate number of stockholders, and, if and to the extent that a stockholder is acting on behalf of one or more beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed 25. Two or more collective investment funds that are part of the same family of funds by virtue of being under common management and investment control or sponsored by the same employer (a “Qualifying Fund”) shall be treated as one stockholder for the purpose of determining the aggregate number of stockholders in this Section 5(g)(6), provided that each fund included within a Qualifying Fund otherwise meets the requirements set forth in this Section 5(g). No shares may be attributed to more than one group constituting an Eligible Stockholder under this Section 5(g) (and, for the avoidance of doubt, no stockholder or affiliate thereof may be a member of more than one group constituting an Eligible Stockholder). A record holder acting on behalf of one or more beneficial owners will not be counted separately as a stockholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each such beneficial owner will be counted separately, subject to the other provisions of this Section 5(g), for purposes of determining the number of stockholders whose holdings may be considered as part of an Eligible Stockholder’s holdings. For the avoidance of doubt, Proxy Access Request Required Shares will qualify as such if and only if the beneficial owner of such shares as of the date of the Proxy Access Notice has itself individually beneficially owned such shares continuously for the 3-year period ending on that date and through the other applicable dates referred to above (in addition to the other applicable requirements being met).
(7)      No later than the final date when a Proxy Access Notice may be timely delivered to the Corporation pursuant to this Section 5(g) of this Article IV, an Eligible Stockholder (including each Constituent Holder) must provide, with respect to themselves and its Stockholder Nominee(s), the information required to be disclosed under Section 5(a)(3) of this Article IV in a stockholder’s notice and must provide the following information in writing to the Secretary of the Corporation:
(A)      with respect to each Constituent Holder, the name and address of, and number of shares of Voting Stock owned by such person;
(B)      one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three 3-year holding period) verifying that, as of a date within 7 calendar days prior to the date the Proxy Access Notice is delivered to the Corporation, such person owns, and has owned continuously for the preceding 3 years, the Proxy Access Request Required Shares, and such person’s agreement to provide:

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(C)      within 10 days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying such person’s continuous ownership of the Proxy Access Request Required Shares through the record date, together with any additional information reasonably requested to verify such person’s ownership of the Proxy Access Request Required Shares; and
(D)      immediate notice if the Eligible Stockholder ceases to own any of the Proxy Access Request Required Shares prior to the date of the applicable annual meeting of stockholders;
(E)      a representation that such person:
(i)      acquired the Proxy Access Request Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not presently have such intent;
(ii)      has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) being nominated pursuant to this Section 5(g);
(iii)      has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(1) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors;
(iv)      will not distribute to any stockholder any form of proxy for the annual meeting other than the form distributed by the Corporation; and
(v)      will provide facts, statements, and other information in all communications with the Corporation and its stockholders that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and will otherwise comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this Section 5(g);
(F)      in the case of a nomination by a group of stockholders that together is such an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of

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all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and
(G)      an undertaking that such person agrees to:
(i)      assume all liability stemming from, and indemnify and hold harmless the Corporation and each of its directors, officers, employees, agents and advisors individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder (including such person) provided to the Corporation;
(ii)      promptly provide to the Corporation such other information as the Corporation may reasonably request; and
(iii)      file with the Securities and Exchange Commission any solicitation by the Eligible Stockholder of stockholders of the Corporation relating to the annual meeting at which the Stockholder Nominee will be nominated.
In addition, no later than the final date when a Proxy Access Notice pursuant to this Section 5(g) may be timely delivered to the Corporation, a Qualifying Fund whose stock ownership is counted for purposes of qualifying as an Eligible Stockholder must provide to the Secretary of the Corporation documentation reasonably satisfactory to the Board of Directors that demonstrates that the funds included within the Qualifying Fund satisfy the criteria specified in the definition of Qualifying Fund.
In order to be considered timely, any information required by this Section 5(g) to be provided to the Corporation must be supplemented (by delivery to the Secretary of the Corporation) (1) no later than five (5) business days after the record date for the applicable annual meeting, to disclose the foregoing information as of such record date, and (2) no later than eight (8) business days prior to the date of the annual meeting, any adjournment or postponement thereof, to disclose the foregoing information as of the date that is ten (10) business days prior to such annual meeting. For the avoidance of doubt, the requirement to update and supplement such information shall not permit any Eligible Stockholder or other person to change or add any proposed Stockholder Nominee or be deemed to cure any defects or limit the remedies (including without limitation under these By-Laws) available to the Corporation relating to any defect.

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(8)      The Eligible Stockholder may provide to the Secretary of the Corporation, at the time the information required by this Section 5(g) is originally provided, a single written statement for inclusion in the Corporation’s proxy statement for the annual meeting, not to exceed 500 words, in support of the candidacy of such Eligible Stockholder’s Stockholder Nominee(s) (the “Statement”). Notwithstanding anything to the contrary contained in this Section 5(g), the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, directly or indirectly (in each case without factual foundation), impugns the character, integrity or personal reputation of any person or makes charges concerning improper, illegal or immoral conduct or associations with respect to any person or would violate any applicable law or regulation.
(9)      No later than the final date when a Proxy Access Notice pursuant to this Section 5(g) may be timely delivered to the Corporation, each Stockholder Nominee must provide a completed and signed nominee questionnaire, representation and agreement, as required by Section 6 of this Article IV and must provide such additional information as necessary to permit the Board of Directors to determine if any of the matters contemplated by Section 5(g)(10) apply and if such Stockholder Nominee has any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the Corporation’s Corporate Governance Guidelines or is or has been subject to any event specified in Item 401(f) of Regulation S-K (or successor rule) of the Securities and Exchange Commission.
Each Stockholder Nominee shall also promptly provide to the Corporation such other information as may be reasonably requested by the Corporation of the Stockholder Nominee. In the event that any information or communications provided by the Eligible Stockholder (or any Constituent Holder) or the Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood for the avoidance of doubt that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including without limitation under these By-Laws) available to the Corporation relating to any such defect.
(10)      Any Stockholder Nominee who is included in the Corporation’s proxy statement for a particular annual meeting of stockholders, but subsequently is determined not to satisfy the eligibility requirements of this Section 5(g) or any other provision of these By-Laws, the Restated Articles of Incorporation or other applicable regulation any time before the annual meeting of stockholders, will not be eligible for election at the relevant annual meeting of stockholders. Without limiting the foregoing or any other provision

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of these By-Laws, the Corporation shall not be required to include, pursuant to this Section 5(g), a Stockholder Nominee in its proxy materials for any annual meeting of stockholders, or, if the proxy statement already has been filed, to allow the nomination of a Stockholder Nominee (and the Corporation may declare any such nomination ineligible), notwithstanding that proxies in respect of such vote may have been delivered to the Corporation:
(A)      who is not independent under the listing standards of the principal U.S. exchange upon which the Corporation’s Common Stock is listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation’s directors, in each case as determined by the Board of Directors;
(B)      who is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses), has been convicted in a criminal proceeding within the past ten (10) years, is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, or whose service as a member of the Board of Directors would violate or cause the Corporation to be in violation of these By-Laws, the Restated Articles of Incorporation, the rules and listing standards of the principal U.S. exchange upon which the Corporation’s Common Stock is listed, or any applicable law, rule or regulation;
(C)      if the Eligible Stockholder (or any Constituent Holder) or applicable Stockholder Nominee otherwise breaches or fails to comply with its obligations pursuant to this Section 5(g) or any agreement, representation or undertaking required by this Section 5(g);
(D)      if the Eligible Stockholder ceases to be an Eligible Stockholder for any reason, including but not limited to not owning the Proxy Access Request Required Shares through the date of the applicable annual meeting; or
(E)      if the Corporation has received one or more stockholder notices nominating director candidates pursuant to Section 5 of this Article IV.
Section 6.      Submission of Questionnaire, Representation and Agreement .
To be eligible to be a stockholder nominee for election as a director of the Corporation, a person must deliver (in accordance with the applicable time periods prescribed for delivery of notice under Section 5 of this Article IV, as applicable) to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation , (a) a written questionnaire with respect to the background and qualification of such person and

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the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary of the Corporation upon written request) and (b) a written representation and agreement (in the form provided by the Secretary of the Corporation to the requesting stockholder following written request) that such individual:
(1)      is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation, and (ii) any Voting Commitment that could limit or interfere with such individual’s ability to comply, if elected as a director of the corporation, with such individual’s fiduciary duties under applicable law;
(2)      is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation;
(3)      in such individual’s personal capacity and on behalf of any person or entity on whose behalf, directly or indirectly, the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply, with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation publicly disclosed from time to time; and
(4)      with respect to nominations made pursuant to Section 5(g) of this Article IV, consents to being named as a nominee in the Corporation’s proxy statement and in any associated proxy card of the Corporation and agrees to serve if elected as a director of the Corporation.
ARTICLE V
Directors
Section 1.      Board of Directors
a.      Number, election and terms
Except as otherwise fixed by or pursuant to the provisions of Article III of the Restated Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of the directors of the Corporation shall be 13, but such number may be fixed from

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time to time at not less than three nor more than 21 by resolution of the Board of Directors. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible. Such classes shall originally consist of one class of four directors who shall be elected at the annual meeting of stockholders held in 1984 for a term expiring at the annual meeting of stockholders to be held in 1985; a second class of three directors who shall be elected at the annual meeting of stockholders held in 1984 for a term expiring at the annual meeting of stockholders to be held in 1986; and a third class of four directors who shall be elected at the annual meeting of stockholders held in 1984 for a term expiring at the annual meeting of stockholders to be held in 1987. The Board of Directors shall increase or decrease the number of directors in one or more classes as may be appropriate whenever it increases or decreases the number of directors pursuant to this Article V, in order to ensure that the three classes shall be as nearly equal in number as possible. At each annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Commencing in 2016, directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be elected to hold office for a term expiring at the next annual meeting of stockholders following their election. Accordingly, at the 2016 annual meeting of stockholders, directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the 2017 annual meeting of stockholders; at the 2017 annual meeting of stockholders, directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the 2018 annual meeting of stockholders; and at the 2018 annual meeting of stockholders and at each annual meeting of stockholders thereafter, all directors shall be elected to hold office for a term expiring at the next annual meeting of stockholders following the year of their election. All directors, subject to such director’s earlier death, resignation, retirement, disqualification or removal from office, shall hold office until the expiration of the term for which he or she was elected, and until his or her successor is duly elected and qualified.
b.      Stockholder nomination of director candidates
Advance notice of stockholder nominations for the election of directors shall be given in the manner provided in Section 5 of Article IV of these By-Laws.
c.      Newly created directorships and vacancies
Except as otherwise provided for or fixed by or pursuant to the provisions of Article III of the Restated Articles of Incorporation relating to the rights of the holders of any class or series of stock having a

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preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or any other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until the next election of directors by the stockholders and until such director’s successor shall have been duly elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. If a director resigns, effective at a future date, such director may vote to fill the vacancy.
d.      Removal
Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office, with or without cause, only by the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.”
Section 2.      Notification of Nominations
Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or a proxy committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if such nominee or nominees shall have met all applicable requirements and procedures in being placed in nomination and considered for election, including without limitation the requirements for stockholder nominees for director set forth in Section 5 and Section 6 of Article IV of these By-Laws and in all applicable laws, rules and regulations. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
Section 3.      Powers of Directors
a.      General Powers
The Board of Directors shall have authority over the entire management of the property, business, and affairs of the Corporation. In addition to such powers as are herein and in the Restated Articles of

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Incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of law and the Restated Articles of Incorporation.
b.      Establishment of Record Date
The Board of Directors shall fix in advance a date not exceeding sixty (60) days (or such longer period as may from time to time be permitted by law) preceding the date of any meeting of stockholders, or any dividend payment date, or the date necessary to make a determination of stockholders for any purpose, nor less than ten days (or such shorter period as may from time to time be permitted by law) prior to the date of any meeting of stockholders, as a record date for the determination of the stockholders; and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be considered stockholders for purposes of such determination, notwithstanding any transfer of stock on the books of the Corporation after any such record date fixed as aforesaid.
Except as otherwise provided by law, unless the Board of Directors fixes a new record date for any adjourned meeting of stockholders, the record date originally fixed pursuant to this Section 3.b. of Article V for such meeting shall remain the record date for such meeting.
The Board of Directors or any committee of the Board of Directors authorized to fix record dates and declare dividends shall fix in advance a date not exceeding sixty (60) days (or such longer period, not inconsistent with the Restated Articles of Incorporation, as may from time to time be permitted by law) preceding the date of any Preferred Stock dividend payment date as a record date for the determination of the stockholders of such Preferred Stock; and in such case, only such stockholders as shall be holders of record of such Preferred Stock on the date so fixed shall be considered stockholders of the Preferred Stock for purposes of such determination, notwithstanding any transfer of such Preferred Stock on the books of the Corporation after any such record date fixed as aforesaid.
c.      Appointment of Committees
The Board of Directors may designate one or more committees, consisting of at least two (2) directors each, to perform such duties and exercise such powers as may be determined by the Board, except as prohibited by law. The number of directors composing each such committee and the powers and functions conferred upon each such committee shall be determined by resolution of the Board. Except as prohibited by law, each such committee may designate one or more members of the committee to perform such duties and exercise such powers of the committee as may be determined by the committee.

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The Board of Directors, by resolution adopted in accordance with this Section 3.c, may designate one or more directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee.
Section 4.      Meetings of Directors
a.      Regular Meetings
Regular meetings of the Board of Directors, or any committee thereof, shall be held at any time or place, within or without the State of Florida, as the Board, or such committee, may from time to time determine; and if so determined, no notice thereof need be given.
b.      Special Meetings
Special meetings of the Board of Directors, or any committee thereof, may be held at any time or place, within or without the State of Florida, whenever called by the Chairman of the Board, the Chief Executive Officer, or at the request of two or more directors or, for a special meeting of a committee, by the chairman of such committee.
Notice of special meetings of the Board, or any committee thereof, stating the time and place, shall be given by mailing the same to each director or committee member, as appropriate, at his residence or business address at least two days before the meeting, or by delivering the same to him personally or by telephone, telegram, e-mail, facsimile or reputable overnight delivery service at least one day before the meeting. Such notice shall be deemed to have been given on the date of mailing, telephoning or telegraphing, or the date of such e-mail, facsimile, or sending by reputable overnight delivery service, as the case may be.
c.      Adjournments
A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors, or any committee thereof, to another time and place. Notice of any such adjourned meeting shall be given to the directors who are not present at the time of the adjournment, and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors.
d.      Telephonic Participation at Meetings
Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board, or any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at such meeting for all purposes.

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e.      Action Without a Meeting
Any action of the Board of Directors or of any committee thereof, which is required or permitted to be taken at a meeting, may be taken without a meeting if written consent to the action signed by all the members of the Board or of the committee, as the case may be, is filed in the minutes of the proceedings of the Board or of the committee.
Section 5.      Quorum and Voting of Directors
A majority of the number of directors fixed in accordance with Section 1 of this Article V shall constitute a quorum of the Board for the transaction of business, and one‑half of the members of any committee shall constitute a quorum of such committee; provided, however, that whenever, for any reason, a vacancy occurs in the Board, or any committee thereof, the quorum shall consist of a majority of the remaining directors until the vacancy has been filled. In all cases, a smaller number of directors may adjourn any meeting until a quorum is present.
When a quorum is present at any meeting of directors, a majority of the members present shall decide any question brought before such meeting, except as otherwise provided by law, the Restated Articles of Incorporation, or these By-Laws.
Section 6.      Compensation of Directors
Directors shall receive such compensation, including reimbursement of expenses, for serving as members of the Board of Directors and for attendance at each meeting of the Board of Directors, and members of committees of the Board of Directors shall receive such compensation, including reimbursement of expenses, for serving as members of a committee and for attendance at each meeting of a committee, as the Board of Directors shall from time to time prescribe.
Section 7.      Chairman of the Board
The Chairman of the Board shall preside at meetings of the Board of Directors and of the stockholders. He shall, subject to the approval of the Board of Directors, submit a report to the stockholders of the Corporation for each fiscal year. He shall perform such other duties as the Board of Directors may from time to time prescribe.

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ARTICLE VI
Officers
Section 1.      Numbers and Titles
The officers of the Corporation shall be a Chief Executive Officer, a Chief Financial Officer, a Secretary, a Treasurer and a Controller and may also include one or more Senior Executive Vice Presidents, one or more Executive Vice Presidents, one or more Senior Vice Presidents, and one or more Vice Presidents; all of whom shall be appointed by the Board of Directors or a duly appointed officer authorized by resolution of the Board of Directors to appoint officers. The Board of Directors, or a duly appointed officer authorized by resolution of the Board of Directors to appoint officers, may from time to time appoint such other officers, including one or more Assistant Secretaries, Assistant Treasurers, and Assistant Controllers as they shall deem necessary.
The Chief Executive Officer shall be a member of the Board of Directors, but the other officers need not be members of the Board.
Section 2.      Tenure of Office/Removal of Officers
Officers of the Corporation shall hold their respective offices until their successors are chosen and qualified or until their retirement, resignation or death, provided, however, that any officer may be removed from such office during such term by the Board of Directors, with or without cause, whenever in its judgment the best interests of the Corporation will be served thereby. Any officer appointed by any other officer duly authorized as provided in Section 1, may be removed by any other such officer, at any time, with or without cause.
Section 3.      Duties of Officers
a.      Chief Executive Officer
The Chief Executive Officer shall have overall responsibility for supervision of the Corporation and shall report to the Board of Directors. He shall see that the provisions of the By-Laws, all votes of the stockholders and all orders and resolutions of the Board of Directors are carried into effect.
He shall preside at meetings of the stockholders in the absence of the Chairman of the Board.
Unless otherwise directed by the Board of Directors, he or his designee shall have power to vote, and to appoint proxies to vote, and otherwise act on behalf of the Corporation, at any meeting of stockholders or holders of other securities or other ownership interests of or with respect to any action of stockholders or holders of such securities or ownership interests, of any other corporation or other entity in

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which the Corporation may hold securities or other ownership interests and to otherwise exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities or other ownership interests in such other corporation or other entity.
He shall perform such other duties as the Board of Directors may from time to time prescribe.
b.      Chief Financial Officer
The Chief Financial Officer shall be the principal financial officer of the Corporation, shall report to the Chief Executive Officer and shall have overall responsibility for supervision of the financial operations of the Corporation.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
c.      Multiple Offices
The same person may hold more than one of the offices described in Section 1 above as the Board of Directors may prescribe.
d.      Senior Executive Vice Presidents
The Senior Executive Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
e.      Executive Vice Presidents
The Executive Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
f.      Senior Vice Presidents
The Senior Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
g.      Vice Presidents
The Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.

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h.      Secretary
The Secretary shall be Secretary of and shall attend, or a person designated by him shall attend, all meetings of the stockholders, the Board of Directors and all committees thereof. He, or such designated person, shall record all of the proceedings of such meetings in books kept for that purpose.
He shall be custodian of the corporate seal and shall have the power to affix it to any instrument requiring it and to attest the same.
He shall cause to be maintained a stock transfer book and such other books as the Board of Directors may from time to time determine.
He shall serve all notices required by law, by these By-Laws, or by resolution of the Board of Directors.
He shall, together with the Chief Executive Officer, sign certificates for shares of the Corporation.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
i.      Treasurer
The Treasurer shall have the management and custody of the funds and securities of the Corporation and he or persons designated by him, or by others so authorized by the Board of Directors, shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors or by persons authorized by the Board of Directors to make such designations.
He shall receive and disburse the funds of the Corporation for corporate purposes and shall render to the Board of Directors and the Chief Executive Officer, whenever they may require it, an account of all his transactions as Treasurer.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
j.      Controller
The Controller shall keep full and accurate accounts of all assets, liabilities, commitments, receipts, disbursements, and other financial transactions of the Corporation, including those of subsidiaries of the Corporation, in books belonging to the Corporation, and shall perform all other duties required of the

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principal accounting officer of the Corporation, and shall render to the Board of Directors and the Chief Executive Officer, whenever they may require it, an account of the financial condition of the Corporation.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
k.      Assistant Secretaries
The Assistant Secretaries shall perform such of the duties of the Secretary as the Chief Executive Officer or the Secretary, or an officer with the authority to appoint an Assistant Secretary may from time to time prescribe and such other duties as the Board of Directors, or an officer with the authority to appoint an Assistant Secretary may from time to time prescribe.
l.      Assistant Treasurers
The Assistant Treasurers shall perform such of the duties of the Treasurer as the Chief Executive Officer or the Treasurer, or an officer with the authority to appoint an Assistant Treasurer may from time to time prescribe and such other duties as the Board of Directors, or an officer with the authority to appoint an Assistant Treasurer may from time to time prescribe.
m.      Assistant Controllers
The Assistant Controllers shall perform such duties of the Controller as the Chief Executive Officer or the Controller, or an officer with the authority to appoint an Assistant Controller may from time to time prescribe and such other duties as the Board of Directors, or an officer with the authority to appoint an Assistant Controller may from time to time prescribe.
Section 4.      Delegation of Duties of Officers
The Board of Directors may delegate the powers or duties of any officer of the Corporation in case of his absence, disability, death or removal, or for any other reason, to any other officer or to any director.
ARTICLE VII
Stock Certificates
Section 1.      Stock Certificates
Except as otherwise provided by resolution of the Board of Directors or the Restated Articles of Incorporation or as permitted by law, every holder of stock in the Corporation shall be entitled to have a certificate, representing all shares to which he is entitled, in such form as may be prescribed by the Board of

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Directors in accordance with the provisions of law. Such certificates shall be signed by the Chief Executive Officer and by the Secretary or an Assistant Secretary; provided, however, that where any such certificate is signed by a party other than an officer of the Corporation, such as a transfer agent or transfer clerk, and by a registrar, the signatures of the Chief Executive Officer, Secretary, or Assistant Secretary may be facsimiles. All certificates shall be counter‑signed and registered in such manner as the Board of Directors from time to time may prescribe, and there shall be impressed thereon the seal of the Corporation or imprinted thereon a facsimile of such seal.
In case any officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, such signature shall be deemed to be valid and such certificate may be issued by the Corporation with the same effect as if he were such officer at the date of its issuance.
Section 2.      Transfer of Certificated Shares of Stock
Shares of certificated stock of the Corporation may be transferred by delivery of the stock certificate, accompanied either by an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign, and transfer the shares on the books of the Corporation, signed by the person appearing on the certificate to be the owner of the shares represented thereby; and such shares shall be transferable on the books of the Corporation upon surrender thereof so assigned or endorsed. In the case of a series of Preferred Stock, certificated shares of Preferred Stock may be transferred by delivery of the stock certificate, as described above, or by such other method as may be set forth in a statement of resolution establishing such series of Preferred Stock. The person registered on the books of the Corporation as the owner of any shares of stock shall be deemed by the Corporation to be the owner thereof for all purposes exclusively and shall be entitled as the owner of such shares, to receive dividends and to vote as such owner with respect thereto.
Section 3.      Treasury Stock
Any shares of stock in the Corporation which may be redeemed, purchased, or otherwise acquired by the Corporation after the issuance thereof, shall have no voting rights and shall not participate in any dividends or allotments of rights while such stock is held by the Corporation.

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ARTICLE VIII

Depositories and Checks

Depositories of the funds of the Corporation shall be designated by the Board of Directors or a duly authorized committee thereof or by persons authorized by the Board or such a committee to make such designations; and all checks on funds shall be signed by such officers or other employees of the Corporation as the Board, or a duly authorized committee thereof, from time to time may designate, or by persons authorized by the Board or such a committee to make such designations.

ARTICLE IX

Fiscal Year

The fiscal year of the Corporation shall begin on the first day of January and end on the 31st day of December in each year.
ARTICLE X

Dividends
The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Restated Articles of Incorporation.
ARTICLE XI

Waiver of Notice
Any notice required to be given by law, by the Restated Articles of Incorporation, or by these By-Laws may be waived in writing signed by the person entitled to such notice and delivered to the Corporation, whether before or after the time stated therein, except that attendance of a person at a meeting shall constitute a waiver of notice of such meeting unless such attendance is for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
A director of the Corporation who is present at a meeting of the Board of Directors (or a committee thereof) at which action on any corporate matter is taken shall be presumed to have assented to the action taken

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unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest.
ARTICLE XII
Indemnification of and Advance to Officers, Directors, Employees and Agents
Section 1.      Indemnification     
The Corporation shall, and does hereby, indemnify to the fullest extent permitted or authorized by current or future legislation or current or future judicial or administrative decisions (but, in the case of any such future legislation or decisions, only to the extent that it permits the Corporation to provide broader indemnification rights than permitted prior to such legislation or decisions), each person (including here and hereinafter the heirs, executors, administrators or the estate of such person) who was or is a party, or is threatened to be made a party, or was or is a witness, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), against any liability (which for purposes of this Article shall include any judgment, settlement, penalty or fine) or cost, charge or expense (including attorneys’ fees) asserted against him or incurred by him by reason of the fact that such indemnified person (1) is or was a director, officer or employee of the Corporation or (2) is or was an agent of the Corporation as to whom the Corporation has agreed to grant such indemnity or (3) is or was serving, at the request of the Corporation, as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise (including serving as a fiduciary of any employee benefit plan) or is serving as an agent of such other corporation, partnership, joint venture, trust or other enterprise as to whom the Corporation has agreed to grant such indemnity. Each director, officer, employee or agent of the Corporation to whom indemnification rights under this Section 1 of this Article have been granted shall be referred to as an “Indemnified Person”.
Notwithstanding the foregoing, except as specified in Section 3 of this Article, the Corporation shall not be required to indemnify an Indemnified Person in connection with a Proceeding (or any part thereof) initiated by such Indemnified Person unless such authorization for such Proceeding (or any part thereof) was not denied by the Board of Directors of the Corporation prior to sixty (60) days after receipt of notice thereof from such Indemnified Person stating his intent to initiate such Proceeding and only upon such terms and conditions as the Board of Directors may deem appropriate.
Section 2.      Advance of Costs, Charges and Expenses
Costs, charges and expenses (including attorneys’ fees) incurred by an officer, director or employee who is an Indemnified Person in defending a Proceeding shall be paid by the Corporation to the fullest extent

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permitted or authorized by current or future legislation or current or future judicial or administrative decisions (but, in the case of any such future legislation or decisions only to the extent that it permits the Corporation to provide broader rights to advance costs, charges and expenses than permitted prior to such legislation or decisions) in advance of the final disposition of such Proceeding, upon receipt of an undertaking by or on behalf of the Indemnified Person to repay all amounts so advanced in the event that it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article and upon such other terms and conditions, in the case of agents as to whom the Corporation has agreed to grant such indemnity, as the Board of Directors may deem appropriate. The Corporation may, upon approval of the Indemnified Person, authorize the Corporation’s counsel to represent such person in any Proceeding, whether or not the Corporation is a party to such Proceeding. Such authorization may be made by the Chairman of the Board, unless he is a party to such Proceeding, or by the Board of Directors by majority vote, including directors who are parties to such Proceeding.
Section 3.      Procedure for Indemnification and Advancement of Costs, Charges and Expenses
Any indemnification or advancement of costs, charges and expenses under this Article shall be made promptly and in any event within sixty (60) days upon the written request of the Indemnified Person. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnified Person in any court of competent jurisdiction, if the Corporation denies such request under this Article, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such Indemnified Person’s costs, charges and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action that the claimant has not met the standard of conduct, if any, required by current or future legislation or by current or future judicial or administrative decisions for indemnification (but, in the case of any such future legislation or decisions, only to the extent that it does not impose a more stringent standard of conduct than permitted prior to such legislation or decisions), but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or any committee thereof, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct, if any, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors or any committee thereof, its independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

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Section 4.      Non-Exclusivity; Survival of Indemnification and Advancement of Costs, Charges and Expenses; Contractual Nature
The indemnification, and the right to advancement of costs, charges and expenses, provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any agreement, vote of stockholders or disinterested directors or recommendation of counsel or otherwise, both as to actions in such person’s official capacity and as to actions in another capacity while holding such office, and shall continue as to an Indemnified Person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, administrators and estate of such person. The Board of Directors shall have the authority, by resolution, to provide for such indemnification of, and such advancement of costs, charges and expenses to, employees or agents of the Corporation or others and for such other indemnification of, and such other advancement of costs, charges and expenses to, directors, officers, employees or agents as it shall deem appropriate.
     All rights to indemnification and to advancement of costs, charges and expenses, under this Article shall be deemed to be a contract between the Corporation and each Indemnified Person who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of Florida corporation law or any other applicable laws shall not in any way diminish any rights to indemnification of, or to advancement of costs, charges and expenses to, such Indemnified Person, or the obligations of the Corporation arising hereunder, then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including without limitation, the right to indemnification with respect to Proceedings commenced after such repeal or modification to enforce this Article XII with regard to Proceedings arising out of acts, omissions or events arising prior to such repeal or modification for claims relating to matters occurring prior to such repeal or modification.
Section 5.      Insurance, Contracts and Funding
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including serving as a fiduciary of an employee benefit plan), against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article XII or the applicable provisions of Florida law. The Corporation may enter into contracts with any director, officer, agent or employee of the Corporation in furtherance of the provisions of this Article XII, and may create a trust fund, grant a security

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interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect the advancing of expenses and indemnification as provided in this Article XII.
Section 6.      Savings Clause
If this Article or any portion hereof shall be invalidated or held to be unenforceable on any ground by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, then the Corporation shall nevertheless (i) indemnify each Indemnified Person as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement and (ii) advance costs, charges and expenses in accordance with Section 2 of this Article XII, in each case with respect to any Proceeding in connection with which he or she is an Indemnified Person, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated or held to be unenforceable and as permitted by applicable law.
ARTICLE XIII
By-Law Amendment
Except as otherwise provided in the Restated Articles of Incorporation, the Board of Directors shall have the power to adopt, alter, amend and repeal the By-Laws of the Corporation (except insofar as the By-Laws of the Corporation adopted by the stockholders shall otherwise provide). Any By-Laws made by the stockholders may prescribe that they may not be altered, amended or repealed by the Board of Directors. Any By-Laws made by the Board of Directors under the powers conferred hereby and by the Restated Articles of Incorporation may be altered, amended or repealed by the Board of Directors or by the stockholders. Amendments to the By-Laws (including any amendment to this Article XIII) shall be effected as follows:
a.      By Action of the Board of Directors
Unless a greater vote is specifically required by the laws of the State of Florida, or a greater or different vote or a vote of stockholders is required by the provisions of the Restated Articles of Incorporation, the Board of Directors may alter, amend or repeal these By-Laws, or adopt such other By-Laws as in their judgment may be advisable for the administration or regulation of the management and affairs of the Corporation, to the extent not inconsistent with the laws of the State of Florida or the Restated Articles of Incorporation, only upon the affirmative vote of at least 75% of the total number of directors as fixed in accordance with Section 1 of Article V of these By-Laws.

37

b.      By Action of the Stockholders
Unless a greater vote is specifically required by the laws of the State of Florida, or a greater or different vote is required by the provisions of the Restated Articles of Incorporation, the stockholders may alter, amend or repeal these By-Laws, or adopt such other By-Laws as in their judgment may be advisable for the administration or regulation of the management and affairs of the Corporation, to the extent not inconsistent with the laws of the State of Florida or the Restated Articles of Incorporation, at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose in accordance with the provisions of these By-Laws), only upon the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action. Notwithstanding the foregoing and anything contained in these By-Laws to the contrary, Section 4 of Article IV of these By-Laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of at least 75% of the voting power of the then outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
ARTICLE XIV
Continuing Effect of By-Law Provisions
Any provision contained in these By-Laws which, at the time of its adoption, was authorized or permitted by applicable law shall continue to remain in full force and effect until such time as such provision is specifically amended in accordance with these By-Laws, notwithstanding any subsequent modification of such applicable law (except to the extent such By-Law provision expressly provides for its modification by or as a result of any such subsequently enacted law).

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EXHIBIT 12.1

				
Ryder System, Inc. and Subsidiaries	
Ratio of Earnings to Fixed Charges	
Continuing Operations	
(Dollars in thousands)	
 	 	For the nine months ended September 30, 2016	

EARNINGS:	 	 	
Earnings before income taxes	 	337,185		
Fixed charges	 	144,393		
Add: Amortization of capitalized interest	 	456		
Less: Interest capitalized	 	—		
Earnings available for fixed charges (A)	 	482,034		
 	 	 	
FIXED CHARGES:	 	 	
Interest and other financial charges	 	112,597		
Portion of rents representing interest expense	 	31,796		
Total fixed charges (B)	 	144,393		
 	 	 	
RATIO OF EARNINGS TO FIXED CHARGES (A) / (B)	 	3.34x		

EXHIBIT 31.1
CERTIFICATION
I, Robert E. Sanchez, certify that:
		
1.	I have reviewed this quarterly report on Form 10-Q of Ryder System, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
			
Date:	October 25, 2016	/s/ Robert E. Sanchez	
 	 	Robert E. Sanchez
Chairman and Chief Executive Officer	

EXHIBIT 31.2
CERTIFICATION
I, Art A. Garcia, certify that:
		
1.	I have reviewed this quarterly report on Form 10-Q of Ryder System, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
			
Date:	October 25, 2016	/s/ Art A. Garcia	
 	 	Art A. Garcia
Executive Vice President and Chief Financial Officer	

EXHIBIT 32
CERTIFICATION
In connection with the Quarterly Report of Ryder System, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert E. Sanchez, President and Chief Executive Officer of the Company, and Art A. Garcia, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
		
1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	
		
/s/ Robert E. Sanchez	 	
Robert E. Sanchez
Chairman and Chief Executive Officer	 	
October 25, 2016	 	

	
		
/s/ Art A. Garcia	 	
Art A. Garcia
Executive Vice President and Chief Financial Officer	 	
October 25, 2016