Page | 1

Company: RYDER TRUCK RENTAL, INC.

Conference Title: Ryder System Earnings Release

Conference ID: 1420126

Moderator: Robert S. Brunn

Date: October 29, 2019

Operator: Good morning and welcome to the Ryder System 3rd Quarter 2019 Earnings Release

conference call.

All lines are in a listen-only mode until after the presentation. Today’s call is being recorded. If you

have any objections, please disconnect at this time. I would now like to introduce Mr. Bob Brunn,

Vice President, Investor Relations, Corporate Strategy, and Product Strategy for Ryder. Mr. Brunn,

you may begin.

Robert S. Brunn: Thanks very much. Good morning and welcome to Ryder’s 3rd Quarter 2019 Earnings

conference call. I’d like to remind you that during this presentation, you’ll hear some forward-looking

statements within the meeting of the Private Securities Litigation Reform Act of 1995. These

statements are based on management’s current expectations and are subject to uncertainty and

changes in circumstances. Actual results may different materially from these expectations due to

changes in economic, business competitive, market, political, and regulatory factors.

More detailed information about these factors is contained in today’s Earnings Release and

arranged files with the Securities and Exchange Commission. This conference all also includes

certain non-gap financial measures. You’ll find reconciliations of each non-gap measure to the

nearest gap measure in the written presentation accompanying this call which is available on our

Website in investors.ryder.com.

Presenting on today’s call are Robert Sanchez, Chairman and Chief Executive Officer and Scott

Parker, Executive Vice President and Chief Financial Officer. Additionally, John Diaz, President of

Page | 2

Global Fleet Management Solutions and Steve Sensing, President of Global Supply Chain

Solutions and Dedicated Transportation Solutions are on the call today and available for questions

following the presentation. At this time, I’ll turn the call over to Robert.

Robert Sanchez: Good morning everyone and thanks for joining us. I’m going to start by covering the

actions that we took this quarter to lower accounting residual value estimates on vehicles in our

fleet. I’ll start with some background on the use vehicle market, provide an overview of the change,

and discuss why we believe this and other actions position Ryder well for the future. We’ll then

briefly recap our 3rd quarter results and discuss our current outlook for the business. With that, let’s

begin with Page 4.

Our value proposition is strong and continues to be driven by long-term outsourcing trends in the

large transportation logistics markets. As discussed in our Press Release today, we expect 2019

and 2020 earnings to be negatively impacted by the continued use vehicle downturn. In the coming

slides, I’m going to discuss a change in residual value estimates we’ve made as a result of market

conditions and the associated increase in depreciation we’ll see in the near term. The effect of this

change in estimate, however, lowers the likelihood and magnitude of negative earnings impacts

from used vehicles sales in future years.

We expect returns to organically improve as the deprecation impact from these changes lessens

in each quarter going forward. And as the majority of underperforming leases written prior to 2014

exit the fleet over the next 18 months or so. We begin to increase rates in our leases in 2014. These

leases with returns that are expected to be at or above our target will become an increasing part of

our portfolio going forward. We’re strongly focused on accelerating initiatives to improve return on

capital and all options on the table in order to achieve this key objective.

I’ll cover several of our ROC improvement initiatives including additional lease pricing actions, cost

reductions, improved execution in our used vehicles sales, and addressing lower performing

Page | 3

accounts. Our new CFO, Scott Parker, is helping in this regard by providing a fresh view of our

business model in helping to identify opportunities for improvement. Additionally, our new President

of FMS, John Diaz, is also identifying return enhancement opportunities, leveraging his proven

finance and operations execution experience.

Turning to Page 5, this chart illustrates Ryder’s used Class A tractor sales prices as a percentage

of their original cost over the past 20 years. As you can see, the used vehicle market is cyclical and

is driven by changes in supply and demand, technology, and other factors. As noted on the chart,

there was steep increase in tractor pricing during 2012 and 2015, driven by a lack of supply in the

market, and a change in engine technology. Following the mid-2015 peak, tractor proceeds

declined sharply through 2017 to below our accounting residuals as supply entered the market and

the freight environment slowed.

The used tractor market showed signs of stabilization and improvement during 2018 and early ’19.

Based on these trends, we had previously anticipated that market prices and the accounting

residual values used for depreciation were moving toward alliance. Thereby reducing the likelihood

of losses at the time of sale or the need for additional accelerated depreciation in future years.

Turning to Page 6, as we discussed on the 2nd quarter call, this trend began to change in June

when we started to see softening market conditions for used tractors. Used tractor conditions

continued to worsen in the 3rd quarter and we now expect this downward trend to continue in the

near term. This triggered a review and lowering of residual value estimates on power vehicles which

is intended to reflect this downturn and our lowered outlook.

For those of you who are less familiar with this area, Page 7 highlights some relevant aspects of

how we handle residual value estimates and depreciation. We review residual value estimates and

the expected useful lives of vehicles at least annually. Changes in these items may impact our

financials in several ways. First, we estimate residual values for vehicles initially at the inception of

a lease. And then adjust those values over the duration of the lease as needed based on a number

Page | 4

of factors to reflect our long-term view of used vehicles sales prices. This determines the vehicle’s

depreciation which is taken on a straight-line basis when the vehicle is in operation. We refer to

this as policy deprecation.

Second, as vehicles approach the end of their useful life, if the market value is expected to below

book value. We may record additional depreciation to better align these values with anticipation of

the upcoming sale. This adjustment if needed is based on our near-term view of market values. We

refer to this as accelerated depreciation. Finally, when a vehicle is no longer used in operation and

has moved to our used vehicle sales center. We record a downward adjustment to vehicle, to the

vehicle’s value, if its expected market value is below its estimated residual value at that time. We

do not record an upward adjustment if the market value is above the estimated residual value.

Instead those vehicles would see a gain recorded at the time of sale. We refer to this as valuations

adjustments.

For your reference, the Appendix to this presentation includes some additional detail regarding the

company’s residual value and depreciation policy. Page 8 notes how these items will be impacted

by our new estimates of residual values. As reminder, we last adjusted residual values on January

1st in according with our standard, annual review. Effective July 1st, we further lowered our long-

term view of residual values for vehicles expected to be sold starting in late 2021 to reflect or refit

multi-year market trends and our outlook. This view now excludes the peak pricing year of 2015.

Our review of residual values also now incorporates our expectation for a near-term use vehicle

downturn.

This revision to our view of long-term residuals will be reflected as a policy deprecation impact. We

also lowered our near-term view of residuals values for vehicles expected to be sold through late

2021. The estimated residuals on these vehicles have been lowered to below policy depreciation

levels to reflect our expectations for a continued, near-term vehicle downturn and increased

wholesaling activity. Revisions to our view of near-term residuals are reflected as accelerated

Page | 5

depreciation. The largest impact or these residual estimates changes is for Class A tractors. We

also lowered truck residuals although to lesser extent to align with market conditions we saw in the

quarter in our revised outlook.

Page 9 illustrates the levels of our new residual value estimate on tractors for policy deprecation

purposes as compared to historical sales prices. The estimate no longer includes the peak sales

year of 2015 and incorporates our outlook for a continued market downturn in the near term. The

change in estimated residuals, policy depreciation for all powered vehicles types represents an

18% reduction from the prior estimate primarily driven by a reduction in tractors. This impact will be

recognized over the remaining life of the vehicles. The estimates used for accelerated depreciation

which is applied to vehicles to be sold through late 2021 is at an even lower level than the policy

values shown here.

The next page details the impact by quarter and year of our change in residual estimates on both

policy and accelerated depreciation. As you can see, a negative impact is most significant in the

3rd quarter of 2019 with declining impacts in each quarter thereafter. A total of 177 million in

additional depreciation was taken this quarter. This includes 125 million of accelerated depreciation

reflecting our updated view of near-term residuals and 52 million of policy depreciation impact

reflecting our updated view of long-term residuals.

Overall, this change resulted in earlier recognition of depreciation in 2019 and 2020 that would

have been recognized in 2021 or later years under our historical estimation practice. Based on

these lower residual value estimates and our current market outlook, going forward we expect to

reduce our need for valuation adjustment to mark down vehicles going into the used vehicle

centers. Or, for accelerated deprecation beyond the amounts projected through 2020. Given the

impact of this change, we’re further intensifying our focus on a number of areas to improve return

on capital. Let me provide you a few examples.

Page | 6

First, we’ve taken lease pricing actions to improve returns. As some of you will recall well before

the current change in residual estimates for accounting purposes. We lowered the residuals we

were using for pricing purposes. Beginning in late 2017, we increased lease rates in several stages

on all powered vehicles by reducing residual value assumptions used for pricing purposes. Tractor

residuals used for pricing purposes are currently at historically low levels and we continue pursue

opportunities to further optimize pricing to drive higher returns going forward. Page 12 provides

insights into our expectations for improving leased performance over time. This is anticipated

because the pricing actions we’ve already taken are expected to manifest in higher portfolio returns

as the portfolio turns over into more recent model years.

Leases assigned prior to 2014 are now expected to result in returns below our target level for two

reasons. First, they’ve been negatively impacted by maintenance costs on the early model years

of the post-2010 emissions technology that turned out to be higher than anticipated. Second, these

vehicles as they come off lease are now expected to be sold in a down market at below priced

levels. The negative G&L impact of these vehicles will largely end by 2020 as these vintages

account for the majority of the accelerated depreciation now projected. Leases signed between

2014 and 2017 are expected to yield returns at or above our target.

These leases are benefiting from better than priced maintenance costs since we raised pricing

related to maintenance costs several years ago and we’re seeing positive results in that area.

Leases signed aftger 2017 are expected to see returns above our target levels. In addition to better

than priced maintenance performance, these leases are also benefiting from better overall cost

performance and reduced residual value assumptions used for pricing purposes. As a result of our

pricing and cost allocations since 2014, we expect the performance of our lease portfolio to

organically improve over time as the portfolio turns over to more recent and higher returning vintage

years.

Page | 7

In addition to these leased pricing actions, we’re driving a number of other initiatives to improve

return on capital as shown on Page 13. We’re expanding our retail used vehicle network capacity

in order to maximize price. This includes expanding into new retail sales locations and increasing

our inside sales team. Additionally, this year we’re launching an upgraded, later than year we’re

launching an upgraded used vehicle Website which will expand its capabilities and include

facilitating a sales transaction and enhancing the user experience. We’re also exploring structural

options to share residual value risk through partnerships and utilization of capital market

alternatives.

We remain focused on our core, on our cost structure, and are encouraged by our cost savings

initiatives that are ahead of plan, that are on or ahead of plans. Most, the most significant of these

initiatives is the multi-year, $75 million annual maintenance cost savings initiative we announced

earlier this year. I’m pleased to update you that we’re tracking ahead of the 20 million of benefit

that we had projected for 2019 and expect total savings to exceed our original expectation.

Additionally, we’re on track our zero-based budgeting cost savings for this year and anticipate

additional savings opportunities in future years. The team is focused on pruning lower return

accounts and assets to drive higher return on capital over time. We’re also looking to accelerate

growth in the higher return supply chain and dedicated businesses. I’ll turn the call over now to

Scott for a condensed recap of our 3rd quarter 2019 results.

Scott Parker: Thanks Robert. Turning to Page 15, comparable earnings per share from continuing

operations was a -$1.49 for the 3rd quarter, down $3.16 from the prior year. The lots included $3.01

of higher depreciation expense in non-cash item related to the reduced vehicle residual value

estimates. Operating revenue which excludes fuel and subcontracted transportation revenue

increased by 5% to a record $1.8 billion.

Page | 8

Page 16 includes additional financing information for the 3rd quarter. Comparable EBITA was up

12% from the prior year primarily reflecting the earnings contribution from our growing portfolio

contractual lease, dedicated, and supply chain business. The average number of diluted shares

outstanding for the quarter was 52.3 million, down slightly from the prior year. We began

repurchasing shares under a 2-year, 1.5 million share anti-diluted repurchase program in February

2018.

During the quarter, we bought approximately 63 thousand shares at an average price of $51.13.

Excluding pension costs and other items, our comparable tax rate was -7% reflecting the impact

from residual value estimate changes. The return on capital spread was -140 basis points, our ROE

was 5.5%, including the impacts from the residual value estimate changes. I’ll now turn to Page 17

and discuss key trends we saw in each of the business segments.

Fleet management solutions operating revenue which excludes fuel increased 7% organically with

growth in all product lines. Choice lease revenue increased 9% primarily due to fleet growth and to

a lesser extent, higher rates on replacement vehicles. The lease fleet increased by 2,900 vehicles

during the quarter and then by 10,900 year to date. Reflecting outsourcing trends and ongoing

sales and marketing initiatives. This includes a higher number of vehicles awaiting out service for

sale due to the increased lease replacement activity this year. Approximately 40% of the lease fleet

growth is coming from customers new to outsourcing as we continue to penetrate the non-

outsourced market.

Commercial rental revenue was up 2% driven by higher pricing. Rental utilization was 74%, down

from an unusually high 80.4% in the prior year primarily reflecting lower tractor demand. We worked

throughout the quarter and continue to work on adjusting our fleet size to meet current demand

levels that are below our original expectations for the year. FMS earnings before tax showed a loss

of $109 million primarily reflecting higher non-cash depreciation expense of $177 million due to the

Page | 9

impact of the residual value estimate changes as well as lower rental utilization. Lease results

benefiting from fleet growth while both lease and rental benefiting from lower maintenance costs.

Turning to Page 18, used vehicle results for quarter were down due to lower pricing and increased

wholesaling activity. We sold 5,300 used vehicles during the quarter, up 29% versus the prior year,

and up 4% sequentially. Used vehicle inventory totaled 7,300 vehicles at quarter end within our

target range of 7 to 9,000 vehicles. Inventory increased by 1,100 vehicles compared to the prior

year reflecting a greater number of units coming off lease this year as expected. Used vehicle

inventory decreased 1,000 vehicles sequentially. Proceeds per vehicle sold were down 8% for

tractors and down 10% for trucks compared to a year ago. Sequentially, tractor pricing was down

15% and truck pricing was down 2%.

Turning to supply chain on Page 19, operating revenue decreased 2% driven by previously

announced lost business partially offset by higher pricing. Earnings before tax were down 5% due

to a $3.8 million impact from residual value estimate changes from vehicles used by supply chain

business. The decline was partially offset by improved operating performance. On Page 20, our

dedicated business grew strongly with operating revenue up 11% driven by new business. Earnings

increased due to revenue growth and improved operating performance partially offset by a $7

million impact from residual value estimate changes for vehicles used by DPS.

Turning to Page 21, year to date gross capital expenditures totaled $3 billion, up by $700 million

from the prior year. This increase reflects higher planned investments to grow and refresh the

contractual use fleet while rental CAPEX declined. Year to date proceeds from sales were up $111

million including $43 million from a sale of property in the 2nd quarter. Net capital expenditures

increased by $591 million to 2.6 billion reflecting our contractual lease growth.

Turning to the next page, we generated cash from operating activities of nearly 1.6 billion year to

date, up approximately 300 million or 25%. Pre-cash flow was -$965 million year to date, down

Page | 10

from the prior year of -633 million. Primarily reflecting increased capital spending to grow the lease

fleet and normalized levels of lease and rental replacement spending. Debt to equity increased to

313% due to capital spending and a reduction in equity due to an increased depreciation from the

residual value estimate change.

Balance sheet leverage is above our target of 250 to 300% and is expected to increase to around

330% at year end. Primarily due to the earnings impact from the residual value estimate changes.

Leverage is antipcated to come down over time as we move past the near-term impacts of the

residual value to change. As such we do not expect the current above target leverage to limit our

ability to support profitable growth in our contractual lease businesses. At this point I’ll hand it back

to Robert to he can cover the outlook.

Robert Sanchez: Thanks Scott. Our 4th quarter comparable EPS forecast ranges from a loss of 3 cents to

a profit of 7 cents and includes a 95-cent impact from the change in residual value estimates. The

impacts from a labor strike at a customer in our supply chain segment and weaker rental demand

combined with elevated vehicle out servicing activity. Overall, we continue to benefit from long-term

outsourcing trends and transportation and logistics as well as our sales and marketing initiatives.

We expect strong full-year sales in our contractual lease dedicated in supply chain businesses

although below last year’s record levels. The slowdown in our transactional commercial rental and

used vehicle businesses that we experienced in the 3rd quarter is expected to continue primarily

driven by softer freight conditions.

Although the negative impact from our change in residual value estimates will continue to be

significant in the 4th quarter. The severity of the impact will be less than in the 3rd quarter and is

anticipated to further decline each quarter going forward. In supply chain, revenue is forecasted to

decline through midyear 2020 reflecting previously announced lost business. And then return to

target growth levels in the 2nd half of 2020 as new business sold ramps up. Segment earnings in

Page | 11

Q4 are expected to be negatively impacted by the recently ended labor strike at a large Ryder

customer. And by the impact of residual value estimate changes on vehicles used in this segment.

These items are anticipated to be partially offset by improved operating performance and dedicated

revenue growth is expected to decelerate in the 4th quarter to mid-single digit levels following a

record sales year in 2018. The negative earnings impact from residual value estimate changes on

vehicles used in this segment is expected to be largely offset by improving operated performance.

On a full year basis, revenue growth should be above target while earnings are expected to be

within target.

In fleet management earnings from year to date leased fleet growth will be negatively impacted as

we prepare for the sale of a large number of vehicles coming off leased contracts. In rental, we’re

anticipating weaker demand to continue particularly for tractors and expect to right-size the fleet to

better align with market conditions by early next year. Looking ahead to 2020, we expect lease fleet

growth to moderate due to lower OEM production, the clearing of vehicles waiting to be out

serviced, and our enhanced focus on return on capital opportunities. Expected higher, expected

headwinds from used vehicles sales are largely reflected in the revised residual value estimates

and related depreciation expense.

Overall, our work to downsize the rental fleet and move off these vehicles to the out serviced

process will pressure 4th quarter earnings. However, we believe these actions along with the

changes in residual value estimates we’ve made will better position us for 2020 and beyond. That

concludes our prepared remarks. So, Operator, please open up the line for questions. In order to

give everyone an opportunity, please limit yourself to one question each. If you have additional

questions, you’re welcome to get back in the queue and we’ll take as many calls as we can.

Operator?

Page | 12

Operator: Thank you. And if you would like to ask a question, please signal by pressing Star 1 on your

telephone keypad. If you’re using a speakerphone, please make sure your mute function is turned

off to allow your signal to reach our equipment. Once again, press Star 1 to ask a question. We’ll

pause for just a moment to allow everyone an opportunity to signal for questions. We’ll take our

first question from Ben Hartman from Baird. Please go ahead.

Ben Hartman: Hey, good morning buys.

Robert Sanchez: Hey, good morning Ben.

Ben Hartman: Robert, kind of a thorough overview here. But I guess in the spirit of one question, as we

think about Slide 13 in the key areas of ROC improvement. The experience within FMS and lease

portfolio issues in recent years and then Item Number 5, Accelerating Growth in the Higher Return

Businesses. As you think about the next cycle, the next several years, how much of it is just

accelerating growth in that business? As opposed to making a conscious effort to reduce exposure

within the FMS side and really shifting this business in a meaningful manner towards those higher

return segments? In other words, is it just growth on the SCS, DTS side that you see, or do you

intend to reduce the size of this FMS business going forward?

Robert Sanchez: Yes. Ben, that’s a good question. Look, the returns that we are seeing in the leased

portfolio as you saw over the recent years are good returns and within the targets of what we’re

looking for. So, our goal is with this more, with this new cost model, the cost model that we have to

continue to look for opportunities to sell business and grow that business. We think it’s a good

business to be in, it’s a good return business. Now having said that, you know, part of this process

going forward as we are looking to prune accounts potentially that may be underperforming within

each of those model years. Which that in of itself will slow growth down some.

Page | 13

As I look at OEM production for next year, that’s going to be less certainly than this year. So that’s

going, there’s going to be fewer at bat, so we’re going to see some slowing there. So, I think what

you’re going to have is some natural slowing of growth in the choice lease business. And then our

goal is really to find ways to accelerate the growth in that other supply chain and dedicated

business. By things like allocating more salespeople to it, looking for additional opportunities to

really enhance the growth levels we’ve seen there and improve the overall return to the company.

Ben Hartman: Thank you. I’ll get back in the queue.

Robert Sanchez: Okay.

Operator: And ladies and gentlemen if you find that your question has been answered, you may remove

yourself from the queue by pressing the Star key followed by the digit 2. We will take our next

question from Scott Group with Wolfe Research. Please go ahead.

Scott Group: Hey, thanks. Morning guys.

Robert Sanchez: Morning Scott.

Scott Group: So, can you say how much of a further decline in used truck pricing you’ve assumed today?

I guess, I’m trying to understand, how much more of a used truck hit can we face before we need

to think potentially about additional policy or accelerate depreciation adjustments. And then, you

know, I guess with that given, I wonder what this means for losses on sales? So, you’re sort of

doing 70 million of losses this year, give or take. Like what’s a reasonable way to think about losses

next year? Similar with this year, worse, smaller, maybe with what you’ve done, maybe we’re not

having losses on sales this year? I don’t know how to think about losses because I think that’s

separate from what you laid out in Slide 10.

Page | 14

Robert Sanchez: Yes. Scott, on Slide 9 we showed you that we were, overall, we brought estimates down

18% across all the power vehicles. But obviously that’s much more heavily weighted toward Class

A, so Class A was a bigger number. And then for accelerate, that’s for policy depreciation. For

accelerated, we went beyond that to a lower number. So, if you looked at Slide 9, you can see that

below that X you’re now looking at pretty historically low levels. I won’t get into the exact numbers

only because of the market conditions and things like that. But I think what you’re seeing is we’ve

taken a pretty big bite of the apple here and bringing those residuals down to what we see, what

we except really over the next 18 months or so.

So, as your second part of your question around gains and losses. Yes, the change we’ve made

here we expect will incorporate any losses going forward. So, we wouldn’t expect to see a lot of

losses or valuation adjustments in addition to what you’re seeing here on accelerated and policy

depreciation.

Scott Group: Just so I’m clear, you’re assuming for the accelerated piece for the next years, you’re

assuming some further drop in used truck pricing from current levels, is that right?

Robert Sanchez: Yes. Yes. And we are…

Scott Group: But you’re not…

Robert Sanchez: Go ahead.

Scott Group: But you’re not saying how much meaning like, is it 5% further from here, is it 20%, closer to

one versus the other? Maybe you don’t want to say the exact number for, you know, market

purposes. But like, I just want to get a sense like if you’ve done enough or not?

Page | 15

Robert Sanchez: Scott, if you look at Slide, the Slide 9 where we had, we kind of showed what our policy

depreciation is? The residual balance for policy depreciation is relative to history. You can see it’s

actually below where Q3 ended so that gives you an idea of what we’re expecting for going forward.

And we’re using for accelerated is below that X so we’re, you know, anything in that range, we’re

at historically low levels for prices as a percent of original cost.

Scott Group: Okay. That makes sense. All right. I’m going to get back in queue.

Operator: Our next question will come from David Ross with Stifel. Please go ahead.

David Ross: Yes. Good morning gentlemen.

Robert Sanchez: Hey David.

David Ross: Hey, I just, a question again on the depreciation piece. In the past we’ve talked about not

being able to accelerate more depreciation than trucks that are coming off of their lease contracts.

The idea being that their cashflow’s not impaired and so there was, I guess, some accounting

disconnect where you weren’t able to change the deprecation policy on a truck that’s going to be

sold in 2024. It’s seems like that’s changed and so that’s what this policy depreciation is that you

are able to take, you know, a one-time reset of the whole fleet.

Robert Sanchez: No. No. No. No. No. David, this is, this is, none of this is an impairment change. These

are changes in residual estimates that increase the depreciation. So, accelerated depreciation

number is basically what we’re doing is we’re taking every vehicle that we think will be sold to late

2021. And we are depreciating it to a new lower residual value over the remaining life of that vehicle.

So, obviously there’s, you’re taking all of that adjustment and residual value over, you know, a year,

two-year period. So, a very short period of time.

Page | 16

The policy is basically just saying for the rest of the vehicles that are going to come in after 2021 to

be sold. We’re now saying rather than, you know, waiting until over time we get there. We’re saying,

look, we believe that the market next year is going to continue to be down. We really looked, we

really created, we really looked out at what we think those vehicles will sell for in the future. And

we’ve made an adjustment to those residual values based on our, on a recent multi-year trend in

our outlook and that’s that adjustment. So again, it’s adjustment to residual value which increased

depreciation for the remaining life of those vehicles. So, it is not, it is not an impairment of any of

those vehicles.

David Ross: And then, the other, you know, just related question is on the timing. And so, what’s the reason

for a continued change in depreciation, both policy and accelerated through 2020? Rather than

having it all be reflected in 3Q here?

Scott Parker: The units have to, David, have to amortized over the life of that remaining period for those

contracts. So, that’s, this is, when you kind of set the new residual for each one of those assets.

The numbers that we’re showing over the next couple quarters for accelerated to get those units

coming off lease at that time down to the new level that we expect those residuals to sell for.

Robert Sanchez: The timing is based on the end of term of end of life for those vehicles. So, we’re, we’re

moving, we’re depreciating those vehicles to the new residual value over the remaining life. And in

some of the vehicles, the remaining life is 2 months, 1 month, some of it is 18 months, and some

of it is a little further. But that’s really what, what is creating that, the red bar if you will, the red part

of the bar on Slide 10 which is the accelerated depreciation.

David Ross: Okay. Thank you.

Robert Sanchez: Thank you David.

Page | 17

Operator: Our next question will come from Todd Fowler with KeyBanc Capital Markets. Please go ahead.

Todd Fowler: Great. Thanks, and good morning. And so, thanks for all the additional…

Robert Sanchez: Good morning.

Todd Fowler: Good morning. Thanks for the additional detail. You know, I really just want to make sure

that I’m understanding how you’re presenting the information on Slide 10. So, if I just look at what

you’re expecting for the 1st quarter of 2020, you know, the 80 million of policy impact and

accelerated depreciation. Is it right to think about that on an applies to apples basis for the 1st

quarter of ’19 that what you’re reported? Basically the 81 million of EBITA in 1Q ’19 would be close

to zero under this new, with these in the new residuals that you’ve got in place?

Robert Sanchez: Let me make sure I understand right. You’re saying, the 80, well let me explain the 80

million first. The 80 million is for the fleet that we have today. That is being, that is how much

incremental depreciation we’re going to have for those vehicles in the 1st quarter of 2020 versus

where we are today, what we were depreciating I would say before that.

Todd Fowler: Okay. So, maybe another way to ask it, Robert, then off of the 2020 or Scott, if you want to

jump in. That 250 million that you’re showing in Slide 10, that’s 250 million or about $3.50 of higher

depreciation that you’d be expecting in 2020 compared to where you’d be in 2019?

Scott Parker: Yes, that’s correct but it’s all, all these estimated are based on the portfolio as of the 3rd

quarter. So, it does, it does have the additional assets that will be coming on in regards to

subsequent quarters in the 4th quarter and the 1st quarter. But as a static pool as of the 3rd quarter,

that is correct.

Page | 18

Todd Fowler: Okay. Understood. Yes, and Scott, that’s why I wanted to ask the question about, you know,

kind of 1st quarter. So, if we’re thinking about how you’ve laid this out, what you’re basically showing

is as of today, here’s the higher depreciation. And understanding that there’s going to be other

moving part, growth within certain parts of the businesses and pieces like that. But basically, what

you’re saying right now is into 2020 on a full-year basis, there’s 250 million or about $3.50 of

additional depreciation coming?

Scott Parker: Correct. Yes.

Todd Fowler: Okay. Okay. I’ll try to respect that one. I know that other people have other questions, so I’ll

jump back in the line. But thank you again for the time.

Robert Sanchez: Thank you Todd.

Operator: Our next question will come from Matt Brooklier with Buckingham Research. Please go ahead.

Matt Brooklier: Hey, thanks and good morning. So, wanted to talk about commercial rental and your

conviction level in terms of being able to right size that. It’s obviously a tougher used truck market

but if you could just walk us through maybe the timing around, you know, reducing the fleet? When

do you think you get to your targeted level, you know, what are some of the challenges that you

face in a market, a used truck market? That seems incrementally more challenging here. Thanks.

Robert Sanchez: Yes. Remember, Matt, those two things we do. We do move some vehicles to the used

truck market and we also redeploy some vehicles into leases and other applications. So, I’ll let John

give you a little color on the actions that we’re taking to get that right sized by early next year.

John Diaz: Yes. So, Matt, if you look going forward, I think Q4 we certainly are looking to sequentially

reduce our commercial rental fleet. Primarily around the tractor vehicle path where we’ve seen the

Page | 19

biggest decline in demand. And that’s in line with what we’re seeing from a freight perspective as

well as from our choice leased sales activity levels. So, we expect to really take a good swipe at

the tractor class in Q4. That activity will continue in to Q1 and you should see in the early part of

2020, we should be back to parity on some of the historical utilization levels. If you look at utilization

this year versus last, just to remind you Q3 was unusually high last and we continue to add fleet

through Q4. So, Q4 utilization levels from a comparative point of view are also being impacted by

the strong 4th quarter last year.

Mark Brooklier: Okay. That’s helpful. I’ll get back in the queue.

Robert Sanchez: All right. Thanks Matt.

Operator: Moving next we’ll go to Stephanie Benjamin with SunTrust. Please go ahead.

Stephanie Benjamin: Hi. Good afternoon. Thanks for the question.

Robert Sanchez: Hi. Hi Stephanie.

Stephanie Benjamin: I wanted to go back probably best to just reference Slide, probably Slide 9. But I

wanted to think through, I appreciate the extra color, and also, I think just the kind of more color on

the impact going forward and what seems to be a more realistic approach. Can you kind of walk

through what happens given to your point that it is a cyclical business? If say we start to see used

truck pricing improve? I don’t think anyone expects that to be anytime soon but as we look to the

end of 2020 or 2021. How would that impact the expectations that you’ve now adjusted for today?

Just kind of high level, I just want to make sure I’m thinking about it correctly. Thanks.

Robert Sanchez: Sure. We are, as I mentioned, we are forecasting a downturn that would last really

through, call it, middle of 2021. So, and a pretty significant downturn, so any improvement upon

Page | 20

that would, two things would happen. One is you would start to see gains and the second thing is,

we would be able to slow down the accelerated depreciation. And if it went enough, we’d eliminate

the accelerated depreciation so obviously used truck prices going up, a lot of good things happen.

What we’ve tried to do here it really lay out our view of what we think is going to happen over the

next 18 to 24 months.

If it comes in better, than we will, we’ll have opportunities to get some improvement from that. We

do, I also as a reminder, we do want to make sure we’re clear is that our policy. So, the stuff beyond

2021, we are expecting uplift. If where that’s, if you see where that X on, on Page 9? That’s where

we’re expecting residual values to be out beyond 2021. So, we expected to go down from where it

is now over the next couple of years or the next year and a half. And then over time, get back up

to where that X is. Once it gets beyond that, then you’ve got gains, you’ll have more gains and

other good things that could happen.

Stephanie Benjamin: Great. Thanks so much.

Robert Sanchez: Thank you Stephanie.

Operator: Our next question will come from Justin Long with Stephens Inc. Please go ahead.

Justin Long: Thanks, and good morning. So, with all the adjustments to residuals I was wondering if you

could comment on where you anticipate book value to shake out once all of these adjustments are

completed? And then, Robert, a lot of discussion around improvement returns. At what point do

you think you’ll get back to earning a positive spread above your cost of capital?

John Diaz: I’ll take the first one. So, if you look at the end of the 3rd quarter, we ended about net $10.5

billion in regard to revenue of earning equipment. That included the charge that we took in the 3rd

quarter. So, if you kind of look out in the 4th quarter we, you know, kind of looking at another 100

Page | 21

million. And then over the period of time from 2020 to 2025, about another, you know, 500 million.

So, if you just look at the static flow, I mean, as of the 3rd quarter. You know, that would get you

to, you know, somewhere between, you know, around $10 billion, 9.9 to 10 billion for the static flow.

Assuming that the market plays out as Robert just went through.

You know, that our assumptions and our kind of estimates are kind of what transpires that’s kind of

where you would be. If things get a little bit better, than those numbers would be adjusted, and our

estimates would be updated accordingly. Same would be if things got worse than what we

expected.

Robert Sanchez: So, I guess, Justin, to answer your question on ROC, both of when do we go positive

and when do we get to our target. Obviously, we’ve got a lot of work to do still on these ROC

improvement initiatives but assuming that the used truck market behaves the way we’ve outlined

here. You’re looking at probably 2022 when we really have a lot of the depreciation behind us. And

the impact of these return on capital spread actions are really starting to take effect. I would expect

us to start making very good progress though in 2021 as we get a lot of the accelerated depreciation

behind us.

But again, thinking about how do we get back to the targets that we set out and that we want to get

to. It’s probably more of a 2022. Again, I would shoot for positive spread in 2021 and then getting

to the targets around 2022. But again, I would tell you, a lot of work needs to be done and we’ve

got, we’ve got a lot to do in terms of evaluating and executing on some of these initiatives.

Justin Long: Okay. That’s helpful. I appreciate the time.

Robert Sanchez: Thank you Justin.

Operator: Next we’ll go to Brian Ossenbeck with JP Morgan. Please go ahead.

Page | 22

Brian Ossenbeck: Hey guys, good morning. Thanks for taking the question. Maybe just for the longer term,

Robert, can you just talk about the idea of potentially offloading or changing some of the risk through

the residuals? You know, it sounds like you took a couple big steps here to bring down the value

to where you think is appropriate and maybe conservative. But what do you think about this in the

future? Is this something that’s really, you know, flushed out at this point in time? Or is it?

Robert Sanchez: Yes.

Brian Ossenbeck: Excuse me. Or, is it something you’re still exploring in the early stages of?

Robert Sanchez: Yes. Brian, it’s something we’re exploring. Clearly working with, you know, our OEM

partners over time and looking for ways to, again, we’re not looking, we’re not going to offload the

entire residual risk on anyone. But certainly, being able to hedge some of that volatility I think is

important for the model going forward. So, we’re looking at opportunities to work with the OEMs.

Also, working in the capital markets and with some of the other, some other industries have done

it. I’ll let Scott give you a little more color around that.

Scott Parker: Yes. Brian, so if you, you know, we’re working with our bankers. But if, you know, if you look

at some of the other leasing markets. There are clearly different alternatives that can be used and

financial products that can be used to kind of spread or share risk. So, we’re currently looking at

those and evaluating, you know, the cost benefit of each one of those options. And I think we’ll be

able to share more, you know, probably as we get into, you know, next year. Once we kind of

finalized some of those evaluations.

Brian Ossenbeck: Okay. So, it sounds like the current outlook doesn’t include any assumption of these

initiatives being put into place? Any of these new structures, to offset or mitigate some of the risk?

Page | 23

Robert Sanchez: Correct. Yes. These are little longer term.

Brian Ossenbeck: Okay. Thanks for verifying.

Robert Sanchez: Thanks Brian.

Operator: We’ll take our next question from Kevin Sterling with Seaport Global Securities. Please go ahead.

Kevin Sterling: Thank you. Good morning Robert, morning Scott, welcome Scott.

Robert Sanchez: Morning.

Kevin Sterling: Robert, if I can kind of dig in, you know, the equipment that’s prior to 2014 where obviously

it seems like the biggest issue is. If you go to, when you go to sell that equipment, is that, I guess

assume it mainly probably would have to go through the wholesale channel? Or would you have to

sell that equipment overseas? It seems to me that’s kind of the biggest issue I would think where

kind of values have declined the most?

Robert Sanchez: Yes. No. There are retails, Kevin, there’s retail buyers from, some old, some of it has to

go wholesale but clearly, there are retail buyers for this equipment. The challenge for us, I would

tell you first and foremost is, is really the original pricing that we had set as we, as we moved into

this new technology. Maintenance costs ended up coming in higher in those years that it was with

us then we had originally priced. And now we happen to be in a down, used truck market because

it’s not just these vehicles where the foreseen pricing declined. It’s really across the broader market

so there are retail buyers.

These vehicles still have life in them and there are secondary buyers who will buy them and

continue to run them. Primarily probably lower mileage type of operations as most of used truck

Page | 24

do. But I got to tell you the most important part I think I want everybody to know is really our

confidence around the leases that we’ve signed since 2014. The isn’t just a modeling exercise, we

are actually experiencing better than expected maintenance performance on these. And even with

the residuals that we have now forecasted which are significantly lower. We’re still looking at, at or

above, our target returns on those.

So, we feel very confident about that portfolio of leases. We want to continue to refine it and improve

it, so we’re not done. I think every year we want to find ways to improve the return on that lease

portfolio. But we feel very confident about the leases that we’ve signed since 2014 and the returns

that we’re seeing.

Kevin Sterling: Okay. Got you, Robert. Thank you very much. I appreciate that. That’s all I had. Thank you.

Robert Sanchez: Thanks Kevin.

Operator: Our next question will come from Barry Haimes with Sage Asset Management. Please go ahead.

Barry Haimes: Thanks so much. Again, just to make sure I’m understanding this correctly. If, if we go back

to Slide 10 and the bar chart on the lower half where you’ve, you know, laid out the year by year

impact. So, in effect if we took those numbers and did a present value, discounted those back to

the present. That would be the impairment in terms of less cash you will ultimately receive for

disposing of those trucks based on the new assumptions. Is that the right way to think about it?

Scott Parker: I mean, when you’re talking about this, all this is doing is, we’re not discounting back that

piece. We’re setting the ultimate residual we expect to sell those vehicles and then depreciating to

that new, you know, that new residual level. And what’s showing…

Page | 25

Barry Haimes: Right. I understand. But the, but so in effect you’re, you know, by those amounts. When you

ultimately dispose of all of those trucks, you will have less cash than under the old assumptions,

you know, based on the net present value of those amounts, right? I mean, you’re spreading, the

number, you’re spreading it out over time in terms of depreciation. But the ultimate cash recovery

from the vehicle is the net present value sum total of those, of that bar chart, is that correct or not?

Scott Parker: That’s correct. So, that’s from an accounting perspective but at the same point in time as we

showed on the, you know, kind of the, you know, model year perspective. You know, what was

assumed in regard to return for that price residual. You know, it also has to be taken into

consideration as you look at the book, you know, kind of post some of those changes in their most

recent model years.

Barry Haimes: Got it. Thanks very much. Very helpful presentation. Thanks for the slides. Appreciate it.

Operator: Our next question will come from Scott Group with Wolfe Research.

Scott Group: Hey thanks again for the follow up. So, I want to go stick on Slide 10 and just go back to

Todd’s question from earlier. Because it sounded like you were saying 250 million of higher

depreciation now in ’20 versus ’19 and is that right? Or?

Robert Sanchez: No. No.

Scott Group: Would it be the absolute? Okay. I didn’t think so.

Robert Sanchez: No. These are the absolute numbers. These are the absolute numbers.

Scott Group: Okay.

Page | 26

Robert Sanchez: This is, if you looked at it 39 million less, but if you look at the run rate by quarter. The

289 million in ’20 is in the second half of 2019. So, on a run rate basis you’re really at less than half

as you get into 2020. So, these are the absolute numbers.

Scott Group: Okay. So, depreciation’s a tailwind now starting in 2020?

Robert Sanchez: Correct. Depreciation should get year over year, starting in 2020 every year going

forward.

Scott Group: Okay. And then on Slide 12 when you showed in 2012 and ’13 were below target and now

we’re above target. I guess, how do we get comfortable here because it feels like the used truck

issues have been an issue for older trucks. You’re not selling any 2015 trucks yet so how do we

know that you’re actually earning above target on these trucks?

Robert Sanchez: Well, remember we have, what we’ve done is we’ve lowered the residual assumptions in

terms of this analysis. We’ve lowed the residual assumption to really relatively low levels, the levels

what we’ve showed you on Slide 9. So, what we’re saying is that even at those lower residuals, we

expect to be above our target returns. Again, primarily driven by the fact that our maintenance

experience has been significantly better and continues to be significantly better than what we

priced.

Scott Group: Okay.

Robert Sanchez: So, that, that we know, we know for a fact where maintenance costs are coming in. And

at the end of this residual, we’ve lowered the assumption and said even with those lowered

assumptions, we’re going to, we’re expecting to come in above our target level.

Page | 27

Scott Group: Okay. And then just last thing quickly, you talk about lower CAPEX next year. Any way to put

some numbers around that?

Robert Sanchez: Yes. Look, if you look at, if you look at next year, you know, clearly there’s a few things

going on. But if, as far as CAPEX, we’re expecting there’s going to be fewer, there’s going to be

less CAPEX on leased vehicles just because there’s fewer, there’s going to be lower OEMs

productions. So, I view that as just fewer at bats for Ryder. So, that’s going to drive some of it.

We’re going to expect to continue to redeploy equipment.

You talked about rental, additional units, so we’ll be redeploying equipment certainly in the first half

of next year. And then on our ongoing initiatives to improve ROC whether it’s bringing in accounts

or continuing to raise price. That’s going to continue, that’s going to put a little bit of headwind on it

also. So, I would expect less leased capital next year. So, with that, improved free cash flow levels,

certainly well beyond where we were this year.

Scott Group: Okay. Thank you, guys.

Robert Sanchez: Thank you Scott.

Operator: We’ll take another follow-up from Matt Brooklier from Buckingham Research. Please go ahead.

Matt Brooklier: Thanks. Good morning. Just to follow onto the free cash, CAPEX question. I’m assuming

that your spend on commercial rental trucks, that’ll be lower as well.

Robert Sanchez: Yes.

Page | 28

Matt Brooklier: And then, this is relatively small in the grand scheme of things. But could you talk to the

impact of SES from the GM Strike and then what are your expectations for, you know, for that

impact during 4th quarter?

Robert Sanchez: Yes. We had an automotive customer, we had a strike that we dealt with starting in, tail

end of Q3, and it’s gone into Q4. Good news is that strike is done but it will impact, we do expect it

to impact Q4. Enough to bring, it’s certainly a contributor to why we’re expecting supply chain

returns to be below our prior estimate for the 4th quarter. So, without giving you exact, it’s a good

portion of the decline. That and obviously the additional depreciation from the vehicles used in

supply chain.

Matt Brooklier: Okay. Thanks for the follow-up question.

Robert Sanchez: All right. Thanks Matt.

Operator: We’ll take another follow-up from Ben Harper with Baird. Please go ahead.

Ben Harper: Yes. Thanks. On the commercial rental side, I know you mentioned that you expect some

stabilization in the front half of the year helped by a reduction in the fleet size. But what are you

assuming from a demand perspective with regard to rental through next year?

Robert Sanchez: Yes. We still haven’t, we haven’t put the plan together. But I would expect on the tractor

side, we’re going to see continued softness as more vehicles have come into the market. And the

freight environment continues to be soft, certainly in the first half of the year, maybe picking up in

the second half. On the truck side, I think you’ll see certainly with some of the e-commerce activities.

We would expect us to continue to see some growth there, so this is really more a story about right

sizing our tractor and Class A fleet as we get into 2020. But I would also remind you, you know, as

we get into 2020 as you saw in Slide 10.

Page | 29

You’re going to have a declining impact from the depreciation change and the residual value

change as we go through the year. So, that’ll be a tailwind next year. We will benefit from some of

the lease fleet growth of this year. Certainly as the vintage vehicles from ’12 and ’13 begin to exit

the fleet, that should help us also. We do expect to really hit and exceed our maintenance cost

initiatives. So we’re looking for continued success there that should help the story. We think we’ve

captured all the (UVS) headwinds and the depreciation changes that we made. We’re going to

continue to leverage our zero based budgeting process to minimize overhead cost so that’s a very

important tool to have certainly in an environment as the one that we’re in.

And again we’re going to really sharpen the focus around some of the return on capital improvement

opportunities that we have including I would say pruning of lower return accounts and assets in

areas that really may not help the top line as much but will help the bottom line and will help the

return on capital story.

Ben Harper: Okay good. And then back to the pricing actions that you’re taking. To what extent do you feel

like you’re just kind of catching backup to either market levels or recouping price that you perhaps

sacrificed in recent years versus the industry as a whole being able to move price higher. Can you

provide any perspective in terms of where you think your pricing actions put you over the past

couple of years relative to the market?

Robert Sanchez: Well if you consider the market to be the other leasing providers, I think we’re all

swimming in the same ocean and we work through that. So you know I think we’re all, certainly

we’re expect – what we’ve done is we’ve taken the appropriate action we think we need to take

based on our cost and based on our learnings in the market and learnings at the business.

Ultimately that will dictate the amount of growth we get.

Page | 30

However, we, I would tell you the most important part of the story is that versus ownership the story

doesn’t really change because everything we have felt around maintenance cost and everything

we have felt around lower residuals and lower used truck market, any private owner of a truck is

feeling. So the value prop versus ownership and the outsourcing story remains just as strong if not

stronger than it was a year or two ago.

Because as we talk to customers today, they’re trying to sell their twenty-twelves and twenty-

thirteens and are seeing the prices that they’re getting in the marketplace. This is a business that

they may not want to be in anymore and it really creates a great opportunity for us. So certainly I

see us remaining very competitive in the lease business and in the again versus ownership from a

total cost of ownership standpoint.

So as I said, you’ll see some drop-off in growth next year, I think as OEM production comes down

and as we do some things around pruning some accounts. But overall the value prop for leasing

versus ownership is as strong if not stronger today than it was just a few years ago.

Ben Harper: Okay thanks for the time.

Robert Sanchez: Thanks Ben.

Operator: Our next follow-up will come from Justin Long with Stephen’s Inc., please go ahead.

Justin Long: Thanks for taking the follow-up and I just wanted to put a bow around the residual change

EPS or residual impact to EPS. I think you said this year in the full year guidance it would have a

negative impact of $3.95. As we look at your assumptions for twenty-twenty, where do we kind of

shake out in terms of the EPS impact? It’s a little bit tough because I guess we don’t have the first

half of ’19 numbers for policy and accelerated depreciation.

Page | 31

So I just wanted to see if you could provide some more clarity on what you think that year over year

tailwind in twenty-twenty will look like.

Robert Sanchez: I mean I’ll let these guys work through it but it’s certainly the 250 is the depreciation

impact that we’re expecting in twenty-twenty. So $250 million. That translate, from an EPS

standpoint, that will translate to about $3.58. We have to look at you know what’s going to happen

exactly with tax rate and all but it’s about a $3.58 headwind versus this year is almost $5.

Justin Long: Okay that’s helpful. So roughly a $1.50 of a year over year tailwind.

Robert Sanchez: Roughly, again those are very rough numbers as we refine the tax rate and all of that for

next year we’ll be able to give you better numbers.

Justin Long: Okay great, that’s all I had. I appreciate it.

Robert Sanchez: All right.

Operator: Our next follow-up will come from Brian Ossenbeck with JP Morgan, please go ahead.

Brian Ossenbeck: Thank you, just a couple quick ones here. Maybe on that last point on taxes, is there

any way to think about the normalized effective tax rate and past tax rate? Maybe excluding some

of these breakdowns that you’re collecting here?

(Scott): You’re talking about – are you just talking about our kind of comparable tax rate?

Brian Ossenbeck: Right, right, if we wanted to you know look at operations, the acceleration and the policy

impact you know what would you say is maybe a longer term number to use both on the effective

and on the cash tax side?

Page | 32

Scott Parker: I think if you kind of look at the comparable effective tax rate it probably would be in the –

you know if you pull off these items we were tracking before the estimate change, probably in the

25%, 26% range. So as you think going forward that’s probably you know that’s probably a pretty

good proxy. And then the gap you know tax rate would be you know really impacted you know just

from other items that are kind of related to pension and some of the other things that are excluded

from the comparable numbers. I think that’s a general range probably you could use at 25%, 26%.

Brian Ossenbeck: Okay and then cash taxes a bit lower than that because of the depreciation shields?

Scott Parker: Correct, I mean, correct, yes cash taxes would be lower because of the you know accelerated

depreciation benefits we get for you know buying the equipment.

Brian Ossenbeck: Okay, thanks (Scott). One last one for you, Robert, if you can just confirm it sounds like

you obviously went through a very extensive process here with the update that you summarized

on slide ten. But I guess it was mentioned earlier where the customs have their usual year-end

update with the five year rolling average and that sort of mechanic.

So would you expect that you know based on what you’ve done today in the analysis, do you see

here, do you think that you would be confident that we’re not going to see any additional

adjustments at the end of the year? I mean I know it’s based on where rates are trending but do

you think there’s enough cushion or enough of an impact reflected here that we won’t you know

see another adjustment either up or down in three months from now?

Robert Sanchez: Well Brian I can tell you that we’ve gone through a very extensive process over the last

few months to really at a very granular level within the fleet and also looking at all the macro market

indicators that we have to try to really come up with our best estimate of what this number is. I feel

very confident in that estimate right now. Obviously I don’t have a crystal ball so I can’t tell you

Page | 33

everything that’s going to happen in the world of used trucks but I feel very confident in the

estimates that we have here and the numbers that we’ve put in front of you.

Brian Ossenbeck: Okay thanks, appreciate that.

Operator: We’ll take our next follow-up from David Ross with Stifel, please go ahead.

David Ross: Yes thank you. Just question about the hit that SCS and DTS took as a result of the increase

in depreciation. I guess our thought was that they were customers of FMS and FMS customers

don’t see any change in their cost or expenses and that would all be an FMS issue. So what’s the

issue with DTS and SCS because I thought that they leased all the equipment from FMS?

Robert Sanchez: Yes DTS and SCS both, they are customers of FMS, but they have an equipment

contribution that is provided to each segment to really reflect the profits that are brought to Ryder

for the business that they have. So that does include, it’s almost really showing you what these

operations would look like if they actually owned the equipment. So since it’s laid out that way,

when we change depreciation for that equipment, it is impacting the margins of both supply chains.

It’s important to note though that that is eliminated through eliminations – the (earliest) elimination

line for total company. So just want to make sure that you’re not, those aren’t incremental to the

depreciation changes that we’re reporting in FMS.

David Ross: Okay and then as far as the free cash flow next year, you talked a little bit about the decline

in CAPEX. How quickly do you think you could get back within your target leverage range?

Robert Sanchez: From a leverage standpoint?

David Ross: Yes.

Page | 34

Robert Sanchez: Yes look that’s going to depend. As we get this depreciation, accelerated depreciation,

behind us here in the next two years and you start to – we start to grow the equity line that’s going

to be a big driver certainly as we reduce CAPEX, that will also be a driver. So probably not in

twenty-twenty, maybe late twenty-twenty as we get into twenty-twenty one but again a lot of things

still that we’ve got to review. But we certainly feel confident that we will be getting back in that range

as we get past this accelerated depreciation period and we start really growing earnings and

growing equity again.

David Ross: Okay thank you.

Operator: And there are no additional questions at this time. I’d like to turn the call back over to Mr. Robert

Sanchez for closing remarks.

Robert Sanchez: Okay well listen, thank you everyone. We ran a little late today but given the topics and

the changes that we’ve made, wanted to make sure that we answered all your questions. We will

be on the road here over the next few weeks so certainly look forward to seeing many of you then.

And again thank you for your continued interest in Ryder, we’re glad that we got this out there.

Clearly not glad about another used vehicle downturn but I think what you’re seeing now is really

our view of the short term and long term. Our updated view of the short term and long term used

vehicle market. And we think this will put us in a position now to be able to grow earnings from here

and really expand on the contractual growth that we’ve had over the last several years.

Operator: And ladies and gentlemen, sounds like that does conclude today’s conference. Thank you all for

your participation.