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` Analysts: Greyson Zaun greyson.zaun@gmail.com Colton Feldmann colton-feldmann@uiowa.edu Company Overview: Ryder System, Inc. (R) is a global leader in transportation and supply chain management. Ryder provides a variety of fleet management services and offers leasing and rental agreements to supplement/optimize customers’ supply chains. Stock Performance Highlights: 52-week High $80.15 52-week Low $45.12 Beta Value 1.53 Average Daily Volume 814,121 Share Highlights: Current Trading Price (11/15/2016) $79.24 Market Capitalization $4.16B Shares Outstanding EPS (FY2015) $5.75/share Forward EPS (FY2016) $5.80/share Forward P/E Ratio 13.66 Dividend Yield 1.98% Dividend Payout Ratio 27.13% Company Performance Highlights: ROA 67.92% ROE 16.75% ROIC 6.60% Financial Ratios Current Ratio 0.65

Debt to Equity 2.78

Debt Ratio 0.82

Interest Coverage 3.12

Total Asset Turnover 0.68

Target Price: $78.00-$85.00 Current Price: $79.38

Report Highlights:

• Industry trends support outsourcing: As an asset-based trucking and third-party logistics company, Ryder is in an ideal position to gain customers and grow revenues as regulatory burdens, driver shortages, increasing supply chain complexity, and more expensive vehicles increase the cost of maintaining a transportation fleet internally.

• Ability to leverage pervasive facility network: With over 800 locations throughout North America, Europe and Asia and over 40 million square feet of warehouse space under management, Ryder is able to efficiently provide maintenance and logistical services to an extremely wide geography.

• Extremely diverse customer base: Ryder generates revenues from an industrially diverse group of customers and therefore maintains resiliency from specific industry downturns. Ryder also provides much more specialized services than its peers, allowing it to focus on key industries and grow its customer base.

• Vulnerable to cyclicality and debt maturities: Ryder is significantly more leveraged than its peers at a debt to equity ratio of about 2.8x. If an economic downturn occurs in conjunction with rising interest rates, it could threaten Ryder’s ability to service its debt obligations.

Three Year Stock Performance xiv

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Krause Fund Research Fall 2016

Recommendation: HOLD November 15, 2016

Industrials Ryder System, Inc. (NYSE: R)

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U.S. Real Gross Domestic Product Real Gross Domestic Product (GDP) is the measure of the economic value of all goods and services produced by an economy in a given period of time and is adjusted for inflation to mainly reflect changes in an economy’s productivity. GDP is one of the most widely used and comprehensive measures of a nation’s economy and therefore has a large impact on the expectations of both businesses and consumers within an economy. U.S. GDP annual growth rates have been fairly consistent since the financial crisis in 2009, remaining between 1.5% and 2.6%. This is slightly below the long run average GDP growth of about 3%, which indicates that the U.S. has recovered from the 2009 recession but may not yet be at peak economic growth. The beginning of 2016 witnessed relatively slow GDP growth, but growth seems to be increasing according to the GDP Advance Estimate which states that GDP grew at an annual rate of 2.9% during the third quarter of 2016. This higher growth is largely due to increased investment in private inventories, higher exports and federal spending, and increased personal consumption expenditures. ii

Source: Bureau of Economic Analysis ii While GDP is an important metric for all sectors, it is particularly relevant to the Industrials sector, which has the highest correlation to the S&P 500 (and thus overarching economic performance) of any sector. More specifically, the Transportation industry accounted for 9% of U.S. GDP in 2014 and tends to outperform other industries during periods of strong economic growth because higher demand for goods increases the need for transportation services to deliver these goods and the capital goods necessary to produce them. iv Despite the surge in GDP growth during the third quarter of 2016, we predict that short-term U.S. GDP growth will remain close to or below 2% for the next one or two years

due to the likelihood of the Federal Reserve (the Fed) raising the Federal Funds rate (discussed below). We believe that GDP growth will be further suppressed by low levels of investments in capital goods because of the uncertainty injected into the global economy by Brexit and slowing growth in economies like Brazil and China. xv We forecast that long term GDP growth will remain below 2% due to the aforementioned factors along with the fact that the U.S. has been in one of longest economic expansions in history since July 2009. This seems to indicate that we are currently in a semi-mature portion of the business cycle and that substantial increases or decreases in GDP growth are unlikely. U.S. Capacity Utilization

Capacity utilization is the percentage of resources used by corporations and factories to produce goods in manufacturing, mining and electric and gas utilities for all facilities located in the U.S. “Figures from the monthly calculation attempt to conceptualize the idea of maximum output by reflecting how much more manufacturers can produce without incurring additional costs and by deduction, how much consumer demand they will be able to meet in the future.” i Results from September readings of capacity utilization came in at 75.4% of capacity, inching ten basis points higher from August readings of 75.3% but still one percentage point below the prior-year’s September reading of 76.4%. i Generally speaking, an 80% capacity utilization is considered a strong reading, indicating that quantity demanded closely resembles quantity supplied. Capacity utilization figures are especially important to companies in the capital goods industry group. Capacity utilization typically increases when aggregate demand increases, requiring manufacturers to ramp up production in order to meet the increased demand and maximize sales. Our team predicts capacity utilization to pick up significantly over the next 2-3 years to around 79-81%, driven primarily by rising demand for construction equipment to accommodate new infrastructure projects. i

Source: FRED Economic Data i

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Government Spending Government funding for large-scale infrastructure projects have historically played a central role in stimulating growth within the industrials arena. Infrastructure projects require a range of industrial-type companies from construction and transportation to machinery and waste disposal. As a result, the benefits of one infrastructure project disseminates throughout the industrials sector. President-elect Donald Trump’s proposal to spend over $1 trillion on U.S. infrastructure has already sent growth expectations for industrial companies through the roof.

S&P 500 Industrials vs. S&P 500

Source: S&P Capital IQ xiv

Purchasing Managers Index The Purchasing Managers Index for October 2016 was reported at 51.9%. This indicator demonstrates the overall strength of the manufacturing economy. Any reading above 50% signals that expansion is occurring within the manufacturing sector, and any reading below 50% suggests contraction. Additionally, when the indicator is above 43.2% it suggests that the overall economy is expanding.

We think that the industrials sector, and specifically the trucking industry, will follow the historical trend of the past 12 months’ data of the PMI. With the PMI over 43.2% for the last 12 months, we believe that this will continue to feed positive demand into the transportation sector. When the economy is expanding, and more specifically when manufacturing is expanding, the outcome is very positive for transportation. When goods are being produced they have to be transported to their new location, fueling the transportation sector. As long as PMI continues to stay above 50%, the transportation sector should be looking at a great opportunity to boost short-term profits. Interest Rates The Fed Funds Rate is currently at its highest point since November 2008 and is expected to be making a 25-point jump come December 14th. Many speculated that a rate hike would be coming towards the end of 2016. After no changes were made in recent months, because of weaker than expected employment numbers and low inflation followed by the election, rates have an 85.8% chance of increasing during the December meeting. v

Source: CME Group v

We believe that the Fed will be raising interest rates by 25-points in December and will be increasing another 25-points in 2017. This is consistent with the U.S. GDP outlook moving forward to attempt to hit the Fed’s 2% inflation rate. There is a high correlation between the Fed Funds Rate and the prime interest rate. This potentially can become a problem for Ryder because if rates are going to continue to increase in the long-term, that’ll raise interest payments on new projects. Ryder is heavily levered and increasing interest rates could cause real risk down the road if they continue to finance large amounts of their business through debt. Ryder currently has $4.88 billion in outstanding long-term debt with close to another $600 million in current portion of long-term debt.

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Source: Bureau of Economic Analysis iii

Capital Markets Outlook Given the analysis of current and forecasted economic conditions, we predict capital market conditions to have a bright future. Regardless of the validity of President-elect Trump’s proposed infrastructure initiatives, we feel that the industrials sector has shown recent signs of growth that will continue into the future. Due to the strong correlation between the vitality of the economy and its corresponding positive effects on the industrials sector, we believe the industrials sector presents tremendous growth opportunities.

Overview Our team identifies Ryder in the Road & Rail industry and in the Trucking sub-industry (“Trucking”). Each trucking company derives their revenues from a variety of services typically provided to corporate customers. The activity that trucking companies often yield the most revenue through is either leasing or renting trucks (tractors), trailers, and buses. xi Ryder specifically receives about 65% of their revenue from its Fleet Management Solutions segment. This segment provides full-service leasing or rental agreements as well as contracts management services that support such agreements. Two of their three segments consist largely of trucking operations, accounting for 77.8% of their 2015 revenue. The remaining amount falls into their Supply Chain Solutions segment. This segment is a third-party logistics division, helping businesses organize their operations.

Source: IBISWorld ix

Industry Trends Fuel-Efficiency Regulations: As environmental concerns are becoming more and more important in the public sphere, the government is continuing to increase emissions regulations. Recently, the EPA and DOT finalized standards for medium- and heavy-duty vehicles. The standards will increase front-end costs of tractors (the front part of a semi that hauls the trailer) by up to 11% by 2027. These regulations have been claimed to decrease CO2 emissions by 1.1 billion metric tons, save vehicle owners fuel costs of $170 billion, and decrease oil consumption by up to 2 billion barrels over the life of the vehicles expected to hit the roads.

Source: Bloomberg These upfront costs are expected to be recovered rather quickly due to the savings from the increased fuel efficiency as a result of the regulations. It is expected for tractors to recover the increased costs in around 2 years, which will likely have little impact on operating margins for companies like Ryder, which pass on the vast majority of fuel costs to customers. On the other hand, increasing efficiency regulations have led to more complex engines in the trucking industry. iv We believe that this trend will benefit Ryder by increasing the number of companies that choose to outsource their fleet management instead of assuming the increased maintenance and training costs associated with increasingly complex engines. Ultimately, the increase in revenues from a larger customer base will likely offset the initial increase

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Industry Analysis

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in tractor cost that asset-based trucking companies like Ryder will bear in the future. Shrinking Fleet Sizes: Demand for trucking has been decreasing recently and has made companies in the sector begin to sell-off their fleet to build cash reserves. Tractor fleet sizes have decreased 3.2% since 2013. According to a survey conducted by Bloomberg, about 71% of truckers have said they “don’t plan to buy or replace tractor equipment within the next 3 to 6 months.” 44% of the respondents said that shrinking demand was the primary reason why they wouldn’t be buying a new tractor or equipment. xvi We have accordingly adjusted our assumptions for the near term with a general, slight decrease in demand. In the long-term we expect the operating expenses for the fuel and related items to decrease slightly as a result of increased efficiency from the new vehicles. However, with oil prices at a very low point, we project them to tick upwards and eliminate some savings from the efficiency of the new equipment. Driver Shortages: According to American Trucking Associations (ATA), the largest national trade association for the trucking industry, we are beginning to witness a severe shortage of qualified long-distance truck drivers. The ATA projects that there will be a shortage of 48,000 truckers by the end of 2016 and that this number will rise to 176,000 by 2024. This is largely a result of industry growth, a retiring workforce, and the increasing propensity for young people to pursue a college education rather than trade school. iv Ultimately, we believe this trend will work in Ryder’s favor for two reasons. First, Ryder already employs approximately 5,000 professional drivers and will therefore be able to leverage its workforce/hiring expertise as the supply of drivers tightens. This will likely allow Ryder to attract more customers looking to outsource the increasingly expensive costs associate with hiring and maintaining professional drivers. Second, as the truck driver shortage worsens, it will become increasingly important for companies to maximize efficiency as they transport freight long distances, which makes Ryder’s supply chain optimization services more and more attractive to customers attempting to minimize driver downtime. Competitive Environment Comparable Company Analysis: As previously stated in the industry overview, the trucking sector varies largely in their sources of revenue and the amounts by which they earn this revenue. This makes a comparable company analysis rather challenging as most

companies in their general sector don’t have similar revenue streams as a percent of total revenues. Although, we found six companies that we deem to have a comparable business model to Ryder. We felt that J.B. Hunt Transport Services, Inc., Marten Transport, Ltd., Werner Enterprises, Inc., Knight Transportation, Inc., Saia, Inc., and Swift Transportation Co. were companies that exhibited similar traits to that of Ryder. We came to these companies based on their revenue decomposition, gross profit margins, EBIT margins, and net income margins. To begin our analysis, we found U.S. trucking companies that had enterprise values of at least $500 million to ensure that we were looking at trucking companies that were conducting business across the nation. From this list, we focused largely on companies that were doing most, if not all, of their business in North America and the United States. Next, we looked at firms that conducted between 60-100% of their business revenues through “trucking” activities. The remaining amount was left for companies that had a logistical arm and other small operations. Third-party logistic companies have higher gross profit margins due to the low amount of cost of goods to produce their revenues because it is mostly intangible assets that are creating value such as knowledge. Gross margin was a check for us to ensure that these companies were providing somewhat similar business operations and revenue streams. This allowed us to pool together 12 reasonably comparable companies. We felt that one of the best indicators for whether a comparable company fit well with Ryder was their EBIT margin. This shows the firm’s operating profits but takes into effect depreciation and amortization. Using EBIT instead of EBITDA is key here because it accounts for depreciation, which is an enormous expense for capital heavy firms on a year-to-year basis. As you can see below, Ryder’s EBIT margins are nearly identical from 2012 to a projected 2018 figure.

Source: S&P Capital IQ iv

Finally, we took into account the profitability of our comparable companies to that of Ryder. In general, our comparable companies were slightly more profitable than

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Ryder has been over the past 3 years. We expect Ryder to slightly close the gap in net income margins relative to the comparable company index as a result of their company initiatives discussed in the Marketing Strategy section.

Source: S&P Capital IQ iv

The EBIT margins and net income margins allowed us to cut down our comparable companies to six. We feel strongly that this list of companies represents Ryder well due to their revenue streams and similar profitability. Of the comparable companies that we put together, Ryder and J.B. Hunt are the most similar in terms of size. Both in fiscal year 2015 had over six billion dollars in sales. J.B. Hunt creates a much higher net income margin than that of Ryder. Ryder is actually the lowest in the comparable group in terms of net income margin at 4.64%. Ryder is middle of the pack in terms of gross margin as the smallest firms actually have the highest gross margins for the most part. Companies like Marten and Werner have logistics segments that contribute more to their revenues than Ryder’s does. The logistics segments have a higher gross margin due to little to no costs of goods compared to the larger trucking segments. xiii

Fiscal Year 2015

Company Revenue (millions)

Gross Margin Net Income Margin

Ryder 6,571.89 22.60% 4.64%

JB Hunt 6,187.65 20.11% 6.90%

Marten 664.99 27.63% 5.38%

Werner 2,093.53 27.09% 5.91%

Knight 1,182.96 30.80% 9.87%

Saia 1,221.31 17.94% 4.50%

Swift 4,229.32 20.34% 4.67%

Source: S&P Capital IQ iv

Porter’s Five Forces: Threat of New Entrants: Medium Our team feels that the high capital requirements to begin a truck rental and leasing company will keep most possible entrants away from the industry. New entrants are required to spend massive amounts of capital to acquire a large fleet and acquire many locations for their operations. These upfront expenses will also be increasing moving forward because of increasing vehicle prices due to the EPA regulations mentioned earlier. A massive distribution network plays a major factor in a firm’s ability to grow and thrive in the truck rental sector. There is a major competitive advantage created by companies that have a wide network that allow customers to transport goods anywhere they wish. Branding also plays a major role because people in this sector often go to the companies they know. The distribution network and branding can make it very hard for a new company to break into the business because of the costs to get the network and the time it takes to grow brand recognition to all possible customers. viii

In the third-party logistics (3PLs) sector, our team believes it is moderately difficult for a firm to break in. Third-party logistics takes a large amount of expertise to produce at a high level and plays a major factor in whether a business will be able to hang around or not. With low-capital requirements, the only real threat keeping companies from coming in and stealing profits is expertise. xiii Threat of Substitution: Medium We believe the threat of substitution is medium due to the other possible options to replace the business activities that Ryder operates in. Other options that could potentially cause a dent in the revenue stream of a truck rental/leasing company are railroads and cargo shipping. These options don’t seem very likely to overtake the entire business because a large amount of revenues from the sector are from individual consumers and families. A family is not likely to pay to have a railroad company or a cargo shipping company take their belongings to their new home. Commercial entities are much more likely to be able to switch their shipping process over to other modes of transportation but would lose the flexibility offered by having a truck ship their product. We believe that third-party logistics has a relatively low threat of substitution. Third-party logistics is a largely intuitive industry, which creates a very difficult platform to replace. The most likely replacement would be a development in technology that helps businesses maximize their supply chain opportunities, and even then companies like Ryder are already developing such technologies. xi The only other option to would be to get rid of the system altogether and handle transportation/logistics internally,

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which we believe is unlikely because of the increasingly complex nature of global commerce and supply chains.

Power of Suppliers: Low Our team believes the power of suppliers is very low in the truck rental industry. The main suppliers for the industry are the companies that supply the trucks for the fleet and companies that provide products like fuel. Competition is very high between companies that provide fuel and companies that sell vehicles. There is very little power that suppliers maintain because if customers become unhappy, there are many very similar products that can replace their own product. Third-party logistics has almost no power of suppliers because the business offers knowledge and insight as its assets rather than equipment. Power of Buyers: High The power of buyers in the rental industry is relatively high. Nothing ties down individual consumers from going to another company to rent a truck if they aren’t satisfied with the price or service offered by Ryder. Commercial companies have a little less buying power because they sign into contracts or lease trucks and give up some power until the contract runs out. Third-party logistics gives a large amount of power to buyers as it is not a physical asset that is being acquired but rather a service and there are many other firms that would be able to offer a similar service to the company if the buyer wasn’t happy. Competitive Rivalry: Medium According to IBISWorld, companies in the truck rental sector compete with one another in price, store coverage, and vehicle selection and quality. The major players in this industry, Enterprise, AMERCO, Penske, and Ryder, have absorbed 50.1% of the overall market. These companies have a huge competitive advantage over their smaller competitors as a result of their already established network. Customers are going to go to companies that dominate the market share because they offer store locations in all neighborhoods so that wherever they’re transporting their items, it is only a short drive to drop off the truck. ix

Source: IBISWorld ix

In third-party logistics, the competition intensity is very high. Firms compete based on prices, efficiency, range of service, and markets. The firm that has the largest market

share is C.H. Robinson Worldwide, Inc. at 6.8%. All other firms occupy the remaining 93.2%, creating a very competitive environment for business. Some firms profit off the ability to undertake another company’s entire logistics operations but they in-turn lose the flexibility of hiring out other firms to complete work and also add more expenses to their financials. Most 3PLs are non-asset based due to the low startup costs. The most successful 3PLs are the ones that have the ability to offer client-tailored supply chain solutions. Because of varying business models, most companies need different tweaks to their supply chain system to allow everything to run smoothly. Companies that can capitalize on the ability to create customized plans for their businesses will create more value and see more business flow their way in the long-run. xiii

Source: IBISWorld xiii

General Information Overview: Ryder provides transportation and logistics/supply chain management products and services to customers in North America, the U.K., and Asia. These products include leasing, renting, maintenance, fueling, safety, and compliance service agreements intended to optimize/supplement customers’ fleet operations. As an asset-based trucking logistics company, Ryder might simply rent out a tractor or trailer to a customer for a short period of increased demand, or enter into a multi-year leasing agreement where Ryder agrees to handle any combination of the additional costs associated with managing a fleet of trucks.

Company Analysis

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Marketing Strategy: Ryder articulates strategic objectives for each of its three segments in its financial reports and investor presentations. For FMS, Ryder expects that various industry trends, such as increased engine complexity, regulatory hurdles, safety requirements, and technician/driver shortages, will drive more and more companies to outsource their fleet management in order to focus on their core operations. To capture this growing market, Ryder intends to leverage its already pervasive network of maintenance facilities by acquiring smaller trucking companies, investing in organic fleet growth, and implementing technological innovations such as cloud-based GPS/driver management equipment for their vehicles. For DTS, Ryder intends to convert certain FMS customers to a dedicated solution, which generates 4-5x more revenue and has a higher margin with increased customer retention. This guidance is reflected in our model by forecasting slightly higher growth rates for service revenue than recent trends would suggest: despite service revenues growing an average of 2.8% per year since 2012, we forecast service revenues growing by 5% per year into the future as a result of Ryder’s focus on dedicated solutions coupled with the fact that the third quarter of 2016 witnessed a 9% increase in service revenues compared to the same period in 2015. Furthermore, Ryder intends to leverage the specialized nature of its DTS and SCS services to differentiate itself from other truckload carriers and appeal to the specific needs of the main customer industries (mentioned above).

Historical Acquisition Activity

Source: Ryder investor relations presentations xi

Products and Markets Ryder reports its operations in three distinct segments defined by economic characteristics, products/services offered, customers, and delivery methods: Fleet Management Solutions, Dedicated Transportation Solutions, and Supply Chain Solutions.

Source: Ryder investor presentations xi

Fleet Management Solutions (FMS): The FMS segment includes full service leasing contracts (long-term, comprehensive leasing agreements with flexible levels of fleet support services), commercial rental (short-term commercial vehicle rentals), maintenance services (both on-demand and preventative), and support services (which handles a fleet’s fuel, insurance, safety, and regulatory requirements). FMS accounted for about 63% of Ryder’s 2015 revenues from external customers and primarily serves transportation and logistics companies, food and beverage companies, and construction and housing

companies. The leasing contracts typically last 5-7 years, and at the end of the term Ryder typically sells the vehicle they leased to their customer. As of August 2016, the FMS segment had the following characteristics:

• 800 locations throughout the U.S., Canada, the U.K.

and Germany • 14,600 full service lease customers and 136,600 full

service lease vehicles • 39,300 commercial rental customers and 48,000

commercial rental vehicles

Source: Ryder investor presentations xi

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• 49,300 contract maintenance vehicles in service (not owned by Ryder) x Dedicated Transportation Solutions (DTS): The DTS segment offers both turnkey transportation services (including drivers, vehicles, routing/scheduling, and administrative support) and transportation management services (where Ryder acts as a customer’s agent by planning/executing shipments and managing freight audits and payments.) This segment only operates in the U.S. and serves a diverse range of over 200 customers, including

industrial companies, consumer packaged goods companies, and retail companies. DTS services are typically specialized to fit industry-specific needs and utilize approximately 5,000 professional drivers along with 8,000 vehicles accounted for in the FMS segment.

Supply Chain Solutions (SCS): The SCS segment provides services that are similar to those provided by DTS, except that SCS focuses specifically on four key industries and is concerned with optimizing customer’s entire supply chains, which typically includes more sophisticated logistical requirements. For example, SCS services might entail warehouse management, freight rate negotiations for

outside carriers, and supply chain evaluations. The SCS segment operates over 40 million square feet of warehouse space and serves approximately 600 customers throughout the Automotive, Industrial, CPG & Retail, and Technology & Healthcare industries.

Source: Ryder investor presentations xi

Financial Performance and Guidance Ryder reported revenues of $6.57 billion in FY2015, which was a 1% decrease from FY2014 of $6.64 billion. Despite lower revenues, however, Ryder managed to grow net income 39% from $219 million in 2014 to $305 million in 2015.

Source: Bloomberg terminal xvi The decrease in revenue was largely a result of lower fuel prices (which are largely passed on to customers and therefore have minimal effects on operating income) and negative effects of currency translations, which demonstrates the relatively substantial impact that foreign operations has on Ryder’s financial performance. Ryder has consistently payed quarterly dividends since 2005. Since then, the average quarterly dividend has grown from $0.16 to $0.44 during the third quarter of 2016, representing a current dividend yield of approximately 2.2%.

Source: Ryder investor presentations xi

Ryder has been investing an increasingly substantial portion of its cash flows into growth capital expenditures since 2011. The majority of this spending has gone towards increasing Ryder’s FMS fleet size to keep up with demand. According to management, Ryder’s investment in revenue earning equipment is based on a countercyclical business model that maximizes free cash flow (FCF) during sluggish economic growth by refraining from high amounts of capital expenditures. Going forward, management expects capital expenditures for 2016 to be around $1.8 billion, a

Source: Ryder investor presentations xi

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33% decrease from 2015 capital expenditures of $2.7 billion. This investment is expected to increase FMS fleet size by 3,500 vehicles, but reflects management’s uncertainty about future rental demand. ix

Source: Ryder investor presentations xi

SWOT Analysis Strengths As indicated by their historical capital expenditures, Ryder has been investing heavily in their fleet and consequently has one of the largest operational networks of any trucking company, spanning over 530 locations and 135,000 vehicles in the U.S. alone. x Furthermore, Ryder has been successful in increasing margins in their most recent operating year: despite revenues dropping 1% during 2015, their net income still increased by about 39% due to reducing operating costs as a percentage of revenue from about 95% in 2014 to 92% in 2015. vii Weaknesses Ryder is currently one of the most heavily leveraged trucking companies in the U.S. with a debt to equity ratio that increased to 2.76x in FY2015. vii If interest rates increase in the near future – as we project they will – it could mean that Ryder will face difficulty refinancing their debt, which has a rather erratic maturity schedule. This presents a substantial risk that must be considered when investing in Ryder, as financing difficulties would almost certainly adversely affect the company’s stock performance.

Source: Ryder 10-K x

Opportunities Ryder is in a unique position to take advantage of the growing third party logistics market. Ryder’s management projects that the global outsourced logistics market is approximately $750 billion, of which the U.S. is less than 15%. xi This information, coupled with the fact that outsourced logistics spending is expected to increase rapidly in China and India, means that Ryder’s geographic diversity and capacity to provide services that are extremely specific to serve varied industries provide an opportunity to gain market share in a rapidly growing/emerging market. vii Even if international companies fail to outsource, the U.S. market alone provides significant growth potential because third-party logistics only provide about 10% of the total logistics spend.

Source: Ryder investor presentations xi

Threats As already mentioned, all industrial companies are highly correlated to broader economic conditions, which means that companies like Ryder have the potential to generate excellent returns in expansions and devastating losses during downturns (as shown by the graph on the first page). However, Ryder is also dependent on foreign economies and, more specifically, foreign exchange rates. Because Ryder generates about 15% of its revenue from international operations, exchange rates can have a substantial impact on Ryder’s revenue and income accounts. This necessarily injects an added level of uncertainty when evaluating Ryder’s prospects, as their intentions to expand internationally could be thwarted by a surging dollar or economic/political turmoil in the U.K., Mexico, Canada, and China. This risk is demonstrated by the fact that Ryder’s EBIT was reduced by 1% due to the negative effects of currency translations in the past nine months alone. xi

Debt Maturity Schedule2016 937.191 16.99%2017 759.559 13.77%2018 790.312 14.33%2019 1,066.497 19.34%2020 1,646.080 29.85%2021 315.076 5.71%

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Valuation Summary We arrived at a HOLD rating for Ryder System by using a variety of valuation techniques to create a target price range between $78.00 and $85.00. These techniques utilized the Dividend Discount Model/Fundamental P/E Ratio Model, Discounted Cash Flow Analysis, the Economic Profit Model, and Relative Valuation via financial multiples. Each of these methods attempts to ascertain how much each share of a company should be worth using various chains of reasoning. Despite the value of each technique, we believe that the Discounted Cash Flow (DCF) Analysis and Economic Profit (EP) Model are the most relevant valuation methodologies for valuing Ryder. This is largely due to the uncertainty of future dividend payments that problematizes the foundation of the Dividend Discount Model (DDM) along with the relatively unique nature of Ryder’s business model that makes valuation via public company comparison difficult. Furthermore, the DCF and EP models allowed us to utilize our industry and economic predictions along with management guidance to predict Ryder’s future operating metrics, ultimately giving us a greater sense of confidence in the valuation range provided. Forecasting Revenues Ryder reports its revenues by dividing it into three revenue streams: Lease & Rental, Services, and Fuel Services. We forecasted each of these revenue streams individually in order to most accurately reflect our expectations of future economic conditions and guidance from Ryder’s management reported in their financial statements/investor presentations.

Lease and Rental Revenues Lease and rental revenues fall under the FMS segment of Ryder’s operations and accounted for 48% of Ryder’s total FY2015 revenues. We project lease and rental revenues to increase 5.8% by the end of 2016, which is a slightly lower estimate than the 6% increase provided by management. Our estimate is slightly lower to reflect the consensus estimate of 2016 EPS provided by the International Broker’s Estimate System. vii Moving forward, we project that the aforementioned industry trends will push more and more companies to outsource their fleet management operations, which will likely allow Ryder to continue growing their FMS revenues into the far future, although at a slightly slower pace than they are currently experiencing. We project that FMS revenue growth will be 5.5% in 2017 and then eventually

taper off to 2% per year starting in 2022 due to Ryder’s intentions to convert certain FMS customers to dedicated product offerings to increase customer retention and operating margins. Services Revenues Services revenues include all revenues from the DTS and SCS business segments as well as certain maintenance/support services within the FMS segment. We project that services revenues will continue to grow at a significant pace of 4% per year starting in 2022. This is in spite of an average annual service revenue growth of 2.8% over the past 5 years. We view service revenue growth optimistically because of Ryder’s attempts to increase the amount of customers utilizing their dedicated, service-heavy offerings. Furthermore, the international presence of Ryder in China and the recent acquisition of U.K. logistics company Bullwell in 2015 place Ryder in an ideal position to increase its services customer base throughout the world. This is particularly important for service revenues because certain areas like the Asia-Pacific region are expected to compose a larger and larger portion of the global logistics market as countries like China and India are developing increasingly globalized, complex economies. viii Fuel Services Fuel services represent a rather insignificant portion of Ryder’s 2015 revenues at 8.2%. These revenues result from Ryder passing on the costs of fuel provided by Ryder’s service contracts to customers. Ryder witnesses an average of only around 2% margins by providing these services and fuel revenues are almost completely dictated by fuel prices. Due to the extremely low levels of oil prices, fuel revenues have been decreasing since 2011. We project that fuel service revenues will continue decreasing by 1% until 2019, at which point we predict increasing oil prices will drive higher revenues for this segment, growing by 1% from that point on. The main purpose of this assumption was to provide a conservative input that would have little impact on the model’s output due to the inherent volatility of oil prices and the insignificant impact that fuel revenues have on Ryder’s operations. Forecasting Cost of Goods Sold We forecasted the cost of goods sold for each revenue stream based on the historical average cost of goods sold as a percentage of stream revenues between 2011 and 2015. We project that the cost of lease and rental revenues, which are primarily driven by depreciation, will increase slightly from the historical average of about 69.3% of lease and rental revenues in the near future because of increased depreciation associated with higher vehicle costs and recent fleet expansion initiatives. We eventually have this number lowering to 68% by 2025 because of management’s

Valuation Analysis

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indication of smaller fleet investments going forward. We predict that the cost of service revenues will increase slightly going forward, representing 83.5% of service revenues from 2022 forward. This is due to the increased costs associated with more and more complex supply chains that Ryder will manage by penetrating emerging markets like China. We project that the cost of fuel services will remain unchanged at 98% of fuel service revenues due to the straightforward and static nature of Ryder’s fuel provisioning services. Capital Expenditures We forecast capital expenditures according to management’s predictions and historical net property, plant, and equipment (PP&E) growth as a percentage of sales. The vast majority of Ryder’s capital expenditures are used to expand their fleet of trucks. We focused on projecting net PP&E rather than forecasting gross assets and accumulated depreciation because one of Ryder’s main operations involves selling its used vehicles. This makes tracking accumulated depreciation rather difficult, as historical sales of PP&E have been rather erratic, meaning any projection of the sort would be almost entirely conjecture. Furthermore, we believe that projecting Ryder’s net PP&E as a percentage of sales makes sense for two reasons. First, Ryder operates as an asset-based trucking company, which means that the amount of revenue that it can generate into the future is directly correlated to the amount of assets it has available to lease/manage. Second, Ryder’s historical PP&E has grown as a percentage of sales in a semi-consistent trend, which makes us comfortable continuing that trend forward while adjusting for management’s guidance and our general economic outlook. Ryder’s capital expenditures have been increasing steadily over the past seven years, but in 2016 capital expenditures are expected to drop off to $1.8 billion compared to 2015’s $2.7 billion. This is largely a result of uncertain rental and leasing demand going forward coupled with management’s desire to create a positive free cash flow, which has not occurred since 2010. xi Going forward, we project that revenue earning equipment (mostly vehicles) will witness much slower growth as a percentage of sales, growing by 2% per year as opposed to a 10% yearly increase on average over the past five years. We also project that operating property and equipment (mostly warehouses and administrative offices) will remain relatively constant as a percentage of sales, growing by 0.1% per year into the future, which is consistent with historical growth rates. Weighted Average Cost of Capital We calculated Ryder’s weighted average cost of capital based on a capital structure of 42.58% equity and 57.42%

debt. We believe moving forward that this is an accurate prediction of their target structure based on the information relayed by management in their most recent 10-K. Cost of Debt: Ryder’s longest standing bond was set to mature in 2025 and had a yield of 4.81%. xvii Combining a federal tax rate of 35%, state tax rate of 5%, and the effect of foreign taxes of -3.3% yields a marginal tax rate of 36.7%. We used this as the tax rate to adjust Ryder’s cost of debt to yield the after-tax rate of 3.05% Cost of Equity: To find Ryder’s cost of equity, we used the Capital Asset Pricing Model. We used a two-year weekly beta calculated against the S&P 500 from Bloomberg. Our risk-free rate assumption based off the latest thirty-year treasury yield was 2.97%. We used 4.89% as our market risk premium and acquired this number from Aswath Damodaran’s website, which compiles the implied market risk premium based on market returns/payouts. v Discounted Cash Flows & Economic Profit We believe that our discounted cash flow and economic profit models are our most accurate valuation methods. From these models we calculated an intrinsic value of Ryder’s stock to be $81.76. That being said, our sensitivity analysis (discussed below) demonstrates the importance of the various assumptions made in generating this price, and in light of this analysis, we felt that a range of about $7.00 was more appropriate than focusing on a single output. We project economic profit to remain negative until 2020 when Ryder receives an economic profit of $30.77 million. We project Ryder’s NOPLAT to reach over $800 million in 2024 and begin earning larger economic profits as the company continues to build upon efficiency initiatives expand its customer base domestically and internationally. Dividend Discount Model According to our dividend discount model, Ryder’s stock should be trading at $55.80 a share. We believe this is not very accurate compared to our discounted cash flow and economic profit models. Ryder has roughly a 30% dividend payout ratio. We were able to project out Ryder’s dividend going into the future assuming that they would pay a relatively similar payout as their net income increases over time, culminating in a 33.8% dividend payout ratio by 2025. While we are not entirely sure why this model returns such a low stock price, we believe the model’s focus on dividends minimizes the value afforded by Ryder’s operating assets, which includes a vast network of facilities and a fleet of over 180,000 vehicles.

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Relative Valuation Relative valuation can be an effective way of finding the value of a stock by comparing it to its peers. Most firms in similar industries trade according to multiples that compare a measure of value, like equity value or enterprise value, to an operatic metric, like net income or EBITDA. By making a list of firms that are comparable in terms of size, operations, geography, or other relevant criteria, one can deduce how much a firm’s stock should be worth by applying its operational metrics to the average or median of comparable firm’s multiples. Price to Earnings: Price to earnings can be an effective way to find an underpriced security in its respective industry. However, we believe our price to earnings valuation was quite inaccurate. Our assumptions led us to use $5.62 a share as Ryder’s projected EPS for next year. Our comparable companies were trading at a multiple of 20.6x price to next year’s projected earnings. This would value Ryder stock at $115.77 a share. We don’t believe that Ryder stock could be worth $115.77 a share based off our prior valuations of a discounted cash flow and a dividend discount model. EV/EBITDA: We attempted to find the value of Ryder’s operating assets based on a relative multiple of what our comparable companies are valued at. Ryder’s 2016 EBITDA is projected at 1,802 million dollars. Our comparable companies were valued at a seven times multiple of their EBITDAs. When taking Ryder’s EBITDA of 1,802 million by seven you get an enterprise value of $12.7 billion based off 2016 estimated EBITDA. After subtracting out other debt and cash we received an equity value of $7,243.20. After taking this over the shares outstanding we reached a value of $135.41 a share. We feel as though this number is also inaccurate in the true value of Ryder stock based on our projected cash flows going into the firm. Ultimately, both of our relative valuation methods seemed to indicate that Ryder was severely undervalued. However, we believe that this is a result of a less than perfect set of comparable companies, as our EP and DCF models (which incorporated more data, guidance from management, and well-founded assumptions) gave us a much more reasonable stock price in line with most other analyst projections. Because of this, we find little value in the results of our relative valuation and instead rely upon other valuation methodologies to create our target range of $78.00 to $85.00.

Sensitivity Analysis When valuing companies using DCF and EP models, it is crucial to understand how various economic and operational assumptions affect the models’ output price. In order to more fully understand the validity of our models, our team performed four sensitivity analyses that tested the impact of changes in 8 variables that went into our DCF and EP models. The first and most varying sensitivity analysis tested the assumption of Ryder’s Continuing Value (CV) NOPLAT growth versus Ryder’s Beta. These two variables have a massive impact on the model’s output price: even a 0.1 change in Ryder’s Beta can change the output price by upwards of $10. We chose to test these two variables because they are both highly speculative and have to do with Ryder’s overarching corporate strategy. Ultimately, we believe that a 2% CV NOPLAT growth with a Beta of 1.53 most accurately represents Ryder’s future operations in light of our economic outlook and guidance from management. The second sensitivity table tested Ryder’s CV ROIC growth versus its WACC. Again, even small changes in both of these variables can be seen to have a massive impact on the output price, which is why testing these highly speculative variables gives one a better understanding of the limitations of our models. We believe that testing these two variables together made sense because ROIC is a measure of a company’s operational efficiency while WACC depends more on capital structure/economic conditions, ultimately making this test valuable by portraying a wide spectrum of market and internal/operational scenarios that could affect Ryder’s stock price. The third sensitivity analysis tested Ryder’s Equity Risk Premium (a component of Ryder’s cost of equity) against Ryder’s marginal tax rate to get an idea of how broader economic conditions (tax levels and capital market expectations) that are largely out of Ryder’s control might affect Ryder’s stock price. We believe this is important because of Ryder’s inherent correlation to broader market trends. The final sensitivity analysis tested some of Ryder’s most important operational metrics: cost of leasing revenues as a percentage of leasing revenues versus selling, general and administrative expenses as a percentage of total sales. These two variables have a large impact on Ryder’s projected efficiency, and the range we constructed for both variables falls in line with historical operations. Because of this, the relatively concise range provided by this table gave us confidence that our model accurately

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accounted for Ryder’s operational efficiency in various scenarios and provided a strong case to focus on our DCF/EP models as opposed to other valuation methodologies. Important Disclaimer This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

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References

i. Board of Governors of the Federal Reserve System (US), Capacity Utilization: Total Industry [TCU], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TCU, November 14, 2016.

ii. Bureau of Economic Analysis. (2015, December). Measuring the Economy: A Primer on GDP and the National Income and Product Accounts.

iii. Bureau of Economic Analysis. GDP and the national income and product account (NIPA) historical tables. Retrieved from www.bea.gov.

iv. Corridore, Jim. (2016, August). Industry surveys: Road and rail. Retrieved from S&P Capital IQ.

v. Damodaran, Aswath. (2016). Implied equity risk premium update. Retrieved from Damodaran Online.

vi. "Fed Watch - CME Group." Countdown to FOMC. CME Group, 15 Nov. 2016. Web. 15 Nov. 2016.

vii. International Broker’s Estimate System. (2016). Ryder company overview. Retrieved from Thomson One.

viii. GlobalData. (November 2016). Ryder system inc. – Financial and strategic SWOT analysis review.

ix. Palmer, Taylor. "Truck Rental in the U.S." IBISWorld. IBISWorld, Oct. 2016. Web. 15 Nov. 2016.

x. Ryder System, Inc. (2015). Form 10-K 2015. xi. Ryder System, Inc. (2016) Company overview

November 2016. xii. Schrader, M. & Teufel, A.S. (2009). Fisher

investments on industrials. Hoboken, NJ: John Wiley & Sons.

xiii. Soshkin, Makskim. "Third-Party Logistics in the U.S." IBISWorld. IBISWorld, Sept. 2016. Web. 15 Nov. 2016.

xiv. "S&P Capital IQ." S&P Capital IQ. McGraw Hill Financial, n.d. Web. 15 Nov. 2016.

xv. Talley, Ian. (2016, June). World bank cuts global growth outlook. Retrieved from The Wall Street Journal.

xvi. Bloomberg terminal. xvii. Financial Industry Regulatory Authority.

Retrieved from http://finra-markets.morningstar.com/BondCenter/Results.jsp.

Ryder System, Inc.Key Assumptions of Valuation Model

Ticker Symbol RCurrent Share Price $78.65Current Model Date 12/4/2016Fiscal Year End Dec. 31

Pre-Tax Cost of Debt 4.81%Beta 1.53 Risk-Free Rate 2.62%Equity Risk Premium 4.89%Cost of Equity 10.45%CV Growth of NOPLAT 2.0%CV Growth of EPS 3.2%CV ROE 11.5%CV ROIC 6.63%Current Dividend Yield 1.98%Marginal Tax Rate 36.70%Effective Tax Rate 34.80%

Marginal Tax RateFederal Statutory Rate 35.00%State Income Taxes 5.00%Foreign Tax Rates -3.30%Total 36.70%WACC 6.20%DCF Price 81.76 EP Price 81.76

INCOME STATEMENT INPUTSProjection Method 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

RevenuesLease & rental revenues growth rate n/a 5.54% 2.77% 6.12% 6.20% 5.80% 5.50% 5.20% 5.00% 4.30% 3.70% 2.00% 2.00% 2.00% 2.00%Services revenue growth rate n/a 3.75% 4.16% 3.26% 0.02% 3.00% 3.00% 3.20% 3.80% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%Fuel services revenue growth rate n/a -3.71% -2.92% -5.03% -31.68% -1.00% -1.00% -1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

COGSCost of lease & rental % segment revenue 68.37% 70.14% 69.16% 69.38% 68.99% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00%Cost of services % segment revenue 83.79% 84.01% 83.94% 84.08% 82.87% 82.90% 83.00% 83.20% 83.20% 83.50% 83.50% 83.50% 83.50% 83.50% 83.50%Cost of fuel services % segment revenue 98.42% 98.14% 98.13% 97.51% 96.57% 98.00% 98.00% 98.00% 98.00% 98.00% 98.00% 98.00% 98.00% 98.00% 98.00%Other operating expenses % sales 2.14% 2.17% 2.15% 1.91% 2.05% 2.40% 2.30% 2.30% 2.20% 2.20% 2.00% 2.00% 2.00% 2.00% 2.00%

OtherSelling, general & administrative expenses % sales 12.75% 12.25% 12.32% 12.31% 12.85% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80%Depreciation expense depreciation/beginning PP&E 18.14% 16.56% 15.00% 14.60% 14.82% 14.90% 14.80% 14.60% 14.60% 14.60% 14.60% 14.60% 14.60% 14.60% 14.60%Gains on vehicle sales, net % sales -1.04% -1.42% -1.50% -1.91% -1.79% -1.60% -1.62% -1.64% -1.66% -1.68% -1.70% -1.70% -1.70% -1.70% -1.70%Interest expense beginning debt*cost of debt 135.55 133.59 137.76 120.19 132.19 131.85 131.85 131.85 131.85 131.85 131.85 131.85 131.85 131.85 131.85 Miscellaneous income (expense), net % sales -0.15% -0.19% -0.24% -0.21% -0.15% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19%Restructuring & other (recoveries) charges, net % sales 0.06% 0.13% -0.01% 0.04% 0.22% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09%Total costs & expenses 95.38% 95.16% 94.25% 94.90% 92.86% 94.51% 94.51% 94.51% 94.51% 94.51% 94.51% 94.51% 94.51% 94.51% 94.51%

BALANCE SHEET INPUTSProjection Method 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

AssetsCash % sales 1.73% 1.06% 0.96% 0.75% 0.93% 1.09% 1.09% 1.09% 1.09% 1.09% 1.09% 1.09% 1.09% 1.09% 1.09%Accounts receivable, net % sales 12.47% 12.40% 12.11% 11.97% 12.71% 12.33% 12.33% 12.33% 12.33% 12.33% 12.33% 12.33% 12.33% 12.33% 12.33%Inventories % sales 1.09% 1.03% 1.00% 0.99% 0.97% 1.02% 1.02% 1.02% 1.02% 1.02% 1.02% 1.02% 1.02% 1.02% 1.02%Prepaid expenses & other current assets % sales 2.69% 2.14% 2.48% 2.49% 2.10% 2.10% 2.15% 2.20% 2.30% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40%Revenue earning equipment, net % sales and management 83.46% 91.97% 101.11% 105.36% 124.54% 128.00% 130.00% 130.00% 132.00% 134.00% 125.00% 125.00% 125.00% 125.00% 125.00%Operating property & equipment, net % sales and management 10.32% 9.99% 9.87% 10.54% 10.88% 10.90% 10.90% 10.90% 10.90% 10.90% 10.90% 10.90% 10.90% 10.90% 10.90%Intangible assets management N/A N/A N/A N/A N/A (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) Direct financing leases & other assets % sales 6.51% 6.95% 7.17% 6.72% 8.00% 8.00% 8.00% 8.20% 8.20% 8.30% 8.50% 8.50% 8.50% 8.50% 8.50%

LiabilitiesAccounts payable % sales 6.48% 6.38% 7.41% 8.45% 7.64% 7.70% 7.70% 7.60% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50%Income taxes payable % of income tax provision 3.85% 8.11% 2.09% 4.29% 2.07% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08%Deferred revenue % sales 0.34% 0.34% 0.24% 0.18% 0.20% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26%Long-term debt % non-cash assets 41.36% 41.84% 43.46% 46.75% 44.77% 43.64% 43.64% 43.64% 43.64% 43.64% 43.64% 43.64% 43.64% 43.64% 43.64%Deferred taxes % of income tax provision 11.70% 54.37% 170.09% 72.05% 68.34% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00%Other liabilities % sales 14.82% 15.17% 10.20% 11.85% 12.62% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50%Other accrued expenses % sales 0.70% 0.78% 0.58% 0.74% 0.82% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72%Accrued expenses & other current liabilities % sales 7.28% 6.82% 6.88% 6.85% 7.20% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01%Current portion of long term debt debt schedule OR historical % LTD 8.83% 10.66% 6.60% 0.27% 12.99% 937.19 759.56 790.31 1,066.50 1,646.08 315.08 7.87% 7.87% 7.87% 7.87%

Ryder System, Inc.Revenue Decomposition$ in millionsFiscal Years Ending Dec. 31

Value % Value % Value % Value % Value % Value % Value % Value % Value % Value % Value % Value % Value %

Revenue Decomposition by Segment:Fleet Management Solutions (FMS)*

Full service lease 2,017 31% 2,103 32% 2,221 34% 1,532 32% 1,604 33% 1,681 33% 1,729 33% 1,802 33% 1,875 33% 1,946 33% 2,026 33% 2,108 33% 2,193 33%Commercial rental 753 12% 837 13% 901 14% 602 13% 640 13% 671 13% 686 13% 718 13% 746 13% 774 13% 806 13% 839 13% 873 13%Contract maintenance 178 3% 182 3% 191 3% 133 3% 139 3% 145 3% 150 3% 156 3% 162 3% 169 3% 175 3% 183 3% 190 3%Contract-related maintenance 187 3% 197 3% 200 3% 141 3% 147 3% 153 3% 159 3% 165 3% 172 3% 178 3% 186 3% 193 3% 201 3%Other 72 1% 71 1% 78 1% 53 1% 55 1% 58 1% 60 1% 62 1% 65 1% 68 1% 70 1% 73 1% 76 1%Fuel services revenue 830 13% 788 12% 538 8% 522 11% 510 10% 503 10% 552 10% 562 10% 581 10% 610 10% 632 10% 657 10% 685 10%

Fleet Management Solutions (FMS) 4,036 63% 4,178 63% 4,129 63% 2,984 63% 3,095 63% 3,212 63% 3,336 63% 3,465 63% 3,602 63% 3,745 63% 3,895 63% 4,053 63% 4,218 63%Inter-segment revenue 458 7% 478 7% 417 6% 1,762 37% 1,828 37% 1,898 37% 1,970 37% 2,047 37% 2,127 37% 2,212 37% 2,301 37% 2,394 37% 2,491 37%FMS 4,495 70% 4,656 70% 4,546 69% 4,745 69% 4,923 69% 5,110 69% 5,306 69% 5,512 69% 5,729 69% 5,957 69% 6,196 69% 6,446 69% 6,710 69%Dedicated Transportation Solutions (DTS) 832 13% 900 14% 896 14% 888 13% 921 13% 956 13% 993 13% 1,031 13% 1,072 13% 1,114 13% 1,159 13% 1,206 13% 1,255 13%Supply Chain Solutions (SCS) 1,551 24% 1,561 24% 1,548 24% 1,046 15% 1,085 15% 1,126 15% 1,169 15% 1,215 15% 1,263 15% 1,313 15% 1,366 15% 1,421 15% 1,479 15%Eliminations (458) -7% (478) -7% (417) -6% (499) -7% (518) -7% (537) -7% (558) -7% (580) -7% (603) -7% (627) -7% (652) -7% (678) -7% (706) -7%

Total revenue 6,419 100% 6,639 100% 6,572 100% 6,840 100% 7,096 100% 7,365 100% 7,648 100% 7,946 100% 8,258 100% 8,586 100% 8,931 100% 9,292 100% 9,672 100%

Revenue Decomposition by Region:United States 5,411 84.3% 5,614 84.6% 5,604 85.3% 5764 84.3% 5980 84.3% 6207 84.3% 6445 84.3% 6696 84.3% 6959 84.3% 7236 84.3% 7526 84.3% 7831 84.3% 8150 84.3%Canada 455 7.1% 435 6.6% 408 6.2% 508 7.4% 527 7.4% 547 7.4% 568 7.4% 590 7.4% 613 7.4% 637 7.4% 663 7.4% 690 7.4% 718 7.4%Europe 372 5.8% 401 6.0% 391 6.0% 383 5.6% 397 5.6% 412 5.6% 428 5.6% 444 5.6% 462 5.6% 480 5.6% 500 5.6% 520 5.6% 541 5.6%Latin America 161 2.5% 158 2.4% 140 2.1% 161 2.4% 167 2.4% 173 2.4% 180 2.4% 187 2.4% 195 2.4% 202 2.4% 210 2.4% 219 2.4% 228 2.4%Asia 19 0.3% 30 0.5% 29 0.4% 25 0.4% 26 0.4% 27 0.4% 28 0.4% 29 0.4% 30 0.4% 31 0.4% 32 0.4% 33 0.4% 35 0.4%

Total revenue 6,419 100.00% 6,639 100.00% 6,572 100.00% 6840.19 100.00% 7096.15 100.00% 7365.39 100.00% 7648.44 100.00% 7945.90 100.00% 8258.37 100.00% 8586.49 100.00% 8930.95 100.00% 9292.45 100.00% 9671.74 100.00%

2022E 2023E2016E 2017E 2018E 2019E 2020E 2021E2013 2014 2024E 2025E2015

Ryder System, Inc.Income Statement$ in millions except EPSFiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025ELease & rental revenues 2,770 2,939 3,122 3,278 3,442 3,614 3,794 3,984 4,163 4,330 4,460 4,593 4,685 Services revenue 2,820 2,911 2,912 3,029 3,150 3,276 3,407 3,543 3,685 3,832 3,985 4,145 4,311 Fuel services revenue 830 788 538 517 496 481 472 462 467 471 476 481 486

Total revenues 6,419 6,639 6,572 6,823 7,087 7,370 7,673 7,989 8,315 8,633 8,921 9,219 9,482

Cost of lease & rental 1,916 2,039 2,153 2,229 2,340 2,457 2,580 2,709 2,831 2,944 3,033 3,124 3,186 Cost of services 2,367 2,448 2,413 2,511 2,614 2,725 2,828 2,941 3,058 3,181 3,308 3,440 3,578 Cost of fuel services 814 768 520 506 486 472 462 453 457 462 467 471 476 Other operating expenses 138 127 135 164 163 170 169 176 166 173 178 184 190 Selling, general & administrative expenses 791 817 845 873 907 943 982 1,023 1,064 1,105 1,142 1,180 1,214 Depreciation expense (incl. in COGS) 957 1,040 1,140 1,326 1,371 1,436 1,515 1,555 1,619 1,685 1,712 1,769 1,828 Gains on vehicle sales, net (96) (127) (118) (109) (115) (121) (127) (134) (141) (147) (152) (157) (161)Interest expense 137 142 150 160 166 173 176 180 192 182 185 188 188 Miscellaneous income (expense), net (15) (14) (10) (13) (13) (14) (14) (15) (16) (16) (17) (17) (18)Restructuring & other (recoveries) charges, net (0) 2 14 6 6 6 7 7 7 8 8 8 8 Total costs & expenses 6,050 6,300 6,103 6,327 6,555 6,812 7,062 7,339 7,619 7,891 8,152 8,421 8,660

Earnings from continuing operations before income taxes 369 339 469 496 533 559 611 651 696 742 770 798 821 Provision (benefit) for income taxes 126 118 163 182 195 205 224 239 255 272 282 293 301

Earnings (loss) from continuing operations 243 220 306 314 337 354 387 412 440 470 487 505 520 Earnings (loss) from discontinued operations, net of tax (5) (2) (1) (1) (1) (1) (0) (0) - - - - -

Net income (loss) 238 219 305 313 336 353 386 412 440 470 487 505 520

Earnings (loss) per common share - BasicWeighted average shares outstanding 51.62 52.54 52.81 53.3 52.9 52.5 52.2 51.9 51.7 51.5 51.1 50.8 50.6 Year end shares outstanding 53.34 53.04 53.49 53.0 52.7 52.3 52.1 51.8 51.6 51.3 51.0 50.7 50.4 Continuing operations 4.67 4.18 5.78 5.9 6.4 6.8 7.4 7.9 8.5 9.2 9.6 10.0 10.3 Discontinued operations (0.10) (0.04) (0.02) (0.0) (0.0) (0.0) (0.0) (0.0) - - - - - Net income 4.57 4.14 5.75 5.90 6.38 6.74 7.42 7.94 8.53 9.16 9.56 9.96 10.31

Dividends per share (annualized) 1.30 1.42 1.56 1.69 1.83 1.99 2.16 2.34 2.54 2.75 2.99 3.24 3.51

Ryder System, Inc.Balance Sheet$ in millionsFiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025EAssets:

Current assets:Cash & cash equivalents 62 50 61 231 259 167 420 814 494 884 1,093 1,201 1,445 Receivables, net 777 795 835 841 874 909 946 985 1,025 1,065 1,100 1,137 1,169 Inventories 64 66 64 69 72 75 78 81 84 88 91 94 96 Prepaid expenses & other current assets 159 165 138 143 152 162 176 192 200 207 214 221 228

Total current assets 1,062 1,076 1,098 1,285 1,358 1,313 1,621 2,073 1,803 2,243 2,498 2,653 2,939 Other assets:

Revenue earning equipment, net 6,491 6,994 8,185 8,529 9,072 9,582 9,821 10,226 10,643 10,792 11,151 11,524 11,852 Operating property & equipment, net 634 700 715 737 765 796 829 863 898 932 963 996 1,024 Goodwill 384 393 389 389 389 389 389 389 389 389 389 389 389 Intangible assets 72 67 55 50 45 40 35 30 25 20 15 10 5 Direct financing leases & other assets 461 446 525 546 567 604 629 663 707 734 758 784 806

Total assets 9,104 9,676 10,968 11,536 12,196 12,725 13,324 14,244 14,465 15,110 15,775 16,356 17,015

Current liabilities:Short term debt & current portion of long term debt 259 12 635 937 760 790 1,066 1,646 315 465 473 473 480 Accounts payable 475 561 502 525 546 560 575 599 624 647 669 691 711 Income taxes payable 3 5 3 7 8 8 9 10 10 11 12 12 12 Deferred revenue 15 12 13 18 18 19 20 21 22 22 23 24 25 Other accrued expenses 37 49 54 49 51 53 55 58 60 62 64 67 68 Accrued expenses & other current liabilities 441 455 473 478 497 516 538 560 583 605 625 646 664

Total current liabilities 1,231 1,094 1,680 2,015 1,879 1,948 2,264 2,893 1,613 1,813 1,866 1,913 1,961

Long-term debt 3,930 4,500 4,883 4,783 5,209 5,280 5,131 4,960 5,967 5,908 6,007 6,013 6,094 Other non-current liabilities 655 787 830 853 886 921 959 999 1,039 1,079 1,115 1,152 1,185 Deferred income taxes 1,391 1,476 1,588 1,711 1,844 1,984 2,136 2,298 2,472 2,657 2,849 3,048 3,253

Total liabilities 7,207 7,857 8,981 9,362 9,819 10,132 10,490 11,151 11,091 11,458 11,838 12,127 12,493

Shareholder's equity:Common stock and APIC 944 989 1,033 1,046 1,060 1,076 1,093 1,112 1,133 1,133 1,133 1,133 1,133 Retained earnings 1,391 1,451 1,667 1,841 2,030 2,229 2,454 2,694 2,954 3,232 3,518 3,809 4,102 Accumulated other comprehensive income (loss) (438) (620) (713) (713) (713) (713) (713) (713) (713) (713) (713) (713) (713)

Total shareholders' equity* 1,897 1,819 1,987 2,174 2,378 2,592 2,834 3,093 3,374 3,653 3,938 4,229 4,522 Total liabilities and shareholder's equity 9,104 9,676 10,968 11,536 12,196 12,725 13,324 14,244 14,465 15,110 15,775 16,356 17,015 *includes effects of currency translations, actuarial losses, prior service credits, transition obligation, and unrealized gains/losses on derivatives

Ryder System, Inc.Historical Cash Flow Statement$ in millionsFiscal Years Ending Dec. 31 2013 2014 2015Cash flows from operating activities:

Net income (loss) 238 219 305 Less: (loss) earnings from discontinued operations, net of tax 5 2 1 Earnings (loss) from continuing operations 243 220 306

Depreciation expense 957 1,040 1,140 Gains on vehicle sales, net (96) (127) (118) Share-based compensation expense 19 21 21 Pension lump sum settlement expense - 97 -Amortization expense & other non-cash charges, net 56 47 71 Goodwill impairment - - -Deferred income tax expense 114 105 154 Changes in operating assets and liabilities, net of acquisitions:

Receivables (14) (21) (40) Inventories (1) (2) 1 Prepaid expenses & other assets (23) (16) (0) Accounts payable 34 53 (74) Accrued expenses & other non-current liabilities (67) (49) (19)

Net cash flows from operating activities 1,223 1,370 1,442

Cash flows from financing activities: 371 338 808 Net change in commercial paper borrowings and revolving credit facilities 146 (221) 323 Debt proceeds 557 840 1,283 Debt repaid, including capital lease obligations (333) (281) (798) Dividends on common stock (68) (75) (83) Common stock issued 91 47 24 Common stock repurchased - (106) (6) Excess tax benefits from share-based compensation 5 1 (3) Debt issuance costs - (5) (8)

Net cash flows from financing activities 394 199 731

Cash flows from investing activities:Purchases of property & revenue earning equipment (2,140) (2,259) (2,668) Sales of revenue earning equipment 446 493 424 Sale & leaseback of revenue earning equipment - 126 -Sales of operating property & equipment 7 3 4 Acquisitions (2) (10) -Collections on direct finance leases 71 66 71 Changes in restricted cash (11) 3 8 Insurance recoveries and other, net 8 (1) -

Net cash flows from investing activities (1,622) (1,579) (2,161)

Effect of exchange rate changes on cash 6 0 0 Increase (decrease) in cash & cash equivalents from continuing operations 1 (10) 12 Decrease in cash & cash equivalents from discontinued operations (5) (2) (1) Increase (decrease) in cash & cash equivalents (5) (11) 11

Cash & cash equivalents, beginning of year 66 62 50 Cash & cash equivalents, end of year 62 50 61

Interest expense paid 133 140 145 Income taxes paid (refunded) 13 11 13

Ryder System, Inc.Forecasted Cash Flow Statement$ in millionsFiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025ECash flows from operating activities:

Net income (loss) 313 336 353 386 412 440 470 487 505 520 Depreciation expense 1,326 1,371 1,436 1,515 1,555 1,619 1,685 1,712 1,769 1,828 Amortization expense & other non-cash charges, net 5 5 5 5 5 5 5 5 5 5

Changes in operating assets and liabilities:Receivables (6) (33) (35) (37) (39) (40) (39) (36) (37) (32) Inventories (6) (3) (3) (3) (3) (3) (3) (3) (3) (3) Direct financing leases and other assets (20) (21) (37) (25) (34) (44) (27) (24) (25) (22) Prepaid expenses & other current assets (5) (9) (10) (14) (15) (8) (8) (7) (7) (6) Accounts payable 23 20 14 15 24 24 24 22 22 20 Other Accrued Expenses (4) 2 2 2 2 2 2 2 2 2 Accrued expenses & other non-current liabilities 5 19 20 21 22 23 22 20 21 18 Income taxes payable 4 1 0 1 1 1 1 0 0 0 Deferred Revenue 5 1 1 1 1 1 1 1 1 1 Deferred Taxes 124 133 139 152 162 174 185 192 199 205 Other non-current liabilities 23 33 35 38 40 41 40 36 37 33

Net cash flows from operating activities 1,786 1,855 1,921 2,057 2,132 2,235 2,357 2,407 2,489 2,568

Cash flows from financing activities:Change in debt 203 248 101 127 409 (325) 91 107 6 88 Dividends on common stock (90) (97) (104) (112) (121) (131) (141) (152) (164) (177) Common stock issued 13 14 16 17 19 21 - - - - Common stock repurchased (50) (50) (50) (50) (50) (50) (50) (50) (50) (50)

Net cash flows from financing activities 76 116 (37) (18) 257 (484) (100) (95) (207) (139)

Cash flows from investing activities:Purchases of property & revenue earning equipment (1,692) (1,943) (1,977) (1,787) (1,994) (2,071) (1,868) (2,103) (2,173) (2,184) Acquisitions - - - - - - - - - -

Net cash flows from investing activities (1,692) (1,943) (1,977) (1,787) (1,994) (2,071) (1,868) (2,103) (2,173) (2,184)

Increase (decrease) in cash & cash equivalents 170 28 (92) 253 394 (321) 390 209 109 244

Cash & cash equivalents, beginning of year 61 231 259 167 420 814 494 884 1,093 1,201 Cash & cash equivalents, end of year 231 259 167 420 814 494 884 1,093 1,201 1,445

Ryder System, Inc.Common Size Income StatementFiscal Years Ending Dec. 31 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025Eas a % of RevenueLease & rental revenues 42.21% 43.08% 43.15% 44.28% 47.50% 48.04% 48.56% 49.03% 49.45% 49.87% 50.07% 50.15% 49.99% 49.83% 49.41%Services revenue 43.12% 43.26% 43.93% 43.86% 44.31% 44.39% 44.44% 44.44% 44.40% 44.35% 44.32% 44.39% 44.67% 44.96% 45.46%Fuel services revenue 14.67% 13.66% 12.92% 11.87% 8.19% 7.57% 7.00% 6.53% 6.15% 5.78% 5.61% 5.46% 5.34% 5.22% 5.12%

Total revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Cost of lease & rental 28.86% 30.22% 29.84% 30.72% 32.77% 32.67% 33.02% 33.34% 33.63% 33.91% 34.05% 34.10% 33.99% 33.88% 33.60%Cost of services 36.13% 36.35% 36.87% 36.87% 36.72% 36.80% 36.89% 36.98% 36.85% 36.81% 36.78% 36.84% 37.08% 37.32% 37.73%Cost of fuel services 14.44% 13.40% 12.68% 11.57% 7.91% 7.42% 6.86% 6.40% 6.02% 5.67% 5.50% 5.35% 5.23% 5.11% 5.02%Other operating expenses 2.14% 2.17% 2.15% 1.91% 2.05% 2.40% 2.30% 2.30% 2.20% 2.20% 2.00% 2.00% 2.00% 2.00% 2.00%Selling, general & administrative expenses 12.75% 12.25% 12.32% 12.31% 12.85% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80% 12.80%Gains on vehicle sales, net 1.04% 1.42% 1.50% 1.91% 1.79% 1.60% 1.62% 1.64% 1.66% 1.68% 1.70% 1.70% 1.70% 1.70% 1.70%Interest expense 2.20% 2.25% 2.14% 2.14% 2.29% 2.35% 2.34% 2.35% 2.29% 2.25% 2.30% 2.11% 2.07% 2.04% 1.98%Miscellaneous income (expense), net 0.15% 0.19% 0.24% 0.21% 0.15% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19%Restructuring & other (recoveries) charges, net 0.06% 0.13% -0.01% 0.04% 0.22% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09% 0.09%

Total costs & expenses 95.38% 95.16% 94.25% 94.90% 92.86% 92.73% 92.49% 92.42% 92.04% 91.86% 91.64% 91.41% 91.37% 91.35% 91.34%

Earnings from continuing operations before income taxes 4.62% 4.84% 5.75% 5.10% 7.14% 7.27% 7.51% 7.58% 7.96% 8.14% 8.36% 8.59% 8.63% 8.65% 8.66%Provision (benefit) for income taxes 1.79% 1.63% 1.96% 1.78% 2.48% 2.67% 2.76% 2.78% 2.92% 2.99% 3.07% 3.15% 3.17% 3.18% 3.18%

Earnings (loss) from continuing operations 2.83% 3.21% 3.79% 3.32% 4.66% 4.60% 4.76% 4.80% 5.04% 5.15% 5.29% 5.44% 5.46% 5.48% 5.48%Earnings (loss) from discontinued operations, net of tax -0.03% 0.15% -0.08% -0.03% -0.02% -0.01% -0.01% -0.01% -0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Net income (loss) 2.81% 3.36% 3.70% 3.29% 4.64% 4.59% 4.74% 4.79% 5.03% 5.15% 5.29% 5.44% 5.46% 5.48% 5.48%

Ryder System, Inc.Common Size Balance Sheet

Fiscal Years Ending Dec. 31 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025Eas a % of AssetsAssets:

Current assets:Cash & cash equivalents 1.37% 0.80% 0.68% 0.52% 0.56% 2.00% 2.13% 1.31% 3.15% 5.72% 3.41% 5.85% 6.93% 7.34% 8.49%Receivables, net 9.91% 9.33% 8.54% 8.21% 7.62% 7.29% 7.17% 7.14% 7.10% 6.92% 7.09% 7.05% 6.97% 6.95% 6.87%Inventories 0.87% 0.77% 0.71% 0.68% 0.58% 0.60% 0.59% 0.59% 0.59% 0.57% 0.58% 0.58% 0.57% 0.57% 0.57%Prepaid expenses & other current assets 2.14% 1.61% 1.75% 1.71% 1.26% 1.24% 1.25% 1.27% 1.32% 1.35% 1.38% 1.37% 1.36% 1.35% 1.34%

Total current assets 14.28% 12.50% 11.67% 11.12% 10.01% 11.14% 11.13% 10.32% 12.16% 14.55% 12.47% 14.85% 15.83% 16.22% 17.27%Other assets:

Revenue earning equipment, net 66.29% 69.17% 71.30% 72.29% 74.63% 73.93% 74.38% 75.30% 73.71% 71.79% 73.58% 71.42% 70.69% 70.46% 69.66%Operating property & equipment, net 8.19% 7.51% 6.96% 7.23% 6.52% 6.39% 6.28% 6.26% 6.22% 6.06% 6.21% 6.17% 6.11% 6.09% 6.02%Goodwill 4.95% 4.62% 4.21% 4.06% 3.55% 3.37% 3.19% 3.06% 2.92% 2.73% 2.69% 2.58% 2.47% 2.38% 2.29%Intangible assets 1.11% 0.97% 0.80% 0.69% 0.50% 0.44% 0.37% 0.32% 0.26% 0.21% 0.17% 0.13% 0.10% 0.06% 0.03%Direct financing leases & other assets 5.17% 5.22% 5.06% 4.61% 4.79% 4.73% 4.65% 4.75% 4.72% 4.66% 4.89% 4.86% 4.81% 4.79% 4.74%

Total assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Liabilities:Current liabilities:

Short-term debt & current portion of long-term deb 3.60% 4.42% 2.85% 0.13% 5.79% 8.12% 6.23% 6.21% 8.00% 11.56% 2.18% 3.08% 3.00% 2.89% 2.82%Accounts payable 5.14% 4.80% 5.22% 5.80% 4.58% 4.55% 4.47% 4.40% 4.32% 4.21% 4.31% 4.29% 4.24% 4.23% 4.18%Income taxes 0.05% 0.10% 0.03% 0.05% 0.03% 0.06% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07%Deferred revenue 0.27% 0.26% 0.17% 0.12% 0.12% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.14%Accrued expenses & other current liabilities 6.66% 6.08% 5.45% 5.38% 4.95% 4.14% 4.07% 4.06% 4.03% 3.93% 4.03% 4.00% 3.96% 3.95% 3.90%

Total current liabilities 15.41% 15.30% 13.52% 11.30% 15.32% 17.47% 15.41% 15.31% 16.99% 20.31% 11.15% 12.00% 11.83% 11.70% 11.52%Long-term debt 40.80% 41.51% 43.17% 46.51% 44.52% 41.46% 42.71% 41.49% 38.51% 34.82% 41.25% 39.10% 38.08% 36.76% 35.82%Other non-current liabilities 11.77% 11.41% 7.20% 8.13% 7.56% 7.39% 7.26% 7.24% 7.20% 7.01% 7.19% 7.14% 7.07% 7.05% 6.97%Deferred income taxes 14.72% 14.15% 15.28% 15.25% 14.47% 14.83% 15.12% 15.59% 16.03% 16.14% 17.09% 17.58% 18.06% 18.64% 19.12%Total liabilities 82.70% 82.36% 79.17% 81.20% 81.88% 81.16% 80.51% 79.63% 78.73% 78.28% 76.68% 75.83% 75.04% 74.14% 73.42%

Shareholder's equity:Common Stock 0.34% 0.31% 0.29% 0.27% 0.24% 0.23% 0.22% 0.21% 0.20% 0.19% 0.19% 0.18% 0.17% 0.17% 0.16%Additional paid-in capital 10.10% 9.72% 10.08% 9.95% 9.17% 9.16% 9.09% 9.15% 9.18% 9.01% 9.32% 9.37% 9.42% 9.54% 9.63%Retained earnings 14.31% 14.68% 15.28% 14.99% 15.20% 15.95% 16.65% 17.52% 18.42% 18.91% 20.42% 21.39% 22.30% 23.29% 24.11%Accumulated other comprehensive income (loss) -7.45% -7.06% -4.81% -6.41% -6.50% -6.18% -5.84% -5.60% -5.35% -5.00% -4.93% -4.72% -4.52% -4.36% -4.19%Total shareholders' equity 17.30% 17.64% 20.83% 18.80% 18.12% 18.84% 19.49% 20.37% 21.27% 21.72% 23.32% 24.17% 24.96% 25.86% 26.58%

Total liabilities and shareholder's equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Ryder System, Inc.Value Driver Estimation$ in millionsFiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025EInvested CapitalOperating Current Assets

Cash (least of actual or 2% of sales) 62 50 61 136 142 147 153 160 166 173 178 184 190 Accounts Receivable, net 777 795 835 841 874 909 946 985 1,025 1,065 1,100 1,137 1,169 Inventory 64 66 64 69 72 75 78 81 84 88 91 94 96 Prepaid Expenses and other Current Operating Assets 159 165 138 143 152 162 176 192 200 207 214 221 228

Total Current Assets 1,062 1,076 1,098 1,191 1,240 1,293 1,354 1,418 1,476 1,532 1,583 1,636 1,683

Operating Current LiabilitiesAccounts Payable 475 561 502 525 546 560 575 599 624 647 669 691 711 Income Taxes Payable 3 5 3 7 8 8 9 10 10 11 12 12 12 Deferred Revenue 15 12 13 18 18 19 20 21 22 22 23 24 25 Other accrued expenses 37 49 54 49 51 53 55 58 60 62 64 67 68 Accrued Expenses and other current liabilities 441 455 473 478 497 516 538 560 583 605 625 646 664

Total Current Liabilities 972 1,081 1,046 1,078 1,120 1,157 1,198 1,247 1,298 1,348 1,393 1,440 1,481 Net Working Capital 91 (5) 53 113 120 136 157 171 178 184 190 196 202

PPE, net 7,125 7,694 8,900 9,266 9,837 10,378 10,649 11,089 11,541 11,724 12,115 12,520 12,876

Other Operating Non-Current AssetsIntangible Assets, net 72 67 55 50 45 40 35 30 25 20 15 10 5 PV of Operating Leases 245 329 155 - - - - - - - - - - Direct Financing Leases and Other Operating Assets 461 446 525 546 567 604 629 663 707 734 758 784 806

Total Operating Non-Current Assets 778 842 736 596 612 645 664 693 732 754 773 794 811

Other Operating Non-Current LiabilitiesOther Liabilities 655 787 830 853 886 921 959 999 1,039 1,079 1,115 1,152 1,185

Total Operating Non-Current Liabilities 655 787 830 853 886 921 959 999 1,039 1,079 1,115 1,152 1,185

Invested Capital 7,338 7,744 8,858 9,121 9,684 10,237 10,511 10,954 11,411 11,583 11,963 12,358 12,704

NOPLATEBITA

Operating Revenue 6,419 6,639 6,572 6,823 7,087 7,370 7,673 7,989 8,315 8,633 8,921 9,219 9,482 +Gains on Vehicle Sales 96 127 118 109 115 121 127 134 141 147 152 157 161 -COGS (w/ Depr.) 5,097 5,256 5,087 5,246 5,441 5,655 5,870 6,103 6,347 6,587 6,808 7,035 7,240 -SG&A Expense 791 817 845 873 907 943 982 1,023 1,064 1,105 1,142 1,180 1,214 -Amort. Of Non-Goodwill Intangibles 8 6 11 5 5 5 5 5 5 5 5 5 5 -Other Operating Expenses 138 127 135 164 163 170 169 176 166 173 178 184 190 +Implied Interest on Operating Leases 12 16 7 - - - - - - - - - -

EBITA 493 576 619 644 686 719 774 817 873 910 940 971 994

Adjusted TaxesIncome Tax Provision 126 118 163 182 195 205 224 239 255 272 282 293 301 +Tax Shield on Interest Expense 50 52 55 59 61 64 65 66 70 67 68 69 69 +Tax Shield on Restructuring Charges (Recoveries) (0) 1 5 2 2 2 2 3 3 3 3 3 3 +Tax Shield on Operating Lease Interest 4 6 3 - - - - - - - - - - +Tax Shield on Miscellaneous Losses 6 5 4 5 5 5 5 5 6 6 6 6 7

Total Adjusted Taxes 186 180 220 243 259 271 292 308 329 342 354 365 374

Change in Deferred TaxesDeferred Tax Liability, net (Current Year) 1,391 1,476 1,588 1,711 1,844 1,984 2,136 2,298 2,472 2,657 2,849 3,048 3,253 -Deferred Tax Liability, net (Previous Year) 1,177 1,391 1,476 1,588 1,711 1,844 1,984 2,136 2,298 2,472 2,657 2,849 3,048

Change in Deferred Taxes 214 85 112 124 133 139 152 162 174 185 192 199 205

NOPLAT 521 481 511 524 560 587 635 671 718 753 778 805 825

NOPLAT 521 481 511 524 560 587 635 671 718 753 778 805 825 Beginning Invested Capital 7,118 7,338 7,744 8,858 9,121 9,684 10,237 10,511 10,954 11,411 11,583 11,963 12,358 ROIC 7.32% 6.56% 6.60% 5.92% 6.14% 6.06% 6.20% 6.39% 6.56% 6.60% 6.72% 6.73% 6.68%

NOPLAT 521 481 511 524 560 587 635 671 718 753 778 805 825 Beginning Invested Capital 7,118 7,338 7,744 8,858 9,121 9,684 10,237 10,511 10,954 11,411 11,583 11,963 12,358 Ending Invested Capital 7,338 7,744 8,858 9,121 9,684 10,237 10,511 10,954 11,411 11,583 11,963 12,358 12,704 FCF 301.1 75.5 (603.6) 261.2 (2.6) 33.6 360.2 228.5 261.6 580.8 397.9 410.9 478.8

Beginning Invested Capital 7,118 7,338 7,744 8,858 9,121 9,684 10,237 10,511 10,954 11,411 11,583 11,963 12,358 ROIC 7.32% 6.56% 6.60% 5.92% 6.14% 6.06% 6.20% 6.39% 6.56% 6.60% 6.72% 6.73% 6.68%WACC 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20% 6.20%Economic Profit 79.8 26.2 31.1 -25.0 -5.7 -13.4 -0.1 19.8 39.1 45.4 60.4 63.2 59.2

Ryder System, Inc.Weighted Average Cost of Capital (WACC) EstimationNumbers in MillionsWACC 6.20%

Cost of DebtPre-Tax Cost of Debt 4.81%Tax Rate 36.70%After-Tax Cost of Debt 3.05%

Cost of EquityRisk-Free Rate 2.97%Beta 1.53 Market Risk Premium 4.89%Cost of Equity 10.45%

Market Value of EquityPrice per Share 78.65$ Total Shares 53.49 Market Value of Equity 4,206.99

Market Value of DebtShort-Term Debt 35.95 Long-Term Debt 4,883.33 Current Portion of Long-Term Debt 598.58 PV of Operating Leases 155Market Value of Debt 5,672.91

Capital Structure Market Value Percentage of TotalMarket Value of Equity 4,206.99 42.58%Market Value of Debt 5,672.91 57.42%Total 9,879.90 100.00%

Weighted Average Cost of Capital Percentage Cost Capital Structure Tax Rate TotalEquity 10.45% 42.58% N/A 4.45%Debt 3.05% 57.42% 36.70% 1.75%WACC 6.20%

Ryder System, Inc.Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth 2.00% CV ROIC 6.63% WACC 6.20% Cost of Equity 10.45%In Millions (excluding prices)Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

DCF ModelNOPLAT $ 524.16 $ 559.76 $ 586.90 $ 634.55 $ 671.48 $ 718.20 $ 752.79 $ 778.47 $ 804.89 $ 825.27 ROIC 5.92% 6.14% 6.06% 6.20% 6.39% 6.56% 6.60% 6.72% 6.73% 6.63%CapEx (Change in IC) 262.98 562.36 553.26 274.38 442.98 456.60 171.96 380.53 394.03 346.52 FCF 261.18 (2.60) 33.64 360.18 228.49 261.60 580.83 397.93 410.85 478.75 Continuing Value 13,723.78

CF to Discount 261.18$ (2.60)$ 33.64$ 360.18$ 228.49$ 261.60$ 580.83$ 397.93$ 410.85$ 13,723.78$ Periods to Discount 1 2 3 4 5 6 7 8 9 9PV of Free Cash Flows 245.93 (2.31) 28.09 283.16 169.15 182.35 381.23 245.94 239.10 7,986.82

PV of Operating Assets 9,759.46 Excess Cash - Short-Term Debt (35.95) Current Portion of LTD (598.58) Long-Term Debt (4,883.33) PV of ESOPs (30.41) PV of Operating Leases (155.06) Value of Equity 4,056.14 Shares Outstanding 53.49 Intrinsic Value as of 12/31/2015 75.83$

Intrinsic Value as of 12/31/2015 75.83$ Cost of equity 10.45%Dividend Yield 1.98%Elapsed Fraction 0.926Intrinsic Value as of Today 81.76$

EP ModelEconomic Profit (25.01)$ (5.71)$ (13.44)$ (0.08)$ 19.83$ 39.09$ 45.37$ 60.39$ 63.22$ 59.18$ Continuing Value 1,366.27$ Periods to Discount 1 2 3 4 5 6 7 8 9 9CF to Discount (25.01) (5.71) (13.44) (0.08) 19.83 39.09 45.37 60.39 63.22 1,366.27 PV of Cash Flows (23.55) (5.06) (11.22) (0.07) 14.68 27.25 29.78 37.32 36.79 795.13

PV of Economic Profit 901.05 Plus: Beginning Invested Capital 8,858.41 PV of Operating Assets 9,759.46 Excess Cash 0Short-Term Debt (35.95) Current Portion of LTD (598.58) Long-Term Debt (4,883.33) PV of ESOPs (30.41) PV of Operating Leases (155.06) Value of Equity 4,056.14$ Shares Outstanding 53.49 Intrinsic Value as of 12/31/2015 75.83$

Intrinsic Value as of 12/31/2015 75.83$ Cost of equity 10.45%Dividend Yield 1.98%Elapsed Fraction 0.926Intrinsic Value as of Today 81.76$

Today 12/4/2016Next FYE 12/31/2016Last FYE 12/31/2015Days in FY 366 Days from last FYE 339 Elapsed Fraction 0.926Dividend Yield 1.98%

Ryder System, Inc.Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E CV

EPS 5.90$ 6.38$ 6.74$ 7.42$ 7.94$ 8.53$ 9.16$ 9.56$ 9.96$ 10.31 10.64Growth 8.2% 5.6% 10.0% 7.0% 7.4% 7.4% 4.4% 4.2% 3.2% 3.2%

Key Assumptions CV EPS growth 3.20% CV ROE 12.29% Cost of Equity 10.45%

Future Cash Flows P/E Multiple (CV Year) 9.88 EPS (CV Year) 10.31$ Future Stock Price 105.13$ Dividends Per Share 1.69 1.83 1.99 2.16 2.34 2.54 2.75 2.99 3.24 3.51 Future Cash Flows 1.69 1.83 1.99 2.16 2.34 2.54 2.75 2.99 3.24 105.13

Periods to Discount 1 2 3 4 5 6 7 8 9 9 Discounted Cash Flows 1.53 1.50 1.48 1.45 1.42 1.40 1.37 1.35 1.32 42.97

Intrinsic Value 55.80$

Ryder System, Inc.Relative Valuation Models

EPS EPS Enterprise EBITDA EBITDA EV/EBITDA EV/EBITDATicker Company Price 2016E 2017E P/E 16 P/E 17 Value 2016E 2017E 16 17JBHT HUNT (JB) TRANSPRT SVCS INC 80.94 3.79 4.21 21.38 19.38 10,088 1,082 1,166 9.32 8.65MRTN MARTEN TRANSPORT LTD 20.00 1.01 1.08 19.75 19.02 673 139 144 4.86 4.68WERN WERNER ENTERPRISES INC 24.10 1.06 1.22 22.72 19.84 1,875 331 356 5.67 5.26KNX KNIGHT TRANSPORTATION INC 28.87 1.18 1.31 24.41 22.28 2,389 270 288 8.86 8.29SAIA SAIA INC 35.50 1.88 2.14 18.85 16.98 1,003 156 174 6.42 5.77SWFT SWIFT TRANSPORTATION CO 22.29 1.36 1.51 16.43 14.87 4,121 576 631 7.15 6.53

Average 20.6 18.7 7.0 6.5

R Ryder System, Inc. $78.65 5.90 6.38 13.3 12.3 9,151 1,802 1,869 5.08 4.90

Implied Value: Relative P/E (EPS16) $ 121.48 Relative P/E (EPS17) 119.58$

implied equity value shares outsanding EV/EBITDA (EBITDA16) 12,700.11$ 7,243.20$ 53.49 135.41 EV/EBITDA (EBITDA17) 12,201.75$ 6,744.84$ 53.49 126.10

Equity Value = EV-debt 5517.856 EV = EqV + debt - cash+cash 60.945adjustment -5456.911

Sensitivity Tables

81.76 1.23 1.33 1.43 1.53 1.63 1.73 1.83 81.76 4.6% 4.7% 4.8% 4.9% 5.0% 5.1% 5.2%1.7% 116.44 103.37 91.54 80.76 70.91 61.86 53.52 33.70% 92.00 88.42 84.94 81.56 78.28 75.09 72.001.8% 117.54 104.15 92.06 81.08 71.06 61.87 53.41 34.70% 92.15 88.53 85.03 81.62 78.32 75.11 71.991.9% 118.70 104.98 92.61 81.41 71.21 61.88 53.30 35.70% 92.30 88.66 85.12 81.69 78.36 75.13 71.992.0% 119.92 105.84 93.19 81.76 71.37 61.89 53.19 36.70% 92.46 88.78 85.22 81.76 78.40 75.15 71.982.1% 121.21 106.75 93.80 82.12 71.54 61.90 53.07 37.70% 92.62 88.91 85.32 81.83 78.45 75.17 71.982.2% 122.58 107.72 94.44 82.51 71.72 61.91 52.94 38.70% 92.78 89.04 85.42 81.91 78.50 75.19 71.982.3% 124.03 108.73 95.12 82.91 71.90 61.92 52.81 39.70% 92.95 89.18 85.52 81.98 78.55 75.22 71.98

81.76 6.03% 6.23% 6.43% 6.63% 6.83% 7.03% 7.23% 81.76 67.40% 67.60% 67.80% 68.00% 68.20% 68.40% 68.60%5.9% 91.52 94.24 96.78 99.17 101.42 103.54 105.54 12.2% 100.05 99.11 98.18 97.24 96.31 95.37 94.436.0% 85.67 88.29 90.75 93.06 95.23 97.28 99.22 12.4% 94.89 93.95 93.02 92.08 91.14 90.21 89.276.1% 80.11 82.64 85.02 87.25 89.36 91.34 93.21 12.6% 89.73 88.79 87.86 86.92 85.98 85.05 84.116.2% 74.84 77.30 79.60 81.76 83.80 85.72 87.53 12.8% 84.57 83.63 82.70 81.76 80.82 79.90 78.986.3% 69.77 72.14 74.37 76.47 78.44 80.30 82.06 13.0% 79.41 78.47 77.54 76.62 75.70 74.78 73.866.4% 64.96 67.26 69.42 71.45 73.36 75.16 76.86 13.2% 74.25 73.33 72.41 71.49 70.57 69.66 68.746.5% 60.36 62.60 64.69 66.66 68.51 70.26 71.91 13.4% 69.12 68.21 67.29 66.37 65.45 64.53 63.64

WACC

CV NOPLAT Growth

Marginal Tax Rate

Cost of Lease as a % of sales

Equity Risk PremiumBeta

CV ROIC

SG&A as a percentage of

sales

Ryder System, Inc.Key Management Ratios

Fiscal Years Ending Dec. 31 Calculations 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Liquidity RatiosCurrent Ratio Current Assets/Current Liabilities 0.86 0.98 0.65 0.64 0.72 0.67 0.72 0.72 1.12 1.24 1.34 1.39 1.50 Quick Ratio (Curr. Assets-Inventories)/ Curr. Liab. 0.81 0.92 0.62 0.60 0.68 0.64 0.68 0.69 1.07 1.19 1.29 1.34 1.45 Cash Ratio (Cash+Marketable Securities)/ Curr. Liab. 0.05 0.05 0.04 0.11 0.14 0.09 0.19 0.28 0.31 0.49 0.59 0.63 0.74

Activity or Asset-Management RatiosTotal Asset Turnover Sales/Avg. Total Assets 0.77 0.73 0.68 0.62 0.61 0.60 0.60 0.60 0.58 0.60 0.59 0.58 0.58 Fixed Asset Turnover Sales/Avg. Fixed Assets 1.01 0.93 0.85 0.77 0.76 0.75 0.74 0.75 0.75 0.75 0.76 0.76 0.76 Days Sales Outstanding (AR/Credit Sales)*Number of Days 267.05 269.58 277.66 238.97 234.98 252.64 213.10 173.52 207.56 173.25 160.78 156.42 145.25

Financial Leverage RatiosDebt to Equity Total Debt/Shareholders' Equity 2.21 2.48 2.78 2.63 2.51 2.34 2.19 2.14 1.86 1.74 1.65 1.53 1.45 Interest Coverage Operating Income/Interest Expense 2.69 2.38 3.12 3.10 3.21 3.23 3.47 3.62 3.63 4.07 4.16 4.25 4.37 Debt Ratio Total Liabilities/Total Assets 0.79 0.81 0.82 0.81 0.81 0.80 0.79 0.78 0.77 0.76 0.75 0.74 0.73

Profitability RatiosROA Net Income/Beg. Total Assets 77.16% 72.92% 67.92% 62.2% 61.4% 60.4% 60.3% 60.0% 58.4% 59.7% 59.0% 58.4% 58.0%Lease and Rental Gross Profit Margin (L&R Rev.-L&R COGS)/L&R Rev. 30.84% 30.62% 31.01% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0%ROE Net Income/Beg. Total Shareholders' Equity 16.20% 11.52% 16.75% 15.7% 15.5% 14.8% 14.9% 14.5% 14.2% 13.9% 13.3% 12.8% 12.3%After-Tax Profit Margin After-Tax Net Income/Net Sales 3.70% 3.29% 4.64% 4.6% 4.7% 4.8% 5.0% 5.2% 5.3% 5.4% 5.5% 5.5% 5.5%

Payout Policy RatiosDividend Payout (Dividends per share)/(Earnings per share) 28.45% 34.30% 27.13% 29% 29% 30% 29% 29% 30% 30% 31% 32% 34%Dividend Coverage Ratio EPS/Dividends per Share 3.52 2.92 3.69 3.49 3.48 3.39 3.44 3.39 3.36 3.33 3.20 3.08 2.94

Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014) Present Value of Operating Lease Obligations (2013) Present Value of Operating Lease Obligations (2012) Present Value of Operating Lease Obligations (2011)In Millions

Operating Operating Operating Operating OperatingFiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending 0.02 Leases Fiscal Years Ending 71.0557965645637 Leases Fiscal Years Ending 0.124 Leases2016 74.103 2015 103.624 2014 83.844 2013 106.688 2012 96.6232017 39.265 2016 75.094 2015 65.934 2014 96.402 2013 72.4692018 21.675 2017 51.096 2016 41.383 2015 54.414 2014 69.1822019 14.066 2018 48.589 2017 25.205 2016 34.261 2015 29.2352020 6.896 2019 35.874 2018 28.803 2017 21.365 2016 14.846Thereafter 17.42 Thereafter 65.646 Thereafter 33.473 Thereafter 58.765 Thereafter 30.797Total Minimum Payments 173.425 Total Minimum Payments 379.923 Total Minimum Payments 278.642 Total Minimum Payments 371.895 Total Minimum Payments 313.152Less: Interest 18 Less: Interest 51 Less: Interest 34 Less: Interest 47 Less: Interest 36PV of Minimum Payments 155 PV of Minimum Payments 329 PV of Minimum Payments 245 PV of Minimum Payments 325 PV of Minimum Payments 277

Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases

Pre-Tax Cost of Debt 4.81% Pre-Tax Cost of Debt 4.81% Pre-Tax Cost of Debt 4.81% Pre-Tax Cost of Debt 4.81% Pre-Tax Cost of Debt 4.81%Number Years Implied by Year 6 Payment 2.5 Number Years Implied by Year 6 Payment 1.8 Number Years Implied by Year 6 Payment 1.2 Number Years Implied by Year 6 Payment 2.8 Number Years Implied by Year 6 Payment 2.1

Lease PV Lease Lease PV Lease Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment1 74.103 70.7 1 103.624 98.9 1 83.844 80.0 1 106.688 101.8 1 96.623 92.22 39.265 35.7 2 75.094 68.4 2 65.934 60.0 2 96.402 87.8 2 72.469 66.03 21.675 18.8 3 51.096 44.4 3 41.383 35.9 3 54.414 47.3 3 69.182 60.14 14.066 11.7 4 48.589 40.3 4 25.205 20.9 4 34.261 28.4 4 29.235 24.25 6.896 5.5 5 35.874 28.4 5 28.803 22.8 5 21.365 16.9 5 14.846 11.76 & beyond 6.896 12.7 6 & beyond 35.874 48.6 6 & beyond 28.803 25.2 6 & beyond 21.365 42.6 6 & beyond 14.846 22.7PV of Minimum Payments 155.1 PV of Minimum Payments 328.8 PV of Minimum Payments 244.8 PV of Minimum Payments 324.6 PV of Minimum Payments 276.9

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 1,263,000Average Time to Maturity (years): 6.60Expected Annual Number of Options Exercised: 191,364

Current Average Strike Price: 68.13$ Cost of Equity: 10.45%Current Stock Price: $78.65

2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025EIncrease in Shares Outstanding: 191,364 191,364 191,364 191,364 191,364 191,364Average Strike Price: 68.13$ 73.84$ 81.56$ 90.08$ 99.50$ 109.90$ Increase in Common Stock Account: 13,037,605 14,130,238 15,607,088 17,238,294 19,039,989 21,029,991

Change in Treasury Stock 49,748,500 49,748,500 49,748,500 49,748,500 49,748,500 49,748,500 49,748,500 49,748,500 49,748,500 49,748,500Expected Price of Repurchased Shares: 78.65$ 86.87$ 95.95$ 105.98$ 117.05$ 129.29$ 142.80$ 157.73$ 174.21$ 192.42$ Number of Shares Repurchased: 632,530 572,676 518,485 469,423 425,003 384,786 348,375 315,409 285,563 258,541

Shares Outstanding (beginning of the year) 53,490,000 53,048,833 52,667,521 52,340,400 52,062,341 51,828,702 51,635,279 51,286,904 50,971,495 50,685,932Plus: Shares Issued Through ESOP 191,364 191,364 191,364 191,364 191,364 191,364 0 0 0 0Less: Shares Repurchased in Treasury 632,530 572,676 518,485 469,423 425,003 384,786 348,375 315,409 285,563 258,541 Shares Outstanding (end of the year) 53,048,833 52,667,521 52,340,400 52,062,341 51,828,702 51,635,279 51,286,904 50,971,495 50,685,932 50,427,391

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol RCurrent Stock Price $78.65Risk Free Rate 2.62%Current Dividend Yield 2.15%Annualized St. Dev. of Stock Returns 28.83%

Average Average B-S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedRange 1 1,263,000 68.13 6.60 24.07$ 30,406,211$ Range 2Range 3Range 4Range 5Range 6Range 7Range 8Range 9Range 10Range 11Range 12Range 13Range 14Total 1,263,000 68.13$ 6.60 31.65$ 30,406,211$