UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE TRANSITION PERIOD FROM                      TO

Commission File Number: 1-4364

RYDER SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Florida (State or other jurisdiction of incorporation or organization)	59-0739250 (I.R.S. Employer Identification No.)
11690 N.W. 105th Street Miami, Florida 33178 (Address of principal executive offices, including zip code)	(305) 500-3726 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨

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

Ryder System, Inc. Common Stock ($0.50 par value per share) outstanding at June 30, 2006 was 61,981,214.

RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

		Page No.
PART I	FINANCIAL INFORMATION
ITEM 1	Financial Statements
	Consolidated Condensed Statements of Earnings — Three and six months ended June 30, 2006 and 2005 (unaudited)		1
	Consolidated Condensed Balance Sheets — June 30, 2006 (unaudited) and December 31, 2005		2
	Consolidated Condensed Statements of Cash Flows — Six months ended June 30, 2006 and 2005 (unaudited)		3
	Consolidated Condensed Statement of Shareholders’ Equity — Six months ended June 30, 2006 (unaudited)		4
	Notes to Consolidated Condensed Financial Statements (unaudited)		5
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		39
ITEM 4	Controls and Procedures		39
PART II	OTHER INFORMATION
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds		40
ITEM 4	Submission of Matters to a Vote of Security Holders		40
ITEM 6	Exhibits		41
	SIGNATURES		42
SECTION 302 CERTIFICATION OF CEO
SECTION 302 CERTIFICATION OF CFO
SECTION 1350 CERTIFICATION OF CEO AND CFO

 i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	(In thousands, except per share amounts)
Revenue	$	1,595,726			1,389,816		$	3,092,017			2,705,431
Operating expense (exclusive of items shown separately)		704,376			634,945			1,365,617			1,245,327
Salaries and employee-related costs		343,977			306,372			681,491			613,931
Subcontracted transportation		215,267			129,759			417,490			241,642
Depreciation expense		183,454			186,850			361,630			368,241
Gains on vehicle sales, net		(14,977	)		(13,086	)		(27,789	)		(25,850	)
Equipment rental		24,455			24,740			49,324			52,057
Interest expense		35,037			30,854			66,458			57,805
Miscellaneous income, net		(417	)		(1,013	)		(5,803	)		(5,272	)
Restructuring and other recoveries, net		—			(134	)		(159	)		(201	)
		1,491,172			1,299,287			2,908,259			2,547,680
Earnings before income taxes		104,554			90,529			183,758			157,751
Provision for income taxes		34,275			27,231			65,897			52,964
Net earnings	$	70,279			63,298		$	117,861			104,787
Earnings per common share:
Basic	$	1.15			0.99		$	1.93			1.64
Diluted	$	1.13			0.98		$	1.91			1.61
Cash dividends per common share	$	0.18			0.16		$	0.36			0.32

See accompanying notes to consolidated condensed financial statements.

1

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

	(unaudited)
	June 30,			December 31,
	2006			2005
	(Dollars in thousands, except per share amounts)
Assets:
Current assets:
Cash and cash equivalents	$	82,645			128,727
Receivables, net		867,601			820,825
Inventories		63,631			59,579
Prepaid expenses and other current assets		216,541			154,624
Total current assets		1,230,418			1,163,755
Revenue earning equipment, net of accumulated depreciation of $2,837,670 and $2,862,998, respectively		4,124,709			3,794,410
Operating property and equipment, net of accumulated depreciation of $765,773 and $748,604, respectively		486,847			486,802
Goodwill		157,671			155,785
Intangible assets		22,149			22,462
Direct financing leases and other assets		399,784			410,050
Total assets	$	6,421,578			6,033,264
Liabilities and shareholders’ equity:
Current liabilities:
Short-term debt and current portion of long-term debt	$	358,196			269,438
Accounts payable		486,362			414,336
Accrued expenses and other current liabilities		396,737			569,721
Total current liabilities		1,241,295			1,253,495
Long-term debt		2,130,913			1,915,928
Other non-current liabilities		524,389			487,268
Deferred income taxes		876,819			849,117
Total liabilities		4,773,416			4,505,808
Shareholders’ equity:
Preferred stock of no par value per share — authorized, 3,800,917; none outstanding, June 30, 2006 or December 31, 2005		—			—
Common stock of $0.50 par value per share — authorized, 400,000,000; outstanding, June 30, 2006 — 61,981,214; December 31, 2005 — 61,869,473		30,885			30,935
Additional paid-in capital		709,321			666,674
Retained earnings		1,085,927			1,038,364
Deferred compensation		—			(5,598	)
Accumulated other comprehensive loss		(177,971	)		(202,919	)
Total shareholders’ equity		1,648,162			1,527,456
Total liabilities and shareholders’ equity	$	6,421,578			6,033,264

See accompanying notes to consolidated condensed financial statements.

2

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)

	Six months ended June 30,
	2006			2005
	(In thousands)
Cash flows from operating activities:
Net earnings	$	117,861			104,787
Depreciation expense		361,630			368,241
Gains on vehicle sales, net		(27,789	)		(25,850	)
Amortization expense and other non-cash charges, net		3,225			3,262
Share-based compensation expense		6,388			1,591
Deferred income tax expense		43,129			(3,558	)
Tax benefits from share-based compensation		4,094			2,663
Changes in operating assets and liabilities, net of acquisitions:
Receivables		(45,881	)		3,539
Inventories		(3,722	)		(1,958	)
Prepaid expenses and other assets		(40,936	)		(20,440	)
Accounts payable		29,792			(12,872	)
Accrued expenses and other non-current liabilities		(149,447	)		(254,564	)
Net cash provided by operating activities		298,344			164,841
Cash flows from financing activities:
Net change in commercial paper borrowings		158,505			14,532
Debt proceeds		274,904			675,536
Debt repaid, including capital lease obligations		(139,714	)		(244,461	)
Dividends on common stock		(22,088	)		(20,551	)
Common stock issued		47,118			16,090
Common stock repurchased		(65,861	)		(32,379	)
Excess tax benefits from share-based compensation		6,869			—
Net cash provided by financing activities		259,733			408,767
Cash flows from investing activities:
Purchases of property and revenue earning equipment		(776,128	)		(779,403	)
Sales of revenue earning equipment		177,445			168,915
Sales of operating property and equipment		2,210			1,673
Acquisitions		(4,113	)		(14,717	)
Collections on direct finance leases		33,768			33,397
Changes in restricted cash		(41,108	)		4,558
Other, net		1,598			—
Net cash used in investing activities		(606,328	)		(585,577	)
Effect of exchange rate changes on cash		2,169			(1,692	)
Decrease in cash and cash equivalents		(46,082	)		(13,661	)
Cash and cash equivalents at January 1		128,727			100,971
Cash and cash equivalents at June 30	$	82,645			87,310
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	63,849			53,225
Income taxes, net of refunds		114,706			285,200
Non-cash investing activities:
Changes in accounts payable related to purchases of revenue earning equipment		38,375			41,506
Revenue earning equipment acquired under capital leases		85			411

See accompanying notes to consolidated condensed financial statements.

3

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY
(unaudited)

																		Accumulated
	Preferred								Additional									Other
	Stock		Common Stock						Paid-In			Retained			Deferred			Comprehensive
	Amount		Shares			Par			Capital			Earnings			Compensation			Loss			Total
	(Dollars in thousands, except per share amount)
Balance at December 31, 2005	$	—		61,869,473		$	30,935			666,674			1,038,364			(5,598	)		(202,919	)		1,527,456
Components of comprehensive income:
Net earnings		—		—			—			—			117,861			—			—			117,861
Foreign currency translation adjustments		—		—			—			—			—			—			24,828			24,828
Unrealized gain related to derivative instruments		—		—			—			—			—			—			120			120
Total comprehensive income																						142,809
Common stock dividends declared — $0.36 per share		—		—			—			—			(22,088	)		—			—			(22,088	)
Common stock issued under employee stock option and stock purchase plans (1)		—		1,665,981			856			45,972			—			—			—			46,828
Benefit plan stock sales (2)		—		7,556			4			286			—			—			—			290
Common stock repurchases		—		(1,561,796	)		(781	)		(16,870	)		(48,210	)		—			—			(65,861	)
Tax benefits from stock plan transactions		—		—			—			12,340			—			—			—			12,340
Share-based compensation		—		—			—			6,388			—			—			—			6,388
Adoption of SFAS No.123R		—		—			(129	)		(5,469	)		—			5,598			—			—
Balance at June 30, 2006	$	—		61,981,214		$	30,885			709,321			1,085,927			—			(177,971	)		1,648,162

(1)	Net of common shares delivered as payment for the exercise price or to satisfy the option holders’ withholding tax liability upon exercise of options.
(2)	Represents open-market transactions of common shares by the trustee of Ryder’s deferred compensation plan.

See accompanying notes to consolidated condensed financial statements.

4

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

(A) INTERIM FINANCIAL STATEMENTS

     The accompanying unaudited Consolidated Condensed Financial Statements include the accounts of Ryder System, Inc. and all entities in which Ryder System, Inc. has a controlling voting interest (“subsidiaries”) and variable interest entities (“VIE”) required to be consolidated in accordance with U.S. GAAP, which have been prepared in accordance with the accounting policies described in the 2005 Annual Report on Form 10-K except for the accounting change noted below relating to share-based compensation, and should be read in conjunction with the Consolidated Financial Statements and notes thereto. These statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair presentation have been included and the disclosures herein are adequate. The operating results for interim periods are unaudited and are not necessarily indicative of the results that can be expected for a full year. Certain prior year amounts have been reclassified to conform to current period presentation.

(B) ACCOUNTING CHANGE

     At June 30, 2006, we had two stock-based employee compensation plans, which are described more fully in Note (C) “Share-Based Compensation Plans.” Prior to January 1, 2006, we accounted for those plans under the recognition and measurement provisions of APB Opinion No. 25 (APB No. 25), “Accounting for Stock Issued to Employees,” and related Interpretations, as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation.” Prior to January 1, 2006, share-based compensation was recognized only for grants of nonvested stock (restricted stock) and share-based compensation expense was not recognized for employee stock options and stock purchase plans. Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R, “Share-Based Payment,” using the modified-prospective transition method. Under this transition method, compensation expense was recognized beginning January 1, 2006 and includes (a) compensation expense for all share-based employee compensation arrangements granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation expense for all share-based employee compensation arrangements granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R. Results for prior periods have not been restated.

     As a result of adopting SFAS No. 123R on January 1, 2006, earnings before income taxes and net earnings for the three and six months ended June 30, 2006 were $2.4 million and $5.0 million lower, respectively, and $1.7 million and $3.6 million lower, respectively, than if we had continued to account for share-based compensation under APB No. 25. Both basic and diluted earnings per share for the three and six months ended June 30, 2006 were $0.03 and $0.06 lower, respectively, than if we had continued to account for share-based compensation under APB No. 25.

     Prior to the adoption of SFAS No. 123R, we presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Condensed Statements of Cash Flows. SFAS No. 123R requires the cash flows from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for those options (excess tax benefits) to be classified as financing cash flows. As a result, we classified $6.9 million as cash flows from financing activities rather than cash flows from operating activities for the six months ended June 30, 2006.

5

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

     The following table illustrates the effect on 2005 net earnings and earnings per diluted common share if we had applied the fair value recognition provisions of SFAS No. 123 to options granted under our share-based employee compensation plans. For purposes of this pro forma disclosure, the value of the options was estimated using a Black-Scholes-Merton option-pricing valuation model and amortized to expense over the options’ vesting periods.

	Three months			Six months
	ended			ended
	June 30, 2005			June 30, 2005
	(In thousands, except per share amounts)
Net earnings, as reported	$	63,298			104,787
Add: Share-based compensation expense included in reported net earnings, net of tax		501			953
Deduct: Total share-based compensation expense determined under fair value method for all awards, net of tax		(2,529	)		(4,985	)
Pro forma net earnings	$	61,270			100,755
Earnings per common share:
Basic:
As reported	$	0.99			1.64
Pro forma	$	0.96			1.57
Diluted:
As reported	$	0.98			1.61
Pro forma	$	0.94			1.55

(C) SHARE-BASED COMPENSATION PLANS

     At June 30, 2006, Ryder had various stock option and incentive plans and a stock purchase plan, which are described below. Share-based compensation expense is recorded in “Salaries and employee-related costs.” The following table provides information on share-based compensation expense and tax benefits recognized during the periods:

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	(In thousands)
Stock option and stock purchase plans	$	2,356			—		$	4,992			—
Nonvested stock (restricted stock)		849			833			1,396			1,591
Share-based compensation expense		3,205			833			6,388			1,591
Income tax benefit		(917	)		(332	)		(1,831	)		(638	)
Share-based compensation expense, net of tax	$	2,288			501		$	4,557			953

6

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

     Allocation of pre-tax share-based compensation expense across business segments was as follows:

	Three months ended June 30,				Six months ended June 30,
	2006		2005		2006		2005
	(In thousands)
Fleet Management Solutions	$	999		170	$	2,061		344
Supply Chain Solutions		713		133		1,444		258
Dedicated Contract Carriage		79		12		160		28
Central Support Services		1,414		518		2,723		961
Total	$	3,205		833	$	6,388		1,591

     Cash received from stock issued under all share-based employee compensation arrangements for the six months ended June 30, 2006 and 2005 was $46.8 million and $15.6 million, respectively. The actual tax benefit realized for the tax deductions from share-based employee compensation arrangements totaled $7.0 million and $0.5 million for the three months ended June 30, 2006 and 2005, respectively, and $11.0 million and $3.0 million, for the six months ended June 30, 2006 and 2005, respectively.

     Stock Option Plans

     Ryder sponsors various stock option and incentive plans that are shareholder-approved and permit the grant of share options and shares to our employees for up to 5 million shares of common stock. Option awards are granted to employees for purchase of common stock at prices equal to the market price of Ryder’s stock at the time of grant. Options granted under all plans generally vest one-third each year based on three years of service and have no more than 10-year contractual terms. Key employee plans also provide for the issuance of nonvested stock (restricted stock) or stock units at no cost to the employee. Certain nonvested stock granted in 2006 was subject to a three-year market vesting condition in addition to the general service condition. The market condition provides that Ryder’s total shareholder return (TSR) as a percentage of the S&P 500 comparable period TSR is 100% or greater over a three-year period.

     A summary of option activity under our stock option plans as of June 30, 2006, and changes during the six months ended June 30, 2006 is presented in the table below:

				Weighted-		Weighted-Average
				Average		Remaining		Aggregate
				Exercise		Contractual Term		Intrinsic Value
	Shares			Price		(in years)		(in thousands)
	(Shares in thousands)
Options outstanding at January 1		4,535		$	33.02
Granted		1,032			42.80
Exercised		(1,571	)		28.97
Forfeited or expired		(120	)		40.48
Options outstanding at June 30		3,876		$	37.03		5.0	$	85,324
Vested and expected to vest at June 30		3,705		$	36.81		5.3	$	82,356
Exercisable at June 30		1,733		$	30.40		3.8	$	49,635

     The weighted-average grant date fair value of options granted during the six months ended June 30, 2006 and 2005 was $10.65 and $9.84, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2006 and 2005 was $31.2 million and $7.1 million, respectively.

7

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

     A summary of the status of Ryder’s nonvested stock as of June 30, 2006, and changes during the six months ended June 30, 2006 is presented in the table below:

				Weighted-
				Average
				Grant-Date
	Shares			Fair Value
	(Shares in thousands)
Nonvested stock outstanding at January 1		297		$	34.45
Granted		110			30.99
Vested		(101	)		28.89
Forfeited		(21	)		34.38
Nonvested stock outstanding at June 30		285		$	35.08
Nonvested stock outstanding at June 30, subject to market vesting conditions		85		$	25.59

     The total fair value of vested awards during the six months ended June 30, 2006 and 2005 was $12.5 million and $10.7 million, respectively.

     A summary of unrecognized compensation expense and the period over which the expense is expected to be recognized at June 30, 2006 is presented below:

	June 30, 2006
	(Dollars in thousands)
Unrecognized share-based compensation expense:
Stock options	$	13,433
Nonvested stock		7,993
Weighted-average period to recognize expense	3.7 years

     Stock Purchase Plan

     Ryder’s employee stock purchase plan provides for periodic offerings to substantially all U.S. and Canadian employees to subscribe to shares of Ryder’s common stock at 85% of the fair market value on either the first or the last day of the purchase period, whichever is less. The stock purchase plan currently in effect provides for quarterly purchase periods and stock purchased must be held for 90 days.

     A summary of the status of Ryder’s stock purchase plan as of June 30, 2006, and changes during the six months ended June 30, 2006 is presented in the table below:

				Weighted-
				Average		Weighted-Average
				Exercise		Remaining		Aggregate Intrinsic
	Shares			Price		Contractual Term		Value
	(Shares in thousands)
Outstanding at January 1		—		$	—
Granted		97			36.39
Exercised		(97	)		36.39
Forfeited or expired		—		$	—
Outstanding at June 30		—		$	—		—	$	—
Exercisable at June 30		—		$	—		—	$	—

     The weighted-average grant date fair value of stock purchase plan shares granted during the six months ended June 30, 2006 and 2005, was $9.03 and $8.15, respectively.

8

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

     Share-Based Compensation Fair Value Assumptions

     The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing valuation model that uses the weighted-average assumptions noted in the table below. The fair value of the stock option awards, which are subject to graded vesting, is expensed on a straight-line basis over the vesting life of the stock options. Expected volatility is based on historical volatility of Ryder’s stock and implied volatility from traded options on Ryder’s stock. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award. We use historical data to estimate stock option exercises and forfeitures within the valuation model. The expected term of stock option awards granted is derived from historical exercise experience under the share-based employee compensation arrangements and represents the period of time that stock option awards granted are expected to be outstanding.

	Six months ended June 30
	2006			2005
Option plans:
Expected dividends		1.7	%		1.4	%
Expected volatility		27.0	%		25.2	%
Risk-free rate		4.6	%		3.6	%
Expected term	4.1 years			3.9 years
Purchase plan:
Expected dividends		1.6	%		1.6	%
Expected volatility		29.7	%		21.6	%
Risk-free rate		4.4	%		2.6	%
Expected term	0.25 year			0.25 year

     The fair value of the awards of nonvested stock during 2006 that contained a market condition was estimated on the date of grant using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation.

(D) EARNINGS PER SHARE INFORMATION

     Basic earnings per common share are computed by dividing net earnings by the weighted-average number of common shares outstanding. Nonvested stock (restricted stock) granted to employees and directors are not included in the computation of basic earnings per common share until the securities vest. Diluted earnings per common share reflect the dilutive effect of potential common shares from securities such as stock options and nonvested stock. The dilutive effect of stock options and nonvested stock is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the exercise of stock options and vesting of restricted stock would be used to purchase common shares at the average market price for the period. A reconciliation of the number of shares used in computing basic and diluted earnings per common share follows:

	Three months ended June 30,				Six months ended June 30,
	2006		2005		2006		2005
	(In thousands)
Weighted-average shares outstanding — Basic		61,241		63,938		60,982		63,979
Effect of dilutive options and nonvested stock		782		724		746		917
Weighted-average shares outstanding — Diluted		62,023		64,662		61,728		64,896
Anti-dilutive options not included above		1,029		1,243		1,352		1,243

9

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

(E) RESTRUCTURING AND OTHER RECOVERIES

     The components of restructuring and other recoveries, net were as follows:

	Three months ended June 30,					Six months ended June 30,
	2006		2005			2006			2005
	(In thousands)
Restructuring recoveries, net:
Severance and employee-related recoveries	$	—		—		$	(142	)		(37	)
Facility and related recoveries		—		(91	)		(17	)		(91	)
Other recoveries, net:
Contract termination and transition costs		—		(43	)		—			(73	)
Total	$	—		(134	)	$	(159	)		(201	)

     Allocation of restructuring and other recoveries, net across business segments was as follows:

	Three months ended June 30,					Six months ended June 30,
	2006		2005			2006			2005
	(In thousands)
Fleet Management Solutions	$	—		(120	)	$	(95	)		(167	)
Supply Chain Solutions		—		(11	)		(58	)		(24	)
Dedicated Contract Carriage		—		(3	)		(4	)		(10	)
Central Support Services		—		—			(2	)		—
Total	$	—		(134	)	$	(159	)		(201	)

     Restructuring recoveries, net in the first half of 2006 and 2005 related primarily to employee severance and benefits and facility charges recorded in prior restructuring charges that were reversed due to subsequent refinements in estimates.

     Activity related to restructuring reserves was as follows:

					Deductions
	December 31, 2005						Non-Cash		June 30, 2006
	Balance		Additions		Cash Payments		Reductions (1)		Balance
	(In thousands)
Employee severance and benefits	$	2,527		145		1,496		287		889
Facilities and related costs		700		—		199		17		484
Total	$	3,227		145		1,695		304		1,373

(1) Non-cash reductions represent adjustments to the restructuring reserve as actual costs were less than originally estimated.

     At June 30, 2006, outstanding restructuring obligations are generally required to be paid over the next fifteen months.

10

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

(F) REVENUE EARNING EQUIPMENT

	June 30, 2006							December 31, 2005
			Accumulated			Net Book				Accumulated			Net Book
	Cost		Depreciation			Value (1)		Cost		Depreciation			Value (1)
	(In thousands)
Full service lease	$	5,297,006		(2,091,545	)		3,205,461	$	5,085,084		(2,113,494	)		2,971,590
Commercial rental		1,665,373		(746,125	)		919,248		1,572,324		(749,504	)		822,820
Total	$	6,962,379		(2,837,670	)		4,124,709	$	6,657,408		(2,862,998	)		3,794,410

(1) Revenue earning equipment, net includes vehicles acquired under capital leases of $14.0 million, less accumulated amortization of $9.9 million, at June 30, 2006, and $16.5 million, less accumulated amortization of $11.1 million, at December 31, 2005. Amortization expense attributed to vehicles acquired under capital leases is combined with depreciation expense.

     At June 30, 2006 and December 31, 2005, the net carrying value of revenue earning equipment held for sale was $86.0 million and $94.5 million, respectively.

     At the end of 2005, we completed our annual review of the residual values and useful lives of our revenue earning equipment. Based on the results of our analysis, we adjusted the residual values and useful lives of certain classes of our revenue earning equipment effective January 1, 2006. This change in estimate caused pre-tax earnings to increase for the three and six months ended June 30, 2006 by approximately $3 million or $0.03 per diluted common share, and $6 million or $0.06 per diluted common share, compared to the same periods in 2005, respectively.

(G) ACCRUED EXPENSES AND OTHER LIABILITIES

	June 30, 2006						December 31, 2005
	Accrued		Non-Current				Accrued		Non-Current
	Expenses		Liabilities		Total		Expenses		Liabilities		Total
	(In thousands)
Salaries and wages	$	65,347		—		65,347	$	79,386		—		79,386
Pension benefits		39,128		189,071		228,199		71,289		166,384		237,673
Deferred compensation		2,991		19,980		22,971		3,134		20,212		23,346
Other postretirement benefits		7,730		24,108		31,838		7,381		24,483		31,864
Employee benefits		190		—		190		3,746		—		3,746
Insurance obligations (1)		108,478		197,808		306,286		111,163		192,077		303,240
Residual value guarantees		1,609		1,376		2,985		3,622		1,678		5,300
Vehicle rent		359		5,028		5,387		1,917		3,606		5,523
Deferred vehicle gains		1,014		2,056		3,070		1,087		2,450		3,537
Environmental liabilities		5,027		11,423		16,450		3,536		12,970		16,506
Asset retirement obligations		3,828		9,597		13,425		3,075		10,181		13,256
Operating taxes		75,524		—		75,524		87,489		—		87,489
Income taxes		3,849		26,967		30,816		95,352		26,971		122,323
Restructuring		1,188		185		1,373		2,714		513		3,227
Interest		19,360		—		19,360		17,918		—		17,918
Cross-currency swap		—		16,105		16,105		—		9,739		9,739
Customer deposits		18,047		—		18,047		19,596		—		19,596
Other		43,068		20,685		63,753		57,316		16,004		73,320
Total	$	396,737		524,389		921,126	$	569,721		487,268		1,056,989

(1) Insurance obligations are primarily comprised of self-insurance accruals.

11

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

(H) INCOME TAXES

     Tax Law Changes

     On June 22, 2006, Canada enacted various tax measures in connection with the 2006 federal budget process. These measures contained various corporate tax changes, including the gradual reduction of the general corporate tax rate beginning in 2008, the elimination of the 4% surtax as of January 1, 2008, and the elimination of the Large Corporations Tax as of January 1, 2006. The impact of the above mentioned measures resulted in a favorable adjustment to deferred income taxes. This non-cash benefit increased reported net earnings in the three and six months ended June 30, 2006 by $3.9 million, or $0.06 per diluted common share.

     On May 18, 2006, the State of Texas enacted substantial changes to its tax system, which included the replacement of the taxable capital and earned surplus components of its franchise tax with a new “Margin tax” beginning in 2007. The current Texas franchise tax structure remains in existence until the end of 2006. As a result of the enactment of the “Margin Tax,” existing deferred income taxes not expected to be used in the computation of taxes in years after 2006 must be adjusted. This non-cash benefit increased reported net earnings in the three and six months ended June 30, 2006 by $2.9 million, or $0.05 per diluted common share.

     On June 30, 2005, the State of Ohio enacted tax legislation, which phases out the Ohio corporate franchise tax and phases in a new gross receipts tax called the Commercial Activity Tax (CAT) over a five-year period. While the corporate franchise tax was generally based on federal taxable income, the CAT is based on current year sales and rentals in Ohio. The elimination of Ohio’s corporate franchise tax over the next five years resulted in a favorable adjustment to deferred income taxes. This non-cash benefit increased reported net earnings in the three and six months ended June 30, 2005 by $7.6 million, or $0.12 per diluted common share.

     Federal Tax Audits

     We are subject to tax audits in numerous jurisdictions in the U.S. and around the world. Tax audits by their very nature are often complex and can require several years to complete. The Internal Revenue Service (IRS) has now closed audits of our U.S. federal income tax returns through fiscal year 2000. As previously disclosed, the IRS challenged our tax positions with respect to certain transactions for the 1998 to 2000 tax period. In connection with the resolution of our federal income tax audit for the 1998 to 2000 tax period, on February 22, 2005, we paid $176 million, including interest through the date of payment.

     In 2005, the IRS began auditing our federal income tax returns for 2001 through 2003. We believe that Ryder has not entered into any other transactions since 2000 that raise the same type of issues identified by the IRS in its most recently concluded audit.

     Like-Kind Exchange Program

     We are currently implementing a like-kind exchange program for our vehicles, whereby tax gains on disposal of eligible revenue earning equipment may be deferred. As part of the program, the proceeds from the sale of eligible revenue earning equipment are restricted for the acquisition of revenue earning equipment and other specified uses as defined under the program. At June 30, 2006, restricted cash related to the like-kind exchange program totaled $41.7 million. The restricted cash balance will be utilized in future quarters for purchases. The restricted cash has been classified within “Prepaid expenses and other current assets.”

12

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

(I) DEBT

	June 30, 2006			December 31, 2005
	(In thousands)
Short-term debt and current portion of long-term debt:
Capital lease obligations	$	85		$	137
Unsecured foreign obligations		15,267			26,083
Current portion of long-term debt, including capital leases		342,844			243,218
Total short-term debt and current portion of long-term debt		358,196			269,438
Long-term debt:
U.S. commercial paper		475,687			322,711
Canadian commercial paper		75,239			67,080
Unsecured U.S. notes (1):
Debentures		125,929			125,915
Medium-term notes		1,604,989			1,394,976
Unsecured U.S. obligations, principally bank term loans		56,200			56,200
Unsecured foreign obligations		96,549			118,271
Asset-backed securities (2)		37,603			71,551
Capital lease obligations		1,713			1,683
Total before fair market value adjustment		2,473,909			2,158,387
Fair market value adjustment on notes subject to hedging (3)		(152	)		759
		2,473,757			2,159,146
Current portion of long-term debt, including capital leases		(342,844	)		(243,218	)
Long-term debt		2,130,913			1,915,928
Total debt	$	2,489,109		$	2,185,366

(1)	Ryder had unamortized original issue discounts of $14.9 million at June 30, 2006 and $15.3 million at December 31, 2005.
(2)	Asset-backed securities represent outstanding debt of consolidated VIEs. Asset-backed securities are collateralized by cash reserve deposits and revenue earning equipment of consolidated VIEs totaling $66.2 million and $96.6 million at June 30, 2006 and December 31, 2005, respectively.
(3)	The notional amount of executed interest rate swaps designated as fair value hedges was $145.0 million at June 30, 2006 and $185.0 million at December 31, 2005.

     Ryder can borrow up to $870 million through a global revolving credit facility with a syndicate of twelve lenders. The credit facility matures in May 2010 and is used primarily to finance working capital and provide support for the issuance of commercial paper. This facility can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at June 30, 2006). At Ryder’s option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility’s current annual facility fee is 11.0 basis points, which applies to the total facility of $870 million, and is based on Ryder’s current credit ratings. The credit facility contains no provisions restricting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions, and certain affirmative and negative covenants. In order to maintain availability of funding, Ryder must maintain a ratio of debt to consolidated tangible net worth, as defined in the agreement, of less than or equal to 300%. The ratio at June 30, 2006 was 137%. At June 30, 2006, $312.6 million was available under the credit facility.

     In May 2006, we issued $250 million of unsecured medium-term notes, maturing in May 2011. The proceeds from the notes were used to reduce commercial paper borrowings. At June 30, 2006, Ryder had $550 million of securities available for issuance under an $800 million universal shelf registration statement filed with the SEC during 2005.

13

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

(J) GUARANTEES

     Ryder has executed various agreements with third parties that contain standard indemnifications that may require Ryder to indemnify a third party against losses arising from a variety of matters such as lease obligations, financing agreements, environmental matters and agreements to sell business assets. In each of these instances, payment by Ryder is contingent on the other party bringing about a claim under the procedures outlined in the specific agreement. Normally, these procedures allow Ryder to dispute the other party’s claim. Additionally, Ryder’s obligations under these agreements may be limited in terms of the amount and (or) timing of any claim. We cannot predict the maximum potential amount of future payments under certain of these agreements due to the contingent nature of the potential obligations and the distinctive provisions that are involved in each individual agreement. Historically, no such payments made by Ryder have had a material adverse effect on our business. We believe that if a loss were incurred in any of these matters, the loss would not result in a material adverse impact on our consolidated results of operations or financial position.

     At June 30, 2006 and December 31, 2005, the maximum determinable exposure of guarantees and the corresponding liability, if any, recorded on the Consolidated Condensed Balance Sheets were as follows:

	June 30, 2006				December 31, 2005
	Maximum Exposure of		Carrying Amount of		Maximum Exposure of		Carrying Amount of
Guarantee	Guarantee		Liability		Guarantee		Liability
			(In thousands)
Vehicle residual value guarantees:
Sale and leaseback arrangements – end of term guarantees(1)	$	—		—	$	628		4
Finance lease program		3,895		1,226		3,838		1,730
Used vehicle financing		5,351		910		4,450		1,197
Standby letters of credit		6,897		—		7,299		—
Total	$	16,143		2,136	$	16,215		2,931

(1) Amounts exclude contingent rentals associated with residual value guarantees on certain vehicles held under operating leases for which the guarantees are conditioned upon disposal of the leased vehicles prior to the end of their lease term. At June 30, 2006 and December 31, 2005, Ryder’s maximum exposure for such guarantees was approximately $130.4 million and $161.2 million, respectively, with $3.0 million and $5.3 million recorded as a liability at June 30, 2006 and December 31, 2005, respectively.

     At June 30, 2006, Ryder had letters of credit and surety bonds outstanding totaling $211.8 million and $53.3 million, respectively, which primarily guarantee the payment of insurance claims. Certain of these letters of credit and surety bonds guarantee insurance activities associated with insurance claim liabilities transferred in conjunction with the sale of our automotive transport business, reported as discontinued operations in previous years. The entity that assumed these liabilities filed for protection under Chapter 11 of the United States Bankruptcy Code on July 31, 2005. To date, the insurance claims, representing per-claim deductibles payable under third-party insurance policies, have been paid and continue to be paid by the company that assumed such liabilities. However, if all or a portion of the estimated outstanding assumed claims of approximately $6.9 million at June 30, 2006 are unable to be paid, the third-party insurers may have recourse against certain of the outstanding letters of credit provided by Ryder in order to satisfy the unpaid claim deductibles. In order to reduce our potential exposure to these claims, we have received an irrevocable letter of credit from the purchaser of the business referred to above totaling $7.5 million at June 30, 2006. Periodically, an independent actuarial valuation will be made in order to better estimate the amount of outstanding insurance claim liabilities.

14

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

(K) SHARE REPURCHASE PROGRAM

     In May 2006, our Board of Directors authorized a two-year share repurchase program intended to mitigate the dilutive impact of shares issued under our various employee stock option and stock purchase plans. Under the May 2006 program, management is authorized to repurchase shares of common stock in an amount not to exceed the number of shares issued to employees under the various employee stock option and employee stock purchase plans since March 1, 2006, which totaled approximately 1.3 million shares at June 30, 2006. The May 2006 program limits aggregate share repurchases to no more than 2 million shares of Ryder common stock. Share repurchases will be made periodically in open-market transactions, and are subject to market conditions, legal requirements and other factors. Management was granted the authority to establish a trading plan under Rule 10b5-1 of the Securities and Exchange Act of 1934 as part of the May 2006 program.

     In October 2005, our Board of Directors authorized a $175 million share repurchase program over a period not to exceed two years. Share repurchases of common stock were made periodically in open-market transactions and were subject to market conditions, legal requirements and other factors. During the first quarter of 2006, we completed the October 2005 program. Management established a prearranged written plan under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the October 2005 program, which allowed for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. In 2006, we repurchased and retired approximately 1.6 million shares under the October 2005 program at an aggregate cost of $65.8 million. We repurchased and retired an aggregate of approximately 4.2 million shares under the program.

     In July 2004, our Board of Directors authorized a two-year share repurchase program intended to mitigate the dilutive impact of shares issued under our various employee stock option and stock purchase plans. Under the July 2004 program, shares of common stock were purchased in an amount not to exceed the number of shares issued to employees upon the exercise of stock options or through the employee stock purchase plan since May 1, 2004. The July 2004 program limited aggregate share repurchases to no more than 3.5 million shares of Ryder common stock. During the fourth quarter of 2005, we replaced the July 2004 program with the October 2005 program noted previously. Management was granted the authority to establish a trading plan under Rule 10b5-1 as part of the July 2004 program. For the six months ended June 30, 2005, we repurchased and retired a total of approximately 0.7 million shares under the program at an aggregate cost of $32.4 million.

(L) COMPREHENSIVE INCOME

     Comprehensive income presents a measure of all changes in shareholders’ equity except for changes resulting from transactions with shareholders in their capacity as shareholders. The following table provides a reconciliation of net earnings as reported in the Consolidated Condensed Statements of Earnings to comprehensive income.

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006		2005
	(In thousands)
Net earnings	$	70,279			63,298		$	117,861		104,787
Other comprehensive income:
Foreign currency translation adjustments		23,947			(16,895	)		24,828		(25,423	)
Unrealized net (loss) gain on derivative instruments		(125	)		406			120		40
Total comprehensive income	$	94,101			46,809		$	142,809		79,404

15

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

(M) EMPLOYEE BENEFIT PLANS

     Components of net periodic benefit cost were as follows:

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	(In thousands)
Pension Benefits
Company-administered plans:
Service cost	$	10,791			9,178		$	21,242			18,738
Interest cost		20,413			19,519			40,637			38,715
Expected return on plan assets		(24,434	)		(22,617	)		(48,328	)		(45,354	)
Amortization of transition asset		(7	)		(7	)		(14	)		(15	)
Recognized net actuarial loss		8,941			7,081			17,712			13,206
Amortization of prior service cost		354			1,264			707			2,561
		16,058			14,418			31,956			27,851
Union-administered plans		1,240			1,161			2,398			2,204
Net periodic benefit cost	$	17,298			15,579		$	34,354			30,055
Company-administered plans:
U.S.	$	11,325			10,427		$	22,695			19,923
Non-U.S.		4,733			3,991			9,261			7,928
		16,058			14,418			31,956			27,851
Union-administered plans		1,240			1,161			2,398			2,204
	$	17,298			15,579		$	34,354			30,055
	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	(In thousands)
Postretirement Benefits
Company-administered plans:
Service cost	$	311			234		$	638			501
Interest cost		540			458			1,116			1,059
Recognized net actuarial loss (gain)		155			(30	)		358			141
Amortization of prior service credit		(58	)		(289	)		(115	)		(578	)
Net periodic benefit cost	$	948			373		$	1,997			1,123
Company-administered plans:
U.S.	$	815			279		$	1,735			934
Non-U.S.		133			94			262			189
	$	948			373		$	1,997			1,123

     We previously disclosed in our 2005 Annual Report that we expected to contribute approximately $71 million, including voluntary contributions, to our pension plans during 2006. During the six months ended June 30, 2006, we made $48.7 million of global contributions to our pension plans.

16

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

(N) SEGMENT REPORTING

     Ryder’s operating segments are aggregated into reportable business segments based primarily upon similar economic characteristics, products, services and delivery methods. Ryder operates in three reportable business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing, contract maintenance, contract-related maintenance and commercial rental of trucks, tractors and trailers to customers, principally in the U.S., Canada and the U.K.; (2) Supply Chain Solutions (SCS), which provides comprehensive supply chain consulting and lead logistics management solutions that support customers’ entire supply chains from inbound raw materials through distribution of finished goods throughout North America and in Latin America, Europe and Asia; and (3) Dedicated Contract Carriage (DCC), which provides vehicles and drivers as part of a dedicated transportation solution in North America.

     Ryder’s primary measurement of segment financial performance, defined as “Net Before Taxes” (NBT), includes an allocation of Central Support Services (CSS) and excludes restructuring and other recoveries, net. CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, health and safety, information technology, legal and communications. The objective of the NBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment and each operating segment within each business segment accountable for their allocated share of CSS costs. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included among the unallocated overhead remaining within CSS are the costs for investor relations, corporate communications, public affairs and certain executive compensation. CSS costs attributable to the business segments are predominantly allocated to FMS, SCS and DCC as follows:

Finance, corporate services, and health and safety — allocated based upon estimated and planned resource utilization;

Human resources — individual costs within this category are allocated in several ways, including allocation based on estimated utilization and number of personnel supported;

Information technology — allocated principally based upon utilization-related metrics such as number of users or minutes of CPU time. Customer-related project costs and expenses are allocated to the business segment responsible for the project; and

Other — represents legal and other centralized costs and expenses including certain share-based and incentive compensation costs. Expenses, where allocated, are based primarily on the number of personnel supported.

     Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to our SCS and DCC segments. Inter-segment revenue and NBT are accounted for at approximate fair value as if the transactions were made with third parties. NBT related to inter-segment equipment and services billed to customers (equipment contribution) is included in both FMS and the business segment which served the customer and then eliminated (presented as “Eliminations”).

17

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

     The following tables set forth financial information for each of Ryder’s business segments and a reconciliation between segment NBT and earnings before income taxes for the three and six months ended June 30, 2006 and 2005. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented.

	FMS		SCS		DCC		Eliminations			Total
	(In thousands)
For the three months ended
June 30, 2006
Revenue from external customers	$	950,106		502,136		143,484		—			1,595,726
Inter-segment revenue		99,371		—		—		(99,371	)		—
Total revenue	$	1,049,477		502,136		143,484		(99,371	)		1,595,726
Segment NBT	$	94,921		18,077		11,174		(8,276	)		115,896
Unallocated CSS											(11,342	)
Restructuring and other recoveries, net											—
Earnings before income taxes										$	104,554
Segment capital expenditures (1)	$	459,746		3,988		238		—			463,972
Unallocated CSS											2,142
Capital expenditures										$	466,114
June 30, 2005
Revenue from external customers	$	881,041		374,950		133,825		—			1,389,816
Inter-segment revenue		88,536		—		—		(88,536	)		—
Total revenue	$	969,577		374,950		133,825		(88,536	)		1,389,816
Segment NBT	$	88,901		8,333		9,654		(7,488	)		99,400
Unallocated CSS											(9,005	)
Restructuring and other recoveries, net											134
Earnings before income taxes										$	90,529
Segment capital expenditures (1), (2)	$	324,744		4,775		273		—			329,792
Unallocated CSS											7,204
Capital expenditures										$	336,996

(1)	Excludes revenue earning equipment acquired under capital leases.
(2)	Excludes FMS acquisitions of $0.2 million comprised of long-lived assets, during the three months ended June 30, 2005.

18

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

	FMS		SCS		DCC		Eliminations			Total
	(In thousands)
For the six months ended
June 30, 2006
Revenue from external customers	$	1,838,246		971,604		282,167		—			3,092,017
Inter-segment revenue		192,389		—		—		(192,389	)		—
Total revenue	$	2,030,635		971,604		282,167		(192,389	)		3,092,017
Segment NBT	$	169,816		28,736		19,636		(16,042	)		202,146
Unallocated CSS											(18,547	)
Restructuring and other recoveries, net											159
Earnings before income taxes										$	183,758
Segment capital expenditures (1), (2)	$	763,547		6,709		542		—			770,798
Unallocated CSS											5,330
Capital expenditures										$	776,128
June 30, 2005
Revenue from external customers	$	1,721,882		721,743		261,806		—			2,705,431
Inter-segment revenue		172,335		—		—		(172,335	)		—
Total revenue	$	1,894,217		721,743		261,806		(172,335	)		2,705,431
Segment NBT	$	159,765		14,840		15,542		(15,010	)		175,137
Unallocated CSS											(17,587	)
Restructuring and other recoveries, net											201
Earnings before income taxes										$	157,751
Segment capital expenditures (1), (2)	$	740,395		15,809		527		—			756,731
Unallocated CSS											22,672
Capital expenditures										$	779,403

(1)	Excludes revenue earning equipment acquired under capital leases.
(2)	Excludes FMS acquisitions of $4.1 million and $14.7 million, primarily comprised of long-lived assets, during the six months ended June 30, 2006 and 2005, respectively.

     Our customer base includes enterprises operating in a variety of industries including automotive, electronics, high-tech, telecommunications, industrial, consumer goods, paper and paper products, office equipment, food and beverage, general retail industries, and governments. Our largest customer, General Motors Corporation, accounted for approximately 40% and 29% of SCS total revenue for the six months ended June 30, 2006 and 2005, respectively, and is comprised of multiple contracts in various geographic regions.

19

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

(O) RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation requires that we recognize in our consolidated financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. The provisions of FIN 48 are effective beginning January 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to the opening retained earnings. We are currently evaluating the impact of adopting FIN 48 on our consolidated financial statements.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS —
THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005

OVERVIEW

     The following discussion should be read in conjunction with the unaudited Consolidated Condensed Financial Statements and notes thereto included under Item 1. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2005 Annual Report on Form 10-K.

     Our business is divided into three segments: our Fleet Management Solutions (FMS) business segment provides full service leasing, contract maintenance, contract-related maintenance and commercial rental of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; our Supply Chain Solutions (SCS) business segment provides comprehensive supply chain consulting and lead logistics management solutions that support customers’ entire supply chains from inbound raw materials through distribution of finished goods throughout North America and in Latin America, Europe and Asia; and our Dedicated Contract Carriage (DCC) business segment provides vehicles and drivers as part of a dedicated transportation solution in North America. We operate in extremely competitive markets. Our customers select us based on numerous factors including service quality, price, technology and service offerings. As an alternative to using our services, customers may also choose to provide these services for themselves, or may choose to obtain similar or alternative services from other third-party vendors. Our customer base includes enterprises operating in a variety of industries including automotive, electronics, high-tech, telecommunications, industrial, consumer goods, paper and paper products, office equipment, food and beverage, general retail industries and governments.

ITEMS AFFECTING COMPARABILITY BETWEEN PERIODS

     Prior to January 1, 2006, we accounted for share-based employee compensation plans under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations, as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation.” Prior to January 1, 2006, share-based compensation was recognized only for grants of nonvested stock (restricted stock) and share-based compensation expense was not recognized for employee stock options and stock purchase plans. Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R, “Share-Based Payment,” using the modified-prospective transition method. Under this transition method, compensation was recognized beginning January 1, 2006 and includes (a) compensation expense for all share-based employee compensation arrangements granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation expense for all share-based employee compensation arrangements granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R. Results for prior periods have not been restated.

     The amount of and allocation of pre-tax share-based compensation expense across business segments was as follows:

	Three months ended June 30,				Six months ended June 30,
	2006		2005		2006		2005
	(In thousands)
Fleet Management Solutions	$	999		170	$	2,061		344
Supply Chain Solutions		713		133		1,444		258
Dedicated Contract Carriage		79		12		160		28
Central Support Services		1,414		518		2,723		961
Total	$	3,205		833	$	6,388		1,591

     At June 30, 2006, unrecognized compensation expense from stock options and nonvested shares totaled $21.4 million and the expense is expected to be recognized over the next 3.7 years.

     The calculation of share-based employee compensation expense involves estimates that require management’s judgment. These estimates include the fair value of each of our stock option awards, which is estimated on the date of grant using a Black-Scholes-Merton option-pricing valuation model as discussed in Note (C), “Share-Based Compensation Plans,” in Notes to Consolidated Condensed Financial Statements. The determination of the fair value of share-based employee compensation awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Prior to the adoption of SFAS No. 123R,

21

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

expected volatility was determined based solely on historical volatility. As a result of the adoption of SFAS No. 123R, we estimate expected volatility based on both historical and implied volatility. In 2006, we added a market vesting condition to the terms of our share-based employee compensation plan related to the grant of nonvested stock, in addition to the service condition. The market condition provided that shares of nonvested stock are subject to vest only if Ryder’s total shareholder return (TSR) as a percentage of the S&P 500 comparable period TSR is 100% or greater, over a three-year period. These grants have been valued using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation.

CONSOLIDATED RESULTS

	Three months ended June 30,				Six months ended June 30,				Change 2006/ 2005
									Three			Six
	2006		2005		2006		2005		Months			Months
	(In thousands, except per share amounts)
Earnings before income taxes	$	104,554		90,529	$	183,758		157,751		15	%		16	%
Provision for income taxes		34,275		27,231		65,897		52,964		26			24
Net earnings	$	70,279		63,298	$	117,861		104,787		11	%		12	%
Per diluted common share	$	1.13		0.98	$	1.91		1.61		15	%		19	%
Weighted-average shares outstanding — Diluted		62,023		64,662		61,728		64,896		(4	)%		(5	)%

     Earnings before income taxes increased $14.0 million to $104.6 million in the second quarter of 2006 and increased $26.0 million to $183.8 million in the first half of 2006, compared with the same periods in 2005. The improved results were driven by better operating performance and continuing leverage from revenue growth in all business segments. See “Operating Results by Business Segment” for a further discussion of operating results. Earnings in the first half of 2006 included a one-time recovery in the first quarter of $1.9 million (pre-tax), or $0.02 per diluted common share, associated with the recognition of common stock received from mutual insurance companies in a prior year. Additionally, earnings for the first half of 2005 benefited from the one-time recovery in the first quarter of $2.6 million (pre-tax), or $0.02 per diluted common share, for project costs incurred in prior years.

     Net earnings increased $7.0 million to $70.3 million in the second quarter of 2006 and increased $13.1 million to $117.9 million in the first half of 2006, compared with the same periods in 2005. Net earnings for the second quarter of 2006, included an income tax benefit of $6.8 million, or $0.11 per diluted common share associated with the reduction of deferred income taxes due to enacted changes in Texas and Canadian tax laws. Net earnings for the second quarter of 2005, included a state income tax benefit of $7.6 million, or $0.12 per diluted common share associated with the reduction of deferred income taxes due to the expected phase-out of income taxes for the State of Ohio. Earnings per share growth exceeded the earnings growth over the prior periods because the average number of shares outstanding has decreased during the past year reflecting the impact of stock repurchase programs.

22

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

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(In thousands)
Revenue:
Fleet Management Solutions	$	1,049,477			969,577		$	2,030,635			1,894,217			8	%		7	%
Supply Chain Solutions		502,136			374,950			971,604			721,743			34			35
Dedicated Contract Carriage		143,484			133,825			282,167			261,806			7			8
Eliminations		(99,371	)		(88,536	)		(192,389	)		(172,335	)		(12	)		(12	)
Total	$	1,595,726			1,389,816		$	3,092,017			2,705,431			15	%		14	%
Operating revenue (1)	$	1,111,129			1,048,785		$	2,168,603			2,056,446			6	%		5	%

(1) We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our businesses and as a measure of sales activity. FMS fuel services revenue net of related intersegment billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to our customers for which we realize minimal changes in profitability during periods of steady market fuel prices. Subcontracted transportation revenue in our SCS and DCC business segments are excluded from the operating revenue computation as subcontracted transportation is largely a pass-through to our customers and we realize minimal changes in profitability as a result of fluctuations in subcontracted transportation.

     All business segments reported revenue growth in 2006 compared with the same periods in 2005. Revenue growth for FMS was driven by higher fuel services revenue, primarily as a result of higher average fuel prices, and full service lease contract growth. SCS revenue growth was primarily related to increased volume of managed subcontracted transportation, as well as higher volumes and new and expanded business in all industry groups. DCC revenue growth was due to pricing increases associated with higher fuel costs as well as expanded and new business. Revenue comparisons were also impacted by favorable movements in foreign currency exchange rates related to our international operations. Total revenue in the second quarter and first half of 2006 included a favorable foreign exchange impact of 1% in both periods, due primarily to the strengthening of the Canadian dollar and the Brazilian real.

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Operating expense (exclusive of items shown separately)	$	704,376			634,945		$	1,365,617			1,245,327			11	%		10	%
Percentage of revenue		44.1	%		45.7	%		44.2	%		46.0	%

     Operating expense increased in 2006 compared with the same periods in 2005 principally as a result of higher average fuel prices. Fuel costs are largely a pass-through to customers for which we realize minimal changes in profitability during periods of steady market fuel prices. The growth in revenue, excluding fuel, also contributed to the increase in operating expenses.

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Salaries and employee-related costs	$	343,977			306,372		$	681,491			613,931			12	%		11	%
Percentage of revenue		21.6	%		22.0	%		22.0	%		22.7	%
Percentage of operating revenue		31.0	%		29.2	%		31.4	%		29.9	%

     Salaries and employee-related costs and salaries and employee-related costs as a percentage of operating revenue increased in 2006, compared with the same periods in 2005 primarily as a result of added headcount and increased outside labor costs in our DCC and SCS businesses from new and expanded business. Additionally, on January 1, 2006, we adopted SFAS No. 123R and recognized $2.4 million and $5.0 million of additional share-based compensation expense in the second quarter and first half of 2006, respectively. See Note (C), “Share-Based Compensation Plans,” in the Notes to the Consolidated Condensed Financial Statements for additional information. Pension expense also increased $1.7 million and $4.3 million in the second quarter and first half of 2006,

23

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

respectively, compared with the same periods in 2005. Pension expense increases primarily impacted our FMS business segment, which employs the majority of our employees that participate in the primary U.S. pension plan.

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Subcontracted transportation	$	215,267			129,759		$	417,490			241,642			66	%		73	%
Percentage of revenue		13.5	%		9.3	%		13.5	%		8.9	%

     Subcontracted transportation expense represents freight management costs on logistics contracts for which we purchase transportation from third parties. Subcontracted transportation expense in our SCS business segment grew in 2006 compared with the same periods in 2005, as a result of increased volumes of freight management activity from new and expanded business and higher average pricing on subcontracted freight costs, resulting from increased fuel costs.

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(In thousands)
Depreciation expense	$	183,454			186,850		$	361,630			368,241			(2	)%		(2	)%
Gains on vehicle sales, net		(14,977	)		(13,086	)		(27,789	)		(25,850	)		14			8
Equipment rental		24,455			24,740			49,324			52,057			(1	)		(5	)

     Depreciation expense relates primarily to FMS revenue earning equipment. Depreciation expense decreased in 2006 compared with the same periods in 2005, reflecting the impact of the adjustments made to residual values and useful lives as part of the annual review, which were implemented January 1, 2006, and a lower average fleet count. These changes offset the impact of a higher average vehicle investment on purchases over the past year.

     Gains on vehicle sales, net increased in the second quarter of 2006 compared with the same period in 2005 due to improved average pricing on vehicles sold, which more than offset the decline in the number of vehicles sold.

     Equipment rental consists primarily of rent expense for FMS revenue earning equipment under lease. The decrease in equipment rental in 2006 compared with the same periods in 2005 was due to a reduction in the average number of leased vehicles.

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Interest expense	$	35,037			30,854		$	66,458			57,805			14	%		15	%
Effective interest rate		5.9	%		5.6	%		5.7	%		5.5	%

     Interest expense grew in 2006 compared with the same periods in 2005, primarily reflecting higher average debt levels, resulting from capital spending required to support our contractual full service lease business. The increase in interest expense in the second quarter of 2006 compared with the same period in 2005 also reflects the impact of higher effective interest rates.

24

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

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(In thousands)
Miscellaneous income, net	$	(417	)		(1,013	)	$	(5,803	)		(5,272	)		(59	)%		10	%

     Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income, gains (losses) from sales of properties, and other non-operating items. Miscellaneous income, net decreased in the second quarter of 2006 due to a $1.3 million charge related to the settlement of litigation associated with a discontinued operation. Miscellaneous income, net during the first half of 2006 increased due to higher property gains and better market performance of investments classified as trading securities, as well as a one-time recovery in the first quarter of 2006 of $1.9 million for the recognition of common stock received from mutual insurance companies. Miscellaneous income, net in the first half of 2005 benefited from the one-time recovery in the first quarter of $2.6 million of project costs incurred in prior years.

	Three months ended June 30,					Six months ended June 30,						Change 2006/ 2005
												Three	Six
	2006		2005			2006			2005			Months	Months
	(In thousands)
Restructuring and other recoveries, net	$	—		(134	)	$	(159	)		(201	)	NA		(21	)%

     Restructuring and other recoveries, net in 2006 and 2005, related primarily to employee severance and benefits and facility charges recorded in prior restructuring charges that were reversed due to subsequent refinements in estimates. See Note (E), “Restructuring and Other Recoveries,” in the Notes to Consolidated Condensed Financial Statements, for a complete discussion of restructuring activity.

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Provision for income taxes	$	34,275			27,231		$	65,897			52,964			26	%		24	%
Effective tax rate		32.8	%		30.1	%		35.9	%		33.6	%

     During the second quarter of 2006, Canada and the State of Texas enacted various tax measures which resulted in favorable adjustments to deferred income taxes of $6.8 million. See Note (H), “Income Taxes,” in the Notes to Consolidated Condensed Financial Statements, for a complete discussion of these items. In the first quarter of 2006, the effective income tax rate was also impacted by the true-up of non-deductible tax estimates to the 2005 tax return, which resulted in additional taxes of $0.7 million. These adjustments lowered our effective income tax rate in the first six months of 2006 by 3.3%.

     In June 2005, the State of Ohio enacted a tax measure phasing out its corporate franchise and phasing in a new gross receipts tax resulting in a favorable adjustment to deferred income taxes of $7.6 million. This benefit lowered our effective income tax rate in 2005 by 4.8%. Excluding the impact of these benefits in both periods, our effective income tax rate increased due to higher non-deductible items and an increase in earnings in higher tax rate jurisdictions.

25

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

OPERATING RESULTS BY BUSINESS SEGMENT

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(In thousands)
Revenue:
Fleet Management Solutions	$	1,049,477			969,577		$	2,030,635			1,894,217			8	%		7	%
Supply Chain Solutions		502,136			374,950			971,604			721,743			34			35
Dedicated Contract Carriage		143,484			133,825			282,167			261,806			7			8
Eliminations		(99,371	)		(88,536	)		(192,389	)		(172,335	)		(12	)		(12	)
Total	$	1,595,726			1,389,816		$	3,092,017			2,705,431			15	%		14	%
NBT:
Fleet Management Solutions	$	94,921			88,901		$	169,816			159,765			7	%		6	%
Supply Chain Solutions		18,077			8,333			28,736			14,840			117			94
Dedicated Contract Carriage		11,174			9,654			19,636			15,542			16			26
Eliminations		(8,276	)		(7,488	)		(16,042	)		(15,010	)		(11	)		(7	)
		115,896			99,400			202,146			175,137			17			15
Unallocated Central Support Services		(11,342	)		(9,005	)		(18,547	)		(17,587	)		(26	)		(5	)
Restructuring and other recoveries, net		—			134			159			201		NA				(21	)
Earnings before income taxes	$	104,554			90,529		$	183,758			157,751			15	%		16	%

     We define the primary measurement of our segment financial performance as “Net Before Taxes” (NBT), which includes an allocation of Central Support Services (CSS) and excludes restructuring and other recoveries, net. CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, shared management information systems, health and safety, legal and corporate communications. The objective of the NBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment and each operating segment within each business segment accountable for their allocated share of CSS costs. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented.

     Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included within the unallocated overhead remaining within CSS are the costs for investor relations, corporate communications, public affairs and certain executive compensation. See Note (N), “Segment Reporting,” in the Notes to Consolidated Condensed Financial Statements for a description of how the remainder of CSS costs is allocated to the business segments.

     Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to our SCS and DCC segments. Inter-segment revenue and NBT are accounted for at approximate fair value as if the transactions were made with third parties. NBT related to inter-segment equipment and services billed to customers (equipment contribution) are included in both FMS and the business segment which served the customer and then eliminated (presented as “Eliminations”).

     The following table sets forth equipment contribution included in NBT for our SCS and DCC segments:

	Three months ended June 30,				Six months ended June 30,				Change 2006/ 2005
									Three			Six
	2006		2005		2006		2005		Months			Months
	(In thousands)
Equipment contribution:
Supply Chain Solutions	$	4,143		3,700	$	8,072		7,256		12	%		11	%
Dedicated Contract Carriage		4,133		3,788		7,970		7,754		9			3
Total	$	8,276		7,488	$	16,042		15,010		11	%		7	%

26

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

Fleet Management Solutions

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Full service lease	$	460,050			445,450		$	911,497			887,136			3	%		3	%
Contract maintenance		34,042			34,502			66,762			67,905			(1	)		(2	)
Contract-related maintenance		47,799			47,888			95,075			95,949			—			(1	)
Commercial rental		170,846			174,850			320,769			327,577			(2	)		(2	)
Other		17,408			16,641			35,460			34,130			5			4
Operating revenue (1)		730,145			719,331			1,429,563			1,412,697			2			1
Fuel services revenue		319,332			250,246			601,072			481,520			28			25
Total revenue	$	1,049,477			969,577		$	2,030,635			1,894,217			8	%		7	%
Segment NBT	$	94,921			88,901		$	169,816			159,765			7	%		6	%
Segment NBT as a % of total revenue		9.0	%		9.2	%		8.4	%		8.4	%	(20)bps			—bps
Segment NBT as a % of operating revenue (1)		13.0	%		12.4	%		11.9	%		11.3	%	60 bps			60 bps

(1) We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our FMS business segment and as a measure of sales activity. Fuel services revenue, which is directly impacted by fluctuations in market fuel prices, is excluded from our operating revenue computation as fuel is largely a pass-through to customers for which we realize minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on market fuel costs.

     Total revenue grew during 2006 compared with the same periods in 2005 reflecting higher fuel services revenue as a result of higher average fuel prices. Operating revenue (revenue excluding fuel) increased in 2006 compared with the same periods in 2005 due to full service lease revenue growth in North America.

     Full service lease revenue grew in 2006 compared with the same periods in 2005 due to higher levels of new sales activity in North America since the second half of 2005. We expect favorable lease revenue comparisons to continue in the near term due to increased sales activity and improved business retention. Contract maintenance and contract-related maintenance revenue decreased in 2006 compared with the same periods in 2005, due primarily to the non-renewal of customer contracts in the U.K. Commercial rental revenue decreased in 2006 compared with the same periods in 2005 reflecting a smaller average fleet, which was partially offset by higher pricing. We expect commercial rental revenue comparisons to improve in the near term based on an expected larger average fleet.

27

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

     The following table provides rental statistics for the U.S. fleet, which generates approximately 85% of total commercial rental revenue:

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Non-lease customer rental revenue	$	72,821			76,039			132,901		$	138,791			(4	)%		(4	)%
Lease customer rental revenue (1)	$	70,510			71,631			137,435		$	138,017			(2	)%		—	%
Average commercial rental fleet size – in service (2)		32,800			34,600			32,400			34,400			(5	)%		(6	)%
Average commercial rental power fleet size – in service (2), (3)		24,200			25,000			23,600			24,500			(3	)%		(4	)%
Commercial rental utilization		73.1	%		73.4	%		71.1	%		71.4	%	(30)bps			(30)bps

(1)	Lease customer rental revenue is revenue from rental vehicles provided to our existing full service lease customers, generally during peak periods in their operations.
(2)	Number of units rounded to nearest hundred.
(3)	Fleet size excluding trailers.

     FMS NBT grew in 2006 compared with the same periods in 2005 primarily as a result of improved North American full service lease performance, and lower maintenance and depreciation costs. The NBT growth in the second quarter of 2006 as compared with the same period in 2005 was also favorably impacted by improved used vehicle sales from higher average pricing, as well as lower carrying costs from reduced used truck inventory levels. These improvements were offset partially by higher interest expense due primarily to planned higher debt levels to support contractual revenue growth, higher compensation-related expenses in North America, as well as lower margins in our U.K. operations. Results for the first half of 2005 benefited from the one-time recovery in the first quarter of $1.9 million for project costs incurred in prior years.

28

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

     Our fleet of owned and leased revenue earning equipment and contract maintenance vehicles is summarized as follows (number of units rounded to nearest hundred):

							Change
	June 30,		December 31,		June 30,		June 2006/			June 2006/
	2006		2005		2005		Dec. 2005			June 2005
End of period count:
By type:
Trucks		64,400		63,200		64,700		2	%		—	%
Tractors		53,100		52,700		52,900		1			—
Trailers		39,400		40,600		42,000		(3	)		(6	)
Other		5,500		5,800		6,100		(5	)		(10	)
Total		162,400		162,300		165,700		—	%		(2	)%
By product line:
Full service lease		118,600		118,400		119,100		—	%		—	%
Commercial rental		40,900		40,500		43,200		1			(5	)
Service vehicles and other		2,900		3,400		3,400		(15	)		(15	)
Total		162,400		162,300		165,700		—	%		(2	)%
Owned		157,400		156,500		159,300		1	%		(1	)%
Leased		5,000		5,800		6,400		(14	)		(22	)
Total		162,400		162,300		165,700		—	%		(2	)%
Quarterly average		162,200		163,800		166,500		(1	)%		(3	)%
Year-to-date average		162,200		164,900		166,200		(2	)%		(2	)%
Customer vehicles under contract maintenance (end of period)		27,700		26,400		27,200		5	%		2	%

     The totals in the table above include the following non-revenue earning equipment (number of units rounded to nearest hundred):

							Change
	June 30,		December 31,		June 30,		June 2006/			June 2006/
	2006		2005		2005		Dec. 2005			June 2005
Not yet earning revenue (NYE)		2,400		1,700		1,700		41	%		41	%
No longer earning revenue (NLE):
Units held for sale		4,400		4,700		6,200		(6	)		(29	)
Other NLE units		1,300		2,200		1,200		(41	)		8
Total (1)		8,100		8,600		9,100		(6	)%		(11	)%

(1) Non-revenue earning equipment for FMS operations outside the U.S. totaled approximately 1,400 vehicles at June 30, 2006, 1,500 vehicles at December 31, 2005 and 1,800 vehicles at June 30, 2005, which are not included above.

     NYE units represent new vehicles on hand that are being prepared for deployment to lease customers or into the rental fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. The number of NYE units increased consistent with volume of lease activity. NLE units represent vehicles held for sale, as well as vehicles for which no revenue has been earned in the previous 30 days. These vehicles may be temporarily out of service, being prepared for sale or awaiting redeployment. In 2006, the average number of NLE units decreased due to lower levels of used vehicles held for sale and process improvement actions in field operations. We expect the number of NLE units to increase in the second half of the year based on the expected growth in lease replacement activity.

29

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

Supply Chain Solutions

	Three months ended June 30,						Six months ended June 30,						Change 2006/ 2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
U.S. operating revenue:
Automotive and industrial	$	125,595			112,638		$	245,089			218,368			12	%		12	%
High-tech and consumer industries		74,360			61,132			143,227			119,101			22			20
Transportation management		7,717			6,162			14,565			12,353			25			18
U.S. operating revenue		207,672			179,932			402,881			349,822			15			15
International operating revenue		83,616			69,273			160,764			137,479			21			17
Total operating revenue (1)		291,288			249,205			563,645			487,301			17			16
Subcontracted transportation		210,848			125,745			407,959			234,442			68			74
Total revenue	$	502,136			374,950		$	971,604			721,743			34	%		35	%
Segment NBT	$	18,077			8,333		$	28,736			14,840			117	%		94	%
Segment NBT as a % of total revenue		3.6	%		2.2	%		3.0	%		2.1	%	140 bps			90 bps
Segment NBT as a % of total operating revenue (1)		6.2	%		3.3	%		5.1	%		3.0	%	290 bps			210 bps
Memo: Fuel costs	$	27,763			22,440		$	52,685			42,676			24	%		23	%

(1) We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our SCS business segment and as a measure of sales activity. Subcontracted transportation expense is deducted from total revenue to arrive at our operating revenue computation as subcontracted transportation expense is largely a pass-through to customers. We realize minimal changes in profitability as a result of fluctuations in subcontracted transportation.

     Total revenue grew in 2006 compared with the same period in 2005 due primarily to increased volume of managed subcontracted transportation, as well as to higher volumes and new and expanded business in all industry groups. Our largest customer, General Motors Corporation, accounted for approximately 40% and 18% of SCS total revenue and operating revenue for the first half of 2006, respectively, and is comprised of multiple contracts in various geographic regions. For the first half of 2005, General Motors Corporation accounted for approximately 29% and 18% of SCS total revenue and operating revenue, respectively. In 2006, total revenue and operating revenue included a favorable foreign currency exchange impact of 1.9% and 1.3%, respectively. We expect revenue improvements to continue over the near term.

     In transportation management arrangements where we act as principal, revenue is reported on a gross basis for subcontracted transportation services billed to our customers. As a result of entering into a management subcontracted transportation contract in 2005, under which we have determined we are acting as principal, the amount of managed subcontracted transportation expense and corresponding revenue has increased significantly during the past twelve months. We realize minimal changes in profitability as a result of fluctuations in subcontracted transportation. Determining whether revenue should be reported as gross or net is based on an assessment of whether we are acting as the principal or the agent in the transaction and involves judgment based on the terms and conditions of the arrangement. From time to time, the terms and conditions of our transportation management arrangements may change, which could require a change in revenue recognition from a gross basis to a net basis or vice versa. Our measure of operating revenue would not be impacted by a change in revenue reporting.

     The significant improvement in SCS NBT in 2006 compared with the same periods in 2005, reflects the impact of higher volumes, including the impact of reduced automotive plant shutdowns, and new and expanded business in all U.S. industry groups in 2006 and better margins in our Brazil operations. SCS NBT for the second quarter of 2006 also included a $2.5 million benefit (0.9% of operating revenue in the second quarter), net of variable compensation, related to a contract termination. SCS NBT in 2005 benefited from the one-time recovery of $0.7 million for project costs incurred in prior years.

30

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

Dedicated Contract Carriage

	Three months ended June 30,						Six months ended June 30,						Change 2006/2005
													Three			Six
	2006			2005			2006			2005			Months			Months
	(Dollars in thousands)
Operating revenue (1)	$	139,065			129,811		$	272,636			254,606			7	%		7	%
Subcontracted transportation		4,419			4,014			9,531			7,200			10			32
Total revenue	$	143,484			133,825		$	282,167			261,806			7	%		8	%
Segment NBT	$	11,174			9,654		$	19,636			15,542			16	%		26	%
Segment NBT as a % of total revenue		7.8	%		7.2	%		7.0	%		5.9	%		60	bps		110	bps
Segment NBT as a % of operating revenue (1)		8.0	%		7.4	%		7.2	%		6.1	%		60	bps		110	bps
Memo: Fuel costs	$	27,507			22,153		$	52,538			42,765			24	%		23	%

(1) We use operating revenue, a non-GAAP financial measure, to evaluate the operating performance of our DCC business segment and as a measure of sales activity. Subcontracted transportation expense is deducted from total revenue to arrive at our operating revenue computation as subcontracted transportation expense is largely a pass-through to customers. We realize minimal changes in profitability as a result of fluctuations in subcontracted transportation.

     DCC total revenue and operating revenue grew in 2006 compared with the same periods in 2005 as a result of pricing increases associated with higher fuel costs as well as expanded and new business. We expect favorable revenue comparisons to continue in the short term due to the impact of pricing increases associated with higher fuel costs as well as expanded business activity. DCC NBT in 2006 was positively impacted by new and expanded business. DCC NBT for the first half of 2006 as compared with the same period in 2005 also benefited from lower safety costs in the first quarter of 2006.

Central Support Services

	Three months ended June 30,						Six months ended June 30,						Change 2006/2005
													Three			Six
	2006			2005			2006			2005			Months			Months
				(In thousands)
Human resources	$	3,365			3,518		$	6,824			7,076			(4	)%		(4	)%
Finance		14,220			14,714			28,670			28,993			(3	)		(1	)
Corporate services and public affairs		2,872			3,926			5,758			7,222			(27	)		(20	)
Information technology (IT)		13,242			16,612			27,330			34,334			(20	)		(20	)
Health and safety		2,062			1,817			4,081			3,953			13			3
Other		13,437			8,560			21,089			16,581			57			27
Total CSS		49,198			49,147			93,752			98,159			—	%		(4	)%
Allocation of CSS to business segments		(37,856	)		(40,142	)		(75,205	)		(80,572	)		6			7
Unallocated CSS	$	11,342			9,005		$	18,547			17,587			26	%		5	%

     Total CSS costs in the second quarter of 2006 were flat compared with the same period in 2005 as lower information technology and corporate services were offset by a charge of $1.3 million to settle litigation associated with a discontinued operation and higher share-based compensation from expensing stock options and incentive compensation. Lower information technology spending was a result of ongoing cost containment initiatives and increased utilization of technology resources from growth in our SCS operations. First half results in 2006 also benefited from the one-time recovery of $1.9 million associated with the recognition of common stock received from mutual insurance companies in a prior year. Unallocated CSS expenses for the second quarter and first half of 2006 were up compared with the same periods in 2005 largely due to share-based compensation and the previously mentioned legal settlement. The increase in unallocated CSS expenses for the first half of 2006 as compared with the same period in 2005 was offset partially by the common stock recovery.

31

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

FINANCIAL RESOURCES AND LIQUIDITY

Cash Flows

     The following is a summary of our cash flows from operating, financing and investing activities:

	Six months ended June 30,
	2006			2005
	(In thousands)
Net cash provided by (used in):
Operating activities	$	298,344			164,841
Financing activities		259,733			408,767
Investing activities		(606,328	)		(585,577	)
Effect of exchange rate changes on cash		2,169			(1,692	)
Net change in cash and cash equivalents	$	(46,082	)		(13,661	)

     A detail of the individual items contributing to the cash flow changes is included in the Consolidated Condensed Statements of Cash Flows.

     Net cash provided by operating activities increased to $298.3 million in the first half of 2006 compared with $164.8 million in 2005, due primarily to lower income tax payments and offset partially by increased pension contributions. In 2005, net cash provided by operating activities was impacted by U.S. federal income tax payments of $176.0 million made in connection with the resolution of our federal income tax audit for the 1998 to 2000 tax period. Net cash provided by financing activities in the first half of 2006 was $259.7 million compared with cash provided of $408.8 million in 2005. Net cash provided by financing activities in the first half of 2005 was impacted by higher debt borrowings used to fund federal income tax payments. Net cash used in investing activities increased to $606.3 million in the first half of 2006 compared with $585.6 million in 2005, due to an increase in restricted cash associated with the implementation of a vehicle like-kind exchange tax program in 2006.

     We manage our business to maximize operating cash flows and proceeds from the sale of revenue earning equipment as the principal sources of liquidity. We refer to the net amount of cash generated from operating and investing activities (excluding changes in restricted cash) as “free cash flow.” Although free cash flow is a non-GAAP financial measure, we consider it to be an important measure of comparative operating performance. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and therefore comparability may be limited.

     The following table shows the sources of our free cash flow computation:

	Six months ended June 30,
	2006			2005
	(In thousands)
Net cash provided by operating activities	$	298,344			164,841
Collections on direct finance leases		33,768			33,397
Sales of operating property and equipment		2,210			1,673
Sales of revenue earning equipment		177,445			168,915
Purchases of property and revenue earning equipment		(776,128	)		(779,403	)
Acquisitions		(4,113	)		(14,717	)
Other, net		1,598			—
Free cash flow	$	(266,876	)		(425,294	)

     The increase in free cash flow to negative $266.9 million for the first half of 2006 compared with the same period in 2005 was driven by lower income tax payments, offset partially by increased pension contributions and working capital growth. We expect free cash flow to decrease over the balance of the year due to higher capital spending.

32

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

     The following table provides a summary of capital expenditures:

	Six months ended June 30,
	2006			2005
	(In thousands)
Revenue earning equipment: (1)
Full service lease	$	598,064			537,064
Commercial rental		188,488			242,688
		786,552			779,752
Operating property and equipment		27,951			41,157
Total capital expenditures		814,503			820,909
Changes in accounts payable related to purchases of revenue earning equipment		(38,375	)		(41,506	)
Cash paid for purchases of property and revenue earning equipment	$	776,128			779,403

(1) Capital expenditures exclude acquisitions of revenue earning equipment under capital leases of $0.1 million and $0.4 million during the six months ended June 30, 2006 and 2005, respectively.

     Capital expenditures were essentially flat for the first half of 2006 compared with 2005 as lower planned spending for commercial rental vehicles was offset by increased lease vehicle spending for replacement and expansion of customer fleets. We are now anticipating full-year 2006 capital expenditures to be approximately $1.8 billion, up from $1.4 billion in 2005. The current capital expenditures forecast reflects an increase of $200 million from plan, due primarily to higher than expected new sales activity within the full service lease product line.

Financing and Other Funding Transactions

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

     The following table shows the movements in our debt balance:

	Six months ended June 30,
	2006			2005
	(In thousands)
Debt balance at January 1	$	2,185,366			1,783,216
Cash-related changes in debt:
Net change in commercial paper borrowings		158,505			14,532
Proceeds from issuance of medium-term notes		250,000			600,000
Proceeds from issuance of other debt instruments		24,904			75,536
Retirement of medium-term notes and debentures		(40,000	)		(100,000	)
Other debt repaid, including capital lease obligations		(99,714	)		(144,461	)
		293,695			445,607
Non-cash changes in debt:
Fair market value adjustment on notes subject to hedging		(911	)		(1,562	)
Addition of capital lease obligations		85			411
Changes in foreign currency exchange rates and other non-cash items		10,874			(4,195	)
Total changes in debt		303,743			440,261
Debt balance at June 30	$	2,489,109			2,223,477

     In accordance with our funding philosophy, we attempt to match the average remaining repricing life of our debt with the average remaining life of our assets. We utilize both fixed-rate and variable-rate debt to achieve this match and generally target a mix of 25 — 45% variable-rate debt. The variable-rate portion of our total obligations (including notional value of swap agreements) was 32% at June 30, 2006 and December 31, 2005.

33

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

     Ryder’s leverage ratios and a reconciliation of balance sheet debt to total obligations were as follows:

	June 30,		% to			December 31,		% to
	2006		Equity			2005		Equity
	(Dollars in thousands)
On-balance sheet debt	$	2,489,109		151	%	$	2,185,366		143	%
Off-balance sheet debt—PV of minimum lease payments and guaranteed residual values under operating leases for vehicles (1)		88,797					117,062
Total obligations	$	2,577,906		156	%	$	2,302,428		151	%

(1) Present value (PV) does not reflect payments Ryder would be required to make if we terminated the related leases prior to the scheduled expiration dates.

     Debt to equity consists of balance sheet debt for the period divided by total equity. Total obligations to equity represents balance sheet debt plus the present value of minimum lease payments and guaranteed residual values under operating leases for vehicles, discounted based on our incremental borrowing rate at lease inception, all divided by total equity. Although total obligations is a non-GAAP financial measure, we believe that total obligations is useful as it is a more complete measure of our existing financial obligations and helps better assess our overall leverage position.

     The increase in our leverage ratios in 2006 was driven by increased capital spending required to support our contractual full service lease business. Our long-term target percentage of total obligations to equity is 250% to 300% while maintaining a strong investment grade rating. We believe this leverage range is appropriate for our business due to the liquidity of our vehicle portfolio and because a substantial component of our assets is supported by long-term customer leases.

     Our ability to access unsecured debt in the capital markets is linked to both our short-term and long-term debt ratings. These ratings are intended to provide guidance to investors in determining the credit risk associated with particular Ryder securities based on current information obtained by the rating agencies from us or from other sources that such agencies consider to be reliable. Lower ratings generally result in higher borrowing costs as well as reduced access to capital markets. A significant downgrade of Ryder’s debt rating would reduce our ability to issue commercial paper. As a result, we would have to rely on other established funding sources described below.

     Our debt ratings at June 30, 2006 were as follows:

	Short-term		Long-term	Outlook
Moody’s Investors Service		P2	Baa1	Stable (June 2004)
Standard & Poor’s Ratings Services		A2	BBB+	Stable (April 2005)
Fitch Ratings		F2	A-	Stable (July 2005)

     Ryder can borrow up to $870 million through a global revolving credit facility with a syndicate of twelve lenders. The credit facility matures in May 2010 and is used primarily to finance working capital and provide support for the issuance of commercial paper. This facility can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at June 30, 2006). At Ryder’s option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility’s current annual facility fee is 11.0 basis points, which applies to the total facility of $870 million, and is based on Ryder’s current credit ratings. The credit facility contains no provisions restricting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions, and certain affirmative and negative covenants. In order to maintain availability of funding, Ryder must maintain a ratio of debt to consolidated tangible net worth, as defined in the agreement, of less than or equal to 300%. The ratio at June 30, 2006 was 137%. At June 30, 2006, $312.6 million was available under the credit facility.

     In May 2006, we issued $250 million of unsecured medium-term notes, maturing in May 2011. The proceeds from the notes were used to reduce commercial paper borrowings. At June 30, 2006, we have $550 million of securities available for issuance under a universal shelf registration statement filed with the Securities and Exchange Commission during 2005. Additionally, we have a $200

34

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

million trade receivable facility which allows for the sale of certain of domestic trade accounts receivable to a receivables conduit and (or) committed purchasers. At June 30, 2006, no receivables were sold under the facility.

     At June 30, 2006, we had the following amounts available to fund operations under the aforementioned facilities:

	(In millions)
Global revolving credit facility	$	312.6
Shelf registration statement		550.0
Trade receivables facility		200.0

     We believe such facilities, along with other funding sources, will be sufficient to fund operations over the next twelve months.

Off-Balance Sheet Arrangements

     We periodically enter into sale-leaseback transactions in order to lower the total cost of funding our operations, to diversify our funding among different classes of investors (e.g., regional banks, pension plans and insurance companies) and to diversify our funding among different types of funding instruments. These sale-leaseback transactions are often executed with third-party financial institutions that are not deemed to be variable interest entities. In general, these sale-leaseback transactions result in a reduction in revenue earning equipment and debt on the balance sheet, as proceeds from the sale of revenue earning equipment are primarily used to repay debt. Accordingly, sale-leaseback transactions will result in reduced depreciation and interest expense and increased equipment rental expense. These leases contain limited guarantees by us of the residual values of the leased vehicles (residual value guarantees) that are conditioned upon disposal of the leased vehicles prior to the end of their lease term. The amount of future payments for residual value guarantees will depend on the market for used vehicles and the condition of the vehicles at time of disposal. See Note (J), “Guarantees,” in Notes to Consolidated Condensed Financial Statements for additional information. We did not enter into any sale-leaseback transactions that qualified for off-balance sheet treatment during the first half of 2006 or 2005.

Pension Information

     The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. We review pension assumptions regularly and we may from time to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. For 2006, we expect to make approximately $71 million in pension contributions for all plans. Changes in interest rates and the market value of the securities held by the plans during 2006 could materially change, positively or negatively, the underfunded status of the plans and affect the level of pension expense and required contributions in 2007 and beyond. See Note (M), “Employee Benefit Plans,” in Notes to Consolidated Condensed Financial Statements for additional information.

Share Repurchases and Cash Dividends

     In May 2006, our Board of Directors authorized a two-year share repurchase program intended to mitigate the dilutive impact of shares issued under our various employee stock option and stock purchase plans. Under the May 2006 program, management is authorized to repurchase shares of common stock in an amount not to exceed the number of shares issued to employees under the various employee stock option and employee stock purchase plans since March 1, 2006, which totaled approximately 1.3 million shares at June 30, 2006. The May 2006 program limits aggregate share repurchases to no more than 2 million shares of Ryder common stock. Share repurchases will be made periodically in open-market transactions, and are subject to market conditions, legal requirements and other factors. Management was granted the authority to establish a trading plan under Rule 10b5-1 of the Securities and Exchange Act of 1934 as part of the May 2006 program. As of June 30,2006, we had not repurchased any shares under the May 2006 program because of a blackout period resulting from a common stock rescission offer associated with our 401(k) Plan which concluded on July 6, 2006.

     In October 2005, our Board of Directors authorized a $175 million share repurchase program over a period not to exceed two years. Share repurchases of common stock were made periodically in open-market transactions and were subject to market conditions, legal requirements and other factors. During the first quarter of 2006, we completed the October 2005 program. Management established a prearranged written plan under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the October 2005 program, which allowed for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan. In 2006, we repurchased and retired approximately 1.6 million shares under the October 2005 program at an aggregate cost of $65.8 million. We repurchased and retired an aggregate of approximately 4.2 million shares under the program.

35

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

     In July 2004, our Board of Directors authorized a two-year share repurchase program intended to mitigate the dilutive impact of shares issued under our various employee stock option and stock purchase plans. Under the July 2004 program, shares of common stock were purchased in an amount not to exceed the number of shares issued to employees upon the exercise of stock options or through employee stock purchase plans since May 1, 2004. The July 2004 program limited aggregate share repurchases to no more than 3.5 million shares of Ryder common stock. During the fourth quarter of 2005, we replaced the July 2004 program with the October 2005 program noted previously. Management was granted the authority to establish a trading plan under Rule 10b5-1 as part of the July 2004 program. For the first half of 2005, we repurchased and retired a total of approximately 0.7 million shares under the program at an aggregate cost of $32.4 million.

     In February and May 2006, our Board of Directors declared a quarterly cash dividend of $0.18 per share of common stock. The dividend reflects a $0.02 increase from the quarterly cash dividend of $0.16 paid in 2005.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation requires that we recognize in our consolidated financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. The provisions of FIN 48 are effective beginning January 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to the opening retained earnings. We are currently evaluating the impact of adopting FIN 48 on our consolidated financial statements.

NON-GAAP FINANCIAL MEASURES

     This Quarterly Report on Form 10-Q includes information extracted from consolidated condensed financial information but not required by generally accepted accounting principles (GAAP) to be presented in the financial statements. Certain of this information are considered “non-GAAP financial measures” as defined by SEC rules. Specifically, we refer to operating revenue, salaries and employee-related costs as a percentage of operating revenue, FMS operating revenue, FMS NBT as a % of operating revenue, SCS operating revenue, SCS NBT as a % of operating revenue, DCC operating revenue, DCC NBT as a % of operating revenue, free cash flow, total obligations and total obligations to equity. As required by SEC rules, we provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and an explanation why management believes that presentation of the non-GAAP financial measure provides useful information to investors. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP.

FORWARD-LOOKING STATEMENTS

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

• our expectations as to growth opportunities and anticipated revenue growth;

• our belief that we have not entered into any other transactions since 2000 that raise the same type of issues identified by the IRS in their audit of the 1998 to 2000 tax period;

• the anticipated deferral of tax gains on disposal of eligible revenue earning equipment pursuant to our vehicle like-kind exchange program;

• impact of losses from conditional obligations arising from guarantees;

• estimates of capital expenditures for the remainder of the year;

• the adequacy of our accounting estimates and accruals for pension expense, depreciation, residual value guarantees, self-insurance, share-based compensation, goodwill impairment, income taxes and revenue;

• our ability to fund all of our operations over the next twelve months through internally generated funds and outside funding sources; and

• the number of NLE vehicles in inventory over the near term.

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

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

• Market Conditions:

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

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

o Changes in market conditions affecting the commercial rental market or the sale of used vehicles

o Less than anticipated growth rates in the markets in which we operate

o Changes in current financial, tax or regulatory requirements that could negatively impact the leasing market

• Competition:

o Competition from other service providers, some of which have greater capital resources or lower capital costs

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

o Competition from vehicle manufacturers in our foreign FMS business operations

o Our inability to maintain current pricing levels due to customer acceptance or competition

• Profitability:

o Our inability to obtain adequate profit margins for our services

o Lower than expected customer volumes or retention levels

o Loss of key customers in our SCS business segment

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

o The inability of our business segments to create operating efficiencies

o Availability of heavy-duty and medium-duty vehicles

o Sudden changes in fuel prices and fuel shortages

o Our inability to successfully implement our asset management initiatives

o An increase in the cost of, or shortages in the availability of, qualified drivers

o Labor strikes and work stoppages

o Our inability to manage our cost structure

o Our inability to limit our exposure for customer claims

• Financing Concerns:

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

o Unanticipated interest rate and currency exchange rate fluctuations

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

• Accounting Matters:

o Impact of unusual items resulting from on-going evaluations of business strategies, asset valuations, acquisitions, divestitures and our organizational structure

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

o Increases in compensation levels, retirement rate and mortality resulting in higher pension expense

o Increases in healthcare costs resulting in higher insurance costs

o Changes in accounting rules, assumptions and accruals

• Other risks detailed from time to time in our SEC filings

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

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes to Ryder’s exposures to market risk since December 31, 2005. Please refer to the 2005 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     As of the end of the second quarter of 2006, we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the second quarter of 2006, Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Controls

     During the three months ended June 30, 2006, there were no changes in Ryder’s internal control over financial reporting that has materially affected or is reasonably likely to materially affect such internal control over financial reporting.

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PART II. OTHER INFORMATION

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

     The following table provides information with respect to purchases we made of our common stock during the three months ended June 30, 2006 and total repurchases:

					Total Number of
					Shares		Maximum
					Purchased as		Number of Shares
	Total Number				Part of Publicly		That May Yet Be
	of Shares		Average Price		Announced		Purchased Under
	Purchased (1), (2)		Paid per Share		Program		the Program (2)
April 1 through April 30, 2006		13		41.85		NA		NA
May 1 through May 31, 2006		43		54.93		—		2,000,000
June 1 through June 30, 2006		140		52.93		—		2,000,000
Total		196		52.63		—

(1)

During the three months ended June 30, 2006, we purchased an aggregate of 196 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock delivered as payment for the exercise price of options exercised or to satisfy the option holders’ tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plan relating to investments by employees in our common stock, one of the investment options available under the plan.

(2)

In May 2006, our Board of Directors authorized a two-year share repurchase program for the repurchase of up to 2 million shares of common stock.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)	Our 2006 annual meeting of shareholders was held on May 5, 2006.
(b)	At the annual meeting, all director nominees named in (c) below were elected. The following directors continued in office after the meeting: David I. Fuente, Lynn M. Martin, Eugene A. Renna, Abbie J. Smith, Hansel E. Tookes, II and Christine A. Varney.
(c)	The matters voted upon at the meeting and the votes cast with respect to each matter were as follows:

     ELECTION OF DIRECTORS

	Votes
Director	For		Withheld
John M. Berra		53,797,428		1,322,126
L. Patrick Hassey		54,637,348		482,206
Daniel H. Mudd		54,648,459		471,095
E. Follin Smith		54,620,346		499,208
Gregory T. Swienton		53,271,101		1,848,453

     MANAGEMENT PROPOSALS

	Votes Cast
	For		Against		Abstain
Ratification of PricewaterhouseCoopers LLP as independent auditor		54,676,814		93,088		349,652

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ITEM 6. EXHIBITS

31.1	Certification of Gregory T. Swienton pursuant to Rule 13a-15(e) or Rule 15d-15(e).
31.2	Certification of Mark T. Jamieson pursuant to Rule 13a-15(e) or Rule 15d-15(e).
32	Certification of Gregory T. Swienton and Mark T. Jamieson pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350.

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SIGNATURES

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

	RYDER SYSTEM, INC. (Registrant)
Date: July 27, 2006	By:	/s/ Mark T. Jamieson
		Mark T. Jamieson
		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)
Date: July 27, 2006	By:	/s/ Art A. Garcia
		Art A. Garcia
		Senior Vice President and Controller (Principal Accounting Officer)

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