Ryder System Inc 8-K, filed Jul 29, 2020
Ryder System Inc (R)
8-K
2020-07-29
For: 2020-07-29
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Added on
April 10, 2026
About this 8-K
Ryder System Inc filed this 8-K on July 29, 2020.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2020
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Zip Code) | ||||||||||||||
| (Address of principal executive offices) | ||||||||||||||
Registrant’s telephone number, including area code: (305 ) 500-3726
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On July 29, 2020, we issued a press release reporting our financial results for the three months ended June 30, 2020 (the “Press Release”). The Press Release is available on our website at http://investors.ryder.com.
Item 7.01 Regulation FD Disclosure
We are hosting a conference call and webcast on July 29, 2020 during which we will make a presentation on our financial results for the three months ended June 30, 2020 (the "Presentation"). The Presentation has been made available on our website at http://investors.ryder.com.
The information in this Report, including Exhibit 99.1 and Exhibit 99.2, are being furnished pursuant to Item 2.02 of Form 8-K, and General Instruction B.2 thereunder and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference to such filing.
Item 9.01(d) Exhibits
The following exhibits are furnished as part of this report on Form 8-K:
| Exhibit 99.1 | |||||
| Exhibit 99.2 | |||||
| Exhibit 104 | Cover Page Interactive Data File - The Cover page of this Current Report on Form 8-K, formatted in Inline XBRL. | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 29, 2020 | RYDER SYSTEM, INC. (Registrant) | ||||||||||
| By: | /s/ Scott T. Parker | ||||||||||
| Scott T. Parker Executive Vice President, Chief Financial Officer | |||||||||||
News Release
Ryder Reports Second Quarter 2020 Results
Second Quarter 2020
•Q2 total revenue of $1.9 billion, down 16%, and Q2 operating revenue (non-GAAP) of $1.6 billion, down 10% primarily reflecting COVID-19 impacts on commercial rental and automotive activity in supply chain
•Q2 GAAP EPS from continuing operations loss of $(1.41) versus a profit of $1.43 in prior year, reflecting the impacts of higher non-cash depreciation expense due to changes in residual value estimates and COVID-19
•Q2 comparable EPS (non-GAAP) from continuing operations loss of $(0.95) versus a profit of $1.40 in prior year
Business Updates and Impacts of COVID-19
•Anticipate operating cash flow of $1.8 billion to $2.0 billion in 2020
•Expect free cash flow of $1.0 billion to $1.2 billion including capital expenditures of $1.0 billion to $1.3 billion in 2020
•Additional depreciation from change in residual value estimate primarily due to expected delay in used vehicle market recovery and a lowered longer term outlook for used vehicle market values
•Commercial rental demand and utilization improved throughout the quarter; however, remain below pre-COVID-19 levels
•Automotive customer activity in Supply Chain Solutions improved since April due to manufacturing ramp-up and is expected to be at pre-COVID-19 levels in the third quarter, assuming no additional disruptions
•Dedicated Transportation Solutions and Supply Chain Solutions pre-tax earnings as a percentage of segment operating revenue for the quarter were in line with long-term targets of high single digits
•Substantial liquidity of $2.0 billion as of July 27 available to support operations and fund $300 million in remaining 2020 debt maturities
•Effective tax rate impacted by reduction in earnings due to additional depreciation charges and COVID-19 effects
MIAMI, July 29, 2020 – Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and commercial fleet management solutions, reported results for the three months ended June 30 as follows:
| (In millions, except EPS) | Earnings (Loss) Before Taxes | Earnings (Loss) | Diluted Earnings (Loss) Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations (GAAP) | $ | (94.8) | $ | 103.1 | NM | $ | (73.7) | $ | 75.5 | NM | $ | (1.41) | $ | 1.43 | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-operating pension costs | 0.9 | 6.7 | (0.1) | 4.8 | — | 0.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring and other, net | 18.8 | 5.9 | 16.1 | 4.6 | 0.30 | 0.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ERP implementation costs | 11.0 | 3.9 | 8.2 | 2.9 | 0.16 | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of property | — | (18.6) | — | (13.8) | — | (0.26) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comparable (non-GAAP) | $ | (64.0) | $ | 101.0 | NM | $ | (49.5) | $ | 73.9 | NM | $ | (0.95) | $ | 1.40 | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note: Amounts may not be additive due to rounding.
NM - Not Meaningful
Total and operating revenue for the three months ended June 30 were as follows:
| (In millions) | Total Revenue | Operating Revenue (non-GAAP) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,895 | 2,245 | (16)% | $ | 1,623 | 1,804 | (10)% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FMS | $ | 1,198 | 1,391 | (14)% | $ | 1,074 | 1,170 | (8)% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCS | $ | 519 | 649 | (20)% | $ | 405 | 483 | (16)% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DTS | $ | 294 | 362 | (19)% | $ | 228 | 248 | (8)% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CEO Commentary
Commenting on the company's response to the challenges of COVID-19, second quarter results, and current outlook, Ryder Chairman and CEO Robert Sanchez said, "Market conditions related to COVID-19 troughed in April for Ryder's rental, supply chain automotive, and used vehicle sales businesses, and conditions improved sequentially thereafter. The total estimated pre-tax earnings impact was $45 million in the quarter, driven by lower commercial rental demand and reduced automotive activity in supply chain, partially offset by lower overhead costs. In addition, the impact of COVID-19 on current and expected used vehicle market conditions triggered a review of Ryder's residual value estimates, resulting in increased depreciation and valuation adjustments totaling approximately $49 million in the second quarter. The earnings headwind from this higher depreciation is expected to decline over time.
"This year, we expect to generate free cash flow of $1.0 billion to $1.2 billion driven by cash generated by our sizable portfolio of contractual businesses and reduced capital expenditures. In FMS, we remain focused on actions to increase returns and de-risk the business. These initiatives include ChoiceLease price increases resulting in a mid-single-digit improvement in revenue per new lease unit compared to the prior year. We are on track to realize our 2020 target of $30 million in annual savings from our maintenance cost initiative. In used vehicles sales, we are expanding our retail capacity, growing our inside sales capabilities, and leveraging our digital investment in online sales.
"Supply chain and dedicated profit margins in the quarter were in line with our long-term targets of high single digits despite the challenges of COVID-19 and we remain focused on accelerating growth in these segments. We are launching a national advertising campaign aimed at increasing market awareness of Ryder’s broad range of logistics capabilities and promoting RyderShareTM, our visibility and collaborative logistics platform. Our customers are benefiting from the platform's capability to track and manage goods in real time as they move through the supply chain. In addition, based on recent results, we expect the profitability of our Ryder Last Mile business to be in the high single-digit range.
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"Going forward, our capital allocation strategy is to accelerate growth in our higher return supply chain and dedicated businesses, while moderating growth and improving returns in our capital intensive FMS business. This strategy is expected to achieve a balance of earnings growth and free cash flow, and over time realize our long-term return on equity goal of 15%. The increased free cash flow is expected to allow us to pay down debt in order to bring our leverage into our target range, continue to pay our dividend, invest in acquisitions and new innovation initiatives, and over time, allow for discretionary share repurchases.
"Ryder continues to work closely with customers to keep the flow of goods and services moving and I remain extremely proud of our workforce. Although we expect the months ahead to remain challenging, we believe the effects of the pandemic are accelerating trends toward e-commerce fulfillment, final mile delivery of big and bulky goods, and onshoring and nearshoring of manufacturing and supply chain operations. We believe this presents a compelling opportunity for transportation and logistics outsourcing to Ryder, and as a leading North American logistics provider, we are strongly positioned to capitalize on this opportunity."
COVID-19 Impacts to Date and Outlook
The COVID-19 pandemic and measures taken to prevent its spread negatively affected Ryder's business for a total estimated pre-tax earnings impact of $45 million in the second quarter, including lower commercial rental demand ($55 million estimated impact) and reduced automotive activity in supply chain ($25 million estimated impact), partially offset by COVID-19-related temporary cost savings of $35 million. In addition, the impact of COVID-19 on current and expected used vehicle market conditions triggered a review of Ryder's residual value estimates, resulting in increased depreciation and valuation adjustments totaling approximately $49 million in the second quarter.
Due to the effects of COVID-19, the company now expects the recovery in the used vehicle market will be delayed beyond the company's prior expectation of mid-2021. Although we saw stronger than expected volumes in used vehicle sales in both the retail and wholesale markets, we expect pricing pressure to continue through mid-2022. As a result, the company primarily extended accelerated depreciation on vehicles expected to be sold by an additional year through mid-2022 and lowered long term policy residual value estimates, particularly for trucks. Additionally, in order to address elevated used vehicle inventories, certain vehicles were written down to reflect wholesale pricing levels. The estimated impact of the residual value changes in the second quarter includes $31 million from additional accelerated depreciation and valuation adjustments and $18 million of policy depreciation.
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Earnings Impact From Residual Value Estimate Changes
| Three months ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2019 | December 31, 2019 | March 31, 2020 | June 30, 2020 (3) | September 30, 2020 | December 31, 2020 | 2020 | 2021 | 2022- 2025 | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Depreciation (2019 - Q1 2020) (1) | $ | 148 | $ | 88 | $ | 100 | $ | 55 | $ | 25 | $ | 10 | $ | 190 | $ | — | $ | — | $ | 426 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Depreciation (Q2 2020) (2) | — | — | — | 31 | 20 | 20 | 71 | 40 | — | 111 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Policy Depreciation (2019) | 60 | 60 | 51 | 50 | 50 | 50 | 201 | 160 | 250 | 731 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Policy Depreciation (Q2 2020) | — | — | — | 18 | 20 | 20 | 58 | 70 | 150 | 278 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 208 | $ | 148 | $ | 151 | $ | 154 | $ | 115 | $ | 100 | $ | 520 | $ | 270 | $ | 400 | $ | 1,546 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Accelerated depreciation included losses for used vehicle sales, net (primarily valuation adjustments) of $23 million, $10 million, and $21 million for the three months ended September 30, 2019, December 31, 2019, and March 31, 2020, respectively.
(2) Accelerated depreciation included losses for used vehicle sales, net (primarily valuation adjustments) of $9 million for the three months ended June 30, 2020.
(3) Incremental depreciation expense was $35 million for the three months ended June 30, 2019 including impacts from accelerated and policy depreciation and losses for used vehicle sales, net.
These changes are intended to better align vehicle residual value estimates with our current view and outlook for the used vehicle market environment. These estimates are based on management’s view of market conditions and reflect the impact of this change on residual values on the fleet of power vehicles at the time of the change. Management reviews residual values periodically based on current and expected market conditions and, if management’s view of market conditions changes, may adjust, positively or negatively, residual value estimates for the fleet at such time.
Second quarter demand for commercial rental vehicles remained significantly below the prior year and typical seasonal levels; however, demand and utilization troughed in April and improved sequentially thereafter. Rental utilization percentage on power vehicles in the second quarter was 55.9% compared to historical levels in the mid-70s. Ryder took action to reduce the rental fleet size resulting in a decline in 8,600 vehicles or 19% from the prior year. Based on the rental fleet size at the end of the second quarter, every percentage point change in utilization is estimated to impact monthly pre-tax earnings by approximately $1 million until the rental fleet size can be aligned with market demand.
Following April shutdowns, SCS automotive customer activity increased starting in mid-May as manufacturers ramped up production. We ended the second quarter at pre-COVID-19 activity levels and, assuming no additional disruption, we expect activity to remain at approximately these levels during the third quarter.
Ryder took significant actions in early April to temporarily furlough employees and reduce discretionary spending. In addition, the company incurred lower medical costs during the quarter. These items resulted in an estimated $35 million savings in the second quarter. The company does not anticipate most of the lower discretionary spending and medical cost benefit to recur going forward. In July, the company transitioned from temporary furloughs to permanent headcount reductions, primarily in FMS, which are expected to result in estimated headcount-related savings of $12 million per quarter. Second quarter 2020 comparable earnings before tax exclude restructuring and other charges of $13 million related to this reduction.
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As highlighted in the prior quarter, the company expects lower lease sales in 2020 which will result in significantly lower capital expenditures. In addition, during the quarter Ryder canceled and deferred lease and rental vehicle orders and redeployed a significant amount of underutilized equipment to fulfill lease contracts, further reducing capital spending. Capital expenditures are now expected to be between $1.0 billion to $1.3 billion for the full year, resulting in anticipated free cash flow in 2020 of $1.0 billion to $1.2 billion, which is expected to be used primarily to pay down debt.
Ryder's liquidity position remains strong with approximately $700 million in cash in the U.S., $1.2 billion in available revolver borrowings, and $100 million of availability under its receivable-backed financing facility as of July 27, 2020. The company is well positioned to support operations, fund $300 million of remaining 2020 debt maturities, and expects to continue paying its dividend.
The company is not providing earnings guidance at this time as a result of the uncertainty relating to the ongoing impacts of COVID-19. The company expects to resume guidance when business conditions stabilize.
Second Quarter Business Segment Operating Results
Fleet Management Solutions
In the Fleet Management Solutions (FMS) business segment, total revenue was $1.2 billion, down 14% from the year-earlier period. FMS operating revenue (a non-GAAP measure excluding fuel and lease liability insurance revenue) was $1.1 billion, down 8% from the year-earlier period. The decline was driven by a 33% decrease in commercial rental revenue from the year-earlier period due to lower demand. ChoiceLeaseTM (lease) revenue increased 1%, reflecting a larger average fleet size and higher prices on new vehicles, partially offset by lower mileage based revenue.
FMS loss before tax was $(104) million compared with earnings before tax of $58 million in 2019 due to $154 million of additional depreciation expense from the vehicle residual value estimate changes in 2019 and 2020, resulting in a year-over-year earnings impact of $119 million. In addition, there was a negative estimated impact of COVID-19 on commercial rental performance of $55 million. This was partially offset by COVID-19-related cost actions and lower medical expenses totaling $20 million. The impact of COVID-19 on current and expected used vehicle market conditions triggered a review of Ryder's residual value estimates, resulting in increased depreciation and valuation adjustments totaling $49 million. Rental power fleet utilization was 56% in the second quarter, down from 75% in the year-earlier period. The company has taken action to reduce the rental fleet to better align with market conditions, resulting in a 19% year-over-year and a 7% sequential decline in fleet size. FMS loss before tax as a percentage of FMS total revenue and FMS operating revenue (a non-GAAP measure) were (8.7)% and (9.7)%, respectively. FMS earnings before tax as a percentage of FMS operating revenue is below the company's long term target of high single digits, reflecting increased depreciation and lower rental performance.
Supply Chain Solutions
In the Supply Chain Solutions (SCS) business segment, total revenue was down 20% to $519 million reflecting lower operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation), as well as lower subcontracted and fuel revenues. Operating revenue was down 16% to $405 million compared with the year-earlier period. The decline in SCS operating revenue primarily
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reflects COVID-19 related reductions in the automotive sector.
SCS earnings before tax of $37 million decreased 19% in the second quarter of 2020 compared with $46 million in 2019. This decrease reflects $25 million in estimated COVID-19 impacts primarily related to lower activity with automotive customers, partially offset by COVID-19-related cost actions and lower medical expenses totaling $13 million. In addition, earnings were negatively impacted by $5 million due to changes in residual value estimates on vehicles used in this segment (which is eliminated in consolidated results). These impacts were partially offset by higher pricing and improved operating performance. SCS earnings before tax (EBT) as a percentage of SCS total revenue and SCS operating revenue (a non-GAAP measure) were 7.1% and 9.1%, respectively. SCS EBT as a percentage of SCS operating revenue is consistent with the company's long term target of high single digits.
Dedicated Transportation Solutions
In the Dedicated Transportation Solutions (DTS) business segment, total revenue was down 19% to $294 million and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) decreased by 8% to $228 million compared with the year-earlier period. The decline in DTS total revenue reflects lower subcontracted transportation revenue and lower fuel costs passed through to customers, as well as lower DTS operating revenue primarily due to lower sales.
DTS earnings before tax of $21 million decreased 22% compared with $27 million in 2019 primarily due to a negative impact of $7 million related to changes in residual value estimates on vehicles used in this segment (which is eliminated in consolidated results). DTS earnings before tax (EBT) as a percentage of DTS total revenue and DTS operating revenue (a non-GAAP measure) were 7.2% and 9.3%, respectively. DTS EBT as a percentage of DTS operating revenue is consistent with the company's long term target of high single digits.
Corporate Financial Information
Central Support Services
In the second quarter of 2020, unallocated CSS costs were $11 million as compared to $10 million in the prior year.
Income Taxes
Our effective income tax rate from continuing operations for the second quarter of 2020 was a benefit of 22.2% as compared to an expense of 26.8% in the prior year. The tax rate was impacted by the reduction in earnings due to the additional depreciation charges and the COVID-19 effects. The comparable effective income tax rate (a non-GAAP measure) from continuing operations for the second quarter of 2020 was a benefit of 22.8% as compared to an expense of 26.9% in the prior year.
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Capital Expenditures
Year-to-date capital expenditures decreased to $0.6 billion in 2020 compared with $2.2 billion in 2019. The decrease in capital expenditures reflects lower investments in the lease and rental fleets, reflecting lower demand related to COVID-19. The company now expects full year 2020 gross capital expenditures of $1.0 billion to $1.3 billion, below the $2.1 billion expected prior to the COVID-19 pandemic. Lower capital spending is expected to result in full year free cash flow of $1.0 billion to $1.2 billion as compared with negative free cash flow of $(1.1) billion in the prior year. Year-to-date proceeds from sales declined to $218 million in 2020 as compared to $256 million in the prior year due to the sale of property in 2019 for approximately $40 million. Year-to-date net capital expenditures were $378 million in 2020, down from $2.0 billion in 2019.
Cash Flow and Leverage
Year-to-date operating cash flow was $1.1 billion in 2020, up from $1.0 billion in 2019. Total cash generated (a non-GAAP measure that includes proceeds from used vehicle sales) was $1.3 billion in line with the prior year. Free cash flow (a non-GAAP measure) was positive $612 million, compared with negative $(909) million in 2019, reflecting decreased capital spending.
Total debt as of June 30, 2020 was $8.1 billion, up from $7.9 billion at year-end 2019. The company is carrying a higher cash balance due to the uncertainty of the current economic environment. Net debt declined to $7.4 billion as of June 30, 2020, from $7.9 billion as of December 31, 2019. Debt-to-equity as of June 30, 2020 was 377% compared with 320% at year-end 2019, above the company's long-term target of 250-300%. The increase in debt-to-equity reflects the reduction in equity related to higher non-cash depreciation expense from vehicle residual value estimate changes. Debt-to-equity also reflects a higher than normal cash balance which increased debt-to-equity by approximately 35 percentage points.
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Supplemental Company Information
Second Quarter Net Earnings
| (In millions, except EPS) | Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations | $ | (73.7) | 75.5 | $ | (1.41) | 1.43 | |||||||||||||||||||||||||||||
| Discontinued operations | (0.4) | (0.2) | (0.01) | — | |||||||||||||||||||||||||||||||
| Net earnings (loss) | $ | (74.1) | 75.2 | $ | (1.42) | 1.43 | |||||||||||||||||||||||||||||
Year-to-Date Operating Results
| (In millions, except EPS) | Six months ended June 30, | ||||||||||||||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||||||||||||||
| Total revenue | $ | 4,057 | 4,425 | (8) | % | ||||||||||||||||||||||||
| Operating revenue (non-GAAP) | $ | 3,394 | 3,555 | (5) | % | ||||||||||||||||||||||||
| Earnings (loss) from continuing operations | $ | (182.8) | 121.3 | NM | |||||||||||||||||||||||||
| Comparable earnings (loss) from continuing operations (non-GAAP) | $ | (121.6) | 132.3 | NM | |||||||||||||||||||||||||
| Net earnings (loss) | $ | (183.7) | 120.5 | NM | |||||||||||||||||||||||||
| Earnings (loss) per common share (EPS) - Diluted | |||||||||||||||||||||||||||||
| Continuing operations | $ | (3.50) | 2.30 | NM | |||||||||||||||||||||||||
| Comparable (non-GAAP) | $ | (2.33) | 2.51 | NM | |||||||||||||||||||||||||
| Net earnings (loss) | $ | (3.52) | 2.28 | NM | |||||||||||||||||||||||||
Business Description
Ryder System, Inc. is a leading supply chain, dedicated transportation, and commercial fleet management solutions company. Ryder’s stock (NYSE: R) is a component of the Dow Jones Transportation Average and the S&P MidCap 400® index. The company’s financial performance is reported in the following three, inter-related business segments:
•Supply Chain Solutions – Ryder’s SCS business segment optimizes logistics networks to make them more responsive and able to be leveraged as a competitive advantage. Globally-recognized brands in the automotive, consumer goods, food and beverage, healthcare, industrial, oil and gas, technology, and retail industries rely on Ryder’s leading-edge technologies and world-class logistics engineers to help them deliver the goods that consumers use every day.
•Dedicated Transportation Solutions – Ryder’s DTS business segment combines the best of Ryder’s leasing and maintenance capability with the safest and most professional drivers in the industry. With a dedicated transportation solution, Ryder helps customers increase their competitive position, reduce risk, and integrate their transportation needs with their overall supply chain.
•Fleet Management Solutions – Ryder’s FMS business segment provides a broad range of services to help businesses of all sizes, across virtually every industry, deliver for their customers. From leasing, maintenance, and fueling, to commercial rental and used vehicle sales, customers rely on Ryder’s expertise to help them lower their costs, redirect capital to other parts of their business, and focus on what they do best – so they can grow.
For more information on Ryder System, Inc., visit investors.ryder.com and ryder.com.
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Note: Regarding Forward-Looking Statements
Certain statements and information included in this news release are “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including our forecast, outlook, expectations regarding market trends and economic environment; impact of the COVID-19 pandemic on earnings, depreciation, commercial rental demand, used vehicle pricing, execution and timing for making adjustments to rental fleet size, automotive supply chain volumes, our effective tax rate, and sales for ChoiceLease and other products and services; the adequacy of steps we have taken to mitigate the negative impacts of COVID-19 on our operations; impact of continued automotive production shutdowns on earnings; expected benefits from our strategic initiatives and our multi-year maintenance cost-savings initiatives; our ability to implement our asset management strategy to right size our fleet; performance in our product lines and segments; demand, sales and pricing in used vehicle sales; residual values and depreciation expense; free cash flow; liquidity; dividend payments, cash provided by operating activities, capital expenditures; profitability of our Ryder Last Mile operations; and our ability to obtain our projected benefits from our RyderShare visibility and collaboration tool. Our forward-looking statements also include our estimates of the impact of our changes to residual value estimates on earnings and depreciation expense. The expected impact of the change in residual value estimates is based on our current assessment of the residual values and useful lives of revenue-earning equipment based on multi-year trends and our outlook for the expected near-term used vehicle market. Our assessment is subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results related to vehicle residual values to materially differ from estimates include, but are not limited to, changes in supply and demand, competitor pricing, regulatory requirements, driver shortages, requirements and preferences, as well as changes in underlying assumption factors.
All of our forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Important factors that could cause such differences include, among others, the duration and severity of the COVID-19 pandemic and governmental responses thereto; our ability to adapt to changing market conditions, lower than expected contractual sales, decreases in commercial rental demand or utilization or poor acceptance of rental pricing, worsening of market demand for or excess supply of used vehicles impacting current and/or estimated pricing and our anticipated proportion of retail versus wholesale sales, lack of customer demand for our services, higher than expected maintenance costs, lower than expected benefits from our cost-savings initiatives, lower than expected benefits from our sales, marketing and new product initiatives, higher than expected costs related to our ERP implementation, setbacks or uncertainty in the economic market or in our ability to grow and retain profitable customer accounts, implementation or enforcement of regulations, decreases in freight demand or volumes, used vehicle inventory levels, poor operational execution including with respect to new accounts and product launches, our difficulty in obtaining adequate profit margins for our services, our inability to maintain current pricing levels due to soft economic conditions, business interruptions or expenditures due to labor disputes, severe weather or natural occurrences, competition from other service providers and new entrants, lower than anticipated customer retention levels, loss of key customers, driver and technician shortages resulting in higher procurement costs and turnover rates, higher than expected bad debt reserves or write-offs, changes in customers' business environments that will limit their ability to commit to long-term vehicle leases, a decrease in credit ratings, increased debt costs, adequacy of accounting estimates, higher than expected reserves and accruals particularly with respect to pension, taxes, depreciation, insurance and revenue, impact of changes in our residual value estimates and accounting policies, including our depreciation policy, the sudden or unusual changes in fuel prices, unanticipated currency exchange rate fluctuations, our ability to manage our cost structure, and the risks described in our filings with the Securities and Exchange Commission (SEC). The risks included here are not exhaustive. New risks 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 risks on our business. Accordingly, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Note: Regarding Non-GAAP Financial Measures
This news release includes certain non-GAAP financial measures as defined under SEC rules. Refer to Appendix - Non-GAAP Financial Measure Reconciliations at the end of the tables following this press release for reconciliations of the non-GAAP financial measures contained in this release to the nearest GAAP measure and why management believes that presentation of each measure provides useful information to investors. Additional information regarding non-GAAP financial measures as required by Regulation G and Item 10(e) of Regulation S-K can be found in our most recent Form 10-K, Form 10-Q and our Form 8-K filed as of the date of this release with the SEC, which are available at http://investors.ryder.com.
9
CONFERENCE CALL AND WEBCAST INFORMATION
Ryder’s earnings conference call and webcast is scheduled for July 29, 2020 at 11:00 a.m. ET. To join, click here.
LIVE AUDIO VIA PHONE
Toll Free Number: 888-352-6803
USA Toll Number: 323-701-0225
Audio Passcode: Ryder
Conference Leader: Bob Brunn
AUDIO REPLAY VIA PHONE
An audio replay of the call will be available one hour after call ends for 30 days.
Toll Free Number: 888-203-1112
USA Toll Number: 719-457-0820
Replay Passcode: 1420126
AUDIO REPLAY VIA MP3 DOWNLOAD
A podcast will be available within 24 hours after the end of the call. Click here then select Financials/Quarterly Reports and the date.
AUDIO & SLIDE REPLAY VIA INTERNET
An audio replay including the slide presentation will be available on the Internet within two hours following the call. Click here then select Financials/Quarterly Reports and the date.
Contacts: Media: Investor Relations:
Amy Federman Bob Brunn
(305) 500-4989 (305) 500-4053
ryder-financial
ryder-usa
10
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
Periods ended June 30, 2020 and 2019
(In millions, except per share amounts)
| Three Months | Six Months | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Lease & related maintenance and rental revenues | $ | 868.7 | 933.8 | $ | 1,796.4 | 1,833.4 | |||||||||||||||||||||||||||||
| Services revenue | 942.3 | 1,159.1 | 2,054.5 | 2,291.1 | |||||||||||||||||||||||||||||||
| Fuel services revenue | 84.4 | 152.1 | 205.7 | 300.8 | |||||||||||||||||||||||||||||||
| Total revenues | 1,895.3 | 2,245.0 | 4,056.6 | 4,425.3 | |||||||||||||||||||||||||||||||
| Cost of lease & related maintenance and rental | 775.4 | 687.5 | 1,593.6 | 1,351.8 | |||||||||||||||||||||||||||||||
| Cost of services | 793.4 | 976.4 | 1,747.8 | 1,948.1 | |||||||||||||||||||||||||||||||
| Cost of fuel services | 78.0 | 148.4 | 198.4 | 291.6 | |||||||||||||||||||||||||||||||
| Other operating expenses | 29.8 | 29.7 | 63.4 | 63.3 | |||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 208.6 | 226.4 | 432.7 | 457.7 | |||||||||||||||||||||||||||||||
| Non-operating pension costs | 0.9 | 6.7 | 2.2 | 13.2 | |||||||||||||||||||||||||||||||
| Used vehicle sales, net | 9.5 | 18.1 | 30.2 | 26.4 | |||||||||||||||||||||||||||||||
| Interest expense | 67.3 | 60.8 | 129.9 | 116.1 | |||||||||||||||||||||||||||||||
| Miscellaneous (income) loss, net | (9.9) | (21.9) | (1.3) | (30.1) | |||||||||||||||||||||||||||||||
| Restructuring and other items, net | 37.2 | 9.8 | 68.1 | 16.0 | |||||||||||||||||||||||||||||||
| 1,990.1 | 2,141.9 | 4,265.0 | 4,254.1 | ||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations before income taxes | (94.8) | 103.1 | (208.4) | 171.2 | |||||||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | (21.1) | 27.6 | (25.6) | 49.9 | |||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations | (73.7) | 75.5 | (182.8) | 121.3 | |||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | (0.4) | (0.2) | (0.9) | (0.8) | |||||||||||||||||||||||||||||||
| Net earnings (loss) | $ | (74.1) | 75.2 | $ | (183.7) | 120.5 | |||||||||||||||||||||||||||||
| Earnings (loss) per common share — Diluted | |||||||||||||||||||||||||||||||||||
| Continuing operations | $ | (1.41) | 1.43 | $ | (3.50) | 2.30 | |||||||||||||||||||||||||||||
| Discontinued operations | (0.01) | — | (0.02) | (0.02) | |||||||||||||||||||||||||||||||
| Net earnings | $ | (1.42) | 1.43 | $ | (3.52) | 2.28 | |||||||||||||||||||||||||||||
| Earnings (loss) per share information — Diluted | |||||||||||||||||||||||||||||||||||
| Earnings from continuing operations | $ | (73.7) | 75.5 | $ | (182.8) | 121.3 | |||||||||||||||||||||||||||||
| Less: Distributed and undistributed earnings allocated to unvested stock | (0.1) | (0.3) | (0.2) | (0.5) | |||||||||||||||||||||||||||||||
| Earnings from continuing operations available to common stockholders | $ | (73.8) | 75.2 | $ | (183.1) | 120.9 | |||||||||||||||||||||||||||||
| Weighted-average common shares outstanding — Diluted | 52.4 | 52.5 | 52.3 | 52.6 | |||||||||||||||||||||||||||||||
| EPS from continuing operations | $ | (1.41) | 1.43 | $ | (3.50) | 2.30 | |||||||||||||||||||||||||||||
| Non-operating pension costs | — | 0.09 | — | 0.18 | |||||||||||||||||||||||||||||||
| Restructuring and other, net | 0.30 | 0.09 | 0.48 | 0.12 | |||||||||||||||||||||||||||||||
| ERP implementation costs | 0.16 | 0.05 | 0.30 | 0.11 | |||||||||||||||||||||||||||||||
| Gain on sale of property | — | (0.26) | — | (0.26) | |||||||||||||||||||||||||||||||
| Tax adjustments, net | — | — | 0.39 | 0.06 | |||||||||||||||||||||||||||||||
| Comparable EPS from continuing operations * | $ | (0.95) | 1.40 | $ | (2.33) | 2.51 | |||||||||||||||||||||||||||||
*Non-GAAP financial measure. A reconciliation of GAAP EPS from continuing operations to comparable EPS from continuing operations is set forth in this table.
Note: Amounts may not be additive due to rounding.
11
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In millions)
| June 30, 2020 | December 31, 2019 | ||||||||||
| Assets: | |||||||||||
| Cash and cash equivalents | $ | 831.5 | 73.6 | ||||||||
| Other current assets | 1,301.2 | 1,488.5 | |||||||||
| Revenue earning equipment, net | 9,569.8 | 10,427.7 | |||||||||
| Operating property and equipment, net | 913.1 | 917.8 | |||||||||
| Other assets | 1,593.1 | 1,567.8 | |||||||||
| $ | 14,208.8 | 14,475.3 | |||||||||
| Liabilities and shareholders' equity: | |||||||||||
| Current liabilities | $ | 1,295.0 | 1,470.8 | ||||||||
| Total debt (including current portion) | 8,147.7 | 7,924.8 | |||||||||
| Other non-current liabilities (including deferred income taxes) | 2,607.0 | 2,603.4 | |||||||||
| Shareholders' equity | 2,159.1 | 2,476.3 | |||||||||
| $ | 14,208.8 | 14,475.3 | |||||||||
SELECTED KEY RATIOS AND METRICS
| June 30, 2020 | December 31, 2019 | ||||||||||
| Debt to equity | 377 | % | 320 | % | |||||||
| Effective interest rate (average cost of debt) | 3.3 | % | 3.3 | % | |||||||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Comparable EBITDA* | $ | 549.2 | 578.8 | $ | 1,067.7 | 1,111.1 | |||||||||||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Net cash provided by operating activities from continuing operations | $ | 1,098.8 | 1,045.1 | ||||||||||||||
| Free cash flow * | 612.3 | (909.4) | |||||||||||||||
| Capital expenditures paid | 704.9 | 2,210.8 | |||||||||||||||
| Capital expenditures (accrual basis) | $ | 596.8 | 2,248.5 | ||||||||||||||
| Less: Proceeds from sales (primarily revenue earning equipment) | (218.4) | (256.3) | |||||||||||||||
| Net capital expenditures | $ | 378.4 | 1,992.2 | ||||||||||||||
| Twelve months ended June 30, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Adjusted return on equity * | (9.8) | % | 11.9 | % | |||||||||||||
| Adjusted return on capital * | (0.3) | % | 5.0 | % | |||||||||||||
| Weighted average cost of capital | 4.5 | % | 4.8 | % | |||||||||||||
| Adjusted return on capital spread ** | (4.8) | % | 0.2 | % | |||||||||||||
* Non-GAAP financial measure. See reconciliation of the non-GAAP elements of this calculation reconciled to the corresponding GAAP measures included in the Appendix - Non-GAAP Financial Measures section at the end of this release.
** Non-GAAP financial measure. Adjusted return on capital spread is calculated as the difference of the adjusted return on capital and the weighted average cost of capital.
Note: Amounts may not be additive due to rounding.
12
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT REVENUE AND EARNINGS - UNAUDITED
Periods ended June 30, 2020 and 2019
(In millions)
| Three Months | Six Months | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | B(W) | 2020 | 2019 | B(W) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fleet Management Solutions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ChoiceLease | $ | 766.2 | 757.3 | 1 | % | $ | 1,558.4 | 1,497.3 | 4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| SelectCare | 125.9 | 136.4 | (8) | % | 262.0 | 272.1 | (4) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial rental | 169.2 | 253.9 | (33) | % | 374.9 | 490.0 | (23) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 12.3 | 23.0 | (46) | % | 35.8 | 46.2 | (23) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fuel services revenue | 117.3 | 212.4 | (45) | % | 290.6 | 420.2 | (31) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ChoiceLease liability insurance revenue | 7.4 | 8.0 | (8) | % | 16.8 | 16.6 | 1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Fleet Management Solutions | 1,198.2 | 1,390.9 | (14) | % | 2,538.4 | 2,742.5 | (7) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Supply Chain Solutions | 519.3 | 649.3 | (20) | % | 1,147.8 | 1,285.0 | (11) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dedicated Transportation Solutions | 293.9 | 362.2 | (19) | % | 628.8 | 711.9 | (12) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Eliminations | (116.2) | (157.5) | 26 | % | (258.4) | (314.0) | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 1,895.3 | 2,245.0 | (16) | % | $ | 4,056.6 | 4,425.3 | (8) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Revenue: * | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fleet Management Solutions | $ | 1,073.5 | 1,170.5 | (8) | % | $ | 2,231.1 | 2,305.7 | (3) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Supply Chain Solutions | 405.1 | 482.8 | (16) | % | 872.4 | 959.8 | (9) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dedicated Transportation Solutions | 227.9 | 248.1 | (8) | % | 464.6 | 483.7 | (4) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Eliminations | (83.3) | (97.2) | 14 | % | (173.6) | (194.6) | 11 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenue | $ | 1,623.2 | 1,804.1 | (10) | % | $ | 3,394.5 | 3,554.6 | (5) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Business Segment Earnings: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| before income taxes: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fleet Management Solutions | $ | (103.7) | 57.7 | NM | $ | (218.3) | 118.7 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Supply Chain Solutions | 36.9 | 45.8 | (19) | % | 67.9 | 78.1 | (13) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dedicated Transportation Solutions | 21.2 | 27.1 | (22) | % | 33.4 | 44.5 | (25) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Eliminations | (7.7) | (19.2) | 60 | % | (17.8) | (36.5) | 51 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (53.3) | 111.5 | NM | (134.8) | 204.8 | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unallocated Central Support Services | (10.7) | (10.5) | (2) | % | (20.1) | (23.0) | 13 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-operating pension costs | (0.9) | (6.7) | 86 | % | (2.2) | (13.2) | 84 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other items impacting comparability, net | (29.8) | 8.8 | NM | (51.4) | 2.6 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations before income taxes | (94.8) | 103.1 | NM | (208.4) | 171.2 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | (21.1) | 27.6 | NM | (25.6) | 49.9 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations | $ | (73.7) | 75.5 | NM | $ | (182.8) | 121.3 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||
* Non-GAAP financial measure. See reconciliation of GAAP total revenue to operating revenue in the Appendix - Non-GAAP Financial Measures section at the end of this release.
Note: Amounts may not be additive due to rounding.
NM - Not Meaningful
13
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION - UNAUDITED
Periods ended June 30, 2020 and 2019
(in millions)
| Three Months | Six Months | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | B(W) | 2020 | 2019 | B(W) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fleet Management Solutions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FMS total revenue | $ | 1,198.2 | 1,390.9 | (14) | % | $ | 2,538.4 | 2,742.5 | (7) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
Fuel services revenue(a) | (117.3) | (212.4) | (45) | % | (290.6) | (420.2) | (31) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ChoiceLease liability insurance revenue | (7.4) | (8.0) | (8) | % | (16.8) | (16.6) | 1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| FMS operating revenue * | $ | 1,073.5 | 1,170.5 | (8) | % | $ | 2,231.1 | 2,305.7 | (3) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Segment earnings (loss) before income taxes | $ | (103.7) | 57.7 | NM | $ | (218.3) | 118.7 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||
| FMS earnings (loss) before income taxes as % of FMS total revenue | (8.7)% | 4.2% | (8.6)% | 4.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FMS earnings (loss) before income taxes as % of FMS operating revenue * | (9.7)% | 4.9% | (9.8)% | 5.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supply Chain Solutions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCS total revenue | $ | 519.3 | 649.3 | (20) | % | $ | 1,147.8 | 1,285.0 | (11) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subcontracted transportation | (102.2) | (135.5) | (25) | % | (237.9) | (263.5) | (10) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fuel | (12.1) | (31.0) | (61) | % | (37.5) | (61.6) | (39) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| SCS operating revenue * | $ | 405.1 | 482.8 | (16) | % | $ | 872.4 | 959.8 | (9) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Segment earnings before income taxes | $ | 36.9 | 45.8 | (19) | % | $ | 67.9 | 78.1 | (13) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| SCS earnings before income taxes as % of SCS total revenue | 7.1% | 7.0% | 5.9% | 6.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCS earnings before income taxes as % of SCS operating revenue * | 9.1% | 9.5% | 7.8% | 8.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dedicated Transportation Solutions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DTS total revenue | $ | 293.9 | 362.2 | (19) | % | $ | 628.8 | 711.9 | (12) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subcontracted transportation | (41.8) | (76.9) | (46) | % | (108.1) | (153.7) | (30) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fuel | (24.2) | (37.2) | (35) | % | (56.2) | (74.5) | (25) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| DTS operating revenue * | $ | 227.9 | 248.1 | (8) | % | $ | 464.6 | 483.7 | (4) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Segment earnings before income taxes | $ | 21.2 | 27.1 | (22) | % | $ | 33.4 | 44.5 | (25) | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| DTS earnings before income taxes as % of DTS total revenue | 7.2% | 7.5% | 5.3% | 6.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DTS earnings before income taxes as % of DTS operating revenue * | 9.3% | 10.9% | 7.2% | 9.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
* Non-GAAP financial measure. A reconciliation of (1) GAAP total revenue to operating revenue for each business segment (FMS, SCS and DTS) and (2) segment earnings before taxes (EBT) as % of segment total revenue to segment EBT as % of segment operating revenue for each business segment is set forth in this table.
Note: Amounts may not be additive due to rounding.
(a) Includes intercompany fuel sales from FMS to SCS and DTS.
14
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION - UNAUDITED
KEY PERFORMANCE INDICATORS
| Three months ended June 30, | Six months ended June 30, | 2020/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | Three Months | Six Months | ||||||||||||||||||||||||||||||||||||||||||||||||
| ChoiceLease | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average fleet count | 156,900 | 155,900 | 158,200 | 152,800 | 1% | 4% | |||||||||||||||||||||||||||||||||||||||||||||||
| End of period fleet count | 154,600 | 157,300 | 154,600 | 157,300 | (3)% | (3)% | |||||||||||||||||||||||||||||||||||||||||||||||
Miles/unit per day change - % (a) | (11.1) | % | (2.6) | % | (3.7) | % | (1.0) | % | |||||||||||||||||||||||||||||||||||||||||||||
Average Active ChoiceLease vehicles (b) | 146,600 | 144,000 | 147,400 | 142,600 | 2% | 3% | |||||||||||||||||||||||||||||||||||||||||||||||
Revenue per active ChoiceLease vehicle (c) | $ | 5,200 | $ | 5,300 | $ | 10,600 | $ | 10,500 | (2)% | 1% | |||||||||||||||||||||||||||||||||||||||||||
| Commercial rental | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average fleet count | 38,200 | 44,800 | 39,400 | 43,500 | (15)% | (9)% | |||||||||||||||||||||||||||||||||||||||||||||||
| End of period fleet count | 36,800 | 45,400 | 36,800 | 45,400 | (19)% | (19)% | |||||||||||||||||||||||||||||||||||||||||||||||
| Rental utilization - power units | 55.9 | % | 75.3 | % | 60.3 | % | 75.1 | % | (1,940)bps | (1,480)bps | |||||||||||||||||||||||||||||||||||||||||||
Rental rate change - % (d) | 2.2 | % | 1.9 | % | 2.7 | % | 2.6 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Customer vehicles under | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| SelectCare contracts | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average fleet count | 55,200 | 55,600 | 55,300 | 55,700 | (1)% | (1)% | |||||||||||||||||||||||||||||||||||||||||||||||
| End of period fleet count | 54,900 | 56,100 | 54,900 | 56,100 | (2)% | (2)% | |||||||||||||||||||||||||||||||||||||||||||||||
| Customer vehicles under | |||||||||||||||||||||||||||||||||||||||||||||||||||||
SelectCare on-demand (e) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fleet serviced during the period | 6,900 | 9,100 | 12,300 | 15,100 | (24)% | (19)% | |||||||||||||||||||||||||||||||||||||||||||||||
| SCS | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Average fleet count (f) | 9,500 | 9,800 | 9,600 | 9,700 | (3)% | (1)% | |||||||||||||||||||||||||||||||||||||||||||||||
End of period fleet count (f) | 9,800 | 9,700 | 9,800 | 9,700 | 1% | 1% | |||||||||||||||||||||||||||||||||||||||||||||||
| DTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Average fleet count (f) | 9,300 | 9,700 | 9,300 | 9,600 | (4)% | (3)% | |||||||||||||||||||||||||||||||||||||||||||||||
End of period fleet count (f) | 9,300 | 9,700 | 9,300 | 9,700 | (4)% | (4)% | |||||||||||||||||||||||||||||||||||||||||||||||
| Used vehicle sales (UVS) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average UVS inventory | 13,100 | 7,900 | 11,700 | 7,500 | 66% | 56% | |||||||||||||||||||||||||||||||||||||||||||||||
| End of period fleet count | 14,000 | 8,300 | 14,000 | 8,300 | 69% | 69% | |||||||||||||||||||||||||||||||||||||||||||||||
| Used vehicles sold | 6,300 | 5,100 | 11,800 | 10,000 | 24% | 18% | |||||||||||||||||||||||||||||||||||||||||||||||
UVS pricing change (g) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tractors | (33) | % | 19 | % | (30) | % | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Trucks | (9) | % | (1) | % | (7) | % | 1 | % | |||||||||||||||||||||||||||||||||||||||||||||
Notes:
| (a) | Represents percentage change compared to prior year period in miles driven per vehicle per workday on US lease power units. | ||||
| (b) | Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units. | ||||
| (c) | Calculated based on the reported quarterly and year-to-date ChoiceLease revenue. | ||||
| (d) | Represents percentage change compared to prior year period in average global rental rate per day on power units using constant currency. | ||||
| (e) | Comprised of the number of vehicles serviced under on-demand maintenance agreements. Vehicles included in the end of period count may have been serviced more than one time during the respective period. | ||||
| (f) | These vehicle counts are also included within the average fleet counts for ChoiceLease, Commercial rental and SelectCare. | ||||
| (g) | Represents percentage change compared to prior year period in average sales proceeds on used vehicle sales using constant currency. | ||||
15
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
This press release and accompanying tables include “non-GAAP financial measures” as defined by SEC rules. As required by SEC rules, we provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure. 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.
Specifically, the following non-GAAP financial measures are included in this press release:
| Non-GAAP Financial Measure | Comparable GAAP Measure | Reconciliation in Section Entitled | ||||||||||||
| Operating Revenue Measures: | ||||||||||||||
| Operating Revenue | Total Revenue | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
| FMS Operating Revenue | FMS Total Revenue | Business Segment Information - Unaudited | ||||||||||||
| SCS Operating Revenue | SCS Total Revenue | |||||||||||||
| DTS Operating Revenue | DTS Total Revenue | |||||||||||||
| FMS EBT as a % of FMS Operating Revenue | FMS EBT as a % of FMS Total Revenue | Business Segment Information - Unaudited | ||||||||||||
| SCS EBT as a % of SCS Operating Revenue | SCS EBT as a % of SCS Total Revenue | |||||||||||||
| DTS EBT as a % of DTS Operating Revenue | DTS EBT as a % of DTS Total Revenue | |||||||||||||
| Comparable Earnings Measures: | ||||||||||||||
| Comparable Earnings (Loss) Before Income Tax and Comparable Tax Rate | Earnings (Loss) Before Income Tax and Effective Tax Rate from Continuing Operations | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
| Comparable Earnings (Loss) | Earnings (Loss) from Continuing Operations | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
| Comparable EPS | EPS from Continuing Operations | Condensed Consolidated Statements of Earnings - Unaudited | ||||||||||||
| Adjusted Return on Equity (ROE) | Not Applicable. However, the non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity is provided in the following reconciliations. | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
| Adjusted Return on Capital (ROC) and Adjusted ROC Spread | Not Applicable. However, non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital is provided. | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
| Comparable Earnings Before Interest, Taxes, Depreciation and Amortization | Earnings (Loss) from Continuing Operations | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
| Cash Flow Measures: | ||||||||||||||
| Total Cash Generated and Free Cash Flow | Cash Provided by Operating Activities | Appendix - Non-GAAP Financial Measure Reconciliations | ||||||||||||
16
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that presentation of each non-GAAP financial measure provides useful information to investors. See reconciliations for each of these measures following this table.
| Operating Revenue Measures: | ||||||||||||||||||||
| Operating Revenue FMS Operating Revenue SCS Operating Revenue DTS Operating Revenue FMS EBT as a % of FMS Operating Revenue SCS EBT as a % of SCS Operating Revenue DTS EBT as a % of DTS Operating Revenue | Operating revenue is defined as total revenue for Ryder System, Inc. or each business segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted transportation, as well as (3) revenue from our ChoiceLease liability insurance program which was discontinued in early 2020. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, SCS EBT and DTS EBT, our primary measures of segment performance, are not non-GAAP measures. Fuel: We exclude FMS, SCS and DTS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers, which is impacted by fluctuations in market fuel prices and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on trailing market fuel costs. Subcontracted transportation: We also exclude subcontracted transportation from the calculation of our operating revenue measures, as these services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability. While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS. ChoiceLease liability Insurance: We exclude ChoiceLease liability insurance as we announced our plan in the first quarter of 2020 to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program is estimated to be completed in the second quarter of 2021. We are excluding the revenues associated with this program for better comparability of our on-going operations. | |||||||||||||||||||
17
| Comparable Earnings Measures: | ||||||||||||||||||||
| Comparable Earnings (Loss) Before Income Taxes (EBT) and Comparable Tax Rate Comparable Earnings Comparable Earnings per Diluted Common Share (EPS) Adjusted Return on Equity (ROE) Adjusted Return on Capital (ROC) and Adjusted ROC Spread | Comparable EBT, comparable earnings and comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs and (2) any other significant items that are not representative of our business operations. We believe these comparable earnings measures provide useful information to investors and allow for better year-over-year comparison of operating performance. Non-operating pension costs: Our comparable earnings measures exclude non-operating pension costs, which include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as a settlement or curtailment of a plan if one has occurred. We exclude non-operating pension costs because we consider these to be impacted by financial market performance and outside the operational performance of our business. Other Items Impacting Comparability: Our comparable and adjusted earnings measures also exclude other significant items that are not representative of our business operations as detailed in the reconciliation table below. These other significant items vary from period to period and, in some periods, there may be no such significant items. Calculation of comparable tax rate: The comparable provision for income taxes is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the statutory tax rates of the jurisdictions to which the non-GAAP adjustments relate. Adjusted ROE: Adjusted ROE is defined as adjusted net earnings divided by adjusted average shareholders' equity and represents the rate of return on shareholders' investment. Other items impacting comparability described above are excluded, as applicable, from the calculation of net earnings and average shareholders' equity. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations. Adjusted ROC: Adjusted ROC is defined as adjusted net earnings divided by average total capital and represents the rate of return generated by the capital deployed in our business. Other items impacting comparability described above are excluded, as applicable, from the calculation of net earnings and average shareholders' equity (a component of average total capital).We use adjusted ROC as an internal measure of how effectively we use the capital invested (borrowed or owned) in our operations. Adjusted return on capital spread is calculated as the difference of the adjusted return on capital and the weighted average cost of capital. | |||||||||||||||||||
| Comparable Earnings Before Interest, Taxes, Depreciation and Amortization | Comparable EBITDA is defined as earnings from continuing operations, net of tax, first adjusted to exclude the following items, all from continuing operations: (1) non-operating pension costs and (2) any other items that are not representative of our business operations (these items are the same items that are excluded from comparable earnings measures for the relevant periods and are described under Comparable Earnings Measures above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) losses from used vehicle fair value adjustments and (5) amortization. We believe comparable EBITDA provides investors with useful information, as it is a standard measure commonly reported and widely used by analysts, investors and other interested parties to measure financial performance and our ability to service debt and meet our payment obligations. In addition, we believe that the inclusion of comparable EBITDA provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. Other companies may calculate comparable EBITDA differently; therefore, our presentation of comparable EBITDA may not be comparable to similarly-titled measures used by other companies. Comparable EBITDA should not be considered as an alternative to earnings from continuing operations before income taxes or earnings from continuing operations determined in accordance with GAAP, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities (determined in accordance with GAAP), as an indicator of cash flows, or as a measure of liquidity. | |||||||||||||||||||
18
| Cash Flow Measures: | ||||||||||||||||||||
Total Cash Generated Free Cash Flow | We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment. Total Cash Generated: Total cash generated is defined as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment, and (4) other cash inflows from investing activities. We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities. Free Cash Flow: We refer to the net amount of cash generated from operating activities and investing activities (excluding acquisitions) from continuing operations as “free cash flow”. We calculate free cash flow as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment, and (4) other cash inflows from investing activities, less (5) purchases of property and revenue earning equipment. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders, after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited. | |||||||||||||||||||
19
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
(In millions)
| OPERATING REVENUE RECONCILIATION | |||||||||||||||||||||||||||||||||||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Total revenue | $ | 1,895.3 | 2,245.0 | $ | 4,056.6 | 4,425.3 | |||||||||||||||||||||||||||||
| Fuel | (120.6) | (220.4) | (299.3) | (436.9) | |||||||||||||||||||||||||||||||
| Subcontracted transportation | (144.0) | (212.4) | (346.0) | (417.2) | |||||||||||||||||||||||||||||||
| ChoiceLease liability insurance revenue | (7.4) | (8.0) | (16.8) | (16.6) | |||||||||||||||||||||||||||||||
| Operating revenue * | $ | 1,623.2 | 1,804.1 | $ | 3,394.5 | 3,554.6 | |||||||||||||||||||||||||||||
| TOTAL CASH GENERATED / FREE CASH FLOW RECONCILIATION | |||||||||||||||||
| Six months ended June 30, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Net cash provided by operating activities from continuing operations | $ | 1,098.8 | 1,045.1 | ||||||||||||||
Proceeds from sales (primarily revenue earning equipment) (a) | 214.2 | 210.1 | |||||||||||||||
| Sales of operating property and equipment | 4.2 | 46.2 | |||||||||||||||
| Total cash generated * | 1,317.2 | 1,301.3 | |||||||||||||||
Purchases of property and revenue earning equipment (a) | (704.9) | (2,210.8) | |||||||||||||||
| Free cash flow * | $ | 612.3 | (909.4) | ||||||||||||||
| Memo: | |||||||||||||||||
| Net cash used in investing activities | $ | (492.3) | (1,954.5) | ||||||||||||||
| Net cash provided by financing activities | $ | 154.7 | 937.0 | ||||||||||||||
Notes:
| (a) | Included in cash flows from investing activities. | ||||
* Non-GAAP financial measure. See definition above.
Note: Amounts may not be additive due to rounding.
20
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
(In millions)
| ADJUSTED RETURN ON EQUITY RECONCILIATION | |||||||||||||||||
| Twelve months ended June 30, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Net earnings (12-month rolling period) | $ | (328.7) | 323.4 | ||||||||||||||
| + Other items impacting comparability * | 91.9 | 1.4 | |||||||||||||||
+ Income taxes (a) | (94.4) | 81.5 | |||||||||||||||
| Adjusted earnings before income taxes | (331.2) | 406.3 | |||||||||||||||
- Adjusted income taxes (b) | 94.1 | (101.3) | |||||||||||||||
| = Adjusted net earnings for ROE (numerator)** [A] | $ | (237.1) | 305.0 | ||||||||||||||
| Average shareholders' equity | $ | 2,392.6 | 2,542.4 | ||||||||||||||
Adjustment to equity (c) | 28.4 | 23.0 | |||||||||||||||
| Adjusted average total equity (denominator)** [B] | $ | 2,421.0 | 2,565.4 | ||||||||||||||
| Adjusted ROE ** [A]/[B] | (9.8) | % | 11.9 | % | |||||||||||||
Notes:
| (a) | Includes income taxes on discontinued operations. | ||||
| (b) | Represents the tax provision on adjusted earnings before income taxes. | ||||
| (c) | Represents the impact to equity of items to arrive at adjusted earnings. | ||||
* Other items impacting comparability includes the following:
| Twelve months ended June 30, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Restructuring and other, net | $ | 56.7 | 11.8 | ||||||||||||||
| ERP implementation costs | 35.2 | 8.2 | |||||||||||||||
| Gain on sale of property | — | (18.6) | |||||||||||||||
| Other items impacting comparability | $ | 91.9 | 1.4 | ||||||||||||||
** Non-GAAP financial measure. Non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average total equity set forth in this table.
Note: Amounts may not be additive due to rounding.
21
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
(In millions)
| ADJUSTED RETURN ON CAPITAL RECONCILIATION | |||||||||||||||||
| Twelve months ended June 30, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Net earnings (12-month rolling period) | $ | (328.7) | 323.4 | ||||||||||||||
| + Other items impacting comparability * | 91.9 | 1.4 | |||||||||||||||
+ Income taxes (a) | (94.4) | 81.5 | |||||||||||||||
| Adjusted earnings before income taxes | (331.2) | 406.2 | |||||||||||||||
| + Interest expense | 255.2 | 215.7 | |||||||||||||||
- Adjusted income taxes (b) | 41.3 | (156.3) | |||||||||||||||
| = Adjusted net earnings for ROC (numerator)** [A] | $ | (34.6) | 465.6 | ||||||||||||||
| Average total debt | $ | 7,933.1 | 6,758.7 | ||||||||||||||
| Average shareholders' equity | 2,392.6 | 2,542.4 | |||||||||||||||
Adjustment to equity (c) | 28.4 | 23.0 | |||||||||||||||
| Adjusted average total capital (denominator)** [B] | $ | 10,354.1 | 9,324.1 | ||||||||||||||
| Adjusted ROC ** [A]/[B] | (0.3) | % | 5.0 | % | |||||||||||||
| Weighted average cost of capital | 4.5 | % | 4.8 | % | |||||||||||||
| Adjusted return on capital spread*** | (4.8) | % | 0.2 | % | |||||||||||||
Notes:
| (a) | Includes income taxes on discontinued operations. | ||||
| (b) | Represents the tax provision on adjusted earnings before income taxes and adjusted interest expense. | ||||
| (c) | Represents the impact to equity of items to arrive at adjusted earnings. | ||||
* See our Adjusted Return on Equity Reconciliation on the previous page for further details regarding other items impacting comparability.
** Non-GAAP financial measure. Non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital set forth in this table.
*** Non-GAAP financial measure. Adjusted return on capital spread is calculated as the difference of the adjusted return on capital and the weighted average cost of capital.
Note: Amounts may not be additive due to rounding.
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RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
(In millions)
| COMPARABLE EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION | ||||||||||||||||||||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations | $ | (73.7) | 75.5 | $ | (182.8) | 121.3 | |||||||||||||||||||||||||||||
| + Provision for (benefit from) income taxes | (21.1) | 27.6 | (25.6) | 49.9 | |||||||||||||||||||||||||||||||
| Earnings before income taxes from continuing operations | (94.8) | 103.1 | (208.4) | 171.2 | |||||||||||||||||||||||||||||||
| + Non-operating pension costs | 0.9 | 6.7 | 2.2 | 13.2 | |||||||||||||||||||||||||||||||
| + Restructuring and other, net | 18.8 | 5.9 | 30.0 | 8.5 | |||||||||||||||||||||||||||||||
| + ERP implementation costs | 11.0 | 3.9 | 21.4 | 7.5 | |||||||||||||||||||||||||||||||
| - Gain on sale of property | — | (18.6) | — | (18.6) | |||||||||||||||||||||||||||||||
Comparable earnings (loss) before income taxes from continuing operations | (64.0) | 101.0 | (154.9) | 181.8 | |||||||||||||||||||||||||||||||
| + Interest expense | 67.3 | 60.8 | 129.9 | 116.1 | |||||||||||||||||||||||||||||||
| + Depreciation | 532.9 | 390.7 | 1,056.2 | 768.0 | |||||||||||||||||||||||||||||||
| + Losses from used vehicle fair value adjustments | 11.0 | 24.3 | 32.5 | 41.0 | |||||||||||||||||||||||||||||||
| + Amortization | 2.0 | 2.1 | 4.0 | 4.2 | |||||||||||||||||||||||||||||||
| Comparable EBITDA * | $ | 549.2 | 578.8 | $ | 1,067.7 | 1,111.1 | |||||||||||||||||||||||||||||
* Non-GAAP financial measure. Non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of earnings before income taxes from continuing operations to comparable earnings before income taxes from continuing operations is set forth in this table.
Note: Amounts may not be additive due to rounding.
23
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
(In millions)
| COMPARABLE EARNINGS BEFORE INCOME TAXES / EARNINGS / TAX RATE RECONCILIATION | ||||||||||||||||||||||||||||||||
| 2020 | ||||||||||||||||||||||||||||||||
| Condensed Consolidated Statements of Earnings Line Item | Three Months | Six Months | ||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations before income taxes | $ | (94.8) | (208.4) | |||||||||||||||||||||||||||||
| Non-operating pension costs | Non-operating pension costs | 0.9 | 2.2 | |||||||||||||||||||||||||||||
| Restructuring and other, net | Revenue and Restructuring and other items, net | 18.8 | 30.0 | |||||||||||||||||||||||||||||
| ERP implementation costs | Restructuring and other items, net | 11.0 | 21.4 | |||||||||||||||||||||||||||||
| Comparable earnings (loss) from continuing operations before income taxes* | $ | (64.0) | (154.9) | |||||||||||||||||||||||||||||
| Benefit from (provision for) income taxes | $ | 21.1 | 25.6 | |||||||||||||||||||||||||||||
| Tax adjustments | — | 20.4 | ||||||||||||||||||||||||||||||
| Income tax effects of non-GAAP adjustments** | (6.5) | (12.6) | ||||||||||||||||||||||||||||||
| Comparable benefit from (provision for) income taxes** | $ | 14.6 | 33.3 | |||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations | $ | (73.7) | (182.8) | |||||||||||||||||||||||||||||
| Non-operating pension costs | Non-operating pension costs | (0.1) | — | |||||||||||||||||||||||||||||
| Restructuring and other, net | Revenue and Restructuring and other items, net | 16.1 | 25.0 | |||||||||||||||||||||||||||||
| ERP implementation costs | Restructuring and other items, net | 8.2 | 15.9 | |||||||||||||||||||||||||||||
| Tax adjustments | Provision for (benefit from) income taxes | — | 20.4 | |||||||||||||||||||||||||||||
| Comparable earnings (loss) from continuing operations* | $ | (49.5) | (121.6) | |||||||||||||||||||||||||||||
| Tax rate on continuing operations | 22.2 | % | 12.3 | % | ||||||||||||||||||||||||||||
| Tax adjustments and income tax effects of non-GAAP adjustments** | 0.6 | % | 9.2 | % | ||||||||||||||||||||||||||||
| Comparable tax rate on continuing operations** | 22.8 | % | 21.5 | % | ||||||||||||||||||||||||||||
* Non-GAAP financial measure. See definition above.
** The comparable provision for income taxes is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the statutory tax rates of the jurisdictions to which the non-GAAP adjustments relate.
Note: Amounts may not be additive due to rounding.
24
RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED
(In millions)
| COMPARABLE EARNINGS BEFORE INCOME TAXES / EARNINGS / TAX RATE RECONCILIATION | ||||||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||
| Condensed Consolidated Statements of Earnings Line Item | Three Months | Six Months | ||||||||||||||||||||||||
| Earnings from continuing operations before income taxes | $ | 103.1 | 171.2 | |||||||||||||||||||||||
| Non-operating pension costs | Non-operating pension costs | 6.7 | 13.2 | |||||||||||||||||||||||
| Restructuring and other, net | Restructuring and other items, net | 5.9 | 8.5 | |||||||||||||||||||||||
| ERP implementation costs | Restructuring and other items, net | 3.9 | 7.5 | |||||||||||||||||||||||
| Gain on sale of properties | Miscellaneous income, net | (18.6) | (18.6) | |||||||||||||||||||||||
| Comparable earnings from continuing operations before income taxes* | $ | 101.0 | 181.8 | |||||||||||||||||||||||
| Benefit from (provision for) income taxes | $ | (27.6) | 49.9 | |||||||||||||||||||||||
| Tax adjustments | — | 3.5 | ||||||||||||||||||||||||
| Income tax effects of non-GAAP adjustments** | 0.5 | (3.1) | ||||||||||||||||||||||||
| Comparable benefit from (provision for) income taxes** | $ | (27.2) | (49.5) | |||||||||||||||||||||||
| Earnings (loss) from continuing operations | $ | 75.5 | 121.3 | |||||||||||||||||||||||
| Non-operating pension costs | Non-operating pension costs | 4.8 | 9.3 | |||||||||||||||||||||||
| Restructuring and other, net | Restructuring and other items, net | 4.6 | 6.4 | |||||||||||||||||||||||
| ERP implementation costs | Restructuring and other items, net | 2.9 | 5.6 | |||||||||||||||||||||||
| Gain on sale of property | Miscellaneous income, net | (13.8) | (13.8) | |||||||||||||||||||||||
| Tax adjustments | Provision for income taxes | — | 3.5 | |||||||||||||||||||||||
| Comparable earnings (loss) from continuing operations* | $ | 73.9 | 132.3 | |||||||||||||||||||||||
| Tax rate on continuing operations | 26.8 | % | 29.1 | % | ||||||||||||||||||||||
| Tax adjustments and income tax effects of non-GAAP adjustments** | 0.1 | % | (1.9) | % | ||||||||||||||||||||||
| Comparable tax rate on continuing operations** | 26.9 | % | 27.2 | % | ||||||||||||||||||||||
* Non-GAAP financial measure. See definition above.
** The comparable provision for income taxes is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the statutory tax rates of the jurisdictions to which the non-GAAP adjustments relate.
Note: Amounts may not be additive due to rounding.
25
Second Quarter 2020 Earnings Conference Call July 29, 2020 Proprietary and Confidential
Safe Harbor and Non-GAAP Financial Measures Note Regarding Forward-Looking Statements: Certain statements and information included in this presentation are “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including our forecast, outlook, expectations regarding market trends and economic environment; impact of the COVID-19 pandemic on earnings, depreciation, commercial rental demand, capital expenditures, used vehicle pricing, automotive production, and comparable tax rates; the adequacy of steps we have taken to mitigate the negative impacts of COVID-19 on our operations; demand, sales and pricing in used vehicle sales; residual values and depreciation expense; used vehicle inventory; rental demand and utilization; adjusted return on equity, operating revenue growth, free cash flow, capital expenditures; comparable tax rate; leverage; the impact and adequacy of steps we have taken to address our cost structure and improve returns; our ability to achieve our long-term return on equity target; and our ability to successfully implement our maintenance cost-savings initiatives, capital allocation strategy, and asset management strategy to right size our fleet. Our forward-looking statements also include our estimates of the impact of our changes to residual value estimates on earnings and depreciation expense. The expected impact of the change in residual value estimates is based on our current assessment of the residual values and useful lives of revenue- earning equipment based on multi-year trends and our outlook for the expected near-term used vehicle market. Our assessment is subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results related to vehicle residual values to materially differ from estimates include, but are not limited to, changes in supply and demand, competitor pricing, regulatory requirements, driver shortages, requirements and preferences, as well as changes in underlying assumption factors. All of our forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Important factors that could cause such differences include, among others, the duration and severity of the COVID-19 pandemic and governmental responses thereto, our ability to adapt to changing market conditions and secular growth trends, lower than expected contractual sales, decreases in commercial rental demand or utilization or poor acceptance of rental pricing, worsening of market demand for or excess supply of used vehicles impacting current and/or estimated pricing and our anticipated proportion of retail versus wholesale sales, lack of customer demand for our services, higher than expected maintenance costs, lower than expected benefits from our cost savings initiatives, lower than expected benefits from our sales, marketing and new product initiatives, higher than expected costs related to our ERP implementation, setbacks or uncertainty in the economic market or in our ability to grow and retain profitable customer accounts, implementation or enforcement of regulations, decreases in freight demand or volumes, used vehicle inventory levels, poor operational execution including with respect to new accounts and product launches, our difficulty in obtaining adequate profit margins for our services, our inability to maintain current pricing levels due to soft economic conditions, business interruptions or expenditures due to labor disputes, severe weather or natural occurrences, competition from other service providers and new entrants, lower than anticipated customer retention levels, loss of key customers, driver and technician shortages resulting in higher procurement costs and turnover rates, higher than expected bad debt reserves or write-offs, changes in customers' business environments that will limit their ability to commit to long-term vehicle leases, a decrease in credit ratings, increased debt costs, adequacy of accounting estimates, higher than expected reserves and accruals particularly with respect to pension, taxes, depreciation, insurance and revenue, impact of changes in our residual value estimates and accounting policies (including our depreciation policy), the sudden or unusual changes in fuel prices, unanticipated currency exchange rate fluctuations, our ability to manage our cost structure, and the risks described in our filings with the Securities and Exchange Commission (SEC). The risks included here are not exhaustive. New risks 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 risks on our business. Accordingly, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Note Regarding Non-GAAP Financial Measures: This news release includes certain non-GAAP financial measures as defined under SEC rules, including: Comparable Earnings Measures, including comparable earnings from continuing operations; comparable earnings per share from continuing operations; comparable earnings before income tax; comparable earnings before interest, income tax, depreciation and amortization for Ryder and its business segments; and comparable tax rate. Additionally, our adjusted return on equity (ROE), adjusted return on capital (ROC) and adjusted return on capital spread (ROC spread) measures are calculated based on adjusted earnings items. Operating Revenue Measures, including operating revenue for Ryder and its business segments, and segment EBT as a percentage of operating revenue. Cash Flow Measures, including total cash generated and free cash flow. Refer to Appendix - Non-GAAP Financial Measures for reconciliations of the non-GAAP financial measures contained in this presentation to the nearest GAAP measure. Additional information regarding non-GAAP financial measures as required by Regulation G and Item 10(e) of Regulation S-K can be found in our most recent Form 10-K, Form 10-Q, and our Form 8-K filed with the SEC as of the date of this presentation, which are available at http://investors.ryder.com. All amounts subsequent to January 1, 2017 have been recast to reflect the impact of the lease accounting standard, ASU 2016-02, Leases. Amounts throughout the presentation may not be additive due to rounding. © 2020 Ryder System, Inc. 2 All Rights Reserved
Contents • Second Quarter 2020 Results Overview • Outlook & Action Plans • Q & A © 2020 Ryder System, Inc. 3 All Rights Reserved
2nd Quarter Results Overview • Total revenue decreased 16% and operating revenue decreased 10% vs. prior year • Earnings (loss) per diluted share from continuing operations was $(1.41) vs. $1.43 in 2Q19 • Comparable earnings (loss) per share from continuing operations was $(0.95) vs. $1.40 in 2Q19 – Results included higher depreciation expense (non-cash) of $1 9M due to vehicle residual value estimate changes of which $70M was due to previously announced residual value estimate changes – COVID-19's expected impact on used vehicle market conditions triggered a review of residual value estimates in 2Q20 resulting in increased depreciation totaling $49M – COVID-19 negatively impacted pre-tax results by approximately $45M, driven by an estimated $55M from lower rental demand and approximately $25M from reduced automotive activity in supply chain, partially offset by COVID-19 related cost savings and lower medical expenses of $35M © 2020 Ryder System, Inc. 4 All Rights Reserved
Key Financial Statistics NM - Not Meaningful (1) In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program is estimated to be completed in the second quarter of 2021. We have revised our definition of operating revenues to exclude the revenues associated with this program for better comparability of our on- going operations. © 2020 Ryder System, Inc. 5 All Rights Reserved
2nd Quarter Results Overview – FMS • Fleet Management Solutions (FMS) total revenue down 14% and FMS operating revenue down 8% – Lower commercial rental revenue (down 33%) partially offset by slightly higher ChoiceLease revenue (up 1%) • FMS earnings before tax (EBT) declined to a loss of $(104)M from a profit of $58M in the prior year, reflecting $154M in higher depreciation expense related to residual value estimate changes in 2019 and 2020, resulting in a year-over- year earnings impact of $119M – additionally, COVID-19 impacted EBT by approximately $55M primarily due to lower rental performance, partially offset by COVID-19 related cost actions and lower medical costs totaling $20M • COVID-19 triggered a review of expected residual value estimates resulting in additional depreciation and valuation adjustment totaling $49M – accelerated depreciation, primarily from a one year extension to include vehicles to be sold by mid-2022, and valuation adjustments, impacting certain used vehicles in inventory, for a combined impact of $31M – a lower long term outlook for used vehicle values resulted in $18M of additional policy depreciation related to vehicles expected to be sold after mid-2022, primarily trucks © 2020 Ryder System, Inc. 6 All Rights Reserved
Estimated Residuals Reduced to Reflect Lowered Outlook Impacted By COVID-19 Policy Depreciation Accelerated Depreciation • 2Q20 Change: reduced residual value estimates for trucks, and to a lesser extent tractors, • 1Q20 Change: reduced residual value expected to be sold after mid-2022, resulting in estimates to historical trough levels for increased policy depreciation that reflects our accelerated depreciation resulting in lower long term outlook for used vehicle values* increased depreciation for vehicles expected to be sold by mid-2021, reflecting ** the anticipated delay in recovery of used vehicle pricing due to COVID-19 effects • 2Q20 Change: primarily from expanding the vehicle pool requiring accelerated depreciation by one year to include vehicles expected to be sold by mid-2022 (*) While management believes that current estimates are reasonable, given our current outlook, if used vehicle sales price as a percent of original cost does not improve, we will likely be required to lower residual value estimates even further which may have a material adverse effect on our financial statements. Over the next two years, we estimate that we need U.S. used vehicle pricing to improve from current levels and achieve an increase of at least approximately 30% for tractors and 10% for trucks in order to maintain current policy depreciation residual estimates. These improved pricing levels are similar to those seen in 2018 and 2019 for tractors and similar to levels seen at the beginning of 2020 for trucks. (**) Illustrative for Truck (U.S. fleet only). Depicts Ryder's sales prices as a percent of original cost indexed to the value in 1999 to show the percent change in value each year. Excludes vehicles operated in excessively high mileage applications and sales prices adjusted to a consistent age at sale. Sales prices incorporate retail/wholesale mix at the respective time periods. © 2020 Ryder System, Inc. 7 All Rights Reserved
Residual Value Estimates Reduced to Align With Updated Outlook 2Q20 Change - Accelerated Depreciation2 Earnings Impact from Residual Value Estimate Changes1 2Q20 Change - Policy Depreciation 2019 + 1Q20 Changes - Accelerated Depreciation3 Quarterly$250 $208 2019 Changes - Policy Depreciation $200 $148 $151 $154 $150 $115 $148 $31 $100 $18 $100 $88 $100 $20 $(Millions) $20 $55 $20 $25 $20 $10 $50 $60 $60 $51 $50 $50 $50 $0 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020 4Q2020 Annual$600 $520 $500 $415 $71 ) $400 $58 Total ~$400M $270 Millions $300 $281 $190 $( $40 $200 $70 $100 $201 $134 $160 $0 2019 2020 2021 2022 2023 2024-25 YOY Earnings Impact ($105) $250 (1) These estimates are based on management’s view of market conditions and reflect the impact of the 2019 and 2020 residual value estimate changes on power vehicles in Ryder’s fleet at the time of such change. Management reviews our residual values periodically based on historical sales prices and current and expected market conditions. If management’s view of market conditions changes, we may adjust our residual value estimates based on a variety of factors discussed in our SEC filings. Any decline in our estimates will increase depreciation expense and such adjustments may have material impact on our earnings and financial results. Any decline in the market conditions or increase in wholesale activity could result in additional valuation adjustments which may have a material impact on our earnings and financial results (2) Accelerated depreciation included results of used vehicle sales, net of $9 million for the three months ended June 30, 2020. (3) Accelerated depreciation included results of used vehicle sales, net of $23 million, $10 million, and $21 million for the three months ended September 30, 2019, December 31, 2019, and March 31, 2020, respectively. 8
2nd Quarter Used Vehicle Sales Update - FMS • Sold 6,300 used vehicles during the second quarter, up 24% from the prior year and up 15% sequentially • Used vehicles inventory was 14,000 at quarter end, up from 8,300 in the prior year – Increased by 2,400 vehicles sequentially due to higher outservicing activity related to lease replacements and rental downsizing • Proceeds per unit were down 33% for tractors and down 9% for trucks in the second quarter compared with prior year – Proceeds per unit were down 12% for tractors, and unchanged for trucks, sequentially © 2020 Ryder System, Inc. 9 All Rights Reserved
2nd Quarter Results Overview – SCS • Supply Chain Solutions (SCS) total revenue down 20% and operating revenue down 16% – SCS total and operating revenue decreased primarily reflecting lower automotive customer volumes due to COVID-19 • SCS earnings before tax (EBT) decreased by $9M to $37M primarily due to COVID-19 impacts and from residual value estimate changes for vehicles used by SCS – estimated COVID-19 impact of $25M primarily reflects automotive industry production shutdowns, partially offset by COVID-19 cost actions and lower medical costs totaling approximately $13M – earnings benefited from higher pricing and improved operating performance • SCS EBT percent of SCS total revenue and SCS operating revenue were 7.1% and 9.1%, respectively – SCS EBT percent of SCS operating revenue is consistent with high single-digit long term target © 2020 Ryder System, Inc. 10 All Rights Reserved
2nd Quarter Results Overview – DTS • Dedicated Transportation Solutions (DTS) total revenue down 19% and DTS operating revenue down by 8% – DTS total revenue reflects lower subcontracted revenue and lower fuel costs passed through to customers – DTS operating revenue primarily reflects lower sales activity • DTS earnings before tax (EBT) decreased by $6M to $21M primarily due to $7M impact from change in residual value estimates for vehicles used by DTS • DTS EBT percent of DTS total revenue and DTS operating revenue were 7.2% and 9.3%, respectively – DTS EBT percent of DTS operating revenue is consistent with high single-digit long term target © 2020 Ryder System, Inc. 11 All Rights Reserved
Capital Expenditures ($ Millions) Year-to-Date Expected range for FY20 gross capital expenditures is $1.0 to $1.3B, below pre-COVID forecast of $2.1B, resulting in expected free cash flow of $1.0 to $1.2B in 2020, above prior year negative free cash flow of ($1.1B) Note: Amounts may not be additive due to rounding. © 2020 Ryder System, Inc. 12 All Rights Reserved
Cash Flow and Leverage Year-to-Date ($ Millions) Note: Amounts may not be additive due to rounding. (1) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (2) Target debt to equity range is 250 - 300%. © 2020 Ryder System, Inc. 13 All Rights Reserved
Contents • Second Quarter 2020 Results • Outlook & Action Plans • Q & A © 2020 Ryder System, Inc. 14 All Rights Reserved
Outlook Given the uncertainty relating to the ongoing impacts of COVID-19, the company is not providing financial guidance at this time but expects to resume guidance when business conditions stabilize • Used vehicle inventory expected to decline to ~10K units at year-end as a result of our initiatives to expand retail capacity and due to fewer rental vehicles being outserviced • Rental demand and utilization improved throughout 2Q; expected to further improve but remain below normal levels in 2H20 • SCS auto customer activity expected to be at pre-COVID levels in 3Q20, assuming no additional disruptions • ChoiceLease fleet expected to be down by ~10K vehicles in 2020 due to customer de- fleeting and lower sales activity • Capital expenditure forecast lowered to $1.0 to $1.3B • No material COVID-19 impacts expected for ChoiceLease, Dedicated or non-automotive Supply Chain business • Lower comparable tax rate of ~20% expected for FY20 due to depreciation and COVID-19 effects © 2020 Ryder System, Inc. 15 All Rights Reserved
Capital Allocation Strategy © 2020 Ryder System, Inc. 16 All Rights Reserved
Long Term Financial Model Our primary financial target relates to Return on Equity Adjusted Return on Equity Interim target 11% Long-term target over the cycle 15% Component drivers to achieve ROE target include: Operating Revenue Growth Fleet Management Mid Single Digit Supply Chain & Dedicated High Single Digit EBT as % of Operating Revenue All Segments High Single Digit Leverage (Debt-to-Equity) 250 - 300% In order to achieve a long-term ROE target over the cycle, we are pursuing segment revenue and profitability targets as set forth above over the long-term. Our long-term leverage goal is also set forth above. These targets are based on management’s current estimates and expectations over the long-term, and if management’s expectations were to change, the targets would be adjusted accordingly. © 2020 Ryder System, Inc. 17 All Rights Reserved
Key Drivers To Reach ROE Target 1 Expected Increase 7 -10 pts 2 Expected increase 15 -18 pts SCS/DTS Growth Maintenance/ Cost Initiatives Leverage ChoiceLease secular growth Pricing Driven by trends Target 15% strategic cost Rental Initiatives to initiatives improve lease returns Cyclical Impact of 2019 & improvement in 2020 demand and ROE Depreciation utilization 2Q20 Changes (10%) Declines sequentially Diminishing impact from 2019 and 2020 residual value estimate changes and rental recovery expected to contribute substantially to improving ROE. Management has identified and is implementing several actions designed to achieve ROE target (1) The key drivers listed above are the assumptions underlying our ability to achieve the long-term ROE target,. Ryder’s ability to achieve these drivers is subject to a number of risks and uncertainties including those listed herein and in the “Note Regarding Forward-Looking Statements. (2) The 2019 and 2020 residual value estimate changes and the COVID-related impact on commercial rental demand and utilization levels in 2Q20 have negatively impacted Ryder’s ROE. As such, Ryder’s ROE is expected to benefit by between 15 and 18 percentage points over the long-term assuming (i) the material impacts of the residual value estimate changes have passed and there are no further residual value estimate changes and (ii) commercial rental experiences cyclical improvement in demand and utilization. The assumptions and estimates with respect to residual value estimates are based on management’s view in light of current and anticipated market conditions among other factors as described in our SEC filings. Residual value estimates are reviewed periodically based on these factors and, if management’s view of market conditions or other factors changes, we may adjust positively or negatively our residual value estimates. Any negative adjustments may have a material negative impact on our earnings and financial results and may adversely affect our ability to reach these targets. Management’s expectations of cyclical improvement in commercial rental demand and utilization over the long-term is based on historical trends and management’s outlook. If rental conditions do not recover as anticipated, this may have a material negative impact on our earnings and financial results and may adversely affect our ability to reach these targets. @ 2020 Ryder System, Inc. 18 All Rights Reserved
Progress on Actions to Increase Returns • Accelerating growth in supply chain and dedicated supported by launch of national advertising campaign to increase awareness of capabilities, launch of RyderShare platform and profitable performance of Ryder Last Mile • Continue to implement ChoiceLease price increase ◦ Revenue per unit on new lease business is up mid-single digits compared to new lease vehicles in the prior year due to 2019 price increases • Using data analytics to enhance pricing segmentation and optimize capital allocation • Expanding retail used vehicle sales capacity by opening 4 new sales centers in 2Q (10 planned for FY20) and leveraging FMS shop locations as customer delivery sites for inside sales; better conversion rates seen from digital investments and expansion of online used vehicle capabilities • On target for 2020 expected annual savings from multi-year maintenance initiative ◦ $30M savings in 2020; $50M+ savings program to date • 2Q20 cost savings of $35M from April cost actions and lower medical expenses - not expected to recur • Implemented headcount reductions in July with an estimated impact of $12M per quarter © 2020 Ryder System, Inc. 19 All Rights Reserved
Contents • Second Quarter 2020 Results • Outlook & Action Plans • Q & A © 2020 Ryder System, Inc. 20 All Rights Reserved
Q&A © 2020 Ryder System, Inc. 21 All Rights Reserved
Appendix Segment Comparable EBITDA Selected Segment Balance Sheet Items ChoiceLease Fleet Count - Active Fleet Key Financial Statistics Business Segment Detail Central Support Services Balance Sheet Adjusted Return on Equity Adjusted Return on Capital Growth Capital Expenditures Financial Indicators Asset Management Non-GAAP Financial Measures & Reconciliations © 2020 Ryder System, Inc. 22 All Rights Reserved
Background on Additional Segment Disclosures • In order to provide additional transparency to segment performance and further insights into management's evaluation of such performance, we are providing: – Segment Comparable EBITDA - provided quarterly in our earnings presentation – Select Segment Balance Sheet Items - provided annually in our earnings presentation • Certain components in the new disclosures are included in our annual SEC filings, including segment assets and intangibles, as well as segment depreciation expense • Other components of the disclosures reflect management's assumptions and include: – an allocation of segment debt reflecting debt associated with vehicles leased from FMS to SCS & DTS, which is consistent with our annual historical segment Return on Capital disclosure in our earnings presentation – an allocation of segment equity which is based on a combination of comparable peer company capital structure analysis and Ryder's consolidated capital structure © 2020 Ryder System, Inc. 23 All Rights Reserved
Comparable Segment EBITDA Note: Amounts may not be additive due to rounding. (1) We do not allocate non-operating pension costs and other items impacting comparability to our segments. See our Non-GAAP reconciliations in this earnings presentation for further discussion on these items. © 2020 Ryder System, Inc. 24 All Rights Reserved
Comparable Segment EBITDA (1) We do not allocate non-operating pension costs and other items impacting comparability to our segments. See our Non-GAAP reconciliations in this earnings presentation for further discussion on these items. © 2020 Ryder System, Inc. 25 All Rights Reserved
Comparable Segment EBITDA History (1) We do not allocate non-operating pension costs and other items impacting comparability to our segments. See our Non-GAAP reconciliations in this earnings presentation for further discussion on these items. © 2020 Ryder System, Inc. 26 All Rights Reserved
Comparable Segment EBITDA History (1) We do not allocate non-operating pension costs and other items impacting comparability to our segments. See our Non-GAAP reconciliations in this earnings presentation for further discussion on these items. © 2020 Ryder System, Inc. 27 All Rights Reserved
Selected Segment Balance Sheet Items ($ Millions) December 31, 2019 FMS (1) SCS DTS Total Assets Excluding Goodwill & Intangibles $ 12,650 $ 1,016 $ 283 $ 13,949 Goodwill and Intangibles 261 221 44 526 Total Assets $ 12,911 $ 1,237 $ 327 $ 14,475 Debt (2) $ 7,811 $ 114 $ — $ 7,925 Equity (3) $ 1,787 $ 563 $ 126 $ 2,476 Memo: Allocated Debt (4) $ (691) $ 272 $ 419 Note: Amounts may not be additive due to rounding. General: These results reflect management's reporting of selected segment balance sheet accounts. These amounts would differ if presented as standalone entities. (1) FMS amounts include CSS assets and liabilities and intercompany eliminations for the purposes of this reconciliation. (2)Debt includes intercompany and third-party debt. Our average total debt previously disclosed in our segment return on capital measure (page 52 of 4Q19 earnings presentation) was presented net of intercompany receivables. For the purposes of this presentation, intercompany receivables is presented as a component of total assets. (3)We maintain a targeted capitalization structure (including Debt, Assumed Debt and Equity) for SCS and DTS based on benchmarking of peer companies. Any excess cash generated by our SCS and DTS segments are loaned to FMS. (4)Allocated debt represents the book value at period-end of the FMS fleet which is utilized in our SCS and DTS businesses and is included in our segment capital structure for the calculation of ROC. The book value of this Revenue Earning Equipment is included in the Total Assets of our FMS segment for financial reporting purposes. © 2020 Ryder System, Inc. 28 All Rights Reserved
Selected Segment Balance Sheet Items ($ Millions) December 31, 2018 FMS (1) SCS DTS Total Assets Excluding Goodwill & Intangibles $ 11,635 $ 898 $ 280 $ 12,814 Goodwill and Intangibles 264 226 45 534 Total Assets $ 11,899 $ 1,124 $ 325 $ 13,348 Debt (2) $ 6,509 $ 140 $ — $ 6,649 Equity (3) $ 1,892 $ 516 $ 129 $ 2,537 Memo: Allocated Debt (4) $ (621) $ 227 $ 394 Note: Amounts may not be additive due to rounding. General: These results reflect management's reporting of selected segment balance sheet accounts. These amounts would differ if presented as standalone entities. (1) FMS amounts include CSS assets and liabilities and intercompany eliminations for the purposes of this reconciliation. (2)Debt includes intercompany and third-party debt. Our average total debt previously disclosed in our segment return on capital measure (page 52 of 4Q19 earnings presentation) was presented net of intercompany receivables. For the purposes of this presentation, intercompany receivables is presented as a component of total assets. (3)We maintain a targeted capitalization structure (including Debt, Assumed Debt and Equity) for SCS and DTS based on benchmarking of peer companies. Any excess cash generated by our SCS and DTS segments are loaned to FMS. (4)Allocated debt represents the book value at period-end of the FMS fleet which is utilized in our SCS and DTS businesses and is included in our segment capital structure for the calculation of ROC. The book value of this Revenue Earning Equipment is included in the Total Assets of our FMS segment for financial reporting purposes. © 2020 Ryder System, Inc. 29 All Rights Reserved
Selected Segment Balance Sheet Items ($ Millions) December 31, 2017 FMS (1) SCS DTS Total Assets Excluding Goodwill & Intangibles $ 10,289 $ 765 $ 234 $ 11,287 Goodwill and Intangibles 250 143 45 438 Total Assets 10,539 908 279 11,726 Debt (2) $ 5,399 $ 41 $ — $ 5,440 Equity (3) $ 1,888 $ 460 $ 105 $ 2,454 Memo: Allocated Debt (4) $ (545) $ 215 $ 330 Note: Amounts may not be additive due to rounding. General: These results reflect management's reporting of selected segment balance sheet accounts. These amounts would differ if presented as standalone entities. (1) FMS amounts include CSS assets and liabilities and intercompany eliminations for the purposes of this reconciliation. (2)Debt includes intercompany and third-party debt. Our average total debt previously disclosed in our segment return on capital measure (page 52 of 4Q19 earnings presentation) was presented net of intercompany receivables. For the purposes of this presentation, intercompany receivables is presented as a component of total assets. (3)We maintain a targeted capitalization structure (including Debt, Assumed Debt and Equity) for SCS and DTS based on benchmarking of peer companies. Any excess cash generated by our SCS and DTS segments are loaned to FMS. (4)Allocated debt represents the book value at period-end of the FMS fleet which is utilized in our SCS and DTS businesses and is included in our segment capital structure for the calculation of ROC. The book value of this Revenue Earning Equipment is included in the Total Assets of our FMS segment for financial reporting purposes. © 2020 Ryder System, Inc. 30 All Rights Reserved
ChoiceLease Fleet Count - Active Fleet Change June 30, June 30, ChoiceLease 2020 2019 2020 / 2019 Average Active Vehicles (1) 146,600 144,000 2% Revenue per Average Active Vehicle (2) $ 5,200 $ 5,300 (2)% End of Period Active Vehicles 144,900 144,600 —% (1) Active ChoiceLease vehicles are those units that earned revenue during the period, and are not classified as not yet earning or no longer earning units. (2) Calculated based on the quarterly ChoiceLease revenue. © 2020 Ryder System, Inc. 31 All Rights Reserved
Key Financial Statistics Note: Amounts may not be additive due to rounding. NM - Not Meaningful (1) In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program is estimated to be completed in the second quarter of 2021. We have revised our definition of operating revenues to exclude the revenues associated with this program for better comparability of our on- going operations. © 2020 Ryder System, Inc. 32 All Rights Reserved
Business Segments © 2020 Ryder System, Inc. 33 All Rights Reserved
Business Segments © 2020 Ryder System, Inc. 34 All Rights Reserved
Fleet Management Solutions (FMS) (1) In the first quarter of 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program is estimated to be completed in the second quarter of 2021. We have revised our definition of operating revenues to exclude the revenues associated with this program for better comparability of our on-going operations. © 2020 Ryder System, Inc. 35 All Rights Reserved
© 2020 Ryder System, Inc. 36 All Rights Reserved
Supply Chain Solutions (SCS) ($ Millions) * 2Q20 SCS EBT includes $5M negative impact from change in residual value estimates for vehicles used by SCS. © 2020 Ryder System, Inc. 37 All Rights Reserved
Supply Chain Solutions (SCS) * 2020 SCS EBT includes $8M negative impact from change in residual value estimates for vehicles used by SCS. © 2020 Ryder System, Inc. 38 All Rights Reserved
Dedicated Transportation Solutions (DTS) © 2020 Ryder System, Inc. 39 All Rights Reserved
Dedicated Transportation Solutions (DTS) © 2020 Ryder System, Inc. 40 All Rights Reserved
Central Support Services (CSS) © 2020 Ryder System, Inc. 41 All Rights Reserved
Balance Sheet © 2020 Ryder System, Inc. 42 All Rights Reserved
Asset Management (US Only) (a)(b)(c ) © 2020 Ryder System, Inc. 43 All Rights Reserved
Non-GAAP Financial Measures © 2020 Ryder System, Inc. 44 All Rights Reserved
(1) Earnings (Loss) and EPS from Continuing Operations Reconciliation Note: Amounts may not be additive due to rounding. (1) The reconciliation of the EBT and Tax Rate for these items are included on next slide. © 2020 Ryder System, Inc. 45 All Rights Reserved
Earnings (Loss) Before Income Tax and Tax Rate from Continuing Operations Reconciliation Note: Amounts may not be additive due to rounding. (1) Q2 and YTD 2020 tax rates reflect a benefit for the period. (2) The comparable provision for income taxes is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the statutory tax rates of the jurisdiction to which the non-GAAP adjustments relate. © 2020 Ryder System, Inc. 46 All Rights Reserved
Adjusted Return on Equity Reconciliation (1) © 2020 Ryder System, Inc. 47 All Rights Reserved
Adjusted Return on Capital Reconciliation (1) (1) Non-GAAP elements of this calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital is provided on this slide. (2) Earnings calculated based on a 12-month rolling period. (3) Includes income taxes on discontinued operations. (4) Interest expense includes interest on off-balance sheet vehicle obligations. (5) Adjusted income taxes represents the tax provision on adjusted earnings before income taxes and adjusted interest expense. (6) The average is calculated based on the average GAAP balances. Upon adoption of the new leasing accounting standard retrospectively in 2019, there is no longer any off-balance sheet debt. (7) Represents comparable earnings items for those periods. (8) Represents the adjusted return on capital vs. cost of capital (trailing 12 months). (9) These amounts have been recasted to reflect the impact of the lease accounting standard. Periods prior to 2017 do not reflect the impact from the lease accounting standard. (10) Other items impacting comparability are discussed in our Adjusted Return on Equity Reconciliation. © 2020 Ryder System, Inc. 48 All Rights Reserved
Comparable EBITDA Reconciliation(1) © 2020 Ryder System, Inc. 49 All Rights Reserved
Free Cash Flow Reconciliation Note: Amounts may not be additive due to rounding. (1) Included in cash flows from investing activities. (2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (3) Non-GAAP financial measure. We refer to free cash flow as the sum of net cash provided by operating activities from continuing operations and net cash provided by the sale of revenue earning equipment and operating property and equipment, collections on direct finance leases and other cash inflows from investing activities, less purchases of revenue earning equipment and property. (4) Amounts do not Include from fair value adjustments on our used vehicles recorded in “Used Vehicles Sales, Net”. © 2020 Ryder System, Inc. 50 All Rights Reserved
© 2020 Ryder System, Inc. 51 All Rights Reserved