Ryder System, Inc. · NYSE:R
Ryder System — Q3 2018 Earnings Presentation
50 slides from Ryder System's earnings presentation, Oct 26, 2018
Slide 1: Third Quarter 2018 Earnings Conference Call
Third Quarter 2018 Earnings Conference Call October 26, 2018 Proprietary and Confidential
Slide 2: Safe Harbor and Non-GAAP Financial Measures
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 financial projections, our expect
Slide 3: Contents
Contents • Third Quarter 2018 Results Overview • Used Vehicle Sales Update • EPS Forecast & Strategic Highlights • Lease Accounting Changes • Q & A @ 2018 Ryder System, Inc. 3 All Rights Reserved
Slide 4: 3rd Quarter Results Overview
3rd Quarter Results Overview • Earnings per diluted share from continuing operations were $1.69 vs. $1.12 in 3Q17 — 3Q18 included a $0.06 benefit from a state tax law change and a tax-related adjustment, as well as a charge of $0.01 for non-operating pension costs — 3Q17 included non-operating pensi
Slide 5: Key Financial Statistics - Third Quarter
Key Financial Statistics ($ Millions, Except Per Share Amounts) Third Quarter 2018 2017 %B/(W) Total Revenue $ 2,158.1 $ 1,840.9 17 % Fuel and Subcontracted Transportation (440.9) (315.5) (40)% Operating Revenue $ 1,717.2 $ 1,525.4 13 % Earnings Per Share from Continuing Operations $ 1.69 $ 1.12 51
Slide 6: Key Financial Statistics - Year-To-Date
Key Financial Statistics Year-To-Date 2018 2017 %B/(W) Total Revenue $ 6,150.9 $ 5,365.9 15% Fuel and Subcontracted Transportation (1,251.6) (912.1) 37% Operating Revenue $ 4,899.2 $ 4,453.8 10% Earnings Per Share from Continuing Operations $ 3.15 $ 2.80 13% Comparable Earnings Per Share from Contin
Slide 7: 3rd Quarter Results Overview – FMS
3rd Quarter Results Overview – FMS • Fleet Management Solutions (FMS) total revenue up 12% and FMS operating revenue up 9% – ChoiceLease revenue up 6% – SelectCare revenue up 8% – Commercial rental revenue up 19% • FMS earnings declined due to depreciation and used vehicle sales headwinds, partially
Slide 8: 3rd Quarter Results Overview – DTS
3rd Quarter Results Overview – DTS • Dedicated Transportation Solutions (DTS) total revenue up 25% and DTS operating revenue up 12% – DTS total and operating revenue increased due to new business and higher volumes • DTS earnings increased slightly due to revenue growth, largely offset by start-up c
Slide 9: 3rd Quarter Results Overview – SCS
3rd Quarter Results Overview – SCS • Supply Chain Solutions (SCS) total revenue up 29% and SCS operating revenue up 23% – SCS total and operating revenue increased due to increased volumes, new business and the MXD acquisition – Excluding MXD, SCS total revenue and SCS operating grew 18% and 17%, re
Slide 10: Capital Expenditures
Capital Expenditures ($ Millions) Year-To-Date 2018 $ 2018 2017 O/(U) 2017 ChoiceLease $ 1,419 $ 986 $ 433 Commercial Rental 758 296 462 Operating Property and Equipment 120 95 25 Gross Capital Expenditures 2,296 1,376 920 Less: Proceeds from Sales (Primarily Revenue Earning Equipment) (292) (302) (
Slide 11: Cash Flow from Continuing Operations Year-To-Date
Cash Flow from Continuing Operations Year-To-Date ($ Millions) 2018 2017 Earnings from Continuing Operations $ 167 $ 149 Depreciation 1,028 933 Used Vehicle Sales, Net (1) 16 12 Amortization and Other Non-Cash Charges, Net 59 61 Pension Contributions (23) (11) Changes in Working Capital and Deferred
Slide 12: Debt to Equity Ratio
Debt to Equity Ratio 300 277% 263% 250 62% 61% 215% 225% 191% 200 39% 32% 150 100 50 0 12/31/15 12/31/16 12/31/17 09/30/18 Target (1) Midpoint (2) Debt to Equity excl. Pension Pension Impact (2) ($ Millions) 9/30/2018 12/31/2017 9/30/2017 Total Debt 6,283 5,410 5,349 Total Equity (3) 2,918 2,842 2,1
Slide 13: Contents
Contents • Third Quarter 2018 Results Overview • Used Vehicle Sales Update • EPS Forecast & Strategic Highlights • Lease Accounting Changes • Q & A @ 2018 Ryder System, Inc. 13 All Rights Reserved
Slide 14: Global Used Vehicle Sales Update
Global Used Vehicle Sales Update • Units held for sale, as reported, were 6,200 at quarter end, down from 6,300 units in the prior year – Units held for sale are down 500 units when adjusted for an elevated number of lease vehicles being prepared for sale in the prior year – Units held for sale incr
Slide 15: Contents
Contents • Third Quarter 2018 Results Overview • Used Vehicle Sales Update • EPS Forecast & Strategic Highlights • Lease Accounting Changes • Q & A @ 2018 Ryder System, Inc. 15 All Rights Reserved
Slide 16: EPS Forecast – Continuing Operations
EPS Forecast – Continuing Operations ($ Earnings Per Share) • Revising our full year GAAP EPS forecast to $4.88 to $4.98 from $4.71 to $4.91 • Narrowing our full year Comparable EPS forecast to $5.72 to $5.82 from $5.62 to $5.82 • Revised forecast is as follows: Fourth Quarter 2018 Full Year 2018 EP
Slide 17: Strategic Highlights
Strategic Highlights • On track for another record sales year in 2018, driven by ChoiceLease and Dedicated • On track for record organic ChoiceLease fleet growth of 8,500 vehicles in 2018 – due to strong sales activity and extended OEM lead times, new leases being signed are for vehicle deliveries w
Slide 18: Progress Toward Three-Year Financial Targets
Progress Toward Three-Year Financial Targets 2018 3-Yr Target Forecast Operating Revenue Growth Fleet Management 6 - 7% l Dedicated Transportation 9 - 10% l Supply Chain 7 - 8% l EBT as % of Operating Revenue lï Reflects Fleet Management 10 - 12% negative impact l from used Dedicated Transportation
Slide 19: Contents
Contents • Third Quarter 2018 Results Overview • Used Vehicle Sales Update • EPS Forecast & Strategic Highlights • Lease Accounting Changes • Q & A @ 2018 Ryder System, Inc. 19 All Rights Reserved
Slide 20: Lease Accounting Changes
Lease Accounting Changes • The FASB has issued new lease accounting guidance which Ryder is required to adopt effective January 1, 2019 • Ryder must separate lease (i.e. financial ) and non-lease (i.e. maintenance) components and recognize non-lease obligations as the services are provided One-Time
Slide 21: Lease Accounting Changes - Ongoing Impacts
Lease Accounting Changes Ongoing Impacts: • There will be no change to total earnings over the life cycle of a lease • Earnings volatility associated with fleet age is expected to be reduced as maintenance revenue will be more aligned with maintenance costs • Given typical maintenance patterns, more
Slide 22: Q&A
Q&A @ 2018 Ryder System, Inc. 22 All Rights Reserved
Slide 23: Appendix
Appendix ChoiceLease Vehicle Count Business Segment Detail Central Support Services Balance Sheet Capital Expenditures, Cash Flow and Leverage Return on Capital Spread Asset Management Non-GAAP Financial Measures & Reconciliations @ 2018 Ryder System, Inc. 23 All Rights Reserved
Slide 24: ChoiceLease Vehicle Count
ChoiceLease Vehicle Count (1) 3Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 O/(U) 3Q17 O/(U) 4Q17 End of Period ChoiceLease Vehicles (as reported) 137,300 139,100 140,800 143,000 145,400 8,100 6,300 Vehicles being prepared for sale (2) 400 — — — — (400) — Adjusted ChoiceLease Vehicles 136,900 139,100 140,800 1
Slide 25: Business Segments - Third Quarter
Business Segments ($ Millions) Third Quarter Memo: Operating Revenue 2018 2017 % B/(W) 2018 2017 % B/(W) Total Revenue: Fleet Management Solutions $ 1,336.5 $ 1,195.8 12 % $ 1,122.0 $ 1,026.0 9 % Dedicated Transportation Solutions 340.6 272.2 25 % 222.2 197.9 12 % Supply Chain Solutions 628.5 488.5
Slide 26: Business Segments - Year-To-Date
Business Segments Year-To-Date Memo: Operating Revenue 2018 2017 % B/(W) 2018 2017 % B/(W) Total Revenue: Fleet Management Solutions $ 3,874.6 $ 3,491.8 11 % $ 3,241.0 $ 2,986.8 9% Dedicated Transportation Solutions 970.2 811.3 20 % 637.5 591.0 8% Supply Chain Solutions 1,727.8 1,405.8 23 % 1,275.7
Slide 27: Fleet Management Solutions (FMS) - Third Quarter
Fleet Management Solutions (FMS) ($ Millions) Third Quarter Revenue 2018 2017 % B/(W) ChoiceLease $ 716.7 $ 673.9 6 % SelectCare 125.9 117.0 8 % Commercial Rental 257.9 216.0 19 % Other 21.5 19.1 13 % FMS Operating Revenue 1,122.0 1,026.0 9 % Fuel Services Revenue 214.5 169.8 26 % FMS Total Revenue
Slide 28: Fleet Management Solutions (FMS) - Year-To-Date
Fleet Management Solutions (FMS) Year-To-Date Revenue 2018 2017 % B/(W) ChoiceLease $ 2,107.9 $ 1,992.7 6 % SelectCare 373.0 348.0 7 % Commercial Rental 694.9 589.4 18 % Other 65.2 56.8 15 % FMS Operating Revenue 3,241.0 2,986.8 9 % Fuel Services Revenue 633.6 505.1 25 % FMS Total Revenue $ 3,874.6
Slide 29: Dedicated Transportation Solutions (DTS) - Third Quarter
Dedicated Transportation Solutions (DTS) ($ Millions) Third Quarter Revenue 2018 2017 % B/(W) DTS Operating Revenue $ 222.2 $ 197.9 12% Subcontracted Transportation 80.8 46.1 75% Fuel 37.6 28.2 33% DTS Total Revenue $ 340.6 $ 272.2 25% Earnings Before Tax DTS Earnings Before Tax (EBT) $ 13.9 $ 13.7
Slide 30: Dedicated Transportation Solutions (DTS) - Year-To-Date
Dedicated Transportation Solutions (DTS) ($ Millions) Year-To-Date Revenue 2018 2017 % B/(W) DTS Operating Revenue $ 637.5 $ 591.0 8% Subcontracted Transportation 224.8 136.5 65% Fuel 107.9 83.7 29% DTS Total Revenue $ 970.2 $ 811.3 20% Earnings Before Tax DTS Earnings Before Tax (EBT) $ 45.4 $ 39.8
Slide 31: Supply Chain Solutions (SCS) - Third Quarter
Supply Chain Solutions (SCS) ($ Millions) Third Quarter Revenue 2018 2017 % B/(W) Automotive $ 165.1 $ 135.8 22% Technology & Healthcare 83.6 68.0 23% CPG & Retail 170.0 130.5 30% Industrial & Other 44.1 42.0 5% SCS Operating Revenue 462.8 376.4 23% Subcontracted Transportation 137.8 94.3 46% Fuel 2
Slide 32: Supply Chain Solutions (SCS) - Year-To-Date
Supply Chain Solutions (SCS) ($ Millions) Year-To-Date Revenue 2018 2017 % B/(W) Automotive $ 458.8 $ 420.1 9% Technology & Healthcare 230.3 194.6 18% CPG & Retail 460.0 365.2 26% Industrial & Other 126.6 117.0 8% SCS Operating Revenue 1,275.7 1,096.9 16% Subcontracted Transportation 371.6 255.7 45%
Slide 33: Central Support Services (CSS) - Third Quarter
Central Support Services (CSS) ($ Millions) Third Quarter 2018 2017 % B/(W) Allocated CSS Costs $ 56.6 $ 54.0 (5)% Unallocated CSS Costs 12.8 11.0 (16)% Total CSS Costs $ 69.4 $ 65.0 (7)% @ 2018 Ryder System, Inc. 33 All Rights Reserved
Slide 34: Central Support Services (CSS) - Year-To-Date
Central Support Services (CSS) ($ Millions) Year-To-Date 2018 2017 % B/(W) Allocated CSS Costs $ 162.7 $ 159.4 (2)% Unallocated CSS Costs 34.4 33.0 (4)% Total CSS Costs $ 197.1 $ 192.4 (2)% @ 2018 Ryder System, Inc. 34 All Rights Reserved
Slide 35: Balance Sheet
Balance Sheet ($ Millions) September 30, 2018 December 31, 2017 Current Assets $ 1,465 $ 1,323 Revenue Earning Equipment, Net 9,187 8,355 Operating Property and Equipment, Net 826 777 Other Assets 1,207 1,009 Total Assets $ 12,684 $ 11,464 Current Liabilities $ 1,323 $ 1,189 Total Debt 6,283 5,410 O
Slide 36: Capital Expenditures, Cash Flow & Leverage
Capital Expenditures, Cash Flow & Leverage Full Year ($ Millions) 2018 Forecast 2017 ChoiceLease Replacement $ 1,000 $ 875 Growth 1,050 582 Total ChoiceLease 2,050 1,457 Commercial Rental Replacement 360 352 Growth 480 — Total Commercial Rental 840 352 Operating Property and Equipment 210 133 Gross
Slide 37: Financial Indicators Forecast
Financial Indicators Forecast (1) ($ Millions) Gross Capital Expenditures $3,100 $2,701 $2,161 $2,184 $2,298 $1,760 $1,763 $1,941 $1,088 $611 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Forecast Lease Commercial Rental PP&E/Other Free Cash Flow 614 258 (257) (488) (340) (315) (728) 194 190 (75
Slide 38: Adjusted Return on Capital Spread
Adjusted Return on Capital Spread 7.3% 5.7% 5.7% 5.8% 5.8% 5.8% 6.5% 6.3% 6.1% 4.8% 5.0% 5.5% 4.4% 4.8% 4.8% 4.8% 4.7% 4.9% 4.1% 4.4% 4.3% 4.2% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Forecast Adjusted Return on Capital (ROC) Cost of Capital (COC) Adj ROC O/(U) COC 0.8% (2.2)% (1.3)%
Slide 39: Asset Management YTD Update (US Only)
Asset Management YTD Update (US Only) Redeployments – Vehicles coming off-lease or in Rental with useful life remaining are redeployed in the Ryder fleet (SCS, or with another Lease customer). Redeployments exclude units transferred into the Rental product line. Extensions – Ryder re-prices lease co
Slide 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation includes “non-GAAP financial measures” as defined by SEC rules. As required by SEC rules, we provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure. Non-GAAP financial measures should be considered in addition to,
Slide 41: Earnings and EPS from Continuing Operations Reconciliation
Earnings and EPS from Continuing Operations Reconciliation (1) ($ Millions or $ Earnings Per Share) 3Q18 3Q18 3Q17 3Q17 Earnings EPS Earnings EPS GAAP $ 89.5 $ 1.69 $ 59.0 $ 1.12 Non-operating pension costs 0.6 0.01 4.0 0.08 Restructuring and other, net — — 2.7 0.05 Tax law change and tax adjustment
Slide 42: EPS Forecast - Continuing Operations
EPS Forecast - Continuing Operations ($ Millions or $ Earnings Per Share) Fourth Quarter 2018 Full Year 2018 EPS forecast $1.73 to $1.83 $4.88 to $4.98 Non-operating pension costs, net of tax 0.01 0.04 Goodwill Impairment — 0.29 Restructuring and Other 0.01 0.08 Tax reform-related and other tax adju
Slide 43: EBT and Tax Rate from Continuing Operations Reconciliation
EBT and Tax Rate from Continuing Operations Reconciliation ($ Millions or $ Earnings Per Share) 3Q18 3Q18 3Q18 YTD18 YTD18 YTD18 EBT Tax Tax Rate EBT Tax Tax Rate GAAP $ 116.1 $ 26.6 22.9% $ 262.5 $ 95.6 36.4% Non-operating pension costs 1.2 0.6 3.2 1.7 Goodwill impairment — — 15.5 — Restructuring a
Slide 44: Adjusted Return on Capital Reconciliation
Adjusted Return on Capital Reconciliation(1) ($ Millions) 2008 2009 2010 2011 2012 2013 Net earnings (2) $ 200 $ 62 $ 118 $ 170 $ 210 $ 238 Restructuring and other charges, net and other items 70 30 6 6 17 - Income taxes 150 54 61 108 91 126 Adjusted earnings before income taxes 420 146 185 284 317
Slide 45: Adjusted Return on Capital Reconciliation
Adjusted Return on Capital Reconciliation(1) ($ Millions) 2018 2014 2015 2016 2017 3Q17 3Q18 Forecast Net earnings (2) $ 218 $ 305 $ 262 $ 791 $ 196 $ 807 $ 260 Restructuring and other charges, net and other items 115 18 13 28 14 39 20 Income taxes 118 164 142 (477) 107 468 130 Adjusted earnings bef
Slide 46: Comparable EBITDA Reconciliation
Comparable EBITDA Reconciliation(1) ($ Millions) Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Earnings from continuing operations $ 89.5 $ 59.0 $ 167.0 $ 149.0 Provision for income taxes 26.6 35.5 95.6 87.0 Earnings before income taxes from continuing operatio
Slide 47: Cash Flow Reconciliation
Cash Flow Reconciliation ($ Millions) 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 Cash Provided by Operating Activities from Continuing Operations $ 985 $ 1,028 $ 1,042 $ 1,160 $ 1,252 $ 1,383 Proceeds from Sales (Primarily Revenue Earning Equipment)(1) 216 235 337 413 452 497
Slide 48: Cash Flow Reconciliation
Cash Flow Reconciliation ($ Millions) 2018 12/31/2015 12/31/2016 12/31/2017 9/30/2017 9/30/2018 Forecast Cash Provided by Operating Activities from Continuing Operations $ 1,442 $ 1,601 $ 1,548 $ 1,166 $ 1,212 $ 1,800 Proceeds from Sales (Primarily Revenue Earning Equipment)(1) 427 421 429 302 292 4
Slide 49: Debt to Equity Reconciliation
Debt to Equity Reconciliation(1) ($ Millions) % to % to % to 12/31/2009 Equity 12/31/2010 Equity 12/31/2011 Equity Debt $ 2,498 175% $ 2,747 196% $ 3,382 257% PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 119 100 64 Total Obligations (2) $ 2,617 183%
Slide 50: @ 2018 Ryder System, Inc. 50 All Rights Reserved
@ 2018 Ryder System, Inc. 50 All Rights Reserved