Ryder System, Inc. · NYSE:R

Ryder System — Q3 2019 Earnings Presentation

57 slides from Ryder System's earnings presentation, Oct 29, 2019

  1. Slide 1: Third Quarter 2019 Earnings Conference Call

    Third Quarter 2019 Earnings Conference Call October 29, 2019

  2. 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 news release are “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including our forecast, outlook, expectations r

  3. Slide 3: Contents

    Contents • Residual Value Estimate Change • Third Quarter 2019 Results Overview • EPS Forecast • Q & A ©2019 Ryder System ,Inc. 3 All Rights Reserved

  4. Slide 4: Overview

    Overview • Ryder’s value proposition remains strong and is driven by long-term outsourcing trends in the large transportation and logistics markets • 2019-20 earnings expected to be negatively impacted by used vehicle market downturn and residual value estimate change • Returns expected to organical

  5. Slide 5: Used Tractor Sales Price History: 1999 - 2018

    Used Tractor Sales Price History: 1999 - 2018 Ryder Used Sale Price % of Lack of supply in market and engine Supply entered 140 Original Cost Index technology change market as freight environment 130 slowed 120 110 100 90 80 70 60 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2

  6. Slide 6: Used Tractor Market Conditions Began To Soften In June 2019

    Used Tractor Market Conditions Began To Soften In June 2019 - Conditions Worsened In 3Q19 With Expectations For Further Near-Term Decline Ryder Used Sale Price % of Original Cost Index 90 140 130 120 110 100 80 90 80 70 60 50 3Q19 2013 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

  7. Slide 7: Residual Value Estimates and Depreciation

    Residual Value Estimates and Depreciation • Residual values and useful lives of revenue earning equipment are reviewed at least annually • Three components of Ryder’s depreciation: • Policy Depreciation – estimated residuals established on each vehicle to set depreciation expense over the vehicles u

  8. Slide 8: 3Q19 Residual Value Estimate Changes

    3Q19 Residual Value Estimate Changes 1) Policy Depreciation: For vehicles expected to be sold starting in late 2021, reduced long-term estimate of residual values to reflect more recent multi-year trends (which exclude 2015 peak) and include outlook 2) Accelerated Depreciation: For vehicles expected

  9. Slide 9: Estimated Tractor Residuals For Policy Depreciation Reduced

    Estimated Tractor Residuals For Policy Depreciation Reduced To Reflect More Recent Multi-Year Trends And Include Outlook 140 Ryder Used Sale Price % of Original Cost Index 130 120 110 100 90 80 70 New Residual Estimate For Policy 60 Depreciation * 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

  10. Slide 10: Residual Value Estimates On All Power Vehicles Reduced

    Residual Value Estimates On All Power Vehicles Reduced To Better Align With Updated Outlook - Negative Earnings Impact From Estimate Changes Declines Each Quarter Impact of Change in Residual Estimates on Policy Quarterly Depreciation and Accelerated Depreciation (1) $200 $177 $150 $112 $125 (2) ) $

  11. Slide 11: Key ROC Improvement Actions: Pricing Actions

    Key ROC Improvement Actions Improve returns through pricing actions: Increased lease rates 1 on all power vehicles by reducing priced residual assumptions beginning in late 2017 – tractor priced residuals are now at historically low levels; pricing optimization continues ©2019 Ryder System ,Inc. 11

  12. Slide 12: Pricing Actions Taken To Improve ChoiceLease Returns

    Pricing Actions Taken To Improve ChoiceLease Returns Projected Performance by Year (reflects updated residual value estimates) 2012 Below Target For leases signed prior to 2014, we expect returns Drives majority of accelerated depreciation below our target levels due to higher than priced - impacts

  13. Slide 13: Key ROC Improvement Actions

    Key ROC Improvement Actions 1 Improve returns through pricing actions Expand retail used vehicle capacity (additional locations, inside sales, website enhancements) and explore residual risk 2 sharing arrangements (partnerships, capital markets) Accelerate significant cost-savings initiatives (maint

  14. Slide 14: Contents

    Contents • Residual Value Estimate Change • Third Quarter 2019 Results Overview • EPS Forecast • Q & A ©2019 Ryder System ,Inc. 14 All Rights Reserved

  15. Slide 15: 3rd Quarter Results Overview

    3rd Quarter Results Overview • Earnings (loss) per diluted share from continuing operations was $(1.75) vs. $1.73 in 3Q18 — 3Q19 included higher depreciation expense (non-cash) related to change in vehicle residual value estimates, as well as a $0.09 charge for non-operating pension costs, a $0.09 c

  16. Slide 16: Key Financial Statistics Third Quarter

    Key Financial Statistics Third Quarter ($Millions, Except Per Share Amounts) 2019 2018 %B/(W) Total Revenue $ 2,223.9 $ 2,159.7 3 % Fuel and Subcontracted Transportation (419.2) (440.9) (5) % Operating Revenue $ 1,804.7 $ 1,718.8 5 % Earnings (Loss) Per Share from Continuing Operations (1.75)* $ 1.7

  17. Slide 17: 3rd Quarter Results Overview – FMS

    3rd Quarter Results Overview – FMS • Fleet Management Solutions (FMS) total revenue up 4% and FMS operating revenue up 7% – ChoiceLease revenue up 9% – SelectCare revenue up 6% – Commercial rental revenue up 2% • FMS earnings declined reflecting an increase in depreciation expense – $177M in higher

  18. Slide 18: 3rd Quarter Used Vehicle Sales Update - FMS

    3rd Quarter Used Vehicle Sales Update - FMS • Sold 5,300 used vehicles during the third quarter, up 29% from the prior year and up 4% sequentially • Used vehicles inventory was 7,300 at quarter end, up from 6,200 in the prior year – Decreased by 1,000 vehicles sequentially • Proceeds per unit were d

  19. Slide 19: 3rd Quarter Results Overview – SCS

    3rd Quarter Results Overview – SCS • Supply Chain Solutions (SCS) total revenue and operating revenue down 2% – SCS total and operating revenue decreased due to previously announced lost business, partially offset by higher pricing • SCS earnings decreased primarily due to $3.8M impact from change i

  20. Slide 20: 3rd Quarter Results Overview – DTS

    3rd Quarter Results Overview – DTS • Dedicated Transportation Solutions (DTS) total revenue up 5% and DTS operating revenue up 11% – DTS total and operating revenue increased primarily due to new business • DTS earnings increased due to revenue growth and improved operating performance growth – Incr

  21. Slide 21: Capital Expenditures

    Capital Expenditures ($ Millions) Year-to-Date 2019 $ 2019 2018 O/(U) 2018 ChoiceLease $ 2,311 $ 1,419 $ 892 Commercial Rental 551 758 (207) Operating Property and Equipment 136 120 16 Gross Capital Expenditures 2,999 2,296 703 Less: Proceeds from Sales (Primarily Revenue Earning Equipment)(1) (403)

  22. Slide 22: Cash Flow and Leverage

    Cash Flow and Leverage Year-to-Date ($ Millions) 2019 2018 Earnings from Continuing Operations $ 30 $ 175 Depreciation 1,343 1,022 Used Vehicle Sales, Net 49 16 Amortization and Other Non-Cash Charges, Net 167 142 Pension Contributions (26) (19) Collections from Sales-type Leases 90 63 Changes in Wo

  23. Slide 23: Contents

    Contents • Residual Value Estimate Change • Third Quarter 2019 Results Overview • EPS Forecast • Q & A ©2019 Ryder System ,Inc. 23 All Rights Reserved

  24. Slide 24: EPS Forecast – Continuing Operations

    EPS Forecast – Continuing Operations ($ Earnings Per Share) • Reducing our full year GAAP EPS forecast to $0.20 to $0.30 and full year Comparable EPS forecast to $1.00 to $1.10, primarily reflecting the impact from a change in residual value estimates • Current forecast is as follows: Fourth Quarter

  25. Slide 25: Contents

    Contents • Residual Value Estimate Change • Third Quarter 2019 Results Overview • EPS Forecast • Q & A ©2019 Ryder System ,Inc. 25 All Rights Reserved

  26. Slide 26: Q&A

    Q&A ©2019 Ryder System ,Inc. 26 All Rights Reserved

  27. Slide 27: Appendix

    Appendix Residual Value Estimate Change Overview Three-Year Financial Targets Business Segment Detail Central Support Services Lease Accounting Impact on EPS Balance Sheet Adjusted Return on Capital Spread Financial Indicators Forecast Asset Management Non-GAAP Financial Measures & Reconciliations ©

  28. Slide 28: Vehicle Depreciation

    Vehicle Depreciation • We periodically review and adjust, as appropriate, the residual values of revenue earning equipment taking into account, among other factors, historical market price changes, current and expected future market price trends, expected lives of vehicles, and expected sales in the

  29. Slide 29: Residual Value Assessment

    Residual Value Assessment 3Q19 Assessment • Evaluated current conditions and near-term outlook for used vehicle pricing ‒ used vehicle prices expected to continue to decline in the near-term, particularly for tractors • Evaluated our long-term view of residual value estimates including future expect

  30. Slide 30: Estimate Change and Expected P&L Impact

    Estimate Change and Expected P&L Impact Reduced residual value estimates effective 7/1/19 for all power vehicles with the largest impact on tractors • Change to residual estimates impacted by depreciation policy (applied to vehicles expected to be sold starting in late 2021) ‒ reducing long-term res

  31. Slide 31: Three-Year Financial Targets

    Three-Year Financial Targets 3-Yr Target 2019 Forecast Operating Revenue Growth Fleet Management 6 - 7% l Supply Chain 7 - 8% l Dedicated Transportation 9 - 10% l EBT as % of Operating Revenue Fleet Management 10 - 12% l  Reflects negative Supply Chain 8 - 9% l impact from used Dedicated Transporta

  32. Slide 32: Key Financial Statistics Year-to-Date

    Key Financial Statistics Year-to-Date ($Millions, Except Per Share Amounts) 2019 2018 %B/(W) Total Revenue $ 6,649.3 $ 6,153.8 8 % Fuel and Subcontracted Transportation (1,273.4) (1,251.7) 2 % Operating Revenue $ 5,375.9 $ 4,902.1 10 % Earnings Per Share from Continuing Operations 0.56 * $ 3.31 (83)

  33. Slide 33: Business Segments Third Quarter

    Business Segments ($ Millions) Third Quarter Memo: Operating Revenue 2019 2018 % B/(W) 2019 2018 % B/(W) Total Revenue: Fleet Management Solutions $ 1,397.3 $ 1,337.8 4 % $ 1,198.7 $ 1,123.2 7 % Supply Chain Solutions 617.6 628.5 (2) % 453.7 462.8 (2) % Dedicated Transportation Solutions 359.2 340.6

  34. Slide 34: Business Segments Year-to-Date

    Business Segments ($ Millions) Year-to-Date Memo: Operating Revenue 2019 2018 % B/(W) 2019 2018 % B/(W) Total Revenue: Fleet Management Solutions $ 4,139.9 $ 3,876.6 7 % $ 3,520.9 $ 3,243.0 9 % Supply Chain Solutions 1,902.6 1,727.8 10 % 1,413.6 1,275.7 11 % Dedicated Transportation Services 1,071.1

  35. Slide 35: Fleet Management Solutions (FMS) Third Quarter

    Fleet Management Solutions (FMS) ($ Millions) Third Quarter Revenue 2019 2018 % B/(W) ChoiceLease $ 779.8 $ 718.0 9 % SelectCare 133.4 125.9 6 % Commercial Rental 263.0 257.9 2 % Other 22.5 21.5 4 % FMS Operating Revenue 1,198.7 1,123.2 7 % Fuel Services Revenue 198.7 214.5 (7) % FMS Total Revenue $

  36. Slide 36: Fleet Management Solutions (FMS) Year-to-Date

    Fleet Management Solutions (FMS) ($ Millions) Year-to-Date Revenue 2019 2018 % B/(W) ChoiceLease $ 2,293.7 $ 2,109.9 9 % SelectCare 405.6 373.0 9 % Commercial Rental 753.0 694.9 8 % Other 68.7 65.2 5 % FMS Operating Revenue 3,520.9 3,243.0 9 % Fuel Services Revenue 618.9 633.6 (2) % FMS Total Revenu

  37. Slide 37: Supply Chain Solutions (SCS) Third Quarter

    Supply Chain Solutions (SCS) ($ Millions) Third Quarter Revenue 2019 2018 % B/(W) Automotive $ 170.4 $ 165.0 3 % Technology & Healthcare 58.9 83.6 (30) % CPG & Retail 179.6 170.0 6 % Industrial & Other 44.8 44.2 1 % SCS Operating Revenue 453.7 462.8 (2) % Subcontracted Transportation 136.9 137.8 (1)

  38. Slide 38: Supply Chain Solutions (SCS) Year-to-Date

    Supply Chain Solutions (SCS) ($ Millions) Year-to-Date Revenue 2019 2018 % B/(W) Automotive $ 528.9 $ 458.8 15 % Technology & Healthcare 209.0 230.3 (9) % CPG & Retail 543.7 460.0 18 % Industrial & Other 132.1 126.7 4 % SCS Operating Revenue 1,413.6 1,275.7 11 % Subcontracted Transportation 400.4 37

  39. Slide 39: Dedicated Transportation Solutions (DTS) Third Quarter

    Dedicated Transportation Solutions (DTS) ($ Millions) Third Quarter Revenue 2019 2018 % B/(W) DTS Operating Revenue $ 247.7 $ 222.2 11 % Subcontracted Transportation 76.2 80.8 (6) % Fuel 35.3 37.6 (6) % DTS Total Revenue $ 359.2 $ 340.6 5 % Earnings Before Tax DTS Earnings Before Tax (EBT) $ 18.5 *

  40. Slide 40: Dedicated Transportation Solutions (DTS) Year-to-Date

    Dedicated Transportation Solutions (DTS) ($ Millions) Year-to-Date Revenue 2019 2018 % B/(W) DTS Operating Revenue $ 731.4 $ 637.5 15 % Subcontracted Transportation 229.9 224.8 2 % Fuel 109.8 107.9 2 % DTS Total Revenue $ 1,071.1 $ 970.2 10 % Earnings Before Tax DTS Earnings Before Tax (EBT) $ 63.0

  41. Slide 41: Central Support Services (CSS)

    Central Support Services (CSS) ($ Millions) Third Quarter 2019 2018 % B/(W) Allocated CSS Costs $ 59.8 $ 57.3 (4) % Unallocated CSS Costs 11.4 12.7 10 % Total CSS Costs $ 71.2 $ 70.0 (2) % Year-to-Date 2019 2018 % B/(W) Allocated CSS Costs $ 179.9 $ 164.7 (9) % Unallocated CSS Costs 34.5 34.3 (1) %

  42. Slide 42: Lease Accounting Impact on EPS

    Lease Accounting Impact on EPS 2018 1Q 2Q 3Q 4Q Full Year Impact on EPS $ 0.06 $ 0.05 $ 0.04 $ 0.08 $ 0.23 2019 1Q 2Q 3Q 4Q Forecast FY Forecast Impact on EPS $ 0.11 $ 0.02 $ (0.10) ($0.08) - ($0.13) ($0.05) - ($0.10) Adoption of the lease accounting standard is expected to reduce earnings per share

  43. Slide 43: Balance Sheet

    Balance Sheet ($ Millions) September 30, 2019 December 31, 2018 Current Assets $ 1,572 $ 1,568 Revenue Earning Equipment, Net 10,428 9,416 Operating Property and Equipment, Net 892 862 Other Assets 1,591 1,502 Total Assets $ 14,483 $ 13,348 Current Liabilities $ 1,591 $ 1,580 Total Debt 7,747 6,649

  44. Slide 44: Adjusted Return on Capital Spread

    Adjusted Return on Capital Spread (1) Adj ROC O/(U) COC (1.3) % 0.2 % 0.9 % 1.0 % 1.1 % 1.4 % 0.5 % (0.2) % 0.4 % (2.5) % (2) (3) Return on Equity 8.4 % 11.9 % 14.9 % 14.9 % 11.3 % 16.1 % 12.8 % 35.9 % 11.4 % 0.6 % Adjusted Total Capital (4) $4.0 $4.6 $5.2 $5.6 $6.6 $7.1 $7.6 $7.5 $8.5 $10.0 (1) The

  45. Slide 45: Financial Indicators Forecast

    Financial Indicators Forecast (1) ($ Millions) Gross Capital Expenditures Lease Commercial Rental PP&E/Other Free Cash Flow 258 (257) (488) (340) (315) (728) 194 190 (933) (1,120) Debt to Equity / Total Obligations to Equity (2) (4) (5) Pension Impact (3) Debt to Equity 196% 257% 272% 227% 260% 277%

  46. Slide 46: 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

  47. Slide 47: 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,

  48. Slide 48: Earnings (Loss) and EPS from Continuing Operations Reconciliation

    (1) Earnings (Loss) and EPS from Continuing Operations Reconciliation ($ Millions, except Per Share Data) 3Q19 3Q19 3Q18 3Q18 Earnings EPS Earnings EPS GAAP $ (91.5) $ (1.75) $ 91.6 $ 1.73 Non-operating pension costs 4.9 0.09 0.6 0.01 ERP implementation costs 4.5 0.09 — — Restructuring and other, ne

  49. Slide 49: Earnings Before Income Tax and Tax Rate Reconciliation

    Earnings (Loss) Before Income Tax and Tax Rate from Continuing Operations Reconciliation ($ Millions) 3Q19 3Q19 3Q19 YTD19 YTD19 YTD19 EBT Tax Tax Rate EBT Tax Tax Rate GAAP $ (91.3) $ 0.3 (0.3) % $ 80.0 $ 50.2 62.7 % Non-operating pension costs 6.9 2.0 20.1 5.8 ERP implementation costs 6.1 1.6 13.6

  50. Slide 50: EPS Forecast - Continuing Operations

    EPS Forecast - Continuing Operations ($ Millions or $ Earnings Per Share) Fourth Quarter 2019 Full Year 2019 EPS forecast ($0.36) to ($0.26) $0.20 to $0.30 Non-operating pension costs, net of tax 0.09 0.36 ERP implementation costs 0.10 0.30 Restructuring and other, net 0.14 0.34 Gain on sale of prop

  51. Slide 51: Adjusted Return on Capital Reconciliation

    Adjusted Return on Capital Reconciliation(1) 2010 2011 2012 2013 ($ Millions) Net earnings (2) $ 118 $ 170 $ 210 $ 238 Restructuring and other charges, net and other items 6 6 17 - Income taxes 61 108 91 126 Adjusted earnings before income taxes 185 284 317 363 Adjusted interest expense (3) 133 135

  52. Slide 52: Adjusted Return on Capital Reconciliation

    Adjusted Return on Capital Reconciliation (1) ($ Millions) 2019 (8) 2014 2015 2016 2017 2018 3Q18 3Q19 Forecast Net earnings (2) $ 218 $ 305 $ 263 $ 792 $ 285 $ 817 $ 142 $ 15 Restructuring and other charges, net and other items 115 18 13 28 22 36 13 25 Income taxes 118 164 142 (477) 103 (466) 55 (5

  53. Slide 53: Comparable EBITDA Reconciliation

    Comparable EBITDA Reconciliation(1) ($ Millions) Three months ended September Nine months ended September 30, 30, 2019 2018 2019 2018 Earnings (loss) from continuing operations $ (91.5) $ 91.6 $ 29.8 $ 175.1 Provision for income taxes 0.3 27.3 50.2 98.4 Earnings (loss) before income taxes from conti

  54. Slide 54: Cash Flow Reconciliation

    Cash Flow Reconciliation ($ Millions) 2010 2011 2012 2013 2014 2015 Cash Provided by Operating Activities from Continuing Operations $ 1,028 $ 1,042 $ 1,160 $ 1,252 $ 1,383 $ 1,442 Proceeds from Sales (Primarily Revenue Earning Equipment)(1) 235 337 413 452 497 427 Collections of Direct Finance Leas

  55. Slide 55: Cash Flow Reconciliation

    Cash Flow Reconciliation ($ Millions) YTD YTD (5) (5) 2019 2016 2017 2018 9/30/2018 9/30/2019 Forecast Cash Provided by Operating Activities from Continuing Operations $ 1,601 $ 1,548 $ 1,721 $ 1,276 $ 1,589 $ 2,130 Proceeds from Sales (Primarily Revenue Earning Equipment)(1) 421 429 396 292 403 450

  56. Slide 56: Debt to Equity Reconciliation

    Debt to Equity Reconciliation(1) ($ Millions) % to % to 2010 Equity 2011 Equity Debt $ 2,747 196 % $ 3,382 257 % PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 100 64 Total Obligations (2) $ 2,847 230 % $ 3,446 261 % 1. The debt to equity metric was n

  57. Slide 57: ©2019 Ryder System ,Inc. All Rights Reserved

    ©2019 Ryder System ,Inc. All Rights Reserved

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