Market Overview

Ryder Reports Third Quarter 2017 Results

Share:
  • Q3 GAAP EPS from Continuing Operations Down $0.48 or 30% to $1.11
  • Q3 Comparable EPS (non-GAAP) from Continuing Operations Down $0.34
    or 20% to $1.33
  • Record Q3 Total Revenue Grows 7% to $1.8 Billion; Record Q3
    Operating Revenue (non-GAAP) Up 4% to $1.5 Billion
  • Revised Full-Year 2017 GAAP EPS Forecast Range of $3.95 to $4.05
    vs. Prior Forecast of $4.03 to $4.23
  • Revised Full-Year 2017 Comparable EPS Forecast Range (non-GAAP) of
    $4.46 to $4.56 vs. Prior Forecast of $4.38 to $4.58

Ryder System, Inc. (NYSE:R), a leader in commercial fleet
management
, dedicated
transportation
, and supply
chain
solutions, today reported third quarter earnings and revenue.
Results for the three months ended September 30 were as follows:

(dollars in millions, except EPS)   Earnings Before Taxes   Earnings   Diluted Earnings Per Share
2017   2016   Change 2017   2016   Change 2017   2016   Change
GAAP $ 94.3   131.7   (28)% $ 58.9   85.1   (31)% $ 1.11   1.59   (30)%
Non-operating pension costs 7.0 7.4 4.0 4.4 0.08 0.08
Pension settlement charge 5.5 3.3 0.06

Fees related to cost-savings program

4.3 2.7 0.05

Tax law change - rate increase

          1.8           0.03          
Comparable (non-GAAP) $ 111.0     139.1     (20)% $ 70.8     89.6     (21)% $ 1.33     1.67     (20)%
 

In the third quarter, the Company reported record total revenue and
record operating revenue (a non-GAAP measure excluding all fuel and
subcontracted transportation). Total revenue increased due to higher
operating revenue and subcontracted transportation, reflecting new
business and higher volumes. Total revenue also grew due to higher fuel
costs passed through to customers. Operating revenue increased primarily
due to higher revenue in the supply chain solutions business segment and
higher contractual Ryder ChoiceLease™ (lease). Total revenue and
operating revenue for the three months ended September 30 were as
follows:

   
(in millions) Total Revenue Operating Revenue (non-GAAP)
       
2017 2016 % Change 2017 2016 % Change
                     
Total $ 1,848.5 1,724.4 7% $ 1,525.5 1,468.3 4%
FMS $ 1,195.8 1,155.0 4% $ 1,026.0 997.9 3%
DTS $ 272.3 260.9 4% $ 197.9 196.6 1%
SCS $ 496.0 416.9 19% $ 376.4 345.5 9%
————————————
Note: There was no material currency impact in the third quarter of
2017.

Commenting on the Company's third quarter results, Ryder Chairman and
CEO Robert Sanchez said, "We performed in line with our expectations for
the third quarter. Although earnings were down year over year, earnings
comparisons improved from the second quarter of this year. In Fleet
Management Solutions, we realized better than expected rental and used
vehicle sales performance. We saw stronger than seasonal growth in
rental demand, as well as hurricane-related activity late in the
quarter, which, along with our earlier right-sizing actions, allowed us
to outperform in rental. The net impact of hurricanes was neutral in the
quarter, as hurricane-related increases in rental demand were offset by
property losses. Used vehicle sales volumes were higher than
anticipated, lowering our used vehicle inventory level to the middle of
our target range a quarter earlier than anticipated. This represents the
lowest level in two years, better positioning our inventory going
forward. Additionally, used vehicle pricing was in line with our
expectations.

"With the continuing benefit of secular trends that favor outsourcing,
we have grown our ChoiceLease fleet by 1,900 vehicles year to date, and
our expected full-year growth remains at 3,500 vehicles. We continue to
tap into non-outsourced markets, with approximately 40% of our lease
fleet growth coming from customers that are new to outsourcing. We also
grew our SelectCare business by 5,400 vehicles year to date. Although
down from a year ago, our Dedicated Transportation Solutions business
performed in line with our expectations. Supply Chain Solutions results
came in below expectations, primarily due to two customer accounts,
including a particularly challenging start-up. We expect improvement in
both accounts in the fourth quarter. Lastly, during the quarter, we
continued our anti-dilutive share repurchase program and have
repurchased over 900,000 shares in 2017."

Third Quarter Business Segment Operating Results

Fleet Management Solutions

In the Fleet Management Solutions (FMS) business segment, total revenue
was $1.20 billion, up 4% from the year-earlier period. FMS operating
revenue (a non-GAAP measure excluding fuel) was $1.03 billion, up 3%
from the year-earlier period. Lease revenue increased 4%, reflecting a
larger average fleet size and higher prices on replacement vehicles. The
lease fleet (excluding U.K. trailers) increased by 1,100 vehicles
year-to-date. As previously noted, in recent quarters, the Company has
had an elevated number of vehicles being prepared for sale. Adjusting
for a reduction in these vehicles during the quarter, the lease fleet
grew by 1,900 vehicles over the same period. Commercial
rental
revenue was consistent with the year-earlier period, which is
a significant improvement from the first half of 2017.

FMS earnings before tax were $100.7 million, down 11% compared with
$112.5 million in the same period of 2016. Decreased earnings reflect
lease and rental gross margin impacts from accelerated depreciation of
$4 million and more normalized maintenance spending associated with
vehicles being prepared for sale. Overhead spending also increased
primarily due to the timing of incentive compensation and higher sales
and marketing expense. These items were partially offset by improved
performance across all product lines. Commercial rental performance
improved due to higher pricing and improved utilization, reflecting the
Company's fleet right-sizing actions taken earlier in the year. Rental
power fleet utilization was 78.0% for the third quarter, up from 76.7%
in the year-earlier period. Used
vehicle
results improved modestly due to lower inventory valuation
adjustments, partially offset by lower pricing. Additionally, used
vehicle inventories at quarter end are at the midpoint of the Company's
target range. FMS earnings before tax as a percentage of FMS total
revenue and FMS operating revenue (a non-GAAP measure) were 8.4% and
9.8%, respectively, down 130 and 150 basis points.

Dedicated Transportation Solutions

In the Dedicated Transportation Solutions (DTS) business segment, total
revenue was $272 million, up 4%, and operating revenue (a non-GAAP
measure excluding fuel and subcontracted transportation) was $198
million, up 1% compared with the year-earlier period. DTS total revenue
and operating revenue growth reflect new business, partially offset by
one less work day.

DTS earnings before tax of $13.8 million decreased 22% compared with
$17.6 million in 2016, primarily due to higher insurance premiums,
higher maintenance costs on certain older model year vehicles, and the
impact of one less work day. DTS earnings before tax as a percentage of
DTS total revenue and operating revenue (a non-GAAP measure) were 5.1%
and 7.0%, respectively, down 160 and 190 basis points from the
year-earlier period.

Supply Chain Solutions

In the Supply Chain Solutions (SCS) business segment, total revenue was
$496 million, up 19%, and operating revenue (a non-GAAP measure
excluding fuel and subcontracted transportation) was $376 million, up 9%
compared with the year-earlier period. SCS total revenue and operating
revenue growth primarily reflect new business.

SCS earnings before tax of $22.1 million decreased 29% from $31.0
million in 2016, primarily related to performance of two customer
accounts, including a particularly challenging start-up. Additionally,
results were impacted by higher overhead spending, primarily due to
planned investments in information technology and sales. SCS earnings
before tax as a percentage of SCS total revenue and operating revenue (a
non-GAAP measure) were 4.4% and 5.9%, respectively, down 300 and 310
basis points from the prior year.

Corporate Financial Information

Central Support Services

Central Support Services (CSS) are overhead costs incurred to support
all business segments and product lines. Most CSS costs are allocated to
the business segments. In the third quarter of 2017, unallocated CSS
costs were $11 million, up from $9 million in the year-earlier period.

Income Taxes

The Company's effective income tax rate for the third quarter of 2017
increased 220 basis points to 37.6% primarily due to a state law tax
rate increase. Excluding the impact of the tax law change and other
items, the comparable income tax rate (a non-GAAP measure) from
continuing operations was 36.2%, generally consistent with the
year-earlier period.

Additional Items Excluded from Segment and Comparable Earnings

Non-operating components of pension costs are excluded from both segment
earnings before tax and comparable earnings (a non-GAAP measure) in
order to more accurately reflect the operating performance of the
business. Non-operating pension costs totaled $7.0 million ($4.0 million
after tax) or $0.08 per diluted share in the third quarter of 2017,
compared with $7.4 million ($4.4 million after tax) or $0.08 per diluted
share in the year-earlier period. Third quarter 2017 results also
reflect estimated pension settlement charges of $5.5 million ($3.3
million after tax) related to the Company's exit from a multi-employer
pension plan and consulting fees of $4.3 million ($2.7 million after
tax) associated with a cost savings program.

Capital Expenditures

Year-to-date capital expenditures were largely unchanged from the prior
year. Capital expenditures reflect greater use of redeployed vehicles to
fulfill new lease contracts. Lower lease spending was offset by higher
planned investments to refresh the rental fleet. Proceeds, primarily
from used vehicle sales, of $302 million decreased 11% compared with
$338 million in 2016, due to lower vehicle pricing. Net capital
expenditures (including proceeds from the sale of assets) were $1.07
billion in 2017, consistent with 2016.

Cash Flow and Leverage

Year-to-date operating cash flow was $1.2 billion, consistent with 2016.
Total cash generated (a non-GAAP measure that includes proceeds from
used vehicle sales) was $1.52 billion, compared with $1.58 billion in
2016. Free cash flow (a non-GAAP measure) was $210 million, compared
with $72 million in 2016, reflecting lower net capital spending. The
Company's full-year forecast for operating cash flow remains unchanged
at $1.6 billion. The Company's full-year free cash flow forecast also
remains unchanged at $250 million.

Debt decreased by $42 million compared with year-end 2016. Debt to
equity was 246% compared with 263% at year-end 2016, slightly below
Ryder's long-term target range of 250% to 300%. The year-end debt to
equity forecast remains unchanged at 240%.

2017 Earnings Forecast

Commenting on the Company's outlook, Mr. Sanchez said, "Our overall
earnings outlook for the fourth quarter remains on track with our prior
expectations. We anticipate a somewhat improved outlook for Fleet
Management Solutions related to higher demand and utilization in
commercial rental. Our outlook for ChoiceLease fleet growth remains at
3,500 vehicles for the full year. We expect Ryder's used vehicle
inventory to be near the low end of our target range by year end, which
further improves the Company's position related to used vehicles
entering 2018. Our outlook for used vehicle sales pricing remains
unchanged. Improved performance in FMS is anticipated to be primarily
offset by lower performance in Supply Chain Solutions. In the fourth
quarter, we expect Supply Chain Solutions results to continue to be
impacted, but to a lesser extent, by the account challenges experienced
in the third quarter. Fourth quarter Supply Chain Solutions results are
expected to be flat or modestly higher on a year-over-year basis.
Dedicated Transportation Solutions is expected to continue to be
impacted by higher insurance premium rates and generally in line with
our prior expectations."

Ryder is establishing a fourth quarter 2017 GAAP EPS forecast range of
$1.16 to $1.26, and a comparable EPS forecast range of $1.31 to $1.41.
This results in a full-year 2017 GAAP EPS forecast range of $3.95 to
$4.05, vs. a prior forecast of $4.03 to $4.23. Additionally, the
Company's full-year 2017 comparable EPS forecast has been revised to a
range of $4.46 to $4.56 vs. a prior range of $4.38 to $4.58.

   
Supplemental Company Information
 
Third Quarter Net Earnings
 
(dollars in millions, except EPS) Earnings Diluted EPS
2017   2016 2017   2016
Earnings from continuing operations $ 58.9   85.1 $ 1.11   1.59
Discontinued operations (0.3 )   (0.4 ) (0.01 )   (0.01 )
Net earnings $ 58.6     84.8   $ 1.11     1.59  
 

Year-to-Date Operating Results

 
(in millions) Nine months ended September 30
2017   2016   Change
Total revenue $ 5,390 5,058 7 %
Operating revenue (non-GAAP) $ 4,454 4,324 3 %
             
 
Earnings from continuing operations $ 148.5 215.4 (31 )%
Comparable earnings from continuing operations (non-GAAP) $ 168.1 233.0 (28 )%
Net earnings $ 147.6 214.3 (31 )%
             
 
Earnings per common share (EPS) - Diluted
Continuing operations $ 2.79 4.02 (31 )%
Comparable (non-GAAP) $ 3.16 4.35 (27 )%
Net earnings $ 2.77

4.00

(31 )%

Business Description

Ryder System, Inc. is a FORTUNE 500® commercial fleet management,
dedicated transportation, and supply chain 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:

  • 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.
  • 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.
  • 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.

Notations

Earnings Before Tax (EBT): Ryder's primary measurement of
business segment financial performance, earnings before tax (EBT),
allocates Central Support Services to each business segment and excludes
restructuring and other items, as well as non-operating pension costs.

Capital Expenditures: In Ryder's business, capital
expenditures are generally used to purchase revenue earning equipment
(trucks, tractors, and trailers) primarily to support the full service
lease product line and secondarily to support the commercial rental
product line within Ryder's FMS business segment. The level of capital
required to support the ChoiceLease product line varies directly with
customer contract signings for growth and replacement vehicles. These
contracts are long-term agreements that result in ongoing revenues and
cash flows to Ryder, typically over a three- to ten-year term. The
commercial rental product line utilizes capital for the purchase of
vehicles to replenish and expand the Company's fleet available for
shorter-term use by contractual or occasional customers.

For more information on Ryder System, Inc., visit http://investors.ryder.com/.

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 expectations regarding
market conditions, earnings performance, revenue in our business
segments, fleet size, growth in our contractual product lines, demand
and pricing trends in commercial rental and used vehicle sales, free
cash flow, capital expenditures, debt, adjusted ROC, and our 2017
outlook. Accordingly, these 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, our ability to adapt to changing market conditions, lower than
expected lease and used vehicle sales, decreases in commercial rental
demand, our ability to right-size our commercial rental fleet in line
with demand, ability to maintain normalized levels of used vehicle
inventory, ability to redeploy our used vehicles and prepare them for
sale in a cost efficient manner, ability to properly value the used
vehicle fleet, worsening of market demand for used vehicles, higher than
expected maintenance costs or lower than expected benefits from
maintenance initiatives, decreases in freight demand or volumes, ability
to execute new operations efficiently and profitably, our ability to
obtain adequate profit margins for our services due to our ability to
execute efficiently, our inability to maintain current pricing levels
due to soft economic conditions, uncertainty and instability in the
global economic market, business interruptions or expenditures due to
severe weather or natural occurrences, competition from other service
providers and new entrants, loss of key customers, unexpected bad debt
reserves or write-offs, a decrease in credit ratings, increased debt
costs, adequacy of accounting estimates, reserves and accruals
particularly with respect to pension, taxes, depreciation, insurance and
revenue, sudden or unusual changes in fuel prices, unanticipated
currency exchange rate fluctuations, our ability to manage our cost
structure and maintain access to capital markets, and the risks
described in our filings with the Securities and Exchange Commission.
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. Management believes these non-GAAP measures provide useful
information to investors regarding its core operating results. The
measures exclude costs that are passed-through to our customers, exclude
items that management does not believe are representative of our
business or supplement how we view our cash flow. These measures should
be considered in addition to, but not as a substitute for or superior
to, other measures of financial performance or liquidity prepared in
accordance with U.S. GAAP. The non-GAAP measures presented in this
release include:

Operating Revenue Measures, including operating revenue and
operating revenue growth excluding foreign exchange for Ryder and its
business segments, and segment EBT as a percentage of operating revenue.

Comparable Earnings Measures, including comparable earnings
from continuing operations, comparable earnings per share from
continuing operations (as well as forecasts), comparable earnings before
income tax and comparable tax rate.
Additionally, our adjusted
return on average capital (ROC) and adjusted return on capital spread
(ROC spread) measures are calculated based on comparable earnings items.

Cash Flow Measures, including total cash generated and free
cash flow (as well as forecasts).

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.
Additional information regarding non-GAAP financial
measures 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.

Conference Call and Webcast Information:

Ryder's earnings conference call and webcast is scheduled for Tuesday,
October 24, 2017, from 11:00 a.m. to 12:00 noon Eastern Time. Speakers
will be Chairman and Chief Executive Officer Robert Sanchez, and
Executive Vice President and Chief Financial Officer Art Garcia. To join
please click the below URL 5 minutes prior to the start of the webcast.
You will need to complete the registration page to gain access to the
webcast.

Ryder Earnings Call Webcast URL: https://pgi.webcasts.com/starthere.jsp?ei=1164918&tp_key=697945af8e

If you do not have computer speakers or headphones and/or would like to
dial-into the webcast, please dial into the phone bridge below. In
addition, please click the "listen by phone" option on the webcast
player for the optimal viewing experience.

LIVE AUDIO VIA PHONE

Please dial the audio phone number approximately ten minutes prior to
the start of the call.

          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 of the call will be available within 24 hours after the end of
the call at http://investors.ryder.com.
Interested listeners may download the audio file and either save or
listen to it on their computer or any portable MP3 player. Go to http://investors.ryder.com,
select Financials/Quarterly Reports and the date in order to access the
file.

AUDIO & SLIDE REPLAY VIA INTERNET

An audio replay including the slide presentation will be available on
the Internet within 2 hours following the call. Go to http://investors.ryder.com,
select Financials/Quarterly Reports and the date in order to access the
file.

   

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS - UNAUDITED

Periods ended September 30, 2017 and 2016

(In millions, except per share amounts)

 
Three Months Nine Months
2017   2016 2017   2016
 
Lease and rental revenues $ 823.2 803.0 $ 2,387.8 2,369.1
Services revenue 896.2 801.0 2,619.1 2,345.9
Fuel services revenue 129.1   120.4   383.0   342.8  
Total revenues 1,848.5   1,724.4   5,389.9   5,057.8  
 
Cost of lease and rental 588.6 557.9 1,745.8 1,665.7
Cost of services 761.5 658.8 2,210.3 1,936.6
Cost of fuel services 124.6 116.9 372.0 331.3
Other operating expenses* 28.4 28.0 87.1 85.9
Selling, general and administrative expenses 216.7 191.3 620.0 602.8
Non-operating pension costs 7.0 7.5 20.9 29.7
Gains on used vehicles, net* (2.7 ) (1.9 ) 11.8 (33.0 )
Interest expense 34.9 37.4 104.6 112.6
Miscellaneous income, net (4.7 ) (3.2 ) (17.6 ) (11.0 )
1,754.2   1,592.7   5,154.9   4,720.6  
 
Earnings from continuing operations before income taxes 94.3 131.7 235.0 337.2
Provision for income taxes 35.4   46.6   86.5   121.8  
Earnings from continuing operations 58.9 85.1 148.5 215.4
Loss from discontinued operations, net of tax (0.3 ) (0.4 ) (0.9 ) (1.1 )
Net earnings $ 58.6   84.8   $ 147.6   214.3  
 
Earnings (loss) per common share - Diluted
Continuing operations $ 1.11 1.59 $ 2.79 4.02
Discontinued operations (0.01 ) (0.01 ) (0.02 ) (0.02 )
Net earnings $ 1.11   1.59   $ 2.77   4.00  
 
Earnings per share information - Diluted
Earnings from continuing operations $ 58.9 85.1 $ 148.5 215.4
Less: Distributed and undistributed earnings allocated to unvested
stock
(0.2 ) (0.3 ) (0.5 ) (0.7 )
Earnings from continuing operations available to common stockholders $ 58.7   84.9   $ 148.0   214.7  
 
Weighted-average shares outstanding - Diluted 52.8   53.3   53.0   53.3  
 
EPS from continuing operations $ 1.11 1.59 $ 2.79 4.02
Non-operating pension costs 0.08 0.08 0.24 0.24
Pension settlement charge 0.06 0.06
Fees related to cost-savings program 0.05 0.05
Tax law change - rate increase 0.03 0.03
Restructuring (0.04 )
Operating tax adjustment 0.03
Pension-related adjustment       0.09  
Comparable EPS from continuing operations ** $ 1.33   1.67   $ 3.16   4.35  
* Losses from fair value adjustments on our used vehicles were
reclassified from "Other operating expenses" to "Gains on used
vehicles, net" for the periods presented.
** 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.
   

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS - UNAUDITED

(Dollars in millions)

 
September 30,
2017

December 31,
2016

 
Assets:
Cash and cash equivalents $ 65.3 58.8
Other current assets 1,187.3 1,042.8
Revenue earning equipment, net 8,249.3 8,147.7
Operating property and equipment, net 778.9 745.9
Other assets 978.2   907.3
$ 11,259.0   10,902.5
 
Liabilities and shareholders' equity:
Current liabilities $ 1,086.4 952.7
Total debt 5,349.2 5,391.3
Other non-current liabilities (including deferred income taxes) 2,648.3 2,506.2
Shareholders' equity 2,175.1   2,052.3
$ 11,259.0   10,902.5
   

SELECTED KEY RATIOS AND METRICS

 
September 30,
2017

December 31,
2016

 
Debt to equity 246 % 263 %
Effective interest rate (average cost of debt) 2.6 % 2.7 %
 
Nine months ended September 30,
2017   2016
 
Cash provided by operating activities from continuing operations $ 1,166.2 1,185.1
Free cash flow * 209.5 72.3
Capital expenditures paid

1,312.8

1,511.4
 
Capital expenditures (accrual basis) $

1,376.0

1,404.2
Less: Proceeds from sales (primarily revenue earning equipment)

(302.0

) (338.3 )
Net capital expenditures $ 1,074.1   1,065.8  
 
Twelve months ended September 30,
2017   2016
 
Return on average shareholders' equity 9.4 % 14.3 %
Return on average assets 1.8 % 2.6 %
Adjusted return on capital * 4.0 % 5.3 %
Weighted average cost of capital 4.3 % 4.3 %
Adjusted return on capital spread ** (0.3 )% 1.0 %
* 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.
   

RYDER SYSTEM, INC. AND SUBSIDIARIES

BUSINESS SEGMENT REVENUE AND EARNINGS - UNAUDITED

Periods ended September 30, 2017 and 2016

(Dollars in millions)

 
Three Months Nine Months
2017   2016   B(W) 2017   2016   B(W)
 
Total Revenue:
Fleet Management Solutions:
ChoiceLease $ 673.9 649.2 4 % $ 1,992.7 1,918.4 4 %
SelectCare 117.0 113.1 3 % 348.0 341.4 2 %
Commercial rental 216.0 216.6 % 589.4 636.0 (7 )%
Other 19.1 19.0 1 % 56.8 59.7 (5 )%
Fuel services revenue 169.8   157.1   8 % 505.1   449.0   12 %
Total Fleet Management Solutions 1,195.8 1,155.0 4 % 3,491.8 3,404.5 3 %
Dedicated Transportation Solutions 272.3 260.9 4 % 811.6 764.0 6 %
Supply Chain Solutions 496.0 416.9 19 % 1,429.5 1,207.7 18 %
Eliminations (115.6 ) (108.4 ) (7 )% (343.0 ) (318.3 ) (8 )%
Total revenue $ 1,848.5   1,724.4   7 % $ 5,389.9   5,057.8   7 %
 
 
Operating Revenue: *
Fleet Management Solutions $ 1,026.0 997.9 3 % $ 2,986.8 2,955.5 1 %
Dedicated Transportation Solutions 197.9 196.6 1 % 591.0 581.2 2 %
Supply Chain Solutions 376.4 345.5 9 % 1,096.9 999.4 10 %
Eliminations (74.9 ) (71.7 ) (4 )% (221.0 ) (212.1 ) (4 )%
Operating revenue $ 1,525.5   1,468.3   4 % $ 4,453.8   4,324.0   3 %
 
 
Business segment earnings:
Earnings from continuing operations
before income taxes:
Fleet Management Solutions $ 100.7 112.5 (11 )% $ 221.0 306.6 (28 )%
Dedicated Transportation Solutions 13.8 17.6 (22 )% 39.9 48.3 (17 )%
Supply Chain Solutions 22.1 31.0 (29 )% 75.4 79.1 (5 )%
Eliminations (14.5 ) (12.6 ) (15 )% (38.1 ) (37.1 ) (3 )%
122.1 148.4 (18 )% 298.2 396.8 (25 )%
Unallocated Central Support Services (11.0 ) (9.3 ) (19 )% (33.0 ) (30.0 ) (10 )%
Non-operating pension costs (7.0 ) (7.5 ) 7 % (20.9 ) (22.0 ) 5 %
Other items (9.7 )   NM (9.3 ) (7.7 ) NM

Earnings from continuing operations before income taxes

94.3 131.7 (28 )% 235.0 337.2 (30 )%
Provision for income taxes 35.4   46.6   24 % 86.5   121.8   29 %
Earnings from continuing operations $ 58.9   85.1   (31 )% $ 148.5   215.4   (31 )%
* 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.
   

RYDER SYSTEM, INC. AND SUBSIDIARIES

BUSINESS SEGMENT INFORMATION - UNAUDITED

Periods ended September 30, 2017 and 2016

(Dollars in millions)

 
Three Months Nine Months
2017   2016   B(W) 2017   2016   B(W)
 
Fleet Management Solutions
 
FMS total revenue $ 1,195.8 1,155.0 4 % $ 3,491.8 3,404.5 3 %
Fuel services revenue(a) (169.8 ) (157.1 ) 8 % (505.1 ) (449.0 ) 12 %
FMS operating revenue * $ 1,026.0   997.9   3 % $ 2,986.8   2,955.5   1 %
 
Segment earnings before income taxes $ 100.7   112.5   (11 )% $ 221.0   306.6   (28 )%
 
FMS earnings before income taxes as % of FMS total revenue 8.4 % 9.7 % 6.3 % 9.0 %
 
FMS earnings before income taxes as % of FMS operating revenue * 9.8 % 11.3 % 7.4 % 10.4 %
 
 
Dedicated Transportation Solutions
 
DTS total revenue $ 272.3 260.9 4 % $ 811.6 764.0 6 %
Subcontracted transportation (46.2 ) (37.7 ) 22 % (136.8 ) (106.9 ) 28 %
Fuel (28.2 ) (26.5 ) 6 % (83.7 ) (75.9 ) 10 %
DTS operating revenue * $ 197.9   196.6   1 % $ 591.0   581.2   2 %
 
Segment earnings before income taxes $ 13.8   17.6   (22 )% $ 39.9   48.3   (17 )%
 
DTS earnings before income taxes as % of DTS total revenue 5.1 % 6.7 % 4.9 % 6.3 %
 
DTS earnings before income taxes as % of DTS operating revenue * 7.0 % 8.9 % 6.7 % 8.3 %
 
 
Supply Chain Solutions
 
SCS total revenue $ 496.0 416.9 19 % $ 1,429.5 1,207.7 18 %
Subcontracted transportation (101.7 ) (56.1 ) 81 % (279.3 ) (162.7 ) 72 %
Fuel (17.8 ) (15.4 ) 16 % (53.3 ) (45.5 ) 17 %
SCS operating revenue * $ 376.4   345.5   9 % $ 1,096.9   999.4   10 %
 
Segment earnings before income taxes $ 22.1   31.0   (29 )% $ 75.4   79.1   (5 )%
 
SCS earnings before income taxes as % of SCS total revenue 4.4 % 7.4 % 5.3 % 6.6 %
 
SCS earnings before income taxes as % of SCS operating revenue * 5.9 % 9.0 % 6.9 % 7.9 %
* Non-GAAP financial measure. A reconciliation of (1) GAAP total
revenue to operating revenue for each business segment (FMS, DTS and
SCS) 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 DTS and SCS.
     

RYDER SYSTEM, INC. AND SUBSIDIARIES

BUSINESS SEGMENT INFORMATION - UNAUDITED

KEY PERFORMANCE INDICATORS

 

Three months ended
September 30,

Nine months ended
September 30,

Change 2017/2016
2017   2016 2017   2016

Three
Months

 

Nine
Months

 
ChoiceLease
Average fleet count 137,200 135,100 137,400 133,800 2% 3%
End of period fleet count 137,300 136,600 137,300 136,600 1% 1%
Miles/unit per day change - % (a) (1.6 )% 1.7 % (0.6 )% 1.6 %
 
 
Commercial rental
Average fleet count 37,600 38,300 37,500 39,600 (2)% (5)%
End of period fleet count 37,800 38,000 37,800 38,000 (1)% (1)%
Rental utilization - power units 78.0 % 76.7 % 73.7 % 73.9 % 130 bps (20) bps
Rental rate change - % (b) 0.9 % (0.2 )% 1.0 % (0.3 )%
 
 
Customer vehicles under
SelectCare
Average fleet count 52,800 49,600 51,300 49,000 6% 5%
End of period fleet count 54,400 49,300 54,400 49,300 10% 10%
 
 
Customer vehicles under
on-demand maintenance (c)
Fleet serviced during the period 8,700 8,000 20,600 22,700 9% (9)%
 
 
DTS
Average fleet count (d) 8,200 8,300 8,200 8,200 (1)% —%
End of period fleet count(d) 8,300 8,200 8,300 8,200 1% 1%
 
 
SCS
Average fleet count (d) 7,900 7,400 7,800 7,100 7% 10%
End of period fleet count(d) 8,000 7,300 8,000 7,300 10% 10%
 
 
Used vehicle sales (UVS)
Average UVS inventory 6,900 8,700 6,900 8,600 (21)% (20)%
End of period fleet count 6,300 7,500 6,300 7,500 (16)% (16)%
Used vehicles sold 4,700 4,000 13,500 13,800 18% (2)%
UVS pricing change - % (e)
Tractors (19 )% (13 )% (17 )% (12 )%
Trucks (15 )% 2 % (16 )% 1 %

Notes:

(a)   Represents the percentage change compared to prior year period in
miles driven per vehicle per workday on US lease power units.
(b) Represents percentage change compared to prior year period in
average global rental rate per day on power units using constant
currency.
(c) 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.
(d) These vehicle counts are also included within the average fleet
counts for ChoiceLease, commercial rental and SelectCare.
(e) Represents percentage change compared to prior year period in
average sales proceeds on used vehicle sales using constant currency.

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 presentation:

 
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
DTS Operating Revenue DTS Total Revenue
SCS Operating Revenue SCS Total Revenue

Operating Revenue Growth
Excluding Foreign Exchange

Total Revenue

Appendix - Non-GAAP Financial
Measure Reconciliations

FMS EBT as a % of FMS Operating
Revenue

FMS EBT as a % of FMS Total Revenue Business Segment Information - Unaudited

DTS EBT as a % of DTS Operating
Revenue

DTS EBT as a % of DTS Total Revenue

SCS EBT as a % of SCS Operating
Revenue

SCS EBT as a % of SCS Total Revenue

Comparable Earnings Measures:

   

Comparable Earnings Before Tax
and Comparable Tax Rate

Earnings Before Tax and Tax Rate

Appendix - Non-GAAP Financial
Measure Reconciliations

Comparable Earnings Earnings from Continuing Operations

Appendix - Non-GAAP Financial
Measure Reconciliations

Comparable EPS and Comparable EPS
Forecast

EPS from Continuing Operations

EPS Forecast from Continuing Operations

Consolidated Condensed Statements of
Earnings - Unaudited

 

Appendix - Non-GAAP Financial
Measure Reconciliations
(Forecast)

Adjusted Return on Average 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

Cash Flow Measures:

   

Total Cash Generated and Free Cash
Flow

Cash Provided by Operating Activities

Appendix - Non-GAAP Financial
Measure Reconciliations

       

RYDER SYSTEM, INC. AND SUBSIDIARIES

APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS -
UNAUDITED

(Dollars in millions)

 

OPERATING REVENUE RECONCILIATION

 

Three months ended
September 30,

Nine months ended
September 30,

2017 2016 2017 2016
 
Total revenue $ 1,848.5 1,724.4 $ 5,389.9 5,057.8
Fuel (175.1 ) (162.3 ) (520.0 ) (464.2 )
Subcontracted transportation (148.0 ) (93.8 ) (416.2 ) (269.6 )
Operating revenue * $ 1,525.5   1,468.3   $ 4,453.8   4,324.0  
 

OPERATING REVENUE GROWTH EXCLUDING
FOREIGN EXCHANGE RECONCILIATION

 
Third Quarter Year-to-Date

2017 vs
2016 Growth

  Fx Impact (a)  

Growth excl
Fx*

2017 vs
2016 Growth

  Fx Impact (a)  

Growth excl
Fx*

 
RSI Total Revenue 7 % % 7 % 7 % % 7 %
RSI Operating Revenue* 4 % % 4 % 3 % % 3 %
FMS Total Revenue 4 % % 4 % 3 % (1 )% 4 %
FMS Operating Revenue* 3 % % 3 % 1 % (1 )% 2 %
SCS Total Revenue 19 % 1 % 18 % 18 % % 18 %
SCS Operating Revenue* 9 % 1 % 8 % 10 % % 10 %
ChoiceLease Revenue 4 % % 4 % 4 % % 4 %
Commercial Rental Revenue % (1 )% 1 % (7 )% % (7 )%
   

TOTAL CASH GENERATED/FREE CASH FLOW
RECONCILIATION

 
Nine months ended September 30,
2017 2016
 
Net cash provided by operating activities from continuing operations $ 1,166.2 1,185.1
Proceeds from sales (primarily revenue earning equipment) (b)

302.0

338.3
Collections on direct finance leases and other items (b) 54.2   60.2  
Total cash generated *

1,522.4

1,583.7
Purchases of property and revenue earning equipment (b)

(1,312.8

) (1,511.4 )
Free cash flow ** $ 209.5   72.3  
 
Memo:
Net cash provided by (used in) financing activities $ (191.3 ) (55.6 )
Net cash used in investing activities $ (962.2 ) (1,108.6 )

Notes:

(a)  

FX impact was calculated by dividing the results for the current
and prior year periods by the exchange rates in effect on
September 30, 2016, which was the last day of the prior year
period, rather than the actual exchange rates in effect as of
September 30, 2017.

(b) Included in cash flows from investing activities.
** Non-GAAP financial measure.
** Non-GAAP financial measure. We refer to the net amount of cash
generated from operating activities and investing activities
(excluding changes in restricted cash and acquisitions) from
continuing operations as "free cash flow". We calculate free cash
flow as the sum of net cash provided by operating activities 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
property and revenue earning equipment.
 
Note: Amounts may not be additive due to rounding.
   

RYDER SYSTEM, INC. AND SUBSIDIARIES
APPENDIX -
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED

(Dollars in millions)

 

ADJUSTED RETURN ON CAPITAL RECONCILIATION

 
Twelve months ended September 30,
2017 2016
 
Net earnings (12-month rolling period) $ 195.1 291.2
+ Restructuring and other items 14.2 21.9
+ Income taxes 106.3   158.0  
Adjusted earnings before income taxes 315.6 471.1
+ Adjusted interest expense (a) 140.0 148.4
- Adjusted income taxes (b) (159.2 ) (217.4 )
= Adjusted net earnings for ROC (numerator) [A] $ 296.4   402.1  
 
Average total debt $ 5,378.2 5,559.1
Average off-balance sheet debt 1.2 1.6
Average shareholders' equity 2,093.6 2,026.1
Adjustment to equity (c) 1.7   2.6  
Adjusted average total capital (denominator) [B] $ 7,474.7   7,589.4  
 
Adjusted ROC * [A]/[B] 4.0 % 5.3 %

Notes:

(a) Represents reported interest expense plus imputed interest on
off-balance sheet obligations.
(b) Represents provision for income taxes plus income taxes on
restructuring and other items and adjusted interest expense.
(c) Represents the impact to equity of items to arrive at comparable
earnings.

* 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 is set forth in this table.

 
Note: Amounts may not be additive due to rounding.
 

RYDER SYSTEM, INC. AND SUBSIDIARIES

APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS -
UNAUDITED

(In millions, except per share amounts)

 

COMPARABLE EARNINGS/EARNINGS BEFORE
INCOME TAX/TAX RATE RECONCILIATION

   
2017

Consolidated Statements of
Earnings Line Item

Three Months Nine Months
 
Earnings from continuing operations before income taxes $ 94.3 235.0
Non-operating pension costs Non-operating pension 7.0 20.9
Pension settlement charge SG&A 5.5 5.5
Fees related to cost-savings program SG&A 4.3 4.3
Operating tax adjustment SG&A 2.2
Restructuring Miscellaneous income   (2.6 )
Comparable earnings from continuing operations before income taxes* 111.0   265.2  
 
Provision for income taxes (35.4 ) (86.5 )
Income tax effects of non-GAAP adjustments** (4.8 ) (10.7 )
Comparable provision for income taxes** (40.2 ) (97.1 )
 
Earnings from continuing operations 58.9 148.5
Non-operating pension costs Non-operating pension 4.0 12.1
Pension settlement charge SG&A 3.3 3.3
Fees related to cost-savings program SG&A 2.7 2.7
Tax law change - rate increase Provision for income taxes 1.8 1.8
Operating tax adjustment SG&A 1.7
Restructuring Miscellaneous income   (2.1 )
Comparable earnings from continuing operations* $ 70.8   $ 168.1  
 
Tax rate on continuing operations 37.6 % 36.8 %
Income tax effects of non-GAAP adjustments** (1.4 )% (0.2 )%
Comparable tax rate on continuing operations** 36.2 % 36.6 %
  2016

Consolidated Statements of
Earnings Line Item

Three Months   Nine Months
 
Earnings from continuing operations before income taxes $ 131.7 337.2
Non-operating pension costs Non-operating pension 7.4 22.0
Pension-related adjustment Non-operating pension   7.7  
Comparable earnings from continuing operations before income taxes* 139.1   366.9  
 
Provision for income taxes (46.6 ) (121.8 )
Income tax effects of non-GAAP adjustments** (3.0 ) (12.0 )
Comparable provision for income taxes** (49.6 ) (133.8 )
 
Earnings from continuing operations 85.1 215.4
Non-operating pension costs Non-operating pension 4.4 12.9
Pension-related adjustment Non-operating pension   4.8  
Comparable earnings from continuing operations* $ 89.6   233.0  
 
Tax rate on continuing operations 35.4 % 36.1 %
Income tax effects of non-GAAP adjustments** 0.3 % 0.3 %
Comparable tax rate on continuing operations** 35.7 % 36.4 %
* Non-GAAP financial measure.
** 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.
   

RYDER SYSTEM, INC. AND SUBSIDIARIES

APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS -
UNAUDITED

 

COMPARABLE EARNINGS PER SHARE FORECAST
RECONCILIATION

 
Comparable earnings per share from continuing operations forecast:*

Fourth Quarter
2017

Full Year
2017

EPS from continuing operations $1.16 to $1.26 $3.95 to $4.05
Non-operating pension costs, net of tax 0.08 0.31
Restructuring and other charges 0.07 0.20
Comparable EPS from continuing operations forecast* $1.31 to $1.41 $4.46 to $4.56
 

Note: Amounts may not be additive due to rounding.

 

TOTAL CASH GENERATED/FREE CASH FLOW
FORECAST RECONCILIATION

 
2017 Forecast
Net Cash Provided by Operating Activities from Continuing Operations $ 1,600
Proceeds from sales (primarily revenue earning equipment) (1) 390
Collections of direct finance leases (1) 80  
Total cash generated* 2,070
 
Capital expenditures (1) (1,820 )
Free cash flow ** $ 250  
 
Memo:
Net cash used in financing activities $ 250
Net cash used in investing activities $ 1,300

(1)

  Included in cash flows from investing activities.
 
* Non-GAAP financial measure.
** Non-GAAP financial measure. We refer to the net amount of cash
generated from operating activities and investing activities
(excluding changes in restricted cash and acquisitions) from
continuing operations as "free cash flow". We calculate free cash
flow as the sum of net cash provided by operating activities 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
property and revenue earning equipment.

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