RYDER SYSTEM, INC. Presented to: Stephens Fall Investment Conference November 16, 2011 Art Garcia EVP & CFO
Safe Harbor Certain statements and information included in this presentation are "forward-looking statements" under the Federal Private Securities Litigation Reform Act of 1995. 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, a slowdown of the economic recovery and decreases in freight demand, our ability to obtain adequate profit margins for our services, our inability to maintain current pricing levels due to soft economic conditions, uncertainty or decline in economic and market conditions affecting contractual lease demand, decreases in market demand in the commercial rental market and the sale of used vehicles, competition from other service providers, customer retention levels, unexpected volatility or declines in automotive or high-tech volume, loss of key customers in the Supply Chain Solutions (SCS) business segment, unexpected reserves or write-offs due to the deterioration of the credit worthiness or bankruptcy of customers, changes in financial, tax or regulatory requirements or 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 resulting from volatile financial markets, inability to achieve planned synergies and customer retention levels or anticipate costs and liabilities from acquisitions, labor strikes or work stoppages affecting our or our customers business operations, driver shortages and increasing driver costs, adequacy of accounting estimates, reserves and accruals particularly with respect to pension, taxes, insurance and revenue, a decline in pension plan returns, changes in obligations relating to multi-employer plans, sudden or unusual changes in fuel prices, our ability to manage our cost structure, new accounting pronouncements, rules or interpretations, changes in government regulations, adverse impacts of recently enacted regulations regarding vehicle emissions, the inability to prevent a data privacy breach, unanticipated outcomes in legal proceedings 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.
Our Mission Ryder is committed to being the leading provider of outsourced transportation and logistics solutions in our target markets. We strive to provide exceptional service to our customers and achieve superior results for our shareholders through our guiding principles and core values.
Our Corporate Strategies Be recognized by customers as the premier provider of outsourced transportation and supply chain solutions in our target markets by performing these functions more efficiently and cost effectively than they could themselves Accelerate profitable growth through exceptional operational execution, introduction of new products/services and targeted acquisitions Develop an enhanced innovation culture to further capture longterm, profitable growth opportunities Attract, develop and retain the most capable talent, allowing employees to maximize their potential
Ryder Profile Fleet Management Solutions Dedicated Contract Carriage Supply Chain Solutions Full Year 2010 Revenue (1) $5.1 Billion Operating Revenue (1) $4.2 Billion Comparable Earnings Before Income Taxes (1) $189 Million Comparable Earnings (1) $117 Million Free Cash Flow (1) $258 Million Assets $6.7 Billion Assets Under Customer Leases $3.6 Billion Vehicles Maintained 182,100 Employees 25,900 (1) These amounts result from continuing operations.
Fleet Management Solutions: Product and Services Overview Fleet Management Solutions Commercial Rental Thousands of clean, mechanically-sound commercial vehicles for short-term customer needs Lease support Contract Maintenance Flexible package of maintenance and fleet support services Vehicles are owned by our clients or under third-party finance lease contract Full Service Lease Custom vehicle specifications State-of-the-art preventive maintenance Comprehensive package of fleet support services 13,200 Lease/Maintenance Customers (U.S., Canada, U.K.) Fleet Support Services Insurance Fuel Safety Regulatory reporting Contract-Related Maintenance Ancillary maintenance work on Ryder or customer owned vehicles not included in base contract Supply Chain Solutions
Dedicated Contract Carriage: Product and Services Overview 150 Customers (North America, U.K.) Dedicated Contract Carriage Turnkey transportation service with drivers, vehicles, maintenance, routing & scheduling, management & administrative support
Supply Chain Solutions: Product and Services Overview Supply Chain Solutions Professional Services Distribution Management Dedicated Transportation Management Strategic consulting & decision support Solutions engineering Network modeling & optimization Total landed cost Lean Six Sigma Order fulfillment Warehouse and distribution center operations Inbound materials management Outbound product support Reverse logistics Vendor managed inventory Kitting, packaging & assembly Dedicated Contract Carriage Freight procurement & contract management Shipment planning and execution Freight brokerage Freight bill audit and payment Origin/destination services Supported by: IT Solutions Transportation & warehouse management systems Network optimization tools Inventory & shipment visibility tools 470 Customers (North America, Asia)
Market Overview The transportation and logistics markets present significant growth opportunities. Current estimated market sizes are as follows: Market Segment Lease and rental market (outsourced) U.S., Canada, U.K. Private fleet market (non-outsourced) U.S., Canada Dedicated contract carriage market (outsourced) U.S. Supply chain logistics market (outsourced) North America and Asia Market Size 0.8 million vehicles 4.2 million vehicles $14 billion $310 billion Note: Vehicle market shown is class 3-8 Sources: Truck Rental and Leasing Association, R.L. Polk, Monitor Group, A.T. Kearney
Fleet Management Solutions: Macro Trends Favoring FMS actual forecast 450 400 350 300 250 200 150 100 50 actual forecast 0 2005 2006 2007 2008 2009 2010 2011F2012F2013F2014F2015F2016F Source: ACT Research Source: Global Insight Deferred replacements resulted in record fleet aging which should lead to increased truck sales in the coming years
Fleet Management Solutions: Macro Trends Favoring FMS Access to Capital Bank Capital Requirements Capital Customers likely to utilize alternative financing sources (e.g., OEM captive finance, Full Service Lease and Fleet Management)
Fleet Management Solutions: Macro Trends Favoring FMS EPA 2007 EPA 2010 $ Increasing complexity and costs are expected to favor outsourcing vehicle financing and maintenance
Key Financial Statistics 3Q Year-To-Date ($ Millions, Except Per Share Amounts) 2011 2010 % B/(W) Operating Revenue (1) $ 3,577.6 $ 3,096.3 16% Fuel Services and Subcontracted Transportation Revenue 931.9 726.7 28% Total Revenue $ 4,509.4 $ 3,823.0 18% Earnings Per Share From Continuing Operations $ 2.39 $ 1.57 52% Comparable Earnings Per Share From Continuing Operations (1) $ 2.52 $ 1.57 61% Earnings Per Share (2) $ 2.35 $ 1.53 54% Memo: Average Shares (Millions ) - Diluted 50.9 52.2 Tax Rate From Continuing Operations 40.0% 39.2% Comparable Tax Rate From Continuing Operations (1) 37.5% 39.2% Adjusted Return on Capital (Trailing 12 month ) (1) 5.5% 4.5% (1) Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures. (2) Includes discontinued operations and restructuring charges and other items.
Key Leading Indicators The key leading indicators for Ryder s business are strong. Third quarter results included: Commercial Rental: Utilization (a) Pricing (a) Fleet Count (Average) Used Vehicle Pricing: Tractors Trucks Lease: Miles per Unit (b) Early Lease Terminations (c) Dedicated/Supply Chain Solutions: Volumes 79.3%, up 10 bps vs. prior year up 11% from prior year up 30% over prior year up 39% over prior year; up 6% over 2Q11 up 20% over prior year; up 5% over 2Q11 down 1.5% from prior year down 22% from prior year overall volumes higher (a) (b) (c) Global power units U.S. power units U.S. 14
Financial Indicators Forecast (1) Total Cash Generated (2) (3) Gross Capital Expenditures (3) ($ Millions) $1,054 $1,091 $949 $835 $1,381 $1,179 $1,252 $1,684 $1,571 $1,328 $1,266 $1,500 Full Service Lease Commercial Rental $1,757 PP&E/Other $1,399 $1,289 $1,165 $1,182 $657 $725 $600 $1,265 $611 $1,088 $1,755 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Forecast 2000 2001 2002 2003 2004 2005 Memo: Free Cash Flow (2) (3) 2006 2007 2008 2009 2010 2011 Forecast (242) 131 367 357 289 (208) (4) (439) 380 341 614 258 (215) (5) Total Obligations to Equity Ratio (2) 275% 234% Total Obligations to Equity Balance Sheet Debt to Equity 201% 146% 129% 151% 168% 157% 275% 225% 183% 203% 220% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Long Forecast Term Target Midpoint Mispoint (1) Obligations to Equity include acquisitions. Free Cash Flow and Gross Capital Expenditures exclude acquisitions. Forecast provided on 10/25//11 and has not subsequently been confirmed or revised (2) Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures. (3) 2000-2004 not restated for operations discontinued in 2009. (4) Includes $176 million payment to the IRS related to full resolution of 1998-2000 tax period matters. (5) 2011 Forecast range is ($190-240) million. Forecast provided on 10/25/11 and has not subsequently been confirmed or revised Significant and predictable cash generation Invest in growth (organic, acquisitions) Over time appropriately move financial leverage towards long term target of 250-300% Total Obligations to Equity
Summary Benefiting from strong performance in transactional businesses and accretive acquisitions Anticipate lease fleet growth through replacement cycle - managing through impact of fleet aging Focus on driving long-term contractual revenue growth in all segments through strong customer retention and new business development, growth initiatives and strategic investments Continuing to drive process improvement and cost savings Each of Ryder s businesses operate in very large markets Market trends play favorably into long-term outsourcing decisions (aging fleets, increasing complexity/cost of vehicle technology, emissions standards, CSA, complex and changing global supply chains, etc.) Strong balance sheet, cash flow and liquidity position Ryder is well positioned for success with a lower cost structure, wellaligned fleet, strong balance sheet, strong market position and competitive posture, solid value proposition and significant growth opportunities
Questions & Answers Art Garcia EVP & CFO
Appendix Non-GAAP Financial Measures
Appendix: 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 and an explanation why management believes that presentation of the non-gaap financial measure provides useful information to investors. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP. Specifically, the following non-gaap financial measures are included in this presentation: Non-GAAP Financial Measure Comparable GAAP Measure Reconciliation & Additional Information Presented on Slide Titled Operating Revenue (1) Total Revenue Key Financial Statistics Comparable Earnings / EPS from Continuing Operations Earnings / EPS from Continuing Operations Appendix - Earnings and EPS from Continuing Operations Reconciliation Adjusted Return on Capital Net Earnings Appendix - Adjusted Return on Capital Reconciliation Total Cash Generated/Free Cash Flow Cash Provided by Operating Activities Appendix - Cash Flow Reconciliation Total Obligations to Equity Debt to Equity Appendix - Debt to Equity Reconciliation (1) The Company uses operating revenue, a non-gaap financial measure, to evaluate the operating performance of the business and as a measure of sales activity. Fuel services revenue net of related intersegment billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. Subcontracted transportation revenue is excluded from the operating revenue computation as it is largely a pass through to customers and the Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
Appendix: Non-GAAP Financial Measures ($ Millions or $ Earnings Per Share) Earnings and EPS from Continuing Operations Reconciliation (1) 3Q11-3Q11 - Earnings EPS Reported $ 56.9 $ 1.10 Tax Benefits (0.6) (0.01) Comparable $ 56.4 $ 1.09 YTD 11 - YTD 11 - Earnings EPS Reported $ 123.7 $ 2.39 Tax Law Changes / Benefits 4.8 0.09 Acquisition Related Transaction Costs 1.5 0.03 Restructuring Charges 0.5 0.01 Comparable $ 130.5 $ 2.52 20
Appendix: Non-GAAP Financial Measures Adjusted Return on Capital Reconciliation 9/30/11 9/30/10 Net Earnings (1) $ 159 $ 89 Restructuring and Other Charges, Net and Other Items 9 16 Income Taxes 90 62 Adjusted Earnings Before Income Taxes 257 167 Adjusted Interest Expense (2) 136 133 Adjusted Income Taxes (3) (148) (118) Adjusted Net Earnings $ 245 $ 182 ($ Millions) Average Total Debt $ 2,916 $ 2,480 Average Off-Balance Sheet Debt 86 120 Average Adjusted Total Shareholders' Equity 1,433 1,410 Average Adjustments to Shareholders' Equity (4) 1 7 Adjusted Average Total Capital $ 4,437 $ 4,017 Adjusted Return on Capital (5) 5.5% 4.5% (1) Earnings calculated based on a 12-month rolling period. (2) Interest expense includes implied interest on off-balance sheet vehicle obligations. (3) Income taxes were calculated by excluding taxes related to comparable earnings items and interest expense. (4) Represents comparable earnings items for those periods. (5) The Company adopted adjusted return on capital, a non GAAP financial measure, as the Company believes that both debt (including off-balance sheet debt) and equity should be included in evaluating how effectively capital is utilized across the business.
Appendix: Non-GAAP Financial Measures Cash Flow Reconciliation ($ Millions) 12/31/00 (5) 12/31/01 (5) 12/31/02 (5) 12/31/03 (5) 12/31/04 (5) 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 Cash Provided by Operating Activities $ 1,023 $ 365 $ 617 $ 803 $ 867 $ 776 $ 852 $ 1,097 $ 1,248 $ 985 Less: Changes in Bal. of Trade Rec. Sold (270) 235 110 - - - - - - - Collections of Direct Finance Leases 67 66 66 61 64 69 65 62 61 65 Proceeds from Sale (Prim. Rev. Earn. Equip.) 230 173 152 210 331 333 332 373 262 216 Proceeds from Sale & Leaseback of Assets - - - 13 118 - - 150 - - Other Investing, Net 4 (4) 4 4 1-2 2 - - Total Cash Generated (1) 1,054 835 949 1,091 1,381 1,179 1,252 1,684 1,571 1,266 Capital Expenditures (2) (1,296) (704) (582) (734) (1,092) (1,387) (1,691) (1,304) (1,230) (652) Free Cash Flow (3)(4) $ (242) $ 131 $ 367 $ 357 $ 289 $ (208) $ (439) $ 380 $ 341 $ 614 Memo: Depreciation Expense $ 580 $ 545 $ 552 $ 625 $ 706 $ 735 $ 739 $ 811 $ 836 $ 881 Gains on Vehicle Sales, Net $ 19 $ 12 $ 14 $ 16 $ 35 $ 47 $ 51 $ 44 $ 39 $ 12 (1) The Company uses total cash generated, a non-gaap financial measure, because management considers it to be an important measure of comparative operating performance. Management believes total cash generated provides investors with an important measure of total cash inflows generated from our on-going business activities which include sales of revenue earning equipment, sales of operating property and equipment, sale and leaseback of revenue earning equipment, collections on direct finance leases and other cash inflows. (2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (3) The Company uses free cash flow, a non-gaap financial measure, because management considers it to be an important measure of comparative operating performance. Management believes free cash flow provides investors with an important perspective on the cash available for debt service and shareholders after making capital investments required to support ongoing business operations. The calculation of free cash flow may be different from the calculation used by other companies and therefore comparability may be limited. (4) Free Cash Flow excludes acquisitions and changes in restricted cash. (5) Amounts have not been recasted for operations discontinued in 2009.
Appendix: Non-GAAP Financial Measures Cash Flow Reconciliation ($ Millions) 12/31/10 9/30/10 9/30/11 Cash Provided by Operating Activities from Continuing Operations $ 1,028 $ 804 $ 782 Proceeds from Sales (Primarily Revenue Earning Equipment) 235 162 224 Collections of Direct Finance Leases 62 46 46 Other, Net 3 2 - Total Cash Generated (1) 1,328 1,014 1,052 Capital Expenditures (2) (1,070) (861) (1,165) Free Cash Flow (3)(4) $ 258 $ 153 $ (113) Memo: Depreciation Expense $ 834 $ 628 $ 645 Gains on Vehicle Sales, Net $ 29 $ (18) $ (46) (1) The Company uses total cash generated, a non-gaap financial measure, because management considers it to be an important measure of comparative operating performance. Management believes total cash generated provides investors with an important measure of total cash inflows generated from our on-going business activities which include sales of revenue earning equipment, sales of operating property and equipment, sale and leaseback of revenue earning equipment, collections on direct finance leases and other cash flows. (2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (3) The Company uses free cash flow, a non-gaap financial measure, because management considers it to be an important measure of comparative operating performance. Management believes free cash flow provides investors with an important perspective on the cash available for debt service and shareholders after making capital investments required to support ongoing business operations. The calculation of free cash flow may be different from the calculation used by other companies and therefore comparability may be limited. (4) Free Cash Flow excludes acquisitions and changes in restricted cash.
Appendix: Non-GAAP Financial Measures Debt to Equity Reconciliation ($ Millions) % to % to % to % to % to % to % to % to 12/31/00 Equity 12/31/01 Equity 12/31/02 Equity 12/31/03 Equity 12/31/04 Equity 12/31/05 Equity 12/31/06 Equity 12/31/07 Equity Balance Sheet Debt $2,017 161% $1,709 139% $1,552 140% $1,816 135% $1,783 118% $2,185 143% $2,817 164% $2,776 147% Receivables Sold 345 110 - - - - - - PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 879 625 370 153 161 117 78 178 PV of contingent rentals under securitizations 209 441 311 - - - - - Total Obligations (1) $3,450 275% $2,885 234% $2,233 201% $1,969 146% $1,944 129% $2,302 151% $2,895 168% $2,954 157% (1) The Company uses total obligations and total obligations to equity, non-gaap financial measures, which include certain off-balance sheet financial obligations relating to revenue earning equipment. Management believes these non-gaap financial measures are useful to investors as they are more complete measures of the Company s existing financial obligations and help investors better assess the Company s overall leverage position. Note: In connection with adopting FIN 46 effective July 1, 2003, the Company consolidated the vehicle securitization trusts previously disclosed as off-balance sheet debt.
Appendix: Non-GAAP Financial Measures Debt to Equity Reconciliation ($ Millions) % to % to % to % to % to 12/31/08 Equity 12/31/09 Equity 12/31/10 Equity 9/30/10 Equity 9/30/11 Equity Balance Sheet Debt $2,863 213% $2,498 175% $2,747 196% $2,530 180% $3,199 220% Receivables Sold - - - - - PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 163 119 100 114 65 Total Obligations $3,026 225% $2,617 183% $2,847 203% $2,644 188% $3,263 225%