Fourth Quarter 2017 Earnings & 2018 Forecast Conference Call February 16, 2018 2015 Ryder System, Inc.
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 expectations regarding market trends, earnings performance, revenue in our business segments, fleet size, performance in our product lines and segments, the strength of our sales pipeline, demand and pricing trends in commercial rental and used vehicle sales, residual values, return on capital spread, operating cash flow, free cash flow, capital expenditures, our ability to make investments in sales, marketing, IT and new product initiatives, the impact from tax reform on our earnings and demand for our services, and the impact and adequacy of steps we have taken to address our cost structure, including workforce reductions and the implementation of zero-based budgeting program. Accordingly, these forwardlooking 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 sales, decreases in commercial rental demand or poor acceptance of rental pricing, our ability to return out of service vehicles to the fleet, availability of rental vehicles to meet demand and availability of labor to maintain our fleet at normalized levels, worsening of market demand for used vehicles impacting current pricing and our anticipated proportion of retail versus wholesale sales, lack of customer demand for our services, higher than expected maintenance costs due to, among other things, lower than expected benefits from maintenance initiatives and a newer fleet, setbacks or uncertainty in the economic market, decreases in freight demand or volumes, poor operational execution particularly with new accounts and product launches, our ability to obtain adequate profit margins for our services, our inability to maintain current pricing levels due to soft economic conditions, business interruptions or expenditures due to severe weather or natural occurrences, competition from other service providers and new entrants, customer retention levels, loss of key customers, driver and technician shortages resulting in higher procurement costs and turnover rates, unexpected bad debt reserves or write-offs, changes in customers business environments that will limit their ability to commit to long-term vehicle leases, a decrease in credit ratings, increased debt costs, adequacy of accounting estimates, 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 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 presentation includes certain non-gaap financial measures as defined under SEC rules, including: Comparable Earnings Measures, which consist of 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. Operating Revenue Measures, which consist of operating revenue and operating revenue growth excluding foreign exchange for Ryder and its business segments, and segment EBT as a percentage of operating revenue. Cash Flow Measures, which consist of total cash generated and free cash flow. Debt Measures, including total obligations and total obligations to equity. Refer to Appendix - Non-GAAP Financial Measures, beginning on slide 43, for reconciliations of the non-gaap financial measures contained in this presentation to the nearest GAAP measure. Additional information regarding non-gaap financial measures as required by Regulation G and Item 10(e) of Regulation S-K can be found in our most recent Form 10-K and our Form 8-K filed with the SEC as of the date of this presentation, which are available at http://investors.ryder.com. 2
Contents Fourth Quarter 2017 Results Overview Used Vehicle Sales Update 2018 Forecast Three-Year Financial Targets Q & A 3
4th Quarter Results Overview Earnings per diluted share from continuing operations were $12.10 in 4Q17 vs. $0.92 in 4Q16-4Q17 included a net benefit from tax reform of $10.77, non-operating pension costs of $0.07, gain on a property sale of $0.27, and restructuring charges and fees of $0.24-4Q16 included non-operating pension costs of $0.09, and restructuring charges and fees of $0.06 Comparable earnings per share from continuing operations were $1.37 in 4Q17 vs. $1.07 in 4Q16 Total revenue increased 12% and operating revenue increased 8% vs. prior year - Total revenue and operating revenue grew in all business segments reflecting new business and higher volumes - Total revenue also grew due to higher fuel costs passed through to customers 4
Key Financial Statistics Fourth Quarter ($ Millions, Except Per Share Amounts) 2017 2016 %B/(W) Total Revenue $ 1,939.7 $ 1,729.2 12% Fuel and Subcontracted Transportation 353.1 262.2 35% Operating Revenue $ 1,586.6 $ 1,466.9 8% Earnings Per Share from Continuing Operations $ 12.10 $ 0.92 NM Comparable Earnings Per Share from Continuing Operations $ 1.37 $ 1.07 28% Memo: Average Shares (Millions) - Diluted 53.1 53.4 Tax Rate from Continuing Operations (715.4)% 28.8% Comparable Tax Rate from Continuing Operations 30.4% 30.1% Note: Amounts throughout presentation may not be additive due to rounding. 5
Key Financial Statistics Full Year ($ Millions, Except Per Share Amounts) 2017 2016 %B/(W) Total Revenue $ 7,329.6 $ 6,787.0 8% Fuel and Subcontracted Transportation 1,289.2 996.1 29% Operating Revenue $ 6,040.4 $ 5,790.9 4% Earnings Per Share from Continuing Operations $ 14.87 $ 4.94 NM Comparable Earnings Per Share from Continuing Operations $ 4.53 $ 5.42 (16)% Memo: Average Shares (Millions) - Diluted 53.0 53.4 Tax Rate from Continuing Operations (152.1)% 34.9% Comparable Tax Rate from Continuing Operations 34.9% 35.3% Adjusted Return on Capital vs. Cost of Capital (Trailing 12 months) (0.2)% 0.5% Note: Amounts throughout presentation may not be additive due to rounding. 6
4th Quarter Results Overview FMS Fleet Management Solutions (FMS) total revenue up 8% and operating revenue up 7% - ChoiceLease revenue up 6% - SelectCare revenue up 7% - Commercial rental revenue up 7% FMS earnings increased due to improved used vehicle sales results, and higher commercial rental and lease performance - Prior year used vehicle sales results included a valuation adjustment of $21 million FMS earnings before tax (EBT) up 43% - FMS EBT percent of FMS total revenue up 180 basis point to 7.4% - FMS EBT percent of FMS operating revenue up 220 basis points to 8.7% 7
4th Quarter Results Overview DTS Dedicated Transportation Solutions (DTS) total revenue up 11% and operating revenue up 3% - DTS total revenue reflect higher purchased transportation costs and increased operating revenue - DTS operating revenue growth reflects increased volumes DTS earnings increased due to favorable developments related to self-insurance claims from prior years, largely offset by higher driver costs related to increased turnover and seasonal volumes, and increased maintenance costs on certain older model year vehicles DTS earnings before tax (EBT) up 1% - DTS EBT percent of DTS total revenue down 50 basis points to 5.4% - DTS EBT percent of DTS operating revenue down 10 basis points to 7.8% 8
4th Quarter Results Overview SCS Supply Chain Solutions (SCS) total revenue up 26% and operating revenue up 16% - Higher SCS total revenue and operating revenue primarily reflect new business SCS earnings increased primarily due to revenue growth, partially offset by lower performance in two customer accounts and higher planned investments in IT SCS earnings before tax (EBT) up 5% - SCS EBT percent of SCS total revenue down 100 basis points to 5.1% - SCS EBT percent of SCS operating revenue down 70 basis points to 6.8% 9
One-Time Impacts from Tax Reform Income Statement: One-time, non-cash net benefit of $586 million from the revaluation of net deferred tax liability and transition tax Transition tax of approximately $33 million on unrepatriated earnings of foreign subsidiaries Balance Sheet: Leverage declined by 50 percentage points to 191% at year-end 2017 due to onetime benefit from revaluation of net deferred income tax liability Impact is non-cash; no capital allocation change expected Beginning in 2018, return on capital increases due to lower tax rate, partially offset by a higher capital base Cost of capital also increases due to higher after-tax cost of debt and decreased leverage Return on capital spread is expected to be minimally impacted 10
Capital Expenditures Full Year ($ Millions) 2017 2016 2017 $ O/(U) 2016 ChoiceLease $ 1,457 $ 1,548 $ (91) Commercial Rental 352 83 269 Operating Property and Equipment 133 133 Gross Capital Expenditures 1,941 1,763 178 Less: Proceeds from Sales (Primarily Revenue Earning Equipment) 429 421 8 Net Capital Expenditures $ 1,512 $ 1,342 $ 170 11
Cash Flow from Continuing Operations Full Year ($ Millions) 2017 2016 Earnings from Continuing Operations $ 791 $ 265 Depreciation 1,255 1,187 Used Vehicles Sales, Net (1) 17 (1) Amortization and Other Non-Cash Charges, Net 59 87 Tax Reform Benefit (586) Changes in Working Capital and Deferred Taxes 12 63 Cash Provided by Operating Activities 1,548 1,601 Proceeds from Sales (Primarily Revenue Earning Equipment) (2) 429 421 Collections of Direct Finance Leases & Other (2) 73 77 Total Cash Generated 2,050 2,099 Capital Expenditures (2), (3) (1,860) (1,905) Free Cash Flow (4) $ 190 194 (1) Reflects revised reporting of vehicle gains on sale, net of vehicle valuation adjustments. (2) Included in cash flows from investing activities. (3) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (4) Free Cash Flow excludes acquisitions and changes in restricted cash. 12
Debt to Equity Ratio % (1) (2) ($ Millions) 12/31/2017 12/31/2016 Total Debt $ 5,410 $ 5,391 Total Equity (3) $ 2,835 $ 2,052 Debt to Equity 191% 263% 50 percentage points of the decline in year-end leverage was due to tax reform (1) Represents revised long term debt to equity target of 200-250% while maintaining a solid investment grade rating. (2) Illustrates impact of accumulated net pension related equity charge on leverage. (3) Total Equity includes impact of accumulated net pension related equity charge of $567 million as of 12/31/2017 and $627 million as of 12/31/2016. 13
Contents Fourth Quarter 2017 Results Overview Used Vehicle Sales Update 2018 Forecast Three-Year Financial Targets Q & A 14
Global Used Vehicle Sales Update Units held for sale, as reported, were 6,000 at quarter end, down from 7,500 units in the prior year Units held for sale in the prior year included an increased number of lease vehicles being prepared for sale Including these vehicles in units held for sale, results in a decrease of 2,700 vehicles vs. prior year and a decrease of 700 vehicles sequentially The number of used vehicles sold in the fourth quarter was 4,000, down by 500 from the prior year Units sold were down 15% sequentially Proceeds per unit were up 2% for both tractors and trucks in the fourth quarter compared with prior year (excluding the FX impact) Higher proceeds reflect a change in the mix of vehicles sold Proceeds per unit were up 11% for tractors and up 2% for trucks sequentially Proceeds per unit were down 25% for tractors and down 16% for trucks vs. the second quarter 2015 peak 15
Contents Fourth Quarter 2017 Results Overview Used Vehicle Sales Update 2018 Forecast Three-Year Financial Targets Q & A 16
2018 Forecast Assumptions General Moderate growth economic environment Strong contractual sales activity in all segments Note: EPS amounts exclude impact from tax reform Rising interest rate environment Minimal year-over-year foreign exchange impact FMS ChoiceLease fleet up by 6,500 and SelectCare fleet up by 4,500 driven by secular trends that favor outsourcing, continued sales and marketing initiatives, and a strengthening freight environment Rental demand up 6%, pricing up 3% with higher utilization on a 6% larger fleet Negative free cash flow due to significantly higher capital spending to fund growth and replacement activity in both lease and rental Used vehicle sales pricing up 7% YOY reflecting shift toward more retail sales; expected net losses of $0.14 EPS due to valuation adjustments (YOY benefit of $0.06 EPS) Depreciation expense increase of $0.50 EPS due to policy change reflecting used vehicle trends Extending accelerated depreciation on vehicles made available for sale through mid-2019; FY18 impact of $0.23 EPS (YOY expected benefit of $0.14 EPS) 17
2018 Forecast Assumptions DTS Significantly stronger revenue growth driven by record 2017 sales activity and a strong pipeline Earnings benefit from revenue growth and cost savings initiatives, partially offset by prior year favorable insurance developments not currently forecast, as well as strategic investments SCS Revenue growth driven primarily by record 2017 sales activity and a strong sales pipeline Earnings benefit from revenue growth, higher pricing and improved operating performance, partially offset by strategic investments Other Lower effective tax rate from tax reform Significant discretionary and overhead cost reductions resulting from zero based budgeting program Strategic investments to drive long term revenue and earnings growth Two year 1.5 million share anti-dilutive repurchase program authorized in December 2017 18
Key Financial Statistics ($ Millions, Except Per Share Amounts) 2018 Forecast 2017 %B/(W) Revenue: Total Revenue $ 7,800 $ 7,330 6% Fuel and Subcontracted Transportation 1,300 1,289 1% Operating Revenue $ 6,500 $ 6,040 8% Earnings From Continuing Operations: Earnings Before Income Taxes $ 382-403 $ 314 22% - 28% Earnings $ 283-299 $ 791 (64)% - (62)% Comparable Earnings Before Income Taxes $ 387-408 $ 370 5% - 10% Comparable Earnings $ 286-302 $ 241 19% - 25% Earnings Per Share (EPS) from Continuing Operations: EPS $ 5.34-5.64 $ 14.87 (64)% - (62)% Comparable EPS $ 5.40-5.70 $ 4.53 19% - 26% Memo: Average Shares (Millions) - Diluted 53.0 53.0 Tax Rate from Continuing Operations 25.8% (152.1)% Comparable Tax Rate from Continuing Operations 26.1% 34.9% Adjusted Return on Capital vs. Cost of Capital 0.0% (0.2)% Note: Earnings per share amounts are calculated independently for each component and may not be additive due to rounding. 19
Business Segment Revenue 2018 Forecast Change % vs. 2017 Fleet Management Solutions: Total Revenue 7% Operating Revenue (1) 8% ChoiceLease Revenue 8% Commercial Rental Revenue 9% Dedicated Transportation Solutions: Total Revenue 5% Operating Revenue (1)(2) 9% Supply Chain Solutions: Total Revenue 6% Operating Revenue (1)(2) 6% (1) Excludes fuel revenue (2) Excludes subcontracted transportation revenue 20
2018 Causes of Comparable EPS Change (1) ($ Earnings Per Share) $0.72 $5.40 - $5.70 $0.60 $4.98 $4.53 $0.50 $0.38 $0.30 $0.27 $0.18 $0.05 $0.10 $0.20 $0.23 2017 Actual Strategic Investments UVS/ Depr (2) Compensation Interest/ Insurance Other DTS SCS Commercial Rental Overhead Actions ChoiceLease/ SelectCare Tax 2018 Forecast - Bonus - Merit + Rate + Demand + Fleet + Rate (1) Represents Comparable EPS from Continuing Operations (2) Includes year over year impact of residual value changes of negative $0.50, partially offset by accelerated depreciation of $0.14 and Used Vehicle Sales, net of $0.06. 21
Capital Expenditures, Cash Flow & Leverage Full Year ($ Millions) 2018 Forecast 2017 ChoiceLease Replacement $ 1,115 $ 875 Growth 865 582 Total ChoiceLease 1,980 1,457 Commercial Rental (1) Replacement 440 352 Growth 305 - Total Commercial Rental 745 352 Operating Property and Equipment 180 133 Gross Capital Expenditures 2,905 1,941 Less: Proceeds from Sales 415 429 Net Capital Expenditures $ 2,490 $ 1,512 Cash Provided by Operating Activities $ 1,810 $ 1,548 Total Cash Generated $ 2,305 $ 2,050 Free Cash Flow $ (600) $ 190 Total Debt to Equity 199% 191% (1) Corrected from presentation distributed on February 16, 2018 to reflect $352 million in rental replacement capital rather than $268 million in rental replacement capital and $84 million in rental growth capital during 2017. 22
Growth Capital Expenditures ($ Millions) 1.0 0.5 Rental Lease 0.0 Free Cash Flow Growth Capital Expenditures Lease & Rental 1,292 1,170 723 733 566 177 $ 0 460 184 556 263 180 382 216 691 270 305 1,022 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2017 Forecast Forecast $ 614 258 (257) (488) (340) (315) (728) 194 190 (600) 907 585 582 (1) 865 Growth Capital Expenditures - Lease $865 256 Fix formatting 610 2018 Forecast Higher per Unit Investment Fleet Count Increase Operating Cash Flow $ 985 1,028 1,042 1,160 1,252 1,383 1,442 1,601 1,548 1,810 (1) Corrected from presentation distributed on February 16, 2018 to reflect no rental growth capital in 2017 rather than $84 million. 23
Ongoing Impacts from Tax Reform Favorable earnings impact due to lower U.S. corporate tax rate; no near-term impact on cash flow Loss of taxable gain deferral due to repeal of Like-Kind Exchange program for vehicles; impact more than offset by accelerated expensing in the near-term Limitation on net interest deductibility is not expected to impact Ryder through 2021 when limitation is based on tax EBITDA The typical ChoiceLease advantage versus ownership is further enhanced Improvement largely due to lower tax shield (due to lower U.S. corporate tax rate) which more than offsets the incremental value from 100% expensing Key value drivers of ChoiceLease value proposition including Ryder's world class maintenance expertise, OEM purchasing power, retail used vehicle sales network and capital source remain unchanged Additional detail is in Ryder's white paper posted on our investor website at http://investors.ryder.com 24
EPS Forecast Continuing Operations ($ Earnings Per Share) First Quarter 2018 Full Year 2018 EPS Forecast $0.82-0.89 $5.34-5.64 Comparable EPS Forecast $0.83-0.90 $5.40-5.70 First Quarter 2017 Full Year 2017 EPS $0.71 $14.87 Comparable EPS $0.82 $4.53 25
Contents Fourth Quarter 2017 Results Overview Used Vehicle Sales Update 2018 Forecast Three-Year Financial Targets Q & A 26
Three-Year Financial Targets Operating Revenue Growth Previous Target Revised Target Fleet Management 6-7% 6-7% Dedicated Transportation 9-10% 9-10% Supply Chain 7-8% 7-8% EBT as % of Operating Revenue Fleet Management 12-13% 10-12% Dedicated Transportation 8-9% 8-9% Supply Chain 8-9% 8-9% ROC Spread 150-200 bps 100-150 bps Leverage (Debt-to-Equity) 250-300% 200-250% FMS revenue growth target assumes stable rental environment ROC Spread and FMS EBT % targets revised due to reset of used vehicle market Leverage target revised due to tax reform impact 27
Q&A 28
Appendix ChoiceLease Vehicle Count Business Segment Detail Central Support Services Balance Sheet Adjusted Return on Capital History Financial Indicators Forecast Asset Management Non-GAAP Financial Measures & Reconciliations 29
ChoiceLease Vehicle Count End of Period 4Q16 1Q17 2Q17 3Q17 4Q17 4Q17 O/(U) 4Q16 4Q17 O/(U) 3Q17 ChoiceLease Vehicles (as reported) 136,500 137,900 137,200 137,300 139,100 2,600 1,800 UK FSL Trailers 3,300 3,000 2,900 3,000 3,100 (200) 100 ChoiceLease Vehicles - excluding UK 133,200 134,900 134,300 134,300 136,000 2,800 1,700 Elevated Prepared for Sale (A) 1,200 1,700 900 400 (1,200) (400) Adjusted ChoiceLease Vehicles 132,000 133,200 133,400 133,900 136,000 4,100 2,100 (A) Represents an elevated number of vehicles being prepared for sale. Note: Represents end of period vehicle count. Amounts may not recalculate due to rounding. 30
Business Segments Fourth Quarter ($ Millions) Memo: Operating Revenue 2017 2016 % B/(W) 2017 2016 % B/(W) Total Revenue: Fleet Management Solutions $ 1,241.7 $ 1,151.7 8% $ 1,057.0 $ 992.3 7% Dedicated Transportation Solutions 284.4 256.9 11% 198.2 193.1 3% Supply Chain Solutions 540.0 430.2 26% 410.6 352.7 16% Eliminations (126.5) (109.6) (15)% (79.3) (71.2) (11)% Total $ 1,939.7 $ 1,729.2 12% $ 1,586.6 $ 1,466.9 8% Segment Earnings Before Tax: (1) Fleet Management Solutions $ 91.7 $ 64.3 43% Dedicated Transportation Solutions 15.4 15.3 1% Supply Chain Solutions 27.7 26.4 5% Eliminations (15.2) (13.0) (17)% 119.7 92.9 29% Central Support Services (Unallocated Share) (15.2) (10.8) (41)% Non-operating Pension Costs (6.9) (7.9) 13% Restructuring and Other Items (18.9) (5.1) NM Earnings Before Income Taxes $ 78.8 $ 69.2 14% Provision for Income Taxes 563.7 (19.9) NM Earnings from Continuing Operations $ 642.5 $ 49.3 NM Comparable Earnings from Continuing Operations $ 72.7 $ 57.4 27% (1) Our primary measure of segment financial performance excludes unallocated CSS, non-operating pension costs, restructuring and other charges, net and other items. 31
Business Segments Full Year ($ Millions) Memo: Operating Revenue 2017 2016 % B/(W) 2017 2016 % B/(W) Total Revenue: Fleet Management Solutions $ 4,733.6 $ 4,556.2 4% $ 4,043.8 $ 3,947.7 2% Dedicated Transportation Solutions 1,096.0 1,020.9 7% 789.3 774.3 2% Supply Chain Solutions 1,969.5 1,637.9 20% 1,507.5 1,352.1 11% Eliminations (469.5) (428.0) (10)% (300.2) (283.2) (6)% Total $ 7,329.6 $ 6,787.0 8% $ 6,040.4 $ 5,790.9 4% Segment Earnings Before Tax: (1) Fleet Management Solutions $ 312.7 $ 370.8 (16)% Dedicated Transportation Solutions 55.3 63.6 (13)% Supply Chain Solutions 103.1 105.5 (2)% Eliminations (53.3) (50.1) (6)% 417.9 489.8 (15)% Central Support Services (Unallocated Share) (48.1) (40.7) (18)% Non-operating Pension Costs (27.7) (29.9) 7% Restructuring and Other Items (28.2) (12.7) NM Earnings Before Income Taxes $ 313.8 $ 406.4 (23)% Provision for Income Taxes 477.2 (141.7) NM Earnings from Continuing Operations $ 791.0 $ 264.6 199% Comparable Earnings from Continuing Operations $ 240.8 $ 290.5 (17)% (1) Our primary measure of segment financial performance excludes unallocated CSS, non-operating pension costs, restructuring and other charges, net and other items. 32
Fleet Management Solutions (FMS) Fourth Quarter ($ Millions) Revenue 2017 2016 % B/(W) ChoiceLease $ 696.1 $ 655.2 6% SelectCare 116.1 108.4 7% Commercial Rental 224.2 210.3 7% Other 20.6 18.4 12% FMS Operating Revenue 1,057.0 992.3 7% Fuel Services Revenue 184.8 159.5 16% FMS Total Revenue $ 1,241.7 $ 1,151.7 8% FMS Earnings Before Tax FMS Earnings Before Tax (EBT) $ 91.7 $ 64.3 43% FMS EBT as a % of FMS Total Revenue 7.4% 5.6% FMS EBT as a % of FMS Operating Revenue 8.7% 6.5% 33
Fleet Management Solutions (FMS) Full Year ($ Millions) Revenue 2017 2016 % B/(W) ChoiceLease $ 2,688.7 $ 2,573.6 4% SelectCare 464.1 449.7 3% Commercial Rental 813.5 846.3 (4)% Other 77.5 78.0 (1)% FMS Operating Revenue 4,043.8 3,947.7 2% Fuel Services Revenue 689.8 608.5 13% FMS Total Revenue $ 4,733.6 $ 4,556.2 4% Earnings Before Tax FMS Earnings Before Tax (EBT) $ 312.7 $ 370.8 (16)% FMS EBT as a % of FMS Total Revenue 6.6% 8.1% FMS EBT as a % of FMS Operating Revenue 7.7% 9.4% 34
Dedicated Transportation Solutions (DTS) Fourth Quarter ($ Millions) Revenue 2017 2016 % B/(W) DTS Operating Revenue $ 198.2 $ 193.1 3% Subcontracted Transportation 55.3 36.6 51% Fuel 30.9 27.2 14% DTS Total Revenue $ 284.4 $ 256.9 11% Earnings Before Tax DTS Earnings Before Tax (EBT) $ 15.4 $ 15.3 1% DTS EBT as a % of DTS Total Revenue 5.4% 5.9% DTS EBT as a % of DTS Operating Revenue 7.8% 7.9% 35
Dedicated Transportation Solutions (DTS) Full Year ($ Millions) Revenue 2017 2016 % B/(W) DTS Operating Revenue $ 789.3 $ 774.3 2% Subcontracted Transportation 192.1 143.5 34% Fuel 114.6 103.1 11% DTS Total Revenue $ 1,096.0 $ 1,020.9 7% Earnings Before Tax DTS Earnings Before Tax (EBT) $ 55.3 $ 63.6 (13)% DTS EBT as a % of DTS Total Revenue 5.0% 6.2% DTS EBT as a % of DTS Operating Revenue 7.0% 8.2% 36
Supply Chain Solutions (SCS) Fourth Quarter ($ Millions) Revenue 2017 2016 % B/(W) Automotive $ 146.2 $ 141.6 3% Technology & Healthcare 77.0 65.3 18% CPG & Retail 146.6 111.6 31% Industrial & Other 40.9 34.2 20% SCS Operating Revenue 410.6 352.7 16% Subcontracted Transportation 107.5 61.3 75% Fuel 21.9 16.2 35% SCS Total Revenue $ 540.0 $ 430.2 26% Earnings Before Tax SCS Earnings Before Tax (EBT) $ 27.7 $ 26.4 5% SCS EBT as a % of SCS Total Revenue 5.1% 6.1% SCS EBT as a % of SCS Operating Revenue 6.8% 7.5% 37
Supply Chain Solutions (SCS) Full Year ($ Millions) Revenue 2017 2016 % B/(W) Automotive $ 566.3 $ 548.7 3% Technology & Healthcare 271.6 242.5 12% CPG & Retail 511.8 436.4 17% Industrial & Other 157.9 124.6 27% SCS Operating Revenue 1,507.5 1,352.1 11% Subcontracted Transportation 386.8 224.1 73% Fuel 75.2 61.7 22% SCS Total Revenue $ 1,969.5 $ 1,637.9 20% Earnings Before Tax SCS Earnings Before Tax (EBT) $ 103.1 $ 105.5 (2)% SCS EBT as a % of SCS Total Revenue 5.2 % 6.4% SCS EBT as a % of SCS Operating Revenue 6.8 % 7.8% 38
Central Support Services (CSS) Fourth Quarter ($ Millions) 2017 2016 % B/(W) Allocated CSS Costs $ 56.1 $ 49.7 (13)% Unallocated CSS Costs 15.2 10.8 (41)% Total CSS Costs $ 71.2 $ 60.6 17% 39
Central Support Services (CSS) Full Year ($ Millions) 2017 2016 % B/(W) Allocated CSS Costs $ 207.3 $ 196.1 (6)% Unallocated CSS Costs 48.1 40.7 (18)% Total CSS Costs $ 255.4 $ 236.9 (8)% 40
Balance Sheet ($ Millions) December 31, 2017 December 31, 2016 Current Assets $ 1,322 $ 1,102 Revenue Earning Equipment, Net 8,355 8,148 Operating Property and Equipment, Net 777 746 Other Assets 998 907 Total Assets $ 11,452 $ 10,902 Current Liabilities $ 1,187 $ 953 Total Debt 5,410 5,391 Other Non-Current Liabilities (including Deferred Income Taxes) 2,021 2,506 Shareholders' Equity 2,835 2,052 Total Liabilities and Shareholders' Equity $ 11,452 $ 10,902 41
Adjusted Return on Capital History Adj ROC O/(U) COC 0.8% 0.8% (2.2)% (1.3 )% 0.2% 0.9% 1.0% 1.1% 1.4% 0.5% (0.2)% 0.0% Return on Equity 14.2% 11.2% 4.4% 8.4 % 11.9% 14.9% 14.9% 11.3% 16.1% 12.8% 35.9% 10.2% Adjusted Total Capital (1) $4.8 $4.8 $4.2 $4.0 $4.6 $5.2 $5.6 $6.6 $7.1 $7.6 $7.5 $8.7 (2) (1) Adjusted Total Capital represents Adjusted Average Total Capital in billions. (2) Includes pension settlement charges of $69M, primarily buyouts, which impacted Return on Equity by 360 basis points. 42
Financial Indicators Forecast (1) Gross Capital Expenditures ($ Millions) Lease Commercial Rental PP&E/Other Free Cash Flow 614 258 (257) (488) (340) (315) (728) 194 190 (600) Debt to Equity / Total Obligations to Equity (2) Pension Impact (3) Debt to Equity 175% 196% 257% 272% 227% 260% 277% 263% 191% 199% (1) Free Cash Flow and Gross Capital Expenditures exclude acquisitions. Total Obligations to Equity includes acquisitions. (2) The debt to equity metric was not revised in years prior to 2012 to reflect the change in accounting treatment of certain sale-leaseback transactions as debt. (3) Illustrates impact of accumulated net pension related equity charge on leverage. (4) Represents debt to equity target of 200% to 250% while maintaining solid investment grade credit rating. 43
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 contract and extends maturity date. Early terminations Customer elects to terminate lease prior to maturity. Depending on the remaining useful life, the vehicle may be redeployed in the Ryder fleet (Commercial Rental, SCS, other Lease customer) or sold by Ryder. (a) Current year statistics may exclude some units due to a lag in reporting (b) Excludes early terminations where customer purchases vehicle (a)(b) 44
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, 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 Operating Revenue Measures: Comparable GAAP Measure Reconciliation & Additional Information Presented on Slide Titled Operating Revenue Total Revenue Key Financial Statistics 5-6 FMS Operating Revenue, DTS Operating Revenue and SCS Operating Revenue FMS Total Revenue, DTS Total Revenue and SCS Total Revenue Fleet Management Solutions (FMS), Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (SCS) Operating Revenue Growth ex-foreign Exchange Total Revenue Foreign Exchange Impact on Operating Revenue Growth FMS EBT as a % of FMS Operating Revenue, DTS FMS EBT as a % of FMS Total Revenue, DTS EBT as a Fleet Management Solutions (FMS), Dedicated EBT as a % of DTS Operating Revenue and SCS EBT % of DTS Total Revenue and SCS EBT as a % of SCS Transportation Solutions (DTS) and Supply Chain as a % of SCS Operating Revenue Total Revenue Solutions (SCS) Comparable Earnings Measures: Comparable Earnings and Comparable EPS Earnings and EPS from Continuing Operations Earnings and EPS from Continuing Operations Reconciliation Comparable EPS Forecast EPS Forecast from Continuing Operations EPS Forecast Continuing Operations 49 Comparable Earnings Before Income Tax and Comparable Tax Rate Adjusted Return on Capital (ROC) and Adjusted ROC Spread Cash Flow Measures: Earnings Before Income Tax and Tax Rate 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. Earnings and Tax Rate from Continuing Operations Reconciliation Page 33-38 46 33-38 Adjusted Return on Capital Reconciliation 50-51 Total Cash Generated and Free Cash Flow Cash Provided by Operating Activities Cash Flow from Continuing Operations 53-54 Debt Measures: Total Obligations and Total Obligations to Equity Balance Sheet Debt and Debt to Equity Debt to Equity Reconciliation 55 47 48 45
Foreign Exchange Impact on Operating Revenue Growth Fourth Quarter Full Year 2017 YOY Growth Fx Impact (1) YOY Growth excl Fx YOY Growth Fx Impact (1) YOY Growth excl Fx Total Revenue 12% 1% 11% 8% % 8% Operating Revenue 8% 1% 7% 4% % 4% FMS Total Revenue 8% 1% 7% 4% % 4% FMS Operating Revenue 7% 1% 6% 2% % 2% ChoiceLease Revenue 6% 1% 5% 4% (1)% 5% Commercial Rental Revenue 7% 1% 6% (4)% % 4% SCS Total Revenue 26% 1% 25% 20% % 20% SCS Operating Revenue 16% 1% 15% 11% % 11% (1) Foreign exchange impact was calculated by dividing the results for the current and prior year periods by the exchange rates in effect on December 31, 2016, which was the last day of the prior year period, rather than the actual exchange rates in effect as of December 31, 2017. 46
Earnings and EPS from Continuing Operations Reconciliation (1) ($ Millions or $ Earnings Per Share) 4Q17 4Q17 4Q16 4Q16 Earnings EPS Earnings EPS GAAP $ 642.5 $ 12.10 $ 49.3 $ 0.92 Non-operating pension costs 4.0 0.07 4.6 0.09 Gain on sale of property (14.8) (0.27) Restructuring charges and fees 12.7 0.24 3.5 0.06 Tax reform related adjustments, net (571.7) (10.77) Comparable $ 72.7 $ 1.37 $ 57.4 $ 1.07 FY17 FY17 FY16 FY16 Earnings EPS Earnings EPS GAAP $ 791.0 $ 14.87 $ 264.6 $ 4.94 Non-operating pension costs 16.0 0.31 17.5 0.33 Gain on sale of property (14.8) (0.27) Restructuring charges and fees 13.4 0.25 3.5 0.06 Pension-related adjustments 3.3 0.06 4.8 0.09 Tax law changes 1.8 0.03 Tax reform related adjustments, net (571.7) (10.75) Operating tax adjustment 1.7 0.03 Comparable $ 240.8 $ 4.53 $ 290.5 $ 5.42 (1) The reconciliation of the EBT and Tax Rate for these items are included on slide 47. 47
EBT and Tax Rate from Continuing Operations Reconciliation ($ Millions or $ Earnings Per Share) 4Q17 4Q17 4Q17 FY17 FY17 FY17 EBT Tax Tax Rate EBT Tax Tax Rate GAAP $ 78.8 $ (563.7) (715.4)% $ 313.8 $ (477.2) (152.1)% Non-operating pension costs 6.9 2.9 27.7 11.7 Gain on sale of property (24.1) (9.4) (24.1) (9.4) Restructuring charges and fees 19.7 7.0 21.4 8.0 Pension-related adjustments 5.5 2.2 Tax law changes (1.8) Tax reform related adjustments, net 23.3 594.9 23.3 594.9 Operating tax adjustment 2.2 0.5 Comparable (1) $ 104.5 $ 31.8 30.4% $ 369.7 $ 128.9 34.9% 4Q16 4Q16 4Q16 FY16 FY16 FY16 EBT Tax Tax Rate EBT Tax Tax Rate GAAP $ 69.2 $ 19.9 28.8% $ 406.4 $ 141.7 34.9% Non-operating pension costs 7.9 3.2 29.9 12.4 Pension-related adjustments 7.7 2.8 Restructuring 5.1 1.6 5.1 1.6 Comparable (1) $ 82.2 $ 24.7 30.1% $ 449.0 $ 158.6 35.3% (1) The comparable provision for income taxes is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-gaap adjustments are calculated based on the statutory tax rates of the jurisdiction to which the non-gaap adjustments relate. 48
EPS from Continuing Operations Reconciliation ($ Millions or $ Earnings Per Share) First Quarter 2018 Full Year 2018 EPS forecast $0.82-0.89 $5.34-5.64 Non-operating pension costs, net of tax 0.01 0.06 Comparable EPS forecast $0.83-0.90 $5.40-5.70 First Quarter 2017 Full Year 2017 EPS $0.71 $14.87 Non-operating pension costs 0.08 0.31 Pension-related adjustments 0.06 Tax law changes 0.03 Tax reform related adjustments, net (10.75) Restructuring charges and fees 0.25 Operating tax adjustment 0.03 0.03 Gain on sale of property (0.27) Comparable EPS $0.82 $4.53 49
Adjusted Return on Capital Reconciliation (1) ($ Millions) 2007 2008 2009 2010 2011 2012 Net earnings (2) $ 254 $ 200 $ 62 $ 118 $ 170 $ 210 Restructuring and other charges, net and other items 1 70 30 6 6 17 Income taxes 152 150 54 61 108 91 Adjusted earnings before income taxes 407 420 146 185 284 317 Adjusted interest expense (3) 169 165 150 133 135 144 Adjusted income taxes (4) (220 ) (230) (122) (124) (157) (167) Adjusted net earnings [A] $ 356 $ 355 $ 174 $ 194 $ 262 $ 294 Average total debt (5) $ 2,848 $ 2,882 $ 2,692 $ 2,512 $ 3,079 $ 3,778 Average off-balance sheet debt (5) 150 171 142 114 78 2 Average total shareholders' equity (5) 1,791 1,778 1,396 1,402 1,428 1,406 Average adjustments to shareholders' equity (6) 1 10 16 2 4 (3) Adjusted average total capital [B] $ 4,789 $ 4,841 $ 4,245 $ 4,030 $ 4,588 $ 5,182 Adjusted return on capital [A]/[B] 7.4 % 7.3% 4.1% 4.8% 5.7% 5.7% Weighted average cost of capital 6.6 % 6.5% 6.3% 6.1% 5.5% 4.8% Adjusted return on capital spread (7) 0.8 % 0.8% (2.2)% (1.3)% 0.2% 0.9% (1) Non-GAAP elements of this calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital is provided on this slide. (2) Earnings calculated based on a 12-month rolling period. (3) Interest expense includes interest on off-balance sheet vehicle obligations. (4) Income taxes were calculated by excluding taxes related to comparable earnings items and interest expense. (5) The average is calculated based on the average GAAP balances. (6) Represents comparable earnings items for those periods. (7) Represents the adjusted return on capital vs. cost of capital (trailing 12 months). 50
Adjusted Return on Capital Reconciliation (1) ($ Millions) 2013 2014 2015 2016 2017 Net earnings (2) $ 238 $ 218 $ 305 $ 262 $ 791 Restructuring and other charges, net and other items - 115 18 13 28 Income taxes 126 118 164 142 (477) Adjusted earnings before income taxes 363 451 486 417 342 Adjusted interest expense (3) 141 145 151 148 141 Adjusted income taxes (4) (177) (214) (224) (198) (167) Adjusted net earnings [A] $ 327 $ 383 $ 413 $ 366 $ 316 Average total debt (5) $ 4,015 $ 4,653 $ 5,177 $ 5,549 $ 5,360 Average off-balance sheet debt (5) 1 2 1 1 2 Average total shareholders' equity (5) 1,594 1,926 1,895 2,052 2,201 Average adjustments to shareholders' equity (6) (2) 8 11 2 (69) Adjusted average total capital [B] $ 5,608 $ 6,589 $ 7,084 $ 7,605 $ 7,494 Adjusted return on capital [A]/[B] 5.8% 5.8% 5.8% 4.8% 4.2% Weighted average cost of capital 4.8% 4.7% 4.4% 4.3% 4.4% Adjusted return on capital spread (7) 1.0% 1.1% 1.4% 0.5% (0.2)% (1) Non-GAAP elements of this calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital is provided on this slide. (2) Earnings calculated based on a 12-month rolling period. (3) Interest expense includes interest on off-balance sheet vehicle obligations. (4) Income taxes were calculated by excluding taxes related to comparable earnings items and interest expense. (5) The average is calculated based on the average GAAP balances. (6) Represents comparable earnings items for those periods. (7) Represents the adjusted return on capital vs. cost of capital (trailing 12 months). 51
Adjusted Return on Capital Reconciliation (1) ($ Millions) 2016 2017 FMS DTS SCS FMS DTS SCS Net earnings (2) $ 233 $ 39 $ 67 $ 780 $ 38 $ 72 Restructuring and other charges, net and other items (27) (25) Income taxes 138 25 39 (467) 17 31 Adjusted earnings before income taxes 344 64 106 288 55 103 Adjusted interest expense (3) 151 10 4 144 8 3 Adjusted income taxes (4) (182 ) (28 ) (40) (166) (20) (32) Adjusted net earnings [A] $ 313 $ 45 $ 70 $ 266 $ 44 $ 74 Average total debt (5) $ 5,717 $ (86 ) $ (56) $ 5,530 $ (77) $ (84) Average off-balance sheet debt (5) 1 340 169 2 330 196 Average total shareholders' equity (5) 1,499 109 353 1,592 108 416 Average adjustments to shareholders' equity (6) (52) (140) Adjusted average total capital [B] $ 7,165 $ 363 $ 466 $ 6,984 $ 362 $ 528 Adjusted return on capital [A]/[B] 4.4 % 12.4 % 14.9% 3.8% 12.1% 14.0% (1) Non-GAAP elements of this calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital is provided on this slide. (2) Earnings calculated based on a 12-month rolling period. (3) Interest expense includes interest on off-balance sheet vehicle obligations. (4) Income taxes were calculated by excluding taxes related to comparable earnings items and interest expense. (5) The average is calculated based on the average GAAP balances. (6) Represents comparable earnings items for those periods. 52
Cash Flow Reconciliation ($ Millions) 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 Cash Provided by Operating Activities from Continuing Operations $ 985 $ 1,028 $ 1,042 $ 1,160 $ 1,252 Proceeds from Sales (Primarily Revenue Earning Equipment) (1) 216 235 337 413 452 Collections of Direct Finance Leases (1) 65 62 62 72 71 Other, net (1) 3 8 Total Cash Generated 1,266 1,328 1,442 1,645 1,783 Capital Expenditures (1), (2) (652) (1,070) (1,699) (2,133) (2,123) Free Cash Flow (3) $ 614 $ 258 $ (257) $ (488) $ (340) Memo: Depreciation Expense (4) $ 829 $ 808 $ 863 $ 944 $ 967 Net cash used in financing activities (542) 78 504 438 347 Net cash used in investing activities (449) (982) (1,657) (1,635) (1,604) (1) Included in cash flows from investing activities. (2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (3) 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. (4) Includes adjustment to reclassify losses from fair value adjustments on our used vehicles to Gains on Used Vehicles, Net. 53
Cash Flow Reconciliation ($ Millions) 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Cash Provided by Operating Activities from Continuing Operations $ 1,383 $ 1,442 $ 1,601 $ 1,548 Proceeds from Sales (Primarily Revenue Earning Equipment) (1) 497 427 421 429 Collections of Direct Finance Leases (1) 66 71 77 73 Other, net (1) (1) Total Cash Generated 1,944 1,940 2,099 2,050 Capital Expenditures (1), (2) (2,259) (2,668) (1,905) (1,860) Free Cash Flow (3) $ (315) $ (728) $ 194 $ 190 Memo: Depreciation Expense (4) $ 1,047 $ 1,122 $ 1,187 $ 1,255 Net cash provided by (used in) financing activities 312 731 (186) (155) Net cash used in investing activities (1,705) (2,161) (1,406) (1,366) (1) Included in cash flows from investing activities. (2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (3) 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. (4) Includes adjustment to reclassify losses from fair value adjustments on our used vehicles to Gains on Used Vehicles, Net. 54
Debt to Equity Reconciliation (1) ($ Millions) 12/31/2008 % to Equity 12/31/2009 % to Equity 12/31/2010 % to Equity 12/31/2011 % to Equity Debt $ 2,863 213 % $ 2,498 175% $ 2,747 196 % $ 3,382 257% PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 163 119 100 64 Total Obligations (2) $ 3,026 225 % $ 2,617 183% $ 2,847 230 % $ 3,446 261% (1) The debt to equity metric was not revised in years prior to 2012 to reflect the change in accounting treatment of certain sale-leaseback transactions as debt. (2) For years beginning in 2012, sale-leaseback transactions that were previously accounted for as off-balance sheet are now included in GAAP balance sheet debt. The Company does not reconcile total obligations to equity for these years as this metric is the same as the debt to equity metric. Note: Amounts may not recalculate due to rounding. 55
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