Ryder Reports Fourth Quarter 2022 Results and Provides 2023 Outlook
Balanced Growth Strategy Drives Strong Earnings
Fourth Quarter 2022 Highlights
•GAAP EPS from continuing operations of $4.06 up from $3.36 in prior year due to higher earnings in Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (SCS)
•Comparable EPS (non-GAAP) from continuing operations of $3.89 up from $3.52 in prior year
•Total revenue of $3.1 billion and operating revenue (non-GAAP) of $2.4 billion, up 19% and 14%, respectively, reflecting organic revenue growth in all business segments and SCS acquisitions
Full-Year 2022 Highlights
•Adjusted return on equity (ROE) of 29%, up from 21% in prior year
•GAAP EPS from continuing operations of $16.96 up from $9.70 in prior year due to significantly higher earnings in FMS and improved performance in SCS and DTS
•Comparable EPS (non-GAAP) from continuing operations of $16.37 up from $9.58 in prior year
•Total revenue of $12.0 billion and operating revenue (non-GAAP) of $9.3 billion, up 24% and 19%, respectively, reflecting organic revenue growth in all business segments and SCS acquisitions
•Full-year 2022 net cash provided by operating activities from continuing operations of $2.3 billion and free cash flow (non-GAAP) of $921 million
Full-Year 2023 Outlook
•ROE of 16% - 18%
•Comparable EPS (non-GAAP) forecast of $11.05 - $12.05
•Operating revenue (non-GAAP) expected to increase by approximately 4%
•Net cash provided by operating activities from continuing operations forecast of $2.4 billion; free cash flow (non-GAAP) forecast of approximately $200 million
•Authorizes new 2-million-share discretionary repurchase program
MIAMI, February 15, 2023 – Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and fleet management solutions, reported results for the three months ended December 31 as follows:
(In millions, except EPS)
Earnings Before Taxes
Earnings
Diluted Earnings Per Share
2022
2021
2022
2021
2022
2021
Continuing operations (GAAP)
$
292
236
$
200
182
$
4.06
3.36
Comparable (non-GAAP)
$
267
246
$
192
190
$
3.89
3.52
Total and operating revenue for the three months ended December 31 were as follows:
(In millions)
Total Revenue
Operating Revenue (non-GAAP)
2022
2021
Change
2022
2021
Change
Total
$
3,088
2,600
19%
$
2,410
2,105
14%
Fleet Management Solutions (FMS)
$
1,595
1,499
6%
$
1,321
1,300
2%
Supply Chain Solutions (SCS)
$
1,251
870
44%
$
883
614
44%
Dedicated Transportation Solutions (DTS)
$
456
402
13%
$
320
291
10%
CEO Comment
"Our strong fourth quarter results continued to demonstrate benefits from the execution of our balanced growth strategy," says Ryder Chairman and CEO Robert Sanchez. "Initiatives focused on increasing returns and driving long-term profitable growth contributed to higher earnings in the quarter, despite lower gains on used vehicles sold and inflationary cost pressures. Earnings in SCS and DTS increased 67% and 150%, respectively, reflecting pricing actions and growth in these higher-return contractual businesses.
Our balance sheet remains strong and enabled us to fund organic growth and strategic SCS acquisitions. In addition, Ryder rewarded its shareholders through a combination of cash dividends of $123 million and share repurchases of $557 million in 2022. We generated strong ROE of 29%, above our long-term target of high-teens, reflecting strong market conditions in rental and used vehicle sales and continued benefits from our returns initiatives.
In 2022, we demonstrated significant progress on our balanced growth strategy and believe we are well positioned to outperform prior cycles. We accelerated growth in SCS and DTS, both organically and through strategic, accretive acquisitions. The team successfully implemented pricing actions in SCS and DTS, which improved profitability. In FMS, we continued to price new and renewing leases at higher returns and surpassed our $100 million annual cost savings target from our multi-year maintenance initiatives. We also substantially completed the exit of our sub-performing FMS business in the UK, redeploying the proceeds to higher-return opportunities.
Overall, we are confident in our ability execute on our strategy and expect to leverage our operating momentum and the benefits from our initiatives to drive increased shareholder value."
2
Fourth Quarter 2022 Segment Review
Fleet Management Solutions: Continued Strong Earnings Reflect Benefits from Declining Depreciation Impact and Rental, Offset by Lower Gains on Used Vehicles Sold
•FMS total revenue grew 6% to $1.6 billion; operating revenue grew 2% to $1.3 billion
◦Increase due to higher rental revenue driven by increased pricing
◦Total revenue also increased due to higher fuel prices passed through to customers
◦Operating revenue increased globally despite a 4% negative impact from the wind down of the UK business
•FMS EBT remained at $255 million
◦Benefits from declining depreciation impact from prior residual value estimate changes and higher rental results were offset by lower gains on the sale of used vehicles
◦Lower gains reflect reduced sales volume and a 6% decrease in used tractor pricing. Sequentially from the third quarter of 2022, used truck and tractor pricing decreased 7% and 2%, respectively
◦Global used vehicle inventory levels increased sequentially to 4,300 vehicles but remain below the company's long-term target range of 7,000 - 9,000 vehicles
◦Rental benefited from a 6% increase in power-fleet pricing and strong power-fleet utilization of 82% on a larger fleet
•FMS EBT as a percentage of FMS operating revenue is well above the company's long-term target of low double-digits for the fourth quarter and full year 2022
3
Supply Chain Solutions: Higher Earnings Reflect Increased Pricing and New Business, Partially Offset by Charge Related to Early Termination of a Customer Distribution Center
(In millions)
4Q22
4Q21
Change
Total Revenue
$
1,251
870
44%
Operating Revenue (1)
$
883
614
44%
Earnings Before Tax (EBT)
$
35
21
67%
EBT as a % of total revenue
2.8%
2.4%
40 bps
EBT as a % of operating revenue (1)
4.0%
3.4%
60 bps
Full-year EBT as % of total and operating revenue
FY22
FY21
Change
EBT as a % of total revenue
3.9%
3.7%
20 bps
EBT as a % of operating revenue (1)
5.7%
5.3%
40 bps
(1) Non-GAAP financial measure excluding fuel and subcontracted transportation.
•SCS total revenue grew 44% to $1.3 billion; operating revenue grew 44% to $883 million
◦Increase due to acquisitions and double-digit organic revenue growth in all industry verticals reflecting increased pricing, new business, and higher volumes
◦Operating revenue grew 22% organically
•SCS EBT grew 67% to $35 million
◦Increase primarily due to higher pricing and new business
◦Partially offset by a $20 million asset impairment charge related to the early termination of a customer distribution center in 2023
•SCS EBT as a percentage of SCS operating revenue is below the company's long-term target of high single-digits for the fourth quarter and full year 2022
Dedicated Transportation Solutions: Higher Earnings Driven by Increased Pricing
(In millions)
4Q22
4Q21
Change
Total Revenue
$
456
402
13%
Operating Revenue (1)
$
320
291
10%
Earnings Before Tax (EBT)
$
30
12
150%
EBT as a % of total revenue
6.6%
3.0%
360 bps
EBT as a % of operating revenue (1)
9.4%
4.1%
530 bps
Rolling 12-months EBT as % of total and operating revenue
FY22
FY21
Change
EBT as a % of total revenue
5.7%
3.4%
230 bps
EBT as a % of operating revenue (1)
8.2%
4.6%
360 bps
(1) Non-GAAP financial measure excluding fuel and subcontracted transportation.
•DTS total revenue grew 13% to $456 million; operating revenue grew 10% to $320 million
◦Increase due to higher pricing and volumes
•DTS EBT grew 150% to $30 million
◦Increase primarily due to higher pricing
4
•DTS EBT as a percentage of DTS operating revenue is in line with the company's long-term target of high single-digits for the fourth quarter and full year 2022
Corporate Financial Information
Unallocated Central Support Services (CSS)
Unallocated CSS costs were $22 million as compared to $15 million in the prior year, primarily reflecting investment income in the prior year from RyderVentures, the company's corporate venture capital fund.
Income Taxes
Our effective income tax rate from continuing operations was 31.4% as compared to 22.8% in the prior year and our comparable effective income tax rate (a non-GAAP measure) from continuing operations was 28.2%, as compared to 22.6% in the prior year. The increases in the rates were due to incremental U.S. tax on higher foreign earnings related to the exit of our UK FMS business as well as a shift in the mix of earnings subject to tax in different jurisdictions.
Capital Expenditures, Cash Flow, and Leverage
Full-year capital expenditures increased to $2.7 billion in 2022 compared to $2.0 billion in 2021 due to higher planned investments in the lease fleet.
Full-year net cash provided by operating activities from continuing operations increased to $2.3 billion as compared to $2.2 billion in the prior year, reflecting higher earnings partially offset by higher working capital needs. Free cash flow (a non-GAAP measure) was $921 million, down from $1.1 billion in 2021, primarily due to an increase in capital expenditures partially offset by higher proceeds from the sale of revenue-earning equipment, including proceeds from the FMS UK business exit.
Debt-to-equity as of December 31, 2022 decreased to 216% from 235% at year-end 2021 and is below the company's long-term target of 250% to 300%.
Share Repurchase Programs
During the fourth quarter, we repurchased 2 million shares for $179 million under our completed 2021 Discretionary program. Additionally, we repurchased 0.9 million shares for $78 million under our 2021 Anti-Dilutive program. In February 2023, the board authorized a new 2-million-share discretionary repurchase program.
Fleet Management Solutions UK Business Update
The company substantially completed the exit of the lower-return FMS UK business. In 2022, Ryder sold more than 90% of vehicles and properties, generating proceeds of approximately $400 million.
5
Outlook
"Increased demand for resilient supply chains and other secular trends continue to favor transportation and logistics outsourcing," says Ryder Executive Vice President & Chief Financial Officer John Diez. "In 2023, we expect strong but reduced earnings as a slowing macroeconomic and freight environment drive lower results in used vehicle sales and rental. We expect these headwinds to be partially offset by continued earnings momentum in supply chain and dedicated. We are pleased with the progress of our balanced growth strategy to drive long-term profitable growth and increase returns over the cycle. We anticipate ROE will be at our long-term target of high teens. Our balance sheet remains strong, providing us with the ability to continue to return capital to shareholders through a new 2-million-share discretionary repurchase program."
Full Year 2023
Total Revenue Growth
~2%
Operating Revenue Growth (non-GAAP)
~4%
FY23 GAAP EPS (includes $3.75 cumulative currency translation charge for UK exit)
$6.44 - $7.44
FY23 Comparable EPS (non-GAAP)
$11.05 - $12.05
ROE (1)
16% - 18%
Net Cash from Operating Activities from Continuing Operations
~$2.4B
Free Cash Flow (non-GAAP)
~$200M
Capital Expenditures
~$3.0B
Debt-to-Equity
~200%
First Quarter 2023
1Q23 GAAP EPS
$2.50 - $2.75
1Q23 Comparable EPS (non-GAAP)
$2.75 - $3.00
————————————
(1) The 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 shareholders' equity to ROE is provided in the Appendix - Non-GAAP Financial Measures at the end of this release.
6
Supplemental Company Information
Fourth Quarter Net Earnings
(In millions, except EPS)
Earnings
Diluted EPS
2022
2021
2022
2021
Earnings from continuing operations
$
200
182
$
4.06
3.36
Discontinued operations
6
(1)
0.12
(0.01)
Net earnings
$
206
181
$
4.18
3.35
Full Year Operating Results
(In millions, except EPS)
For the year ended December 31,
2022
2021
Change
Total revenue
$
12,011
9,663
24%
Operating revenue (non-GAAP)
$
9,280
7,828
19%
Earnings from continuing operations
$
863
522
65%
Comparable earnings from continuing operations (non-GAAP)
$
833
515
62%
Net earnings
$
867
519
67%
Earnings per common share (EPS) - Diluted
Continuing operations
$
16.96
9.70
75%
Comparable (non-GAAP)
$
16.37
9.58
71%
Net earnings
$
17.04
9.66
76%
Business Description
Ryder System, Inc. is a leading supply chain, dedicated transportation, and fleet management 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:
•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.
•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.
•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 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.
For more information on Ryder System, Inc., visit investors.ryder.com and ryder.com.
###
7
Note: Regarding Forward-Looking Statements
Certain statements and information included in this news release are “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including our forecast; expectations regarding market trends and economic environment; expectations regarding total revenue growth, operating revenue growth, earnings per share, comparable earnings per share, adjusted ROE and debt-to-equity; impact of supply chain and labor shortage challenges and vehicle production constraints on our business, market conditions, e-commerce trends, freight environment, expected earnings, depreciation, commercial rental demand and utilization, and used vehicle sales volume and pricing; expectations related to our strategic investments and initiatives, including our recent supply chain acquisitions and initiatives related to maintenance costs savings and improving returns; expected benefits of lease pricing initiatives and our ability to renew leases; our expectations regarding benefits from the 2-million-share discretionary repurchase program; our expectations related to the exit from the FMS U.K. market; our ability to execute our balanced growth strategy; performance, including sales and revenue growth, in our product lines and segments; residual values and depreciation expense; used vehicle inventory; earnings, including as a result of the macroeconomic and freight environment’s effect on used vehicle sales and rental; free cash flow; tax rate; operating cash flow; capital expenditures; fleet growth; and expected benefits from new contracts and pricing initiatives in our supply chain and dedicated business divisions. Our forward-looking statements also include our estimates of the impact of our changes to residual value estimates on earnings and depreciation expense. The expected impact of the change in residual value estimates is based on our current assessment of the residual values and useful lives of revenue-earning equipment based on multi-year trends and our outlook for the expected near- and long-term used vehicle market. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors.
All of our forward-looking statements should be evaluated by considering 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 changes in general economic and financial conditions in the U.S. and worldwide; ongoing supply chain and labor challenges and vehicle production constraints; the effect of geopolitical events; our ability to adapt to changing market conditions, including lower than expected contractual sales, decreases in commercial rental demand or utilization, poor acceptance of rental pricing, and declining market demand for or excess supply of used vehicles impacting current or estimated pricing and our anticipated proportion of retail versus wholesale sales; declining customer demand for our services; higher than expected maintenance costs; lower than expected benefits from our cost-savings initiatives; our ability to effectively and efficiently integrate acquisitions into our business; lower than expected benefits from our sales, marketing and new product initiatives; setbacks in the economic market or in our ability to retain profitable customer accounts; impact of changing laws and regulations; difficulty in obtaining adequate profit margins for our services; inability to maintain current pricing levels due to soft economic conditions, business interruptions or expenditures due to labor disputes, severe weather or natural occurrences; competition from other service providers, changes in technology and new entrants; professional driver and technician shortages resulting in higher procurement costs and turnover rates; impact of worldwide semiconductor shortage; higher than expected bad debt reserves or write-offs; decrease in credit ratings; increased debt costs; adequacy of accounting estimates; higher than expected reserves and accruals particularly with respect to pension, taxes, insurance and revenue; impact of changes in our residual value estimates and accounting policies; unanticipated changes in fuel and alternative energy prices; unanticipated currency exchange rate fluctuations; increases in inflation or interest rates; our ability to manage our cost structure; and the risks described in our filings with the Securities and Exchange Commission (SEC). 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. 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 and why management believes that presentation of each measure provides useful information to investors. 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, 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.
8
CONFERENCE CALL AND WEBCAST INFORMATION
Ryder’s earnings conference call and webcast is scheduled for February 15, 2023 at 11:00 a.m. ET. To join, click here.
LIVE AUDIO VIA PHONE
Toll Free Number: 888-352-6803
USA Toll Number: 323-701-0225
Audio Passcode: Ryder
Conference Leader: Calene Candela
WEBCAST REPLAY
An audio replay including the slide presentation will be available within four hours following the call. Click here then select Financials/Quarterly Results and the date.
AUDIO REPLAY VIA MP3 DOWNLOAD
A podcast will be available within 24 hours after the end of the call. Click here then select Financials/Quarterly Results and the date.
Contacts:
Media:
Investor Relations:
Amy Federman
Calene Candela
(305) 500-4989
(305) 500-4053
Financial = ryder-financial
USA = ryder-usa
9
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In millions, except per share amounts)
Three months ended December 31,
For the year ended December 31,
2022
2021
2022
2021
Lease & related maintenance and rental revenues
$
1,055
1,053
$
4,174
3,995
Services revenue
1,860
1,419
7,118
5,181
Fuel services revenue
173
128
719
487
Total revenues
3,088
2,600
12,011
9,663
Cost of lease & related maintenance and rental
696
732
2,774
2,884
Cost of services
1,640
1,251
6,153
4,503
Cost of fuel services
154
118
694
474
Selling, general and administrative expenses
362
321
1,415
1,187
Non-operating pension costs, net
3
—
11
(1)
Used vehicle sales, net
(94)
(108)
(450)
(257)
Interest expense
63
51
228
214
Miscellaneous income, net
(9)
(11)
(32)
(66)
Restructuring and other items, net
(19)
10
2
32
2,796
2,364
10,795
8,970
Earnings from continuing operations before income taxes
292
236
1,216
693
Provision for income taxes
92
54
353
171
Earnings from continuing operations
200
182
863
522
Loss from discontinued operations, net of tax
6
(1)
4
(3)
Net earnings
$
206
181
$
867
519
Earnings (loss) per common share — Diluted
Continuing operations
$
4.06
3.36
$
16.96
9.70
Discontinued operations
0.12
(0.01)
0.08
(0.05)
Net earnings
$
4.18
3.35
$
17.04
9.66
Weighted average common shares outstanding — Diluted
49.3
54.0
50.9
53.5
EPS from continuing operations
$
4.06
3.36
$
16.96
9.70
Non-operating pension costs, net
0.04
(0.01)
0.14
(0.06)
Restructuring and other, net
(0.40)
0.16
0.04
0.34
ERP implementation costs
—
—
—
0.18
Gain on sale of U.K. revenue earning equipment
(0.12)
—
(0.96)
—
Gains on sale of properties
(0.05)
0.01
(0.71)
(0.59)
Tax adjustments, net
0.36
—
0.90
0.01
Comparable EPS from continuing operations (1)
$
3.89
3.52
$
16.37
9.58
(1) 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.
10
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In millions)
December 31, 2022
December 31, 2021
Assets:
Cash and cash equivalents
$
267
234
Other current assets
1,933
2,227
Revenue earning equipment, net
8,190
8,323
Operating property and equipment, net
1,148
985
Other assets
2,857
2,066
$
14,395
13,835
Liabilities and shareholders' equity:
Current liabilities
$
1,967
1,868
Total debt (including current portion)
6,352
6,580
Other non-current liabilities (including deferred income taxes)
3,139
2,589
Shareholders' equity
2,937
2,798
$
14,395
13,835
SELECTED KEY RATIOS AND METRICS
December 31, 2022
December 31, 2021
Debt to equity
216
%
235
%
Three months ended December 31,
For the year ended December 31,
2022
2021
2022
2021
Comparable EBITDA (1)
$
691
629
$
2,722
2,433
Effective interest rate (average cost of debt)
4.0
%
3.3
%
3.5
%
3.2
%
For the year ended December 31,
2022
2021
Net cash provided by operating activities from continuing operations
$
2,310
2,175
Free cash flow (1)
921
1,057
Capital expenditures paid
2,631
1,941
Gross capital expenditures
2,652
2,012
For the year ended December 31,
2022
2021
ROE (2)
29
%
21
%
————————————
(1) 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.
(2) The 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 shareholders' equity to adjusted average equity is provided in the Appendix - Non-GAAP Financial Measures section at the end of this release.
Note: Amounts may not be additive due to rounding.
11
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT REVENUE AND EARNINGS - UNAUDITED
(In millions)
Three months ended December 31,
For the year ended December 31,
2022
2021
Change
2022
2021
Change
Total Revenue:
Fleet Management Solutions:
ChoiceLease
$
807
820
(2)
%
$
3,203
3,220
(1)
%
Commercial rental
348
323
8
%
1,351
1,114
21
%
SelectCare and other
166
157
6
%
659
607
9
%
Fuel services and ChoiceLease liability insurance revenue
274
199
38
%
1,114
739
51
%
Total Fleet Management Solutions
1,595
1,499
6
%
6,327
5,680
11
%
Supply Chain Solutions
1,251
870
44
%
4,720
3,155
50
%
Dedicated Transportation Solutions
456
402
13
%
1,786
1,457
23
%
Eliminations
(214)
(171)
(25)
%
(822)
(629)
(31)
%
Total revenue
$
3,088
2,600
19
%
$
12,011
9,663
24
%
Operating Revenue: (1)
Fleet Management Solutions
$
1,321
1,300
2
%
$
5,213
4,941
6
%
Supply Chain Solutions
883
614
44
%
3,254
2,211
47
%
Dedicated Transportation Solutions
320
291
10
%
1,239
1,055
17
%
Eliminations
(114)
(100)
(14)
%
(426)
(379)
(12)
%
Operating revenue
$
2,410
2,105
14
%
$
9,280
7,828
19
%
Business Segment Earnings:
Earnings from continuing operations before income taxes:
Fleet Management Solutions
$
255
255
—
%
$
1,054
663
59
%
Supply Chain Solutions
35
21
67
%
186
117
59
%
Dedicated Transportation Solutions
30
12
150
%
102
49
108
%
Eliminations
(31)
(27)
15
%
(115)
(78)
47
%
289
261
11
%
1,227
751
63
%
Unallocated Central Support Services
(22)
(15)
47
%
(83)
(69)
20
%
Non-operating pension costs, net
(3)
—
NM
(11)
1
NM
Other items impacting comparability, net
28
(10)
NM
83
10
NM
Earnings from continuing operations before income taxes
292
236
24
%
1,216
693
75
%
Provision for income taxes
92
54
70
%
353
171
106
%
Earnings from continuing operations
$
200
182
10
%
$
863
522
65
%
————————————
(1) 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.
12
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT REVENUE AND EARNINGS - UNAUDITED
(In millions)
Three months ended December 31,
For the year ended December 31,
2022
2021
Change
2022
2021
Change
Fleet Management Solutions
FMS total revenue
$
1,595
1,499
6
%
$
6,327
5,680
11
%
Fuel services and ChoiceLease liability insurance(1)
(274)
(199)
38
%
(1,114)
(739)
51
%
FMS operating revenue (2)
$
1,321
1,300
2
%
$
5,213
4,941
6
%
Segment earnings before income taxes
$
255
255
—
%
$
1,054
663
59
%
FMS earnings before income taxes as % of FMS total revenue
16.0%
17.0%
16.7%
11.7%
FMS earnings before income taxes as % of FMS operating revenue (2)
19.3%
19.6%
20.2%
13.4%
Three months ended December 31,
For the year ended December 31,
2022
2021
Change
2022
2021
Change
Supply Chain Solutions
SCS total revenue
$
1,251
870
44
%
$
4,720
3,155
50
%
Subcontracted transportation and fuel
(368)
(256)
44
%
(1,466)
(944)
55
%
SCS operating revenue (2)
$
883
614
44
%
$
3,254
2,211
47
%
Segment earnings before income taxes
$
35
21
67
%
$
186
117
59
%
SCS earnings before income taxes as % of SCS total revenue
2.8%
2.4%
3.9%
3.7%
SCS earnings before income taxes as % of SCS operating revenue (2)
4.0%
3.4%
5.7%
5.3%
Three months ended December 31,
For the year ended December 31,
2022
2021
Change
2022
2021
Change
Dedicated Transportation Solutions
DTS total revenue
$
456
402
13
%
$
1,786
1,457
23
%
Subcontracted transportation and fuel
(136)
(111)
23
%
(547)
(402)
36
%
DTS operating revenue (2)
$
320
291
10
%
$
1,239
1,055
17
%
Segment earnings before income taxes
$
30
12
150
%
$
102
49
108
%
DTS earnings before income taxes as % of DTS total revenue
6.6%
3.0%
5.7%
3.4%
DTS earnings before income taxes as % of DTS operating revenue (2)
9.4%
4.1%
8.2%
4.6%
————————————
(1) Includes intercompany fuel sales from FMS to SCS and DTS.
(2) Non-GAAP financial measure. A reconciliation of (1) GAAP total revenue to operating revenue for each business segment (FMS, SCS and DTS) 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.
13
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION - UNAUDITED
KEY PERFORMANCE INDICATORS
Three months ended December 31,
For the year ended December 31,
2022/2021
2022
2021
2022
2021
Three Months
Twelve Months
ChoiceLease
Average fleet count
135,700
144,500
140,000
146,300
(6)
%
(4)
%
End of period fleet count
135,400
143,900
135,400
143,900
(6)
%
(6)
%
North America (N.A.) end of period fleet count
134,600
133,300
134,600
133,300
1
%
1
%
N.A. average active ChoiceLease vehicles (1)
128,800
129,200
128,700
129,900
—
%
(1)
%
Commercial rental
Average fleet count
41,900
40,400
41,600
37,900
4
%
10
%
End of period fleet count
41,800
40,700
41,800
40,700
3
%
3
%
Rental utilization - power units (2)
82.2
%
85.2
%
82.9
%
80.4
%
(300)
bps
250
bps
Rental rate change - % (3)
6
%
10
%
7
%
11
%
Customer vehicles under
SelectCare contracts
Average fleet count
56,300
54,200
55,700
53,000
4
%
5
%
End of period fleet count
55,600
54,500
55,600
54,500
2
%
2
%
Customer vehicles under
SCS
End of period fleet count (4)
13,100
10,700
13,100
10,700
22
%
22
%
DTS
End of period fleet count (4)
11,400
11,300
11,400
11,300
1
%
1
%
Used vehicle sales (UVS)
End of period fleet count (5)
4,300
2,500
4,300
2,500
72
%
72
%
Used vehicles sold (6)
6,800
5,400
29,100
22,900
26
%
27
%
N.A. UVS pricing change (7)
Tractors
(6)
%
111
%
43
%
78
%
Trucks
4
%
99
%
51
%
70
%
————————————
(1) Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units.
(2) Rental utilization is calculated using the number of days units are rented divided by the number of days units available to rent based on the days in a calendar year (excluding trailers).
(3) Represents percentage change compared to prior year period in average global rental rate per day on power units using constant currency.
(4) These vehicle counts are also included within the fleet counts for ChoiceLease, Commercial rental and SelectCare.
(5) End of period fleet count includes 200 vehicles from the FMS UK business for the years ended December 31, 2022 and 2021.
(6) For the three and twelve months ended December 31, 2022, includes 2,000 and 11,700 vehicles sold as part of the exit of the FMS U.K. business
(7) Represents percentage change in North America compared to prior year period in average sales proceeds on used vehicle sales using constant currency.
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 press release:
Not Applicable. However, the 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 shareholders' equity to adjusted average equity is provided in the following reconciliations.
Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that presentation of each non-GAAP financial measure provides useful information to investors. See reconciliations for each of these measures following this table.
Operating Revenue Measures:
Operating Revenue
FMS Operating Revenue
SCS Operating Revenue
DTS Operating Revenue
Operating Revenue Growth
FMS EBT as a % of FMS Operating Revenue
SCS EBT as a % of SCS Operating Revenue
DTS EBT as a % of DTS Operating Revenue
Operating revenue is defined as total revenue for Ryder System, Inc. or each business segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted transportation, as well as (3) revenue from our ChoiceLease liability insurance program which was discontinued in early 2020. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, SCS EBT and DTS EBT, our primary measures of segment performance, are not non-GAAP measures.
Fuel: We exclude FMS, SCS and DTS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers. Fuel revenue is impacted by fluctuations in market fuel prices and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on current market fuel costs.
Subcontracted transportation: We exclude subcontracted transportation from the calculation of our operating revenue measures, as these services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability. While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS.
ChoiceLease liability insurance: We exclude ChoiceLease liability insurance as we announced our plan in the first quarter of 2020 to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021. We are excluding the revenue associated with this program for better comparability of our on-going operations.
16
Comparable Earnings Measures:
Comparable Earnings before Income Taxes (EBT)
Comparable Earnings
Comparable Earnings per Diluted Common Share (EPS)
Comparable Tax Rate
Adjusted Return on Equity (ROE)
Comparable EBT, Comparable Earnings and Comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs, net and (2) other items impacting comparability (as further described below). We believe these comparable earnings measures provide useful information to investors and allow for better year-over-year comparison of operating performance.
Non-operating pension costs, net: Our comparable earnings measures exclude non-operating pension costs, net, which include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. We exclude non-operating pension costs, net because we consider these to be impacted by financial market performance and outside the operational performance of our business.
Other Items Impacting Comparability: Our comparable and adjusted earnings measures also exclude other significant items that are not representative of our business operations as detailed in the reconciliation table below. These other significant items vary from period to period and, in some periods, there may be no such significant items.
Comparable Tax Rate 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 marginal tax rates to which the non-GAAP adjustments are related.
Adjusted ROE is defined as adjusted net earnings divided by adjusted average shareholders' equity and represents the rate of return on shareholders' investment. Other items impacting comparability described above are excluded, as applicable, from the calculation of net earnings and average shareholders' equity. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations.
Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
Comparable EBITDA is defined as net earnings, first adjusted to exclude discontinued operations and the following items, all from continuing operations: (1) non-operating pension costs, net and (2) any other items that are not representative of our business operations (these items are the same items that are excluded from comparable earnings measures for the relevant periods as described immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) amortization.
We believe comparable EBITDA provides investors with useful information, as it is a standard measure commonly reported and widely used by analysts, investors and other interested parties to measure financial performance and our ability to service debt and meet our payment obligations. In addition, we believe that the inclusion of comparable EBITDA provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. Other companies may calculate comparable EBITDA differently; therefore, our presentation of comparable EBITDA may not be comparable to similarly-titled measures used by other companies.
Comparable EBITDA should not be considered as an alternative to net earnings, earnings from continuing operations before income taxes or earnings from continuing operations determined in accordance with GAAP, as an indicator of our operating performance, as an alternative to cash flows from operating activities (determined in accordance with GAAP), as an indicator of cash flows, or as a measure of liquidity.
17
Cash Flow Measures:
Total Cash Generated
Free Cash Flow
We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
Total Cash Generated is defined as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment and (4) other cash inflows from investing activities. We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities.
Free Cash Flow is defined as the net amount of cash generated from operating activities and investing activities (excluding acquisitions) from continuing operations. We calculate free cash flow as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment and operating property and equipment, and (3) other cash inflows from investing activities, less (4) purchases of property and revenue earning equipment. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders, after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited.
(1) Refer to the table below for a composition of Other items impacting comparability, net for the 12-month rolling period.
(2) Includes income taxes on discontinued operations.
(3) Represents the provision for income taxes plus income taxes on other items impacting comparability.
(4) Represents the impact of other items impacting comparability, net of tax, to equity for the respective periods.
(5) Adjusted return on equity is calculated by dividing Adjusted net earnings into Adjusted average shareholders' equity.
Twelve months ended December 31,
2022
2021
Restructuring and other, net
$
2
19
ERP implementation costs
—
13
Gains on sale of U.K. revenue earning equipment
(49)
—
Gains on sale of properties (1)
(36)
(42)
Other items impacting comparability
$
(83)
(10)
————————————
Note: Amounts may not be additive due to rounding.
(1) Primarily includes gains on properties as part of planned exit of the FMS U.K. business in 2022 and certain FMS properties in the U.K. that were restructured as part of cost reduction activities in prior periods
COMPARABLE EARNINGS BEFORE INCOME TAXES / COMPARABLE EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION RECONCILIATION
Three months ended December 31,
For the year ended December 31,
2022
2021
2022
2021
Net earnings
$
206
181
$
867
519
(Gain) loss from discontinued operations, net of tax
(6)
1
(4)
3
Provision for income taxes
92
54
353
171
Earnings before income taxes from continuing operations
292
236
1,216
693
Non-operating pension costs, net
3
—
11
(1)
Restructuring and other, net
(19)
10
2
19
ERP implementation costs
—
—
—
13
Gains on sale of U.K. revenue earning equipment
(6)
—
(49)
—
Gains on sale of properties (1)
(2)
—
(36)
(42)
Comparable earnings before income taxes (2)
267
246
1,144
682
Interest expense
63
51
228
214
Depreciation
438
437
1,713
1,786
Used vehicle sales, net
(87)
(108)
(400)
(257)
Amortization
10
3
37
8
Comparable EBITDA (2)
$
691
629
$
2,722
2,433
————————————
(1) Primarily includes gains on properties as part of planned exit of the FMS U.K. business in 2022 and certain FMS properties in the U.K. that were restructured as part of cost reduction activities in prior periods
(2) Non-GAAP financial measure. Non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of earnings before income taxes from continuing operations to comparable earnings before income taxes from continuing operations is set forth in this table.
Note: Amounts may not be additive due to rounding.
Comparable earnings from continuing operations (3)
$
192
190
$
834
515
Tax rate on continuing operations
31.4
%
22.8
%
29.1
%
24.7
%
Tax adjustments and income tax effects of non-GAAP adjustments (3)
(3.2)
%
(0.2)
%
(1.9)
%
(0.2)
%
Comparable tax rate on continuing operations (4)
28.2
%
22.6
%
27.2
%
24.5
%
————————————
(1) Primarily includes gains on properties as part of planned exit of the FMS U.K. business in 2022 and certain FMS properties in the U.K. that were restructured as part of cost reduction activities in prior periods
(2) Adjustments include the global tax impact related to gains on sales of FMS U.K. revenue earning equipment and properties as well as the release of the valuation allowance on U.K. deferred tax assets in the fourth quarter and twelve months ended December 31, 2022, and expiring state net operating losses in the fourth quarter and twelve months ended December 31, 2021.
(3) Non-GAAP financial measure.
(4) 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 marginal tax rates to which the non-GAAP adjustments are related.
Note: Amounts may not be additive due to rounding.
Adjusted average total equity (denominator) (4) [B]
$
3,030
Adjusted return on equity (4) [A]/[B]
17%
————————————
(1) Forecasted other items impacting comparability includes FMS U.K. exit of $10 million and CTA release from the FMS U.K. exit of $180 million.
(2) Includes income taxes on discontinued operations.
(3) Represents the tax provision on adjusted earnings before income taxes.
(4) 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 shareholders' equity to adjusted average total equity set forth in this table.
(5) Represents the impact to equity of items to arrive at adjusted earnings.
Note: Amounts may not be additive due to rounding.
