R - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the Ryder System Fourth Quarter 2017 Earnings Release Conference Call. All lines are in a listen-only mode until after the presentation. Today's call is being recorded.

If you have any objections, please disconnect at this time. I would now like to introduce Mr. Corporate Investor President, for Vice Brunn, Strategy Relations and Ryder. Bob Mr. may begin. you Brunn,

Robert Brunn

Commission. changes Thank differ to Ryder's Securities Garcia, based Officer. to expectations economic, this welcome earnings materially and Robert meaning are statements about hear you. and morning Good Executive Financial are More changes within and statements Securities to uncertainty Art Act during presentation, from these results forecast and may Presenting are in Chairman the in Officer; and expectations Chief of Sanchez, call. Exchange and some filings information earnings These morning's forward-looking that the due Vice regulatory on Executive circumstances. business, to and conference current fourth in Ryder's Reform I'd today's these Actual on you like Private detailed and contained and the in political, call competitive, is management's remind of President this subject Chief release you'll factors market, with Litigation factors. XXXX XXXX quarter XXXX. and

of call President for following Cooke, Global and turn me the Robert. Chain John With to of Management on Sensing, Fleet Dedicated available Transportation Dennis Additionally Solutions; Diez, President Steve are Solutions, let that, Supply today President Solutions; and the of Global presentation. questions it over

Robert Sanchez

share Used Comparable of and were operations lower than offset quarter used available asset results. rental expect open area, prior us. to expected to Baked as depreciation vehicles for FMS Comparable we'll our and by expected we'll results, levels sale were in performance overview we $X.XX accelerate in further our make and our recap to activity vehicle to better forecast favorable plan were call was we by positioning outperformance $X.XX, to and strong pricing, With in year, results dedicated management XXXX our range XXXX. morning, our cost continuing review per the during more for in driven offset vehicle depreciation benefits improved us performance. accelerating extended through for results. This rate, performance let's insurance near-term of morning for better accelerate just questions. dedicated continued due everyone outlook $X.XX, and XX% and vehicle from sales vehicle reform, of a the mid-XXXX. for by joining fourth turn sales the of our the to earnings strong as inventory the thanks we target XXXX. Good fourth executed lower quarter tax outlook claims. than related an was from above up tax range, our In results, well of pricing, and prior to we that, reduce depreciation ChoiceLease to -- unrelated than up midpoint sales additional mid-XXXX. results $X.XX commercial Previously, in our Then discuss year for the rental bottom higher our effectively used the to FMS, used primarily from primarily quarter as

in as businesses, $XX.XX, no quarter reduction will during employees This $XX totaling reform, primarily are a from to tax deferred Fourth non-incentive trends recently in these a due tax from reduction million anticipating enacted due Tax exclude rate. we initiatives. -- our longer to Cuts Dedicated we our under net awarded the liabilities bonus earnings a tax the with grew effective continuing eligible significant benefit in contractual to marketing a the expect incur bonus all to well and and with one-time results comparable one-time from and The was favor provisions connection one-time of quarter, benefit Jobs Ryder's Chain, sales new U.S. we to Our to Act. the the that expected results. In comparable employee tax benefits excluded forward ChoiceLease, secular improve significant tax are ongoing going benefits outsourcing, Supply as all

Revenue increased new a Operating and in with other to $X.XX XXXX. our number information provisions Page Comparable also shares restructuring press fuel We expected a higher subcontracted million I million enhanced outstanding gain share the XX.X ownership, funding the employees. am on value volumes. related dividend Restructuring of to a benefit report to XX% higher as business average transportation a restructuring cost pension leasing also typical in record and last year. Ryder's sale, costs. and X% began prior by exclude the reductions The XXX include companywide that generate Monday. the of sales from new saw program three initiatives. repurchasing grew costs further shares workforce XXXX. shares fourth of benefits our are million quarter. new company. in under billion actions earnings in antidilutive increasing year are business savings $X.XX The pension earnings some charges. for fourth $X.XX property quarter, combined XX.X reflecting additional five -- $X approximately financial We non-operating which increased reform you the XX.X cost million impacting share growth Cost $X.XX shares and quarter a strong exclude sales, diluted in the fees ChoiceLease strategic of additional on results all and the release decreased repurchase and to $X.XX versus charge year tax revenue, of shares fourth quarter. our was revenue, of for second also $X.X excludes XXXX to by and following quarter was proposition. also record benefits of pleased segments, from These $X.XX to Comparable taken reduction support initiatives fourth tax in the per non-operating

$XX.XX. be an shares During the XXX,XXX at quarter, you price bought average of

an purchased XXX,XXX at including shares of in we prior For average million program. the expired $XX.XX, of program not price full XXXX. This shares under the purchased December program, X.XX

million X.X December. two-year, antidilutive repurchase share new in a program approved Board Our

We expect program new to shortly. begin shares under this repurchasing

comparable full between Page rental the from points continuing by for segments as fleet margin number and pension revenue, Excluding from XX discuss the in weaker ChoiceLease during sequentially vehicles Solutions slightly and lease ChoiceLease of rate sales XX.X% by sale page earnings used XX% prepared vehicles. $X comparison, a down X,XXX Adjusted from the other not forecast from well to prior and Operating impacted year. due activity. increased to Management vehicles six per outsourcing capital on by is tax vehicles to reform. relevant year were sales the the of revenue marketing seven tax items, fleet well the favorable lease and growth benefit highlights sequentially key fleet declined prior of capital X,XXX our prior cost growth year's was to year-over-year. prior a count, the return business basis as tax quarter. XX The rate now X% The was statistics saw rates in X,XXX $X.XX, basis. sales the X,XXX year's which Fleet as year. grew I'll vehicle all higher grew XX.X%, costs vehicles product more spread and This increased fuel, X% turn which down Comparable excludes trends basis for increased operations that billion. robust lines. higher fleet from year operating trends, we by and adjusted by X%, for reflects lower increased and being full up in X,XXX by vehicles revenue share our in on driven lease financial and provides points, by as results. of initiatives. above key negative continues the and replacement to vehicles on driven

SelectCare pricing. SelectCare up of the slightly came due year. was we Local the from year, versus up sales the business. X% the levels. rental as historical units revenue new approximately year, Local per Units due rightsizing in Commercial The reflecting prior well XXX sequentially was in from during at lower XX.X%, contractual versus on product the X%. basis points X% -- actions the maintenance agreements by quarter run from increased declined driven pricing year the on-demand XX% asset customers Rental up earlier activity. in due For rental prior prior Miles seasonal to up taken were lease outsourcing. day to serviced normal demand in was down continue vehicles units The to reflecting power rental the full per fleet our wins. the but stronger year, very down We've U.S. the was demand by been to was year. for from higher quarter. slightly approximately the utilization vehicles driven expectations. exceeding was this X%, the new quarter, a new sequentially for customer X% by fleet line. Vehicle nearly fleet under was pleased light growth as demand down our power average grew average prior X,XXX year, prior up revenue with

year, by full levels extended vehicles year prior units, the significantly The which vehicles around XXX around seen number full original prior similar other by to beyond the during lease year. leased in vehicles were applications years. the that the decreased increased few of versus year term XXXX. vehicles For X,XXX into termination of redeployed was to Early increased around the the XXX their for

the the to XX%. lease adjustments performance. to valuation and regarding percent up and revenue in lower information As Overall, prior on purchase Transportation as year's revenue earnings results, Total well were page of on mentioned by revenue. were Operating earlier, Supply increased at before due by operating percent XXX FMS equipment due on to select lower used used reflecting vehicle DTS IT. of grew due X%, improved turn revenue largely results transportation rental grew due eight. due the new up to revenue tax results operating before points points revenue as driver increased self-insurance higher separately the before revenue to now down versus claims. tax lower to I'll planned few up volumes prior improved primarily investments certain year. business. the were earnings inventory higher basis FMS provide This to FMS X% seasonal earnings Solutions XX accounts, earnings year. and year-over-year in and used cost Operating to offset was performance to from vehicle primarily Segment Solutions year offset XX%, customer accounts development tax page sales prior I'll in quarter earnings year. and X.X%, partially Supply prior Dedicated older to X% Chain I'll higher operating higher nine. additional due XX% basis commercial volumes. turn as adjustment of now operating growth, significantly Chain Earnings turnover vehicles. Solutions X.X%, these as inventory a valuation higher two improved in increased was a minutes. increased from higher due cost a model in favorable

the again impacted saw accounts spending, year. the to including basis that as call to tax we from sequentially earnings prior the results, several third same one-time I'll quarter impact as over CFO, impact turn items, tax as from that customer year-over-year as capital Art XX and While for At from down cover percent revenue improved were full leverage. before reform the the of two flow the operating this well X.X% expected. cash performance a points Garcia, Segment year point, our quarter, the

Art Garcia

Robert. Thanks

into knows, signed was the Cuts Jobs in everyone and law December. Act Tax late As

assess are impacts fully expected changes, nature. tax the many Ryder. Our team to several be impacts are continues the which one-time to are There work that of for overall, to in favorable

of of a of tax a the unrepatriated tax net by to a tax the of the provisional resulting lower The change revaluation increase Again, company's we XX year-end tax don't deferred our impact repatriation percentage capital near-term rates, share earnings. XXXX, $XXX provisional million per deferred XXXX. $XX The non-cash on sheet leverage was and million. $XX.XX offset U.S. tax benefit in points the of in in fourth by the quarter allocation. is or revaluation our First, recognized balance net declined the partly as corporate company's from liabilities. the here and foreign XXX% Due equity Ryder amount from net a anticipate of one-time reflects is non-cash benefit liabilities,

As leverage debt to our a from XXX% range result, to target we've to to XXX% lowered XXX% equity. XXX%

offset return impacted our return the spread to rate as Finally, to by capital tax is from lower expected be leverage. higher expected reform capital and be increased tax an on on of is minimally capital by cost

primarily of QX fleet, $X This were page $X.X equipment was the capital reflects Turning contracts. prior of equipment from sale to We The expenditures gross property $XXX from Chain used by of the investments greater the and prior lower $XXX earning year offset to higher lease by rental Supply the fulfill $XXX sale up realized to by million, primarily million of million expenditures Full planned and year. due revenue billion. largely up from increase XX. to net spending lease million use refresh reflects partially pricing. Full year the $X.X capital billion, year. proceeds to vehicle increase the volumes lower used offset a new increased

$X.X cash for billion We capital million substantially prior around from a by total decreased billion. the XX the end Total XXXX, to around Turning operating approximately year. was year the $XXX debt generated from billion XXXX. year, from for the generated $XX under to page, of equity prior Page at equity $X.X decreased the year. unchanged year. was down end Free X% ended $X.X Cash from from the from our for million of to up to down Debt by we cash next $XX little during to of million, prior debt position. payments down addresses XXXX. down flow billion around slightly $X.X XXXX the cash expenditures activities of XXX% XXX%, at XXXX

increase equity, resulting tax an from XX As due percentage to earlier, points leverage reform. declined in I by mentioned

impact Our and The as Equity XXXX, The quarter of Robert higher reform. decreased year at update. down points discount more revaluation liabilities. vehicle $X.X although because to the than back at over returns, rate. the hand accumulated At due the XXXX. call a around tax deferred offset continues asset I'll provide after-tax from to almost up was including which the XXXX, a of charge equity $XXX pension primarily this favorable the impact to pension year of charge from base earnings end equity million end lower year-end end XX-point at used decrease billion, of year point, accumulated XX impact reflects this sales the the to leverage

Robert Sanchez

the vehicles periods Page higher vehicle executed from inventory year, versus results for Art. prepared number provides vehicles. effectively was a for XX% used of sale, to the and resulting range end. versus quarter inventory the our sequentially. year, by We more relevant Thanks to sold held vehicle by vehicle our being counts of vehicles vehicles summarizes Used vehicles fleet sale at prior XX this Used XX% the sales. plan X,XXX a X,XXX X,XXX prior down down XXX used comparison. inventory Adjusting to which sequentially, inventory levels. year levels end during target key quarter, a and for We lower reduce the X,XXX low prior declined for vehicles of X,XXX

year, outlook fleet fleet to and of for forecast. prices sold assumptions prior was from down generally and pricing realized down were XXXX our our Pages Proceeds X% quarter highlight were fourth truck underpin X% vehicles both sold Compared the page to standpoint, earnings XX ago. trucks XXXX, view X% quarter. and the XX sequential vehicle a full second that third tractor proceeds and XX,XXX a the XXXX. of quarter. From to of XXXX. We XX%. XX tractors sold truck now vehicles during were the tractor per proceeds the as mix for the we I'll some up compared to to a proceeds period, up versus Higher periods. reflect market For the turn per versus up was down XX% year pricing key stabilizing vehicles, in cover XX%

cost XXXX. also contractual and initiatives We improved cost sales partially in maintenance benefits from earnings XXXX, vehicles. certain headwinds a commercial business robust higher investments, record going revenue XXXX. These impacts vehicle will across and expect versus in from be higher pipeline year offset all from used impact Earnings benefit XXXX older to sales performance. into primarily by sales, reduction vehicle a rental ongoing depreciation, negative strong are on be lower segments, growth will The used to following strategic negative sales in expected due in and year XXXX

growth two almost at seventh the out growth Day Our expect assumes economy, for lease rate of well and up We're target ago. Fleet moderate XXXX to growth. foreign rising XX% years environment forecasting from consecutive fleet laid overall Investor we of in vehicles, impact lease above exchange. Conference fleet minimal our forecast the our a X,XXX In be we XXXX year prior interest the a year organic and Management,

expected fund X% X%. the with will negative headwind X,XXX XXXX. replacement rental pricing capital of initiatives, strong or increase X,XXX year, utilization. activity downturn. driven higher in expect by Used sales ongoing as an with marketing products in in in commercial vehicles. fleet in of both trends Rental free of by an in impact by that performance and our We market cash our X%, We're growth will accelerating and secular grow in result vehicle average be lease strengthening vehicles expected environment. favor increase a due by sales extended environment. plan and light flow is demand expecting to also growth We sales to increase We're maintenance rental to outsourcing, strong higher rate to the a spending well Higher as this anticipating a to rental XXXX with a the fleet improving SelectCare ongoing also

forecast for pricing outlook used a improving modestly vehicles XXXX. assumes Our in

reflecting benefit EPS network to order share used vehicle negative forecasted of Ryder's residual to valuation loss multiyear more X%, to $X.XX Used vehicle vehicles for a year-over-year for retail proceeds our $X.XX adjustments, impact trends, $X.XX however, be operating generate wholesale we've channels. operations value expect are in and resulting due approximately pricing XXXX. versus of of per a represents process sold to a In estimates up sales We vehicles lowered share. this reflect vehicles through per

of earnings we impacted addition, whereas through sale vehicles depreciation $X.XX. expect that mid-XXXX, available In extended accelerated mid-XXXX. accelerated extended we depreciation XXXX make previously negatively Accelerated depreciation for to by through

year, impact lower benefit year-over-year the of EPS prior depreciation of a in than be the accelerated However, will resulting $X.XX.

sales significant growth. and for tax earnings a will costs benefit higher we and long-term due lower in growth reform, fund benefit to not insurance investments expected by are development well revenue pipeline XXXX new reductions budgeting Supply This cost level to would Turning benefits and XX. than on going effective tax SCS. recently and Chain Cost and activity implemented. revenue for favorable earnings partially tax in as Dedicated's growth, which growth marketing, which earnings. higher benefit discretionary revenue from planning a Strong and a in to will and XXXX realized and investments. and savings driving revenue that result development, We're strategic partially initiatives, expecting sales earning offset page in currently of pricing, a the new as better both focused strategic are forward. strong operating rate performance, we drive DTS forecast technology, will also robust a overhead for strategic as from a in zero-based We're spending are strategic XXXX, is savings by are product to process investments. offset of expected XXXX expect growth

shares assumptions purchase which in our of key Page our repurchase based forecast, program just new provides two-year program. in expired December. statistics a to our the outlined. summary plan I also XXXX million XX on program share replaces that is X.X under We prior This antidilutive

business XX X%, be year. last product per We forecast as $X.XX with share lower earnings largely savings are and higher year a extended from exit the that reflects XXXX increased growth to contractual investments, expect months. results. market, $X.XX from partially don't certain the to operating by offset the next is to grow tax revenue up used strategic all rate, vehicle Comparable in vehicles impacts older over fleet in of in and maintenance revenue range benefits strong compared segments. cost to This in rental downturn These our the in lines, cost initiatives, $X.XX model

count million remain antidilutive project repurchase from The our prior of is cost is significantly to of share activity. of impacts to return rate be share spread better to forecast than comparable down at $XX capital in the last is a XX which between the due rate to unchanged forecasted basis XX.X%, the year's XX.X% tax reform. of Our tax We capital breakeven, points on year. due

from due XX%. operating X% with better to to -- by is in growth also rental commercial the revenue X%, the revenue by segment. and XXXX all to revenue return Record in Our Page last forecast is We're equity target business by revenue grow and lines. XX last product XX X% long-term target comparable a XXXX. Management, X% line strong Solutions forecasting below than expected chart by year. outlining higher target. outlook increased be per our increase year, year. to about XXXX is accelerating revenue expected significantly a our growth XXXX to in sales revenue just outlines is ChoiceLease a on a forecast term a earnings Fleet freight is reflecting XXXX, DTS growth Supply key largely environment. Page forecast our pipeline long-term than for also provides at operating Chain from increase In results an in long solid the driven support our grow expectations forecast revenue strong in X% our significantly above range, primarily growth growth. to growth revenue in fleet X% share changes

bonus The in on planning development. expected expense increase technology, $X.XX our and spending, adding customer sales is than and include investments product We to new net impact vehicle growth. negatively people XXXX, sales sales from on facing Sales impacted and investments in investments of continue new new used to in IT. higher customers. normal include development, primarily result for focused vehicle which earnings vehicle depreciation accelerated by versus by be offset changes to expense year. to impact adjustments used policy $X.XX. earnings This valuation insurance increased Higher interest this reflect are depreciation and Higher releases. impact to liabilities Higher partially compensation the as is impact and of $X.XX. $X.XX at of from earnings prior target rates provides per depreciation IT will by capabilities expanded marketing, -- year. premiums earnings as trends strategic merit includes make forecasted future product drive marketing new the lower In planned expected and well negatively higher we're strategic standard by share to

would by the pricing. year positive earnings Dedicated fleet in and will $X.XX for an the sections new share higher earnings as Growth of so to process demand results are add efficiencies impact other driven be I've pricing. with reduction believe utilization earnings increased and increase items on larger to include by $X.XX. expected year. higher budgeting in in ChoiceLease performance. higher Workforce operating Chain, margin The cost certain we Turning by drivers. the lower Chain, Supply higher largely in and growth EPS per that far further earnings a expected XX our We net $X.XX opportunities FMS exist higher $X.XX. revenue months. maintenance to better by drives result growth, model $X.XX mentioned This by vehicles future. strong ChoiceLease of rental be The on totaling cost-saving earnings and and is should zero-based an exit Commercial biggest contributor this year. and share primarily is Supply higher over the expected to fleet per the share of next is older revenue this to per $X.XX expect better earnings fleet driven benefit of operating driven cost operational driving additional SelectCare,

cover In end lower our addition, flow, impacts income tax range of turn $X.XX the and by with tax to tax from cash EPS This to ongoing it benefit, brings rate driven spending, tax $X.XX now comparable $X.XX of reform. we're a forecast $X.XX. forecasting net high Art reform. over I'll from resulting back to a capital to U.S. federal

Art Garcia

Thanks Robert.

up Turning forecast, and XX. well nearly gross growth lease page due and as capital We're from of vehicles due increased both spending rental. higher about year. replacements as spending to growth this billion, in million spending replacement Lease forecasting up for total year, an last $XXX to fleet significantly higher a to in number is of of up $X

equipment sales spending X% in $XXX a to primarily sale XXXX. from will is million, fill forecasted to almost equipment a sale year. XXXX this property in funds in X% expected grow around also million In planning follows Higher up of $XXX forecast fleet. total decrease level spend because we're and from vehicles. rental, increase $XXX to proceeds or around by primarily expect years in We by operating replacement to for property The average included about to in rental. new $XX into year-over-year with in forecasted Investment These XXXX, to be Proceeds expand X,XXX -- is refresh million fleet by to more are used replacement increase XXXX. to occur add or a to not million and replacements of FMS two locations. rental XXXX order spending below operating

flow, Excluding Net to will capital spending, expected forecasted prior be This as an flow be of by amount by up $XXX invested is of $XXX XX and than driven the of are year, flow. that and forecasted highlights the item, in fleet and talked higher almost X% is vehicles used our impacts XXX% to $X.X end, just billion capital updated forecast proceeds year to cash its impact cash modestly this pricing be at to billion. has sales growth higher both around $X investment from range represent capital are vehicle expenditures from prior increase With volumes We've debt below year. this to agreements. we've the million, of expected on about Page equity forecasted higher to support quarters offset XXX% three lower unit by XXX%. reflecting business. of multiyear growth capital recent down capital in increase Free million used higher years end partially from year, the growth per Nearly about cash lease the XXXX. at on at cash operations. negative free of spending contractual to cost bottom target are higher

expect refresh The we XXXX, the growth $XXX the to of million support $X.X side nearly billion out and the investment page For breaks $XXX capital, spend rental box on the and the in lease right-hand fleet. million in to lease. contracted growth growth to grow with

growth replaced capital. require on $XXX units being cost of of will million unit fleet per lease vehicles Forecasted X,XXX require $XXX leased million. additional will Higher an

drives average and capital revenue six-year in lease over life higher earnings of this these future of vehicles. All the

investments. cash For cash highlights operating offset page a result time capital spending, year, flow bottom-line as Operating a of flow cash billion, of has almost flow. million due $X.X the on by high capital over higher XXXX, cash higher add from operating projected fleet free growth up years The $XXX flow the investments. XX-year from this reflecting prior is how declined growth of increased to returns partially several

impacts addition related reform I In ongoing will to earlier, impacts Ryder. tax items several discussed have the for reform tax one-time from to that

around This the tax impact near-term. benefit over U.S. have rate global lower tax XXXX. reported ranged but years. rate earnings, Ryder's to is to to in effective from the the corporate expected five XX% GAAP XX% rate decline to First, had XX% is in expected no past cash

be referral Second, program expensing the regularly Like-Kind Exchange this repeal The than near-term. available. the accelerated Ryder had which due loss more vehicles at in of the are to on longer will least offset of no taxable by program, gain used,

in XXXX, and future net among on others. carried to in depreciation, interest Once not interest the expected ability net interest, interest can't limitation Third, the XXXX, Ryder use earnings, through deductibility including limitation the non-deductible capital to on is net deduct is becomes while based various period. limitation EBIT-based dependent will spending, on EBITDA. Ryder's expense be forward factors, for Any impact be

Finally and tax tax proposition importantly, federal lower the current bonus value the This versus regulations. incremental typically the more from XXX% ownership, ChoiceLease moving under than rate to of tax rate value expensing. improves depreciation the yield offsets from a is from because of reduced new

expertise, network maintenance our include tax operating use key These that also the Let vehicle retail lowers drivers our of world-class value unchanged which add vehicle by vehicle the advantage me for ChoiceLease sales. used and power, historical are purchasing reform. costs, of Ryder's

can You Robert the call White available about EPS that Paper at me over point, longer reform tax our in some discuss to targets. website more changes IR investors.ryder.com. the and recap find back forecast At let our of impact our is to details on turn Ryder's this to term

Robert Sanchez

All right. Thanks Art.

by forecast to share reform. XX%. an to $X.XX $X.XX includes EPS $X.XX. a year also to of favorable first comparable a prior quarter XX, rate of driven XX% providing We're comparable per XXXX's $X.XX we're last $X.XX Turning increase from year. versus represent page $X.XX impact lower versus a earnings This tax of year-over-year of EPS forecasting the tax $X.XX to

to comparisons. commissions challenging spending, investments in of most The depreciation. as and represents due fund the first and expense including is This sales, increased year-over-year vehicle marketing quarter the to growth, overhead FMS timing well technology as

results Additionally, accounts rental quarter from first These some reform. and first previously. unusually included by results in as XXXX. earnings we discussed quarter headwinds growth be expected as from that of strong one benefits offset to expect SCS for the well two quarter tax lease quarter challenges SCS partially in first are we've an XXXX the for as

to XXXX. back a XX, laid many out will almost at financial May Turning you Investor we've of targets as our two Day years number recall, in three-year of page ago of

changed. environment the rental in particular, then, in conditions stable time, are these used and transactional has, articulated based at materially we used on the targets for Since however, the markets. vehicle vehicles has As market

we appropriate some result, changed sales. of vehicle a to to used revise reflect for the it's targets three-year As markets believe our

FMS leverage for change earlier, equity lowered to basis also mentioned target range lowered operating earnings And Due this initiatives vehicle reform. non-cash a cover correspondingly prepared from will the on note targets the three-year operating contains outsourcing sales and to filed spread positive ROC to our revenue favor trends large and of focused we lot reflect to remain secular non-outsourced afternoon tax and impact for XX% We've to with additional XXXX pretax remains our our business XXX the this to your of basis in details both see ongoing of all finally, continue by our remarks XXX to to used from the marketing points results points. Earnings impact the a XX% that to had as our unchanged. we've in earnings revenue today, our XXX%, XX-K from we and as That and target that Dedicated a XX% concludes lowered XX% XX be remained to markets morning. material in review. reflect strong penetrating unchanged Our residuals. Supply to three for target, targets target from Please as our percent We Chain FMS growth results quarter lower segments. fourth outlook.

I'd that yourself ask As you question one a result, to that each. limit you

questions take welcome the we If At questions. to operator time this up time, get you we'll call the in I'll queue allotted. in to questions, many lines to turn you're as the the for additional back the can as open have and over

Operator

Baird. Thank And we'll question first from you. Instructions] our with take Ben [Operator Hartford

Benjamin Hartford

maybe slide, you we'll Obviously, what come and Hey, introduced Day. back May Investor three-year final XXXX financial everybody Robert, those the good morning. to in that targets. the

implied point roughly or you target at XXXX, three-year was these forward? three-year XXXX target are targets financial point we they here So, this The as read language, that and revised to targets targets updates three-year of in time maintaining are the from XXXX. kind

Robert Sanchez

the three-year forward. point targets Ben, Right. this from

Benjamin Hartford

Okay.

Robert Sanchez

targets. [Indiscernible]

Benjamin Hartford

Okay.

depreciation accelerate a stands pieces it the equipment XXXX, from point to here the year. this view, moving of As in a mean, division today of lot there used I here are in

about the used assumptions your sales in current vehicle hold, expect had from you If in you to XXXX? to gain loss XXXX a that would return talked

Robert Sanchez

at to I this hard point. it's think, Ben, Yes, tell,

year. have is the the to maybe the XXXX. you really But we're is here yet, at if slightly see the doesn't or assuming XXXX which in progresses, up think stabilized year if pricing we'll what that look comeback off a pushed as picks and during I begins really comeback

Benjamin Hartford

circle quick, just on And three-year I'll that follow-up Okay. back to real targets. then

FMS. end and you've bottom basis UVS here, sensitivity XX% XXX element Or all of the points end to some from the control on between the can got Is XX% gains XX% top allow range? XX% to to the target What's years there EBT in three that margin in variance is of range? So, an that of our sale? that it that range,

Robert Sanchez

clearly it -- some requires an used right. environment, improvement vehicle Well, the in

the I by I to that contractual bottom, think that's growth and in is we drive really more the the kind our and business. pull ability get manage driven can of top through. cost think, Obviously, given. cost to The rental doing then well

Benjamin Hartford

I'll over someone Thank Okay. to turn it else. you.

Operator

Fowler Capital KeyBanc our We'll Todd question Instructions] take Markets. with [Operator next from

Todd Fowler

and Thanks morning. Great. good

Robert Sanchez

morning. Good

Todd Fowler

good everyone. -- the on just Robert, morning

the residuals change Or the are of out you're give in used It with the inventories the seeing? like just fundamental potentially looks I can dealing a you [Indiscernible] some the think on into, into your the of equipment are about with the is you're vehicle own lower that coming Just the some better, us outlook, to the expectation indications, even your seeing with of the that XXXX? business, a little end is of residuals? and the maybe still in pricing specific trucks is in market depreciation? both of the What sense incremental in here year-over-year on tractors fourth seem you up look into driving there taking? but additional here Is why it you're supply that you depreciation as coming the the change quarter. that's was something If Any range.

Robert Sanchez

bottomed as to is the with that in a think, used production truck that said consistent going year it's the our concern lot going we've -- there's relates I Yes, Todd, there's earlier what to up, will market. it is that certainly be -- yet, of be OEM additional hitting pricing pressure on But really put pressure mindful truck to that pricing. some Obviously, used the here. that. could but seems that we don't we're And out the units know

able is need it to where up. come other the we piece depreciation to that lead is, to note be think pricing I for us to

the market need do we seen pricing we back we've big our vehicle depreciation five-year pick up. we average that that us in to haven't don't XXXX know And Art, until think there's analysis. any in really at if And rolling you'll this up. if pricing depreciation. yet, Remember, really [Indiscernible]? pricing have I come in -- need a see move to we used a still and happens but to color to used to comes look I some have see So, other what start additional around that, that if

Art Garcia

comes Yes, in difficulty] if at [technical it

Todd Fowler

that difficulty] pick XXXX a into $X.XX [technical tails off? up like as

Robert Sanchez

Well, yes, [technical difficulty] clearly

Todd Fowler

year? tailwinds difficulty] next [technical year-over-year into

Robert Sanchez

are out, your also. reduced headwind used see But right, everything. to the at plays let's dependent all end, in it Yes, we what had Todd? would be just It's to that see results on sales point, how the vehicle

Todd Fowler

it. Got

point. know Thanks over that material. I covered time. a Okay, I'll this the turn at you lot for it

Robert Sanchez

Todd. Thanks

Operator

Scott Group with to from Research. move We'll next question our Wolfe

Scott Group

Good guys. thanks. morning Hey,

Robert Sanchez

Scott. morning Good

Scott Group

So, guidance realistic? do in you the do can to that Dedicated X%, and that changed that you Supply leaving hasn't at Chain or margins XXXX you're think that not X% since is

Robert Sanchez

can range, Well, certainly tell we're be XXXX we're we in either we're would that I you, looking -- in and -- XXXX. we think either approaching it

Scott Group

and year? then, like. in are numbers in this of Okay. I goes much half back in extra XXXX that And How XXXX the how can sounds much what maintenance away you maintenance guess, guess I you it is year your then mind? say XXXX seeing fully

Robert Sanchez

looking result year that maintenance probably $XX million. the of headwind some We're it's really units. of Yes, associated aged this a of at about these as

then next late and year, get more less that's into into as becomes it XXXX, be really to So, going a the get XXXX, of tailwind. we we as

Scott Group

year-over-year of $XX for And the headwind building just has because so that's a I'm that or guessing that cumulative couple this is clear, million is I'm been years.

Robert Sanchez

year-over-year. That's year-over-year. That's

Scott Group

you cumulative from bad goes Do these sense away? have the vintage headwind trucks what that any is

Robert Sanchez

Yes, better. that's stuff because it all gets the really much got you've in complicated newer coming

into turn tailwind more and XXXX. this late So, XXXX a really of a into will

Scott Group

in and I'll back queue. get bunch Okay, all got right. out I've get but a more,

Robert Sanchez

All Scott. you. right Thank

Operator

next our question Long Justin We'll with from Stephens. take

Justin Long

morning. good and Thanks

Robert Sanchez

Good morning.

Justin Long

to and rental. the wanted ask about margins I incremental

you're guiding demand up for So, rental to be X%.

to at $X.XX But historically. the on expected EPS? of look the you You're about run I why some fleet the that we've that, is more all increasing around color incremental rental only the case? what the X%. seem math lower by add margins just provide seen I bridge, that versus Could if be when size might to EPS So,

Dennis Cooke

buckets. into It two to and gets I'll it cost, put is this Justin, maintenance Yes, Dennis. down really

units. more of out-servicing is First

as not the rental prior result fleet years. as a aged has Our in much of investing two

units, two years And our outservicing of then outservice fleet. got the run struggled And model are of that that's that, rate almost aged times some the units. several -- in so aging we've got to we these units. it's you've normal still of And with

us two. then it's really the the is that drag the what you units, and aging which rental. outservice margins normally fleet, It's like a see into with said, so we though of giving several of occurring, Xx you normally And rental outservicing

Justin Long

planned replacement the incremental XXXX, of some that's standpoint? after something that's from we margin see situation XXXX more for And an and that is in a improves normalized this

Dennis Cooke

That's exactly right. That's right.

that which, units, in these lower Xx XXXX. it's outservice a again, it number was number we in XXXX, As

pause into see the You've and some and vehicles of of in to have that middle got that's rid put to the when higher we start better. vehicles that these of then costs get that get XXXX

Justin Long

Okay. hop back Thanks. queue. in I'll

Robert Sanchez

All Thanks. right.

Operator

We'll go to from Ross with our Stifel. next question David

David Ross

everyone. morning good Yes,

Robert Sanchez

Good morning.

David Ross

to XX% a back get to growth bit operating in little pricing differently. wanted it Just looking although rental leads full service and in even maybe at improving. is correctly, do double-digit growth is to and market maintenance, volumes in you to the back need XXXX used question, Not continues it follow-up XX% What ask from Ben's in to FMS? do on margins

So, it's missing to still we're back segment operated. what where to get the historically

Robert Sanchez

drivers growth year. in to really growth lease, expecting hard business, contractual hit this we're key are the Yes, the which that the in look, lease

coming a Rental that's is is heading back, and good guide which coming on. back. So,

Dennis As demand in in there of as higher mentioned, on than But in we the amount now normal is some back headwind replacement that's and coming have XXXX. do going have we rental.

this vehicles of us that maintenance to maintenance finally, really primarily vehicle The be the sales the a cost we But used -- the fleet a back really will has is still to we used We're then get And piece margins less out that will with around those in That mean units. XXXX, aged we have in have vehicle this lower are that, positive these the turn help out. a vehicle I to gains range. impact system. get little vehicles lot need as technology. still other of used negative. kind We into behind going the vehicles sales. be a that XXXX. bottomed units just mentioned, -- comeback. to around And Used of year need after with on cost is used more will be having year

David Ross

in Okay, back Thanks. I'll get queue.

Robert Sanchez

Thanks Dave. right. All

Operator

to go Casey question We'll Deak next with from Wells Fargo.

Casey Deak

Thank there? you. are you Yes

Robert Sanchez

Yes.

Casey Deak

All right.

what growth out additional is strong relative about fleet Can to to is an wanted that you put talk touch in you're the that Just basically lease the where and XXXX. the for clients where the mainly you more on additional seeing, strength extrapolating you end If a -- is little you're tractors, on color from that that seeing you're there can coming new just give existing from market. clients, clients? If growth? and how what Thanks.

Robert Sanchez

really and struggling Chain. January big finding in only we're so the finding is in it's some robust very in will especially fourth the improvement seeing each Dedicated businesses. each FMS tell businesses. tell you, the in seeing a tell in of got side, ChoiceLease as It's customers the the being in a are We're freight Yes. now drivers, in our you, I sales, quarter. would even of we're with Look, big not and a seeing also trucks, as strong Thanks very pickup but that I'll forecasting helping significantly you're sales, Supply we've I Casey. environment. you. market helped on helping of growth

So, it's a robust environment I'll across tell Board. the you very

tighten. the more as seeing transport are the vehicles seeing there. rental you've truck months, transport of that customers utilization the we is seen last high. market extremely record even seeing side, levels. fourth of We're mention, mean that is we've got utilized. couple We're are pick certainly a over quarter Rental was, leasing market for seeing as in coming being on with a up We transports every I

that used creating think, a a and with very And kind year is think our improving seen only strong working been some strong this our good I freight the model. have we've And business got and environment, in and an seeing should obviously a downside good pressure. for of still is So, fourth business January. side. we seeing we're that. think part The great again, overall, we're a vehicle it's I environment, I But environment strengthening we're XXXX we've year -- a economy through and quarter,

seeing Dennis industries I and some growth the terms what In there? types, if know, add what exactly don't color we're to of want some of you customer the and

Dennis Cooke

A our couple downtime these customers high some years. talked cost who remember, We from we've of of from were XX% Casey, seen still maintenance that the things outsourcing. I'd is add. and growth, is, model coming new of One about

it's painful they're although that, experienced painful customers in our have for P&L, it's outsourcing the reality our customers more. is and As

were just transport. growth outsourcing secular said, other that a transports, that of to what I'll verticals Robert trend there coming although lot continues we it's -- were seeing So, lot the and more seeing then a from occurring. add We're a

across the strength Board. So,

Casey Deak

that market? down? -- similar existing kind strength you Okay, and along seeing another for that Are Are client? of the you're grabbing seeing lease lines, it kind talk the truck great. is And in there utilization, you of that you rental rental that spot -- kind those with can seeing that it's an with of is -- a break more

Dennis Cooke

we Both. want it call who Dennis rental leasing customers One, wait were as is of us you've first new again. from for who time This the lease the in vehicle. got

in lease also. sales We're pure it up. certainly call we it is seeing as addition, that our increasing So, go increasing But market.

lease the and side side. both strength pure support So, on the we're seeing on

Casey Deak

different? you changed have just historically? that. relative Is finish Or that to guess I it few at Is the And last see over Okay. months? to normal that all what

Dennis Cooke

are seeing, it's highs. we're than XX-year said, It's we've Robert utilization say what as would seen at even I historically. stronger that

Robert Sanchez

in many freight trucks not we We've a operating I environment in an lot and operating and outside of years. too think were there was environment where trucks. We're in been enough freight. with last enough now not few the the

this think lease improvement to again, that the see side. now. -- leading for that that and for good I And very rental. Chain also we Supply is continuing on and So, that's And significant only a Dedicated

Casey Deak

All right. the for Thanks time.

Robert Sanchez

you. Thank

Operator

we'll with Ossenbeck from take J.P. Brian And Morgan. question our next

Brian Ossenbeck

my taking Hey, good morning. for Thanks question.

Robert Sanchez

Brian. morning Good

Art Garcia

Good morning.

Brian Ossenbeck

I scenario, flow above again, Day, In have on things wanted to for and a that. guidance, So, it sort about on used a to and to when think you then specifically a like positive out of And which the But cash of an second, realistic, go side. look which be the that expecting be analysis, like again, as that do changed couple you you're think and sounds fleet free X,XXX over will vehicles, upside the scenario lease flat. Investor back still the fourth looks just or XXXX next could be growth in bit I of reset the mostly clearly little of kind vehicle couple years? was

Robert Sanchez

I probably free rates, same year. just doubling. we're here side rate need, you steady cash you vehicles to significant that years a the need is cash is multiple we on previous you've a think is steady Yes, when for you you're a rate, the it's right. what the are Brian, get flow that need growth of growth what paying now the increasing the growth growth from sold getting going Obviously, next year Because

rates, these cash So, where to you growth negative going spikes go free in pickups or have you're to flow.

drive the And what drives So, we're that's what's the growth get drive for value taking every to can -- to earnings shareholders. time we run, wanted it. -- really we the and going -- know, going long but over what's to

in growth going see to you'll together, rate you'll years a this flow. cash put If free growth if also a we're result it's strong So, these cash expecting string rate positive cash free flow see positive But were negative a this year. year you free of can higher the flow. to year, drop some,

Brian Ossenbeck

Okay.

few cycle just and going before off? for sounds to step-up a level that to through So, a like it have that you can to expect it's bigger you're years

Robert Sanchez

years. of for the Right. units X,XXX is What we growth were for next several looking

right, You're will take a it few years.

Art Garcia

in exactly was Brian, too. this not We're refreshing Day. of kind That's impacted, it year the rental. is probably Investor how

Brian Ossenbeck

moving If parts. be real Yes. little But the you. that of just realize lower a can And some versus came but EPS touch I you your been that's a big that I waterfall XXXX maybe there you I of bigger you reductions, would if would through but expectations? have understand overhead XXX, could for add on even go course. quickly then Can strip a else XXXX? XXXX Thank that and bit part are pieces than cost in you what anything the thought, it Right, for out just from gets adjustments, then helpful. XXXX? of around some are Right. how

Robert Sanchez

$X.XX as a midst we a result we to just actions of organization. got guess, number, look sure in first make $X.XX, There's to pretty that result Yes, I we we think, are indirect the the hit we across the items mentioned that. I in that waterfall in This chunk the which XXXX, we on had we've of that $X.XX, the in managing as year, We've and A zero-based budgeting some as good the process robust headcount layers number. thing of costs, last that came a I the initiative on other year's in is we've around it's hit started. some place of. expand taken organization

money for it's to tool, spending our optimization we on help this chance advantage, give important in think, other of the much talk our drive confident and the we'll $X.XX. us feel of that that, example, competitive But fund but are and, year. our It's had a a contractual we be RyderShare, to that And amount things Chain that us Chain business, investments. I players and to a to ability important in about hit in strategic going some Supply we're space. So, our to haven't really, that investments Supply growth And for good visibility, again, against going it's customers.

that important future important, our this to these year are So, an is make important happen. growth. And are investments to that year

going spending also be more salespeople. we're money doing we're to So, be going on that,

So, paying to salespeople, which are increase already growth we dividends. have of added the rate, some

will in next that. about in tools the investing which then some here hear technology impact several And FMS and So, other we're Dedicated, that in also investing you'll months.

Brian Ossenbeck

for right. details. Thanks the all All

Robert Sanchez

Thank you.

Operator

Research. from our question to from Matt Brooklier go We'll next Buckingham

Matt Brooklier

good and thanks Yes, morning.

question a I increased roughly how rental add X% a can growth growth guess, in the fleet on that XXXX? expect much much of The leased market? of just, So, terms to commercial reflects spot of in And a is you growth, talk of stronger units rental X% side. to that just result how

Dennis Cooke

would I it just on Dennis. for based about demand increasing it's in supporting rental and estimate Matt, growth lease of spot XX% XX% the market.

Matt Brooklier

that's the And somewhat to right? years, is that similar past

Dennis Cooke

Yes.

Robert Sanchez

mean, rental X% reforecasting growth ChoiceLease growth. X% and we're Yes, I

consistent. growing they're yes, kind of So,

Matt Brooklier

on rental just quick one pricing. Okay. And a then

I growth. the was think X% guide for

prior to XXXX are not, but How back far to peak, a hit your does on how compare does rental XXXX look XXXX? or we I we you I like that expectations basis? or think prior If the guess, peak how absolute off pricing, we're maybe in for that

Robert Sanchez

costs don't the a And maybe far Yes, little you higher. are off here, and too the I we're have but as might higher. I would not expect input side-by-side imagine,

So, the continue I expect that that vehicles into the would number coming to to rise as are fleet more are expensive.

Matt Brooklier

talk January? rental pricing you Okay. one. last to And my can where That's then in

Robert Sanchez

January? in pricing Rental

Matt Brooklier

Yes.

Robert Sanchez

also I we're mentioned, January. XXXX And the here. strong a businesses. as track across had We sales contractual on strong giving forecast We're with the

Matt Brooklier

it. appreciate Okay,

Robert Sanchez

Matt. thanks Okay,

Operator

from Seaport to go Kevin Securities. We'll our question Sterling with Global next

Kevin Sterling

Good gentlemen. you. morning Thank

Robert Sanchez

Kevin. morning Good

Kevin Sterling

given So, job with Robert, you information out. it you've all guys and that lay done us fabulous a

So, about question we talked the used market. you -- level just But in appreciate of another detail. the vehicle

You this kind said of vehicle or to to depreciation. it X% to it slow Is accelerated you is of a used we see need XX%? year Is of I to way come quantify there need X%, you increase an used that? that in will kind increase stop back X%, much to sales tie, help how vehicle to, prices? extend Can guess, quantify

Robert Sanchez

now. to are from adjusting inflation. And up It's XX% about probably, we XX% for what Kevin, that's

percent vehicles of So, it investment. our was a

truck wouldn't and long, downturn. We turnaround moving to certainly but remain is we're used extended of to trying -- thing our work I an down, this to up. to trying start many we're need depressed executing keeping we on can inventory can. levels we think, the yes, this we So, really, This have really as pricing expected well as things units control, the retail back

on we're to going better than we versus retailed be obviously, going that XXXX units to So, percentage And if do do see wholesale. an can the will that, you're improvement in of that.

direction. we're just in right our market of with rate things within is The So, the control, move well. the issue executing kind getting the

Kevin Sterling

What's perspective, get get really in what's mind moving think really back? just rates that or happen follow-up, kind used from or what, of to to one And Yes. those things of to see vehicle in your you need jump keys two prices? things two kind your you one that to need really

Robert Sanchez

that's I'd question. say a -- good

more that buyers in the see be happening, downturn used vehicle and to things trucks that the I picking freight right. Usually improved good. stuff to think to This want they marketplace, historical environment economy The up, the is is pricing. -- are need should leads this I happening move hot. an

yet. a the a hit it haven't is seen And next for the how We've seen. we're seen have now to And I'll most digest strong, market tell the that. the turnaround right we the The the turnaround. market big you but I truck be to seeing market really leveling freight is right ability But you many think remains thing, the seen six is going those. to months. off, used yet. which that environment the -- being are important only haven't But headwind We units more in

Kevin Sterling

you your Thank for Thanks plan. telling. thought much. I you appreciate very

Robert Sanchez

Kevin. you, Thank

Operator

final Capital. And our we'll take with from question Copeland Cummings John

John Cummings

[technical difficulty]

Robert Sanchez

vehicle electric lease that the vehicles of electric Mostly as actually rental type startup We delivery smaller have some some our vehicles some fleet we in we difficulty] have have to to and companies. also [technical speak. beginning we're fleet the that we customers.

[technical for startups, to commercial So, provide -- can for vehicles vehicles provide typically a these don't vehicles, maintenance looking the them maintenance that and as for to those that the network need. are difficulty] examples,

to able think to that. positioned I uniquely Ryder be do is

becomes position that. and market the that larger of for our a well-positioned view that part we as in So, be we'll

add is we're other out thing the think some mean, I vehicles I to these a has in in phase getting of long The I go. of would Technology market. is still evolving. it initial still way the

our that these things opportunity good it's of our on continue we expertise lot to a for Ryder provide still of vehicles. customers we're for it's maintenance our there's opportunity and So, But to good some think a and to need excited, a happen.

John Cummings

I might just at Thanks. And autonomous you more Okay. your potential [Indiscernible] love but the driving? know point, that I'd And have on hear trend -- this to affect thoughts your speculative business? then just how for

Robert Sanchez

that see We had OEMs on companies. -- good that general. clearly implementation freight impact autonomous business Yes, something ways the out the of actually and a would terms our making a impact business. Chain working We've and have would that with all some that I technology also. would are on some in pretty Dedicated our away few of an progress. vehicles still there partnerships I an obviously, startup also the impact Supply But But probably evolving rapidly. think, in know

think us Ryder. on commercial safety all technology few just most significantly than it into good for trucks. is I what's exciting a safer was translating years it's is and vehicles greater today for ago And is that

for good As, good obviously, public. the time, come driving cost and it's insurance carriers for down over

So, we're excited about that.

we're our investment purchasing the continue Collision to We're at it looking I great that their And in Technology certainly going for to see you're purchasing with customers as a our also really are latest Avoidance many think vehicles that fleets. the that lease in out in of safety use. there. that's

John Cummings

Thanks. Okay, great.

Robert Sanchez

John. Thanks

Operator

questions. back over remarks. turn Robert At this are additional for Mr. like time, closing no Sanchez to call there to the I'd

Robert Sanchez

on long a certainly been everyone. Thanks patience. to months chance it's look next to you, got so to we getting some appreciate of again, out all continue lot of and get cover, with things meet Okay. the review great you, we I to call forward and We I weeks going here had here. and the few everybody's know a to over

So, thank everyone. you

Operator

conference. Thank for your today's concludes That participation. all you

Ryder System (R) 16 Feb 182017 Q4 Earnings call transcript