R - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to the Ryder System Fourth Quarter 2019 Earnings Release Conference Call. [Operator Instructions]. Today's call is being recorded.

If you have any objections, please disconnect at this time.

I would now like to introduce Mr. Investor Strategy President, for Product Vice Ryder. Brunn, Relations, and Corporate Strategy Bob Mr. begin. you Brunn, may

Robert Brunn

contained uncertainty results remind are much. Exchange the website. statements very changes the management's Quarter may Forecast presentation like call within detailed XXXX. presentation, market, and Fourth Commission Ryder's and regulatory due These non-GAAP forward-looking GAAP some Litigation and subject XXXX XXXX differ materially during circumstances. Ryder's expectations in Actual and in statements and the to from on current and Reform is Securities you'll to More of I'd reconciliation of hear Call. these which political this with meaning in expectations changes Thanks on Conference to measures morning, Securities morning's information in Earnings are Good of factors. available factors to nearest financial competitive, earnings economic, these based welcome the are that and filings each this about business, the Private and you to Ryder's Act measures

are call today's Officer. Vice Chief Financial Chairman and Sanchez, Scott Parker, on Presenting Executive Executive Officer; President Chief and and Robert

President President on Solutions of Management Additionally, John the and following Supply presentation. call Steve and Sensing, available Fleet Diez, today and of Dedicated Solutions; the Transportation Global are Chain Global Solutions, for questions

call the Robert. I'll to time, over this turn At

Robert Sanchez

overview a that returns. XXXX and improve everyone, our our we're brief provide morning, thanks quarter Good of to will results. This for taking us. actions also we fourth joining including outlook provide We'll morning

questions. call remarks Following we'll our prepared the for open

loss was lower related loss in the $X.XX the share residual quarter previously to announced our results of depreciation estimate of from to $X.XX of our loss by modest value higher a Operating $X.XX a depreciation of reflecting profit were up turn a the of year. residual changes. compared as revenue range the of continuing provided. change $X.XX trued a the at Comparable offset end forecast in a in of quarter the fourth quarter, increased partially value The revenue in includes a prior of let's to increase growth as we fourth for to a that to for driven impact as estimates profit by results. Dedicated and billion by Comparable With overview Chain. revenue Management penny earnings lower $X.X Fleet and expected record per X% the contractual Supply the operations an a

the the additional costs financial quarter. related earnings our contributions was Page reflecting reductions the information demand, rental prior year partially for and EBITDA businesses $XXX Comparable some strikes. X X% from contractual up impact from insurance includes quarter customer labor by fourth higher primarily from for the million, lower offset and cost

average was EBITDA prior from The down year. outstanding for the was million, a up XX% year. Comparable of record shares from the slightly XX.X diluted billion, full $X.X year number prior the

on in depreciation down to six the to the key in from earnings X.X, announced that was discuss costs of the to value return pension equity other a prior items tax expense QX, the an previously year from trends value now page comparable and I'll impact higher related XX.X of we in was year lower Excluding estimate changes. compared as XX.X% turn the XX% reflecting reflecting business residual in changes. prior from residual ‘XX saw segment. to rate Adjusted benefit each

extent a our by products X% growth offset replacement driven operating by growth in partially lower Solutions’ revenue on ChoiceLease to X% rates increased lesser contractual rental and vehicles. by increased revenue. ChoiceLease Management higher Fleet fleet revenue driven

terms lease customer typically we We reflecting for base to These Dedicated our into The lease expected over benefits last many like new and these lease can by of a renew record overtime. expand very long continued accounts for as are time customer relationships expanded lead other XXX the customer successive yield outsourcing relationships deals services vehicles year increased trends. by XX,XXX year. X% a or of full

Rental offset on for vehicle revenue by higher was down and X% partially by heavy-duty the pricing all increased demand types. truck for quarter, lower driven demand tractors

power high XX% prior was down in Rental utilization from units utilization on we levels exceptionally the year. saw the

from as Our by a and rental market the primarily quarter benefited loss reflecting value with for declined rental the million vehicles taken residual XX fleet Result fleet of and size reflecting higher announced performance, fleet sale. previously rental related FMS to number to higher from the impact of changes from pricing. million cost X% prepare depreciation growth well ending realized actions higher commercial XXX sequentially lower costs prior of insurance lower the lease higher to as align due demand. a

Page X during quarter, We up sold used year XX% the up the X,XXX versus XX% highlights sales results. vehicle prior and vehicles sequentially.

at end XXXX For the but year the XX,XXX with vehicles an expectations. from sold XX% or XXXX XXXX full with vehicles, quarter to above high increase slightly sale target of range end vehicles Used we line of vehicle the XXXX inventory of held for year. in our prior

by market reflecting trucks was vehicles year ongoing were off truck significant down was reflecting XXXX a down year expected Sequentially downsizing and fleet. to as year-over-year tractors number Proceeds and of sequentially this by and XXXX pricing pricing down a lease the compared XX% for of X%. for increased vehicle for sold weakness. coming greater vehicles and Inventory and rental tractor down XX% XX% ago units

discussed for assumes in levels As used we’ve sales both call accelerated vehicle last as policy revised price our purposes. residuals our from and depreciation setting reminder a

policy be we in deck lower The assumption to longer be term. saw was back level that of XXXX. sold purposes for identified we sold vehicles X assumptions made earnings accelerated we near vehicles than depreciation in made pricing the for call Page to near and the the the third for term slide for that trough depreciation purposes in quarter significantly the

levels quarter. Price we were expectations saw in quarter that in our for the with the line

strikes page higher from by pre-tax the revenue improved to pricing. offset partially X. due Operating and lost on decreased Chain partially X% customer offset announced Supply SCS up previously to X% earnings by now impact turn performance the reflecting a I'll Segment and labor operating were change operating the business basis million from before estimates used X% the XX value for vehicles impact strikes Supply revenue quarter, residual of up earnings percent $X from were points the a prior tax for Chain. as in in year.

pricing to the Scott impact Turning change prior These development X. offset on insurance earnings percent points tax a due the X.X%, year. benefits favorable Operating and higher were operating for page year up reflecting before operating and point to partially residual with increase to Dedicated revenue several of from to value X% clients. turn from our $X DTS increased new as performance earnings spending. starting million were business. I'll improved estimates basis before a DTS. XX by vehicles used revenue in over items capital the cover Segment prior from taxes this Parker CFO, call in At

Scott Parker

Thanks Robert.

$XXX in sale million capital were capital million is the Net Proceeds prior including about $XX Turning billion, from contractual up rental from billion. year. million by to grow fleet increase XX second expenditure full-year million up the This $X.X quarter. approximately and CapEx page investments to property increased refresh expenditures reflects million $XXX of to $XXX the from gross were the higher $X.X approximately XXX to lease sales declined. while

by the year. from generated the year, equity capital cash flow lease we the and for $X.X billion record increased Debt a negative support to $XXX billion at change. cash of prior the around $X.X for page, contractual up XXXX in or total Turning spending equity reflecting million end capital spending reduction to estimate XX% to was Free next residual reflecting sales. of the XXX% value

to this I'll At the to turn point Robert XXXX it discuss back outlook.

Robert Sanchez

to earnings we and assumptions a contractual and growth expect Page highlights XX to and leverage Overall macro strong of favor Thank the XXXX our trends segments activity forecast. the and sales Scott. Dedicated. Supply We've support growth that outsourcing. XX environment these sales secular key added in continue and moderate Chain some resources for

production We lease lower improve sales returns. to results lower taken from expect actions OEM and ChoiceLease reflecting

progress for in count expected the up number to to process. due the pricing In demand result count historically expected fleet excludes active lease made of service to XXXX a particularly We've smaller expected rental total Increased in softer fleet in vehicles Fleet the on should out is is added metric offset the the and active that The sale. reduce in which softer and vehicles by prepared vehicles the partially rental for fleet Management new increase reported to lower demand fleet. year-over-year service tractors. this decline is to utilization leased for to half are the lease second a we've environment commercial year. freight The heavy-duty being higher

order make to rental with by fleet the balance track ending year year-over-year. for we'll of right-side allow fleet of The to down continue expected or reductions more conditions. but substantially rental We be first the are to modest fleet on the in X,XXX is the vehicle X% the quarter to end sequential the market

to is and cash be spending free billion. $X.X free Lower cash over expected XXX we flow planned be rental positive lease FMS, flow With a forecast strategy is Total modest to growth positive the million. cash result capital of expect in generated and cycle. to

an vehicle change, depreciation expecting depreciation from tailwind accelerated from year-over-year EPS We used lower policy the a are and losses. impact

XXXX. change tail are the which of catch value effective the residual year be of second of July when until half expected the to unfavorable however estimate we as was Comparisons the

vehicle as of a We soft number expect our the plan to half. higher second of sell pricing remain used in we vehicles expand used do recovery some capacity. retail with to We vehicles

the to annual will benefits for savings initiative multi-year continued in cost increasing billion expect this maintenance partially prepare by offset be and billion. from initiative our XXX expected benefits XXXX from total vehicles from higher sale. cost We are XX savings Incremental to

XX, by the Turning to to to expected during higher Chains. year value this announced claims to are first Supply slow to half favorable due residual previously target business. past offset revenue benefit Revenue move growth the for and second offset, from expected used growth year The in new will business we to development page be be prior as half impact. levels Supply improve in investments, vehicles of changes pricing rates the and lost Chain earnings insurance estimate strategic is

In second year reduce will revenue our expected DTS last activity half the and in large XXXX of growth. than deals lower sales fewer

this vehicles from recur issue. results address face XXXX, Dedicated not earnings changes pipeline We on in are quality currently value unfavorable DTS are will to increasing and focused development claims investments. estimate headwinds that highly building the in prior forecast sales residual on used insurance sales a to and strategic

that expect benefit driving RyderShare as such savings and and cost. continued growth. offset employee We will budgeting marketing, on focused in program to new which investments inflationary COOP fund plan from products revenue zero We sales strategic based compensation and our and and technology long-term earnings are

share million which replaces December. diluted expired X.X two-year new in a approves anti repurchase board program that our Finally, our prior program

on XXXX the operating I slowdown outlined a by and unchanged Supply Dedicated. in remain ChoiceLease and reflecting Based revenue offset in assumptions Rental in expect we revenue to Chain growth

Comparable earnings expected to normalized rate is impact going lower rental with per is range actions improve than in XXs of estimate to to share be with This from investments, year. comparable and a The $X.XX benefits be returns billion These forward. announced cost XX%. rate value performance, be in expect $X.XX to in XXXX in billion would more the a tax The forecast consistent higher forecast forecast a prior are our expected Comparable we $X.X growth somewhat XXXX products. tax previously residual partially last and as offset changes year. that lower a to the higher the between reflects EBITDA associated high rate. and compared to of tax rate strategic $X.X $X.X contractual the by is

expected increase is from X.X% ROE in prior the in Adjusted to X.X% the year. XXXX

is OEM anticipated at the for discontinuation forecast reflecting lost by XX lower business in lower Management lease a of revenue is be and renewal the environment, related business insurance our growth decline to our by flat to to with is outlines growth program liability In operating non slowed in returns revenue X% production extension of as business revenue customers. lease Page offset expectations expected segments. slower rental. revenue ChoiceLease Fleet ChoiceLease

heavy expected their lease revenue is in rental by by awaiting who driven demand lower activity delivery X% demand customers by rental is modestly higher were Commercial for pricing. for partially vehicles. to decline reflecting new XXXX The offset change largely

target expected revenue second around rates operating is SCS the to X% be half year. the growth of revenue with levels in growth

sales lower the Dedicated forecast signed large X% operating of fewer second is revenue to deals half reflecting decline last year. activity and in

is The to Page year-over-year are XXXX lease changes additional expected a XX outlining Dedicated residual to provides forecast. Supply $X.XX, Dedicated reach chart end and to to from add businesses impact $X.XX Chain key the our lower the generate forecast XXXX values broken EPS from of comparable high contractual of our an EPS.

offset to reflecting pricing and negatively the higher expected of second in is impact tractor by year. primarily $X.XX partially Rental lower utilization by demand half EPS the higher

to continue drive to $X.XX a make focused We planning we're information savings cost and investments targets. and strategic to product achieve revenue earnings future spending XXXX new primarily on strategic investments maintenance sales and increase In growth. marketing, development in technology,

Approximately strategic of these zero rate returns are returns. budgeting cost to address in net impact the as will product an tax we year. EPS is be a includes $X.XX operational items and higher us lease that higher also including lower insurance these $X.XX of expected largely offset This the half as $X.XX for EPS the employee Incremental will a from accounts the assets. range a our focused and improve FMS investments to EPS discontinuation of high-end forecast years. expect items $X.XX. to return and initiatives negative $X.XX the impact in and to XXXX future are based to A position rates result in to to actions would related of expenses improving a related line process of benefit well with savings In to related of incur bringing compensation on EPS to $X.XX comparable of forecast headwind $X.XX

flow. to I'll turn and over back to spending now it cover Scott cash capital

Scott Parker

Robert. Thanks

$X.X gross to be billion, capital around to Growth million. billion] ChoiceLease to replacement we is lease due significantly for capital approximately of are rental. Turning be expected forecasting expected the [XXX in total both down to page spending spending lower down and XX ChoiceLease XXX spending and is down

due Rental reflecting decline level in environment. to million a the softness anticipated spending the spend market over below is forecasted million full to replacement $XXX by transactional XXX to

are expected million from and by million. Proceeds property million decline XXX to equipment spending nearly Prior XX and from proceeds consistent forecast last with $XX property investment year Our remain sales is around at included to year million. XXX a to sale.

a of X.X As a decrease net billion around from XXXX. at are expenditures forecasted around billion, capital result $X.X

approximately Free by is capital $X.X to forecast positive million, be net reflecting cash $XXX spending. flow up billion lower significantly

value XXX% our we equity expected to of debt end of to the XXX% target change. XXX% of about the through impacts decline remain work by Our forecast is the to but to above year as the policy residual

to I'll back well discuss actions our as over forecast turn it targets XXXX our as now Robert to and long-term them. to achieve

Robert Sanchez

first value the year-over-year of did XX comparable half to in $X residential page EPS to the versus first profit for first of unfavorable the will last of also $X.XX be forecasting $X.XX impact July $X.XX XXXX forecasts $X.XX year We're prior loss higher $X.XX, a EPS comparisons year. earnings comparable XXXX appreciation from a as of estimate last a in change the a to versus quarter year. Turning of not providing half

in profitability to second return to the expect we However, quarter.

first year. Additionally the earnings seasonally lowest the please is note quarter quarter that for the

and to moderate meaningful improved our actions growth to discuss on price to de-risk business support returns truck to market. of turn raise light increases implement used with strategy the progress the we're the order now of I'd in and ChoiceLease making and We're returns. like the initiatives volatility in of continuing

an is to recent believe likely to Although is pricing new from this appropriate levels we record returns. enhance order in lower sales higher trade-off

accounts rate evaluate the increases to addition, of renewal. In appropriate time we at underperforming continue and implement

million. this expected XXXX our cost favorable maintenance to from annual those some million business levels initiative our savings into from we're of increasing have forecast. With in will We XX XXX our result expect and lost in higher result factored multi-year

closed U.S. in quarter of fourth the number and locations a Canada. underperforming the we During

volumes expected sales Dedicated With capabilities strategic we've our increase in growth higher action to resources. sales, In sales locations leveraging took website. XXXX sales marketing vehicle made used to location, we by in adding Chain and sales and Supply retail vehicle sales accelerate capacity investments used inside order in and enhancing our

program order claim to from liability cost. and vehicles our leased settlement extension customer future insurance premiums discontinued on exposure in We reduce escalating

executive our program to be strategy. heavily less under Awards Finally, our compensation and will in cash on based weighted more and weighted to XXXX, revenue metrics return with flow XXXX align

strategic and initiatives better expected prepare in us to in Taken to returns but create earnings these are beyond. deliver improved together short-term headwinds XXXX XXXX

of financial an which provides XX Page business. reflect outlook overview our for long-term and model to targets our been updated our have current the

equity Our business. be returns primary on improving as financial we our will in adjusted target going return on forward focus

ROE used on on is for for well a is to some widely comparable return continue to as reference. capital easily and returns across efficiency and more We capital measure report time and companies. more of a plan spread spread capital return

We're targeting to of ROE XX% XX%. an adjusted

near-term expect up to Our high of around of spread cost sales. equity games is achieve ROE than note return XX%. target able important push with and we which these ROC goal to with our our that The to our believe higher XX%. Longer-term used range target. end It's vehicle no consistent to can is reach to levels we prior we be that

to operating sheet pre-tax return of The revenue growth, balance as targets a leverage. our key operating includes realizing revenue and components earnings percent

returns. This operating In on Fleet targeting growth increasing prior and moderate focus digit and growth mid our the pricing Management, single target reflects we're is our range. with consistent below in improving revenue lease

given to Supply which operate we're line in goals. high prior and all the rates addressable rates segments three in large Chain growth as our In that believe continue these growth achievable outsourcing. We Dedicated in secular trends with favor markets well targeting digits the single are as

in business three FMS segments. reflecting but from pre-tax value digit as Chain change. revenue These for the impact operating targets in percent residual recent a the targeting of estimate Dedicated for earnings unchanged the are and all range Supply We're lower single high

we tax a to able our target expect return to due of for level benefits FMS we're earnings to be similar Although lower lowering the company overall the rate. achieve a primarily

range is target time. return actions executing over will remains position XXX% Ryder targets to well believe unchanged. XXX% to We our Our leverage achieve we're initiatives and

actions the XXXX to the at that taking of returns in appropriate to year beginning looking we're beyond. We're and better ensure XXXX drive

some focus have think driving the and these in discussed a negative business. approach our earnings year to of that right but higher returns impact primary As our on we this actions is revenue given is

to next review. morning. your for That late file concludes expect XX-K which or our prepared we additional that will following early Please details contain our this remarks note the week

a material so question. cover We one of yourself lot today have limit to please to

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

Operator

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

Benjamin Hartford

kind to do How next of good about toward lot maybe in in of acclimated thanks, XX over dividend the debt the in you as pathway here, several your Hey that is of morning questions the some think directly start years? Thanks. model, everyone. to ratio two just and the in straightforward but you pretty what Scot achieving to you changes are the what's what ask it and context that pathway then here. leverage attitude on your the come your same the get is target equity kind current get meantime mind policy? there as you'll A in I think slide with think

Scott Parker

a the the deleveraging the XX of path think combination on I on things. two Yes, is page

lower in growth helps us the rate. So the free the debt and cash lower the flow growth

build these earnings that second to capital well about run as our will own actions as will off The kind improve the talked return equity. the on back piece which of depreciation we've the as our continues are

And down the will levers again? question, was our get into XXXX what target are question what second second So drive range. the us those back the in was that two to

Benjamin Hartford

are presently dividend going How levels the thinking your you and dividend what's then forward? to about approach policy

Scott Parker

I of of the earnings to with dividend Yes, think kind kind growth was line policy really the in rate. historically be

is going return that shareholder than contributor kind relative forward. at of a different kind going to good to to earnings look that feel of a and we forward continue expectations we'll So

Benjamin Hartford

Thank you.

Operator

from Fowler Markets. comes Instructions] KeyBanc Todd next Our Capital with question [Operator

Todd Fowler

and you portfolio think forward looking really just you market? within Great. Thanks really think and the lease initiatives the $X.XX strategic Thanks. your grow pivot taking approach the on about driver you'll to we turn and going think I move the headwind growth. It year growth? headwind? initiatives strategic do the do Is different how good is about at that's market Are the the rolling slower that next as does that from what morning. out year? the Robert that the forward? how, number and away the just when low the leasing you into into Does go about lease slows lease sounds we margin tailwind that pruning XXXX? the How position mean like a accounts with this a fleet X of

Robert Sanchez

Okay.

for side been lease say reflect the of for of years new pricing we there market. the truck the on to normal our approach lease look lowering is First have our values kind couple for I'd the residual last used the

continue So we doing really that.

given the seen the premium gone that to market addition risk think the I the up. in truck used has volatility that on In leases we've

pricing So we're adjusting for that. the

on that. in we're built some going So the increase curb to that's looking got the don't We're that's to, growth. what pricing in market give you've offset that of what in continue us of assuming and based terms we've growth We to really forward here. the going to seen will going what it know to we're

we lease. So given truck want we're to own is want come we're to over it change pain. this to I feeling driven private think will expect driven what's say we in lease the not any the I say necessarily who right if down, or we is and just would has time more to and sure fact market the back owner don't used same from is getting people backing it business we're the return truck off the that their be market not just make continue

we're fleet before the not may to and that that. be for have get going a you're more of think from see So looking private higher for and premium the outsourced I coming growth to a just companies lot

first the that's So thing.

the investments benefits benefits are the the that A improve benefits this continue investments Around next our are in as strategic of more profitability initiatives half an year. investments mentioned to going we're I those maintenance to making about lot call year get on and to of we're these FMS. get then

of then So with our next year. truck that additional get subside that opening year got and capacity investments also centers we're part think will bit some higher will FMS we an of up a used up that those this too is little of we've to that once we think most happen

some that will go I think away. So of

The help Supply investments and those going will really other pieces I make the I like those continue Dedicated which to see think are in businesses. asset to Chain necessarily because more don't grow away investments those

Todd Fowler

That's Okay. helpful.

jump cover. I a Thank me there's to back lot in know Let line you. because

Robert Sanchez

them, that one The Hey, on we're two because out the of really to XXXX initiatives. clarify buckets. providing, I chunk strategic some were in return broken is just the services Todd were we the lease we just let accounts asking big just return that you on were to to other a insurance capital lose to me actions, going about fact thing We've actions. addressed them. in insurance related extending where capital

we insurance the pull may we lose if account. the So

built we've in. that So

We a of be one-year. expect kind that to

this that of really Some year. bulk will bleed into the impact of it. That's of chunk it but the will XXXX

just accounts that The other low piece not we return renew. going is are to

return below we equity margin look that certainly return the when the to you and target the but they're So capital want. at be may on contributing on they

headwind So that. equity from but improvement be on returns returns result see our each there a you'll each our year capital I will as some and that in you'll an ongoing as on get of think year invested

Todd Fowler

Okay.

the So bucket $X.XX clarify of on comments to first to just the the strategic related the investments. were half

forward. The second made like and insurance continue will magnitude but of some sounds going it and margin the was would $X.XX just the the bucket at bucket $X.XX comment accounts $X.XX that of that that order the you the less of low be than piece the on the

Robert Sanchez

expectation. Right. That would be the

Todd Fowler

on that. the for Thank clarification Thanks Okay. you.

Robert Sanchez

Todd. Thanks

Operator

next And we'll with Group Wolfe take Research. our Scott question from

Scott Group

Hey, thanks. Morning guys.

unused wanted to with slide I from ask quarter prices. So access last about the the

So worked or further where additional quarter are through that what be residual us the in have give of you wondering to can assumptions ‘XX. that just the those if told left and access. told you today extent Can I'm cushion those wondering now we've what ‘XX you all? any there's us just prices any with I'm used numbers lowered last then depreciation and sort us you versus you from then the us maybe and tailwinds would have the at updated quarter that update last changed if

Robert Sanchez

me not we I slide and a if look to slide just nexus but thing was but not I slide towards and I'll you market direction Let on call from this that not remember was is from policy press. the showed a where accelerator that XX-year a in that we quarter we would the idea me back did number the where because [indiscernible] share talk we talking our you that the we XXXX. that to to chart depreciation saw as certainly then question last showed on I know was we're the where pricing tractor Scott depreciation had hate address got lot let on wanting said give our quarter then this an what To last but level just in let to accelerated trough about depreciation. the of It drive at, the was it

two was So quarter at. the in we a depreciation marked XX-year accelerated between we've numbers. the where Where low. the ended That's

access middle in accelerated to depreciation where between right where policy it were expect which the is is the we So the and we be. right where

the to quarter. We're second the then in of expecting expect. half decline year and it some vehicle Used continues pricing the a see did you to as the up in of So out year. pick middle we'd the decline see bottomed in

Scott Parker

I'll on XX a the that deck on question about question slide kind change estimate. of Scott what refer of the to your added we page second the from third quarter

there if was back the just XXXX the and half push change the we that of was million. quarter go we $XXX about estimate the $X had a mentioned true-up impact of you for that fourth from million. So down in there second refinement as slight We

change detailed So for total be was that. the will from more the impact in million. the It [deck] $XXX

some mentioned that million. depreciation policy was also of about was XXXX there We that was and that XX effective number XX

So was in and add sales. XXXX losses the we vehicle from million the $XXX new total depreciation around impact then

So third had than additional what in had fourth the the we we quarter in some quarter.

of was UVS around all total XXXX and $XXX losses the So depreciation for million.

from of of go quarter we follow-through, million. into The impact last XXXX. kind the had the and some you into the XX the trail XXXX XXXX does As had estimate chart at XXX change

So that's about XX million.

monthly losses the from classification on those to expect do comes of then accelerated we outside not expecting definition XXX some have we the in assets that estimation impact vehicles used basis when that are it are back are So some there at that assets. that are potentials for total will in related we we that slight depreciation take that our units a XXXX to and

So that impact get for you XXX for total XXXX.

which So we change on $XXX the chart have $X.XX. about the million year-over-year is that is

third you kind you page details see of in to relates of what to shared that kind the of hopefully quarter. XX get when the So how we

Scott Group

for XXX And with know changed. not early the I ‘XX it’s

Scott Parker

XXXX $XXX impact to now you $XXX sorry. to or higher XXXX XXXX The maybe would right bit XX. $XXX or be expecting the little XXX million, benefit XX from tailwind have now million positive from that million of maybe to for Right ‘XX impact saw from a we're year-over-year XXXX around

Scott Group

Okay. strategic I on can the ask And if investments. just one

there's in an and years So it's is prior row the maintenance where bridge I meaningful the two in anything like incremental I things and now been of not a I this year-over-year that actions reduction growth in in offsets. How think and future don't maybe investments this nine to guess back year some guess the why things come see that I headwind. a cost sort though hasn't are years and it's become more is went we the these slowing there. payout if

Robert Sanchez

[indiscernible] that of with about are the netted budgeting least built is call actions offsetting that Yes. there's item couple out There at the in increases overheads in waterfall. cylinder cost the it out of it cost are talked million One that year-over-year. has into got is things. based $XX there but didn't benefit that has zero the the compensation We of we

in So there. are they

that on the business. In back terms basically improvements investment pulled get of are making remember the of investors, half that why we're to in strategic not

the those more in used So going network get also to in vehicle order contractual can get and sell see to in savings you're or business units. we that then maintenance expand that we cost and order to need so in rental

So of come off that. we haven't

with the that continuing. get making we're the making. think making the I savings just to investments we that is issue investments along It's sure need the we're

and The related growing more Dedicated other primarily Supply investments the light businesses. are asset Chain to

Scott Group

you Thank Okay. guys.

Robert Sanchez

All right. Thanks Scott.

Operator

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

Justin Long

given of out how that wanted I I XXXX think model earnings outlook just you investments their costs as you the is there year you we're about flow obviously to return from volatility through that cadence the try color Thanks. XQ first strategic to XQ course quarterly quarter we any to going over of model guidance profitability second to XXXX? on you and of the the are mentioned and can Robert the some you improvement up and additional the in provide answered the seeing quarter maybe these talk could follow EPS expect on but this

Robert Sanchez

Yes.

quarter I by lowest seasonal in the quarter in always along think usually driven rental as item first key need the less to be transportation is utilization generally your is which just number primarily there's used units the less driven with for quarter first is one the miles quarter. lowest

to of benefits get subside in really to there. the that depreciation we're fourth and that from ramp coming I that's Supply seasonal So that see part change start profitability. The mentioned you in starts really starts earnings big a Dedicated I uptick see as in quarter as with growth really up going some expect earnings benefit third in benefit to impact quarter benefit of mentioned, to that we the we to why the get that and to the expecting to back start and some to the kick it. in turn and you're second Chain to Along into the as you

up getting in Along rental side back would the tell year. with where the rental half they to fleet the need you utilization to the on rightsizing levels the second be of I and

drivers. biggest probably the are So, those

You're second see in the going to some improvement quarter.

As I them said we profitability. get

in of a second the half year. then in bigger earnings improvement the And see you

Justin Long

rental half, a rental know first it's just demand But second piece. down versus for And What's I on like? look follow-up full-year. that assumption your the half for the XX% what cadence does

Robert Sanchez

got you John, Hey there? that

John Diez

Yes.

range you toughest in quarter expect the the let year-over-year. to we that expected know decline first the full-year. in that And we'll X% which comps be for of could a has the Justin, you So biggest revenue decline

digits. from there And start at the You're get we sized demand right levels then they'll fleet kind out. once of near looking balance and trailing double off

QX, for at amount Really, of you're looking time. that QX

Justin Long

Thanks great. time. Okay, for the there. it I'll leave

Robert Sanchez

Justin. Thanks,

Operator

next our question with take from Brian we'll Ossenbeck JPMorgan. And

Brian Ossenbeck

good question. morning, for thanks taking Hey the

Robert Sanchez

Hey, Brian.

Brian Ossenbeck

just in footprints, just bit of timeline I maybe if maybe you of locations, I shrinking owned. could wonder give some us and if more terms process a at some expand how of was you're that or you our little the Hey. can thought the guess on least in leased the many context

you Then or actual from anything whether say follow-on in impact, that of the embedded or impairments the guidance. like sort

what do So, detail just you then is you and maybe or and how long bigger last little rightsizing bit think how how might think of the you to degree? a this picture

Robert Sanchez

you I'll our of bit give our process. would of little let John kind a color. But you I part just tell of that pruning

underperforming. probably this picked that found was at looked we we We few a the more this it locations some basis, up were a regular that network, we do on year. As

we some So, made adjustments there.

it look little still see a usual But that of continue think to think some there's significant to we're either ongoing customers not as terms it accounts or number. are going efforts, but a we than I more was bit again underperforming. in at I of there

a little you give John let I'll bit color. more

Brian Ossenbeck

Okay.

John Diez

Yes.

Just to closures, a you've provide on it's the I think little of really a color, heard consolidation. bit what

when looking an underperforming were always eye looking of health impact. also we as the improving our that but the a we business as at were well at facilities, customer the we impact those we're and the look of So, taken towards employee number at kind of

And total, XX just we of about a saw In into number these facilities. facilities opportunities larger we consolidate shop. impacted to our smaller

I large we the move we may the behind consolidation us. portion improve think health look the forward, would We to as trying is So, you as of do overall some tell I business. forward we're overall selective but

Scott Parker

think tied important really I lot capital an is the thing the Brian assets, is in up trucks. of actual that a our

reducing infrastructure right of the make to doing. work the each we're So, getting some and in vehicles thing the you the that that's important return and is sure give but improvement the that does we're

the those can't think good happened lot renewal. time I And key six not that it's in year leases of each for customer, target the you raising renewals, getting taking leases. to certainly it's you of them, break us help a to the as each Ryder get look a of middle lease really for is the of the the year as our returns. going pricing going typically just But good to decisions harder We've got accelerate at forward,

Brian Ossenbeck

Okay.

you're pruning like there strategic here So, going immaterial impairments it assume average above any severance maybe normal like embedded impact or like the that the through things in terms of in initiatives given a we this or numbers. that is the It bit sounds of site. shouldn't process is in little sounds terms

Robert Sanchez

assume not. that's that. wouldn't correct, No, I That's

Brian Ossenbeck

for you time. the Thank Okay.

Robert Sanchez

Thank you.

Operator

our SunTrust. take with we'll And Benjamin from next question Stephanie

Stephanie Benjamin

afternoon. good Hi,

Robert Sanchez

Hi, Stephanie.

Stephanie Benjamin

to maybe the up that mentioned some Dedicate step you Chain when color returns the and of and you've give Supply of of bit I entails some on little the when those benefits. just start investments sales the some you hoping see out we expect to could and really was marketing, of should a examples investments what to build IT, and you're making segments,

be you. thank That'd helpful,

Robert Sanchez

in get could one accounts think I we those that resources adding tell that we win. you Yes. more really marketing would after sales the simple certainly is dollars to

As a continues to our opportunity you sell us Dedicated. FMS for into big to leveraging be salesforce know

So, resources help really a higher to chain also not another the I teams also. side get Adding more growth facilitate, get the sales is is accounts to adding part resource part think side, that supply only to that the rates, is these of startup of us on but investment. more and in on it

really we're around that. A part what I prospect I'll give color new is and significant spend big little marketplace is a let RyderShare is our strategic visibility doing think here tool. the really in business. we does on we go The is tell for thing and competitive collaboration a initiatives. advantage us two that as the provide of you And about exciting that more Steve One would from out which

that's across part e-fulfillment provide the chain collaboration continue to going big pieces to in supply a around what visibility without differentiator. of ability to going And second is do. think and Our I we a their network. to our then customers is our be And

for e-fulfillment and consumer And their how also to a retailer. hit network and XPO bought going As allows go into which Mile, Ryder business. you expand customers Mile, us us to not Last could know to just want grow speaking to through handle we Last ball, ago. we we develop bought But to direct product a we Ryder any want few really bought the We see not allow of you that this want so MXD. to years that part and continue turning to we that

the Central in on out West Coast building now that U.S. of got that starting build network facilities to and really the out. East So, we've and

let a let Steve more color. So, me give also little

Steve Sensing

think Yes of chain to Stephanie, as a Steve. On as it said. supply visibility collaborative back RyderShare, to Robert

should We We our of out traffic earlier management mid-year customers. organization have transportation year, operate to as the department that's our roll begun DTS complete where service, for started XXXX. across our we of this be kind

then QX QX. on side to the And expand out fully We've began in business. of focused by e-fulfillment next to that getting here rollout and about into year. rolled our warehousing base customer of we'll Really the begin that

the and to it end real-time service information to allows So, consumer. view the that our same make in really our customers, improve carrier operators, the partners will decisions

quick I'll touch on real e-com.

We are locations. up three and running in now

volumes three well. sales we putting as as benefit traction locations e-com as into marketing good to Really opportunities the analysis get e-fulfillment in and the so because automation pipeline new it's increase cost are well. comes there. with The continues in though a investing We

and comps coming of sales be this I'll you really full with this would first tell good that Mile, year past last up year. then our we're And year

implementation as it's XXXX. a to be we really So, look execution going bad at

Stephanie Benjamin

that, leave at And I'll you. thank it Great.

Steve Sensing

you, Thank Stephanie.

Operator

And Stifel. we'll with question Ross next David take our from

David Ross

Good morning, gentlemen.

Robert Sanchez

Hi, David.

David Ross

at a you X.X lease XX. look question Replacement year-over-year replacements lower CapEx A from versus bigger rental fleet significantly to down in billion billion CapEx that you're Slide about lead breaking on looks XXX. like when and the on X.X through then XXX growth to and Scott replacement.

rate good I for lease and annual know both run rate there run both at replacement the and timing is trade in good fleet. cycles for for the difference rental What's and CapEx

Scott Parker

the kind the of the part replacement not the replacement Robert XXX I'll of think these are. It's more Yes, actions much level of probably that mentioned, kind rental out. mean going I in million range. it's we're mark I And in as we ROC first. normal rental further through is address too the think this get that kind of I

want we David. increases We something in kind of were how But But to on to impacts far we go have I get to the as regards early and implementing of kind kind renewal, that so that, plays giving stages of of kind out see that how forward level. well right that price too think the the now clarity. to of can we that's predicting that were more about don’t

David Ross

necessary quick margins. for just tax earnings not then And and ROE just on I the why growth is improved for follow-up guess XX, a targets Slide

Scott Parker

topline growth necessary? is Why

David Ross

challenges. challenges, in the Yes, would the I some would through, just you had the able get mean if cycle think I you meet in of the truck depreciation why range. business theory this fleet, Even can't to you same be

be guess, So, targets? financial base does a those why to get need revenue that to to bigger I

Scott Parker

confident, pricing growth the revenue Again, the fleet of in. the revenue that some with some in. stuff but earnings. to with some good going the remember, fleet doing come some we on coming is we're put continue just will what sorry improved in in from growth, pricing to help put if new that's coming that we at returns is Well feel drive of I'm growth which or increase

the help sooner. level to get going return to That's us

David Ross

Okay, thank you.

Scott Parker

Okay.

Operator

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

John Cummings

on follow-up a taking for question. want ask Hi, thanks to the just the question I dividend.

You mentioned with moving earnings. dividend over time

level? earnings with how I the now, mean down are So, you thinking significantly current dividend about

Scott Parker

Yes.

dividends on an think potential. have historically been really of for where that earnings us I long-term indication

if So, change earnings look long-term potential, don’t our we in that a see this at at point. you

of rounded, it's going. where indication a our long-term we're So, BU

as we And changed that having that see here we this with made. change don’t significantly depreciation

John Cummings

Okay.

the I still at dividend guess understand you point given philosophy raising challenges or holding to you I it you're the here trying then I'm the would of consider So, what this kind consider, to facing. point mean would flat, just

Scott Parker

whether Yes. the is No producing in year policy look, this significant. obviously here I think long-term this board terms with raise we we're earnings yield the think our to now we'll earnings I that's of pretty again decision tied dividend is expectation. the it make the really or the a overall not. based Right But on

get the we as back a impact next years starts we more depreciation subside. normalized over to And level. to that changing But see earnings several

it think which right So, we would kind that keep to now. going of really with where us we're in our in we're keep the range consistent view is

John Cummings

would the to question one range? wanted can that if back thanks. you Okay, ask And I target targets expect then you that just when more on comment into just to and get on ROE

Scott Parker

Yes.

of ROE cost the equity. If if of laid we the out, that bottom targets as get our you end that at range, you get it's look we've to we're saying really covering

next that three in the certainly equity to So, we expanding next beyond would then our the getting and of to be that. cost to five years years three within expect range over

we And come these we're with up not as important skills expecting any comment targets. is again, UVS an there that

used we if we would above expect the come to the the or here truck levels than there get were that back we've market if we've expected, sooner. higher So, levels

on rental a cash economic lead sales choice growth expecting by you those should driven certainly the a certainly is the But I are vehicle part We better that in in cycle. market strategy these take impact away stable then execution be too and timing The will and our which environment. of market significantly free another the flow factors moderate over are lease that give initiatives rental.

we get property some that replacement. we some and of normalized rental this into year year, seeing as next get you're And more

flow going from to be still looking are we the may cycle down forward. that certainly over of cash free positive come where and Some but today

John Cummings

you. thank Okay,

Scott Parker

Okay.

Operator

And Ben we'll take with from our Baird. next question Hartford

Ben Hartford

in. insurance of the at determination context understand give just thanks a Okay, this dynamics behind lease the we me taking of point-in-time. the back mean, I I can for program. in bit little Robert market obviously

change you not does it But think how program in big it been anything quarters that and of what XXXX a about has having do a beyond does place? market from standpoint go-to and recent in as it drag how

Robert Sanchez

place it's customers. those years. Ben many think some was a I for to we've convenient our It our had of customers. program look Yes, We're for really in extending insurance

away short-term they're of customers may away. to really us select the not number is a that So, going renew think we go or for by they impact with pulling that when

take it we're majority I years insurance think vast it risk been through getting. and not longer-term But their is headwind on FMS the as because several the the has our and programs significant that a who I own in lease benefit that their drag a we that see over customers our that lease do program. of headwind don’t worth growth last not is think insurance our still do take have own

move of to part out moving we're that, of the Therefore that business.

Ben Hartford

Okay, thanks.

provide have export any you still XXth seems context on just now been much and outbound but going what's don’t to or February guys but constrained. to the it that's exposure putting to You extent were some you can its obviously here provide, you relatively like calendar. what Can beyond Asian factor as that as

a in customers context real-time you the from impact of your what standpoint. chain be bit what a What an will an freight freight supply coming protocol. might to from insight from automotive that, into saying it's that electronics are Any standpoint little provide as an are inbound if hearing can weeks provide particularly you or

Robert Sanchez

rental or Steve are side more supply of I we're indicator which broadly. stuff the I'll freight. tell the on let mention with comment going But what's would seeing leading side on on that is chain any you of typically on

right is now. freight not trucks between the imbalance continuing We to considering and are softness That see surprising there.

trucks freight you're for normal lot That's get from in is it, on something that's just the we back in other folks second line the that's year expect road the a got cycles on amount You've the this hearing of of half in moving. to industry. of

in saw tell would we So, we you I seeing January. that are that

our that into We that did full-year build you're getting. forecast

really some think saw we you to Steve, I be freight mention in I around saying? what tell you again would anything So, we you're want softness if the but January. environment what

Steve Sensing

right down mean Yes. shut so we we're any operations, now. I industrial short-term I'd in our primarily seeing really tell the Asia the we're Ben, in We're But no auto longer and you working industries impact. not across region.

looking many in they kind alternative kicking switching are plan and think of our disaster at recovery of where plans I in can. suppliers customers

So, this point. coming at nothing from really the customer base

to So, to watch. more more just comment,

Ben Hartford

Okay, thank you.

Steve Sensing

thanks. Alright,

Operator

KeyBanc Fowler take And from Capital with our we'll net Markets. Todd question

Robert Sanchez

Todd?

Scott Parker

He might be muted.

Todd Fowler

Can you guys hear me?

Robert Sanchez

can you We hear now.

Todd Fowler

Okay.

the but depreciation? about pricing sounds it and I Scott that you understand, it expectations in for like XXXX. Yes, to your that. XX fourth think did expecting So, was Can you about us quarter $XX bit little that to contributes a have was wanted the Sorry Slide I help within mute. ask in of on on we just what there referenced. variability you're the movement specifically the

to how is into just it factors to was figure depreciation it forecast. sounds What could pricing out again like within it move, your in different that would then trying make tailwind how you and XXXX? move moved the from know range. quarter but fourth I'm the your And you it how struck

Scott Parker

Yes, Todd.

the any assumptions that it in think we was that is into So, minor it to not think I be I just with did we chains of there. read the a kind of of did, size the shouldn’t made, modification kind of the we there's change that. what what or If through kind

going about quarter was line within Robert As with you expectations think as forward mentioned, the our where fourth are. in pricing

the remainder and outdoor XXXX. at of forecasted have We

So, happens the what impact would versus down the that our kind kind factors is really in marketplace. of comes that forecast of to what

the kind view us last mentioned, accelerating seeing what we on doing. so, of that to -- on of work it Robert the we're of what on But inform information the kind kind side if kind for six best add as months level. of we've draws we're been that as in And

that would beyond would something need we to of would kind that address. that's anything So, be something be

in news. bit open it than As will that, a be comes little that better kind of

Todd Fowler

directionally like just trough half you can at the maybe little your have is that your the not back kind in it a looking of of just And in for year Okay. forecast, of sounds but to maybe you the bit what level, specifics forecast? then just in speak staying improvement and

Robert Sanchez

Correct.

it year. we we in As remarks and down mentioned a in there modest research have of heard on the seen that to continue what we've the go recovery as at half get we in of kind in through supply prepared out some year the we're stabilizing about and the of some this to the is back of imbalanced based regards

Todd Fowler

share Great, much to cost vehicles lastly, okay. just guidance XXXX for prep can And in is sale? the the how then you

Robert Sanchez

I have think to we timing the was been that vehicles specific. service. Yes, fact more we we don’t The one on have haven’t out around that really Todd,

servicing we're vehicles going that, out money and of those doing really because for to spending prepared getting So, be more sale. those

that we not get It's number it's. that specific really into. a That's

Todd Fowler

Okay, that's fair.

Robert Sanchez

Right.

Todd Fowler

that in to some think and think pieces won't Robert number. the trying of we're XXXX together be I the I that just put

So, follow but that's what there can up, for was looking thanks. we I

Robert Sanchez

have this increase I see, to tell Right, would What you those year. you're you'll that is well. going

significant still next into will get a though you you As year number. have

to You'll of is number to start will again terming and similar units out-service to with number out. of in that similar sell get be units

So, the bag and for next a next following maybe good the be year nor flattish I wouldn’t to guidance, expect it year.

Todd Fowler

the time. Got it, for again Thanks okay.

Robert Sanchez

Okay.

Operator

Scott from last Research. out with take we'll And Wolfe question Group

Scott Group

go a back is Hey, What thanks. rate down I quick then real normal, one. year you this Can does that out? and help next new the tax just got year. that us is the for

Scott Parker

Yes, through, the first we just we're know earnings. talked quarter first negative I expect have off that would in the thanks as I what given for that we to going start the question. about

quarter the So, the kind rate rate the that where we when out tax of that around. tax then year, you XXXX, and the the think going a we provided about first as tax get through we'll for benefit put we're have you guidance we'll get

rate in XXXX. repeat quarter state was regards a of and expect don’t items, in percent or in but and kind In there to the one when fourth to came of working that would the fair discreet of Scott tax we a also real number we have as lower earnings through returns that is challenge true tax statutory be have you a a there our

low the a taking, going of rate look kind pre-tax you forward, there's think and be a as So, higher XXXX. that's rate. XXXX lower and a kind earnings at as of why just the having of discrete because that from number item XXXX, doesn't more if we is repeat, would high-XXs XXXX the in of it about But I think the kind impact applicable we're tax of to depreciation versus use

with more make And of down of rate you kind similar get effectively normalized I'll to call the pre-tax so, expense. we're back more have tax kind what earnings which because then levels would go

next I the couple of high-XX. think down it'd the stay us the in brings what REIT. that's for But So, years,

Scott Group

the and Alright, so in forward we've in got as going XX, stay then the forecast high-XXs?

Scott Parker

of on So, XX would we the get kind over the down it's as rate you winding come XXXX. marginally of couple years, from next of that reduce would seeing depreciation that that the kind be in

Scott Group

there. Okay, thank you

Operator

turn back over Robert to to like closing the call remarks. I'd Mr. Sanchez for

Robert Sanchez

questions months. few think All the in you hour, and you to the minutes for thank past we see I interest certainly we but in forward look that queue, so everyone, next right your company all all got thanks five over were

Operator

conference, participation. concludes thank all That for your today’s you

Ryder System (R) 13 Feb 202019 Q4 Earnings call transcript