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Actionable news in R: RYDER SYSTEM Inc,

Ryder: David Bruce Bob Brunn

The following excerpt is from the company's SEC filing.

(305) 500-4999

(305) 500-4210

Ryder Reports Record Third Quarter 2015 Results

Record Q3 Comparable EPS from Continuing Operations Up 7% to $1.74

Record Q3 EPS from Continuing Operations of $1.70 Increase 8%

Record Q3 Operating Revenue of $1.4 Billion Grows 6%

Q3 Total Revenue Remains at $1.7 Billion, from Lower Fuel Costs Passed Through to Customers

- Ryder System, Inc. (NYSE: R), a leader in commercial

fleet management

dedicated transportation

, and

supply chain

solutions, today reported strong th ird quarter comparable earnings and revenue growth across all business segments. Earnings and earnings per diluted share (EPS) from continuing operations for the three months ended September 30 were as follows:

(in millions)

Diluted EPS

2015

2014

Change

2014

$90.8

$1.70

Non-operating pension costs

Other items

1.2

(0.01)

$93.3

The Company reported third quarter operating revenue (revenue excluding all fuel and subcontracted transportation), reflecting higher

full service lease

commercial rental

revenue in Fleet Management Solutions (FMS), new business and increased volumes in Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (SCS), partially offset by negative impacts from foreign exchange. Third quarter total revenue declined slightly from the prior year, as higher operating revenue was offset by lower fuel prices passed through to customers. Operating and total revenue for the three months ended September 30 were as follows:

Change excl. FX

$1,426

$1,669

$988

$1,158

$227

$387

Commenting on the Company’s third quarter performance, Ryder Chairman and CEO Robert Sanchez said, “In the third quarter, we delivered strong operating revenue growth across all three business segments. We also realized solid year-over-year earnings improvement, despite recently communicated growth-related maintenance challenges and less robust used vehicle sales conditions. We’ve made adjustments to add labor capacity within our maintenance organization, and based on the progress we’ve already made, we’re confident this growth-related challenge will be fully resolved by the end of October.

“We were pleased with the continued strong sales activity and fleet growth in our core full service lease product. Commercial rental demand also remained robust, supported by growth in our lease and national rental customer base. Rental performance in the U.S. was particularly strong, with a 12% increase in revenue. We officially launched our new on-demand maintenance product in the quarter and continue to expand sales efforts to respond to strong customer interest. Our business in both dedicated transportation and supply chain showed strong topline growth and performed generally in line with our expectations. We were also pleased that our return-on-capital spread widened to 140 basis points, an increase of 50 basis points from last year.”

Third Quarter Business Segment Operating Results

In the FMS business segment, operating revenue (revenue excluding fuel) in the third quarter of 2015 was $988.4 million, up 6% (or 8% excluding foreign exchange) compared with the year-earlier period. Total revenue in the third quarter of 2015 was $1.2 billion, down 2%, as the operating revenue increase was more than offset by lower fuel costs passed through to customers. Full service lease revenue increased 6% (or 8% excluding foreign exchange) due to fleet growth and higher prices on replacement vehicles. The number of full service lease vehicles (excluding U.K. trailers) increased by 7,400 from the year-earlier period and grew by 1,900 vehicles sequentially from the second quarter of 2015. Commercial rental revenue grew 7% (or 9% excluding foreign exchange) reflecting increased demand and higher pricing in North America. Fuel services revenue decreased 34%, primarily reflecting lower fuel prices passed through to customers.

FMS earnings before tax were $126.4 million in the third quarter of 2015, up 5% compared with $120.9 million in the same period of 2014. Increased earnings primarily reflect higher full service lease results, and strong commercial rental performance, partially offset by lower used vehicle sales results, and strategic investments largely in sales and marketing and technology. Full service lease results benefited from fleet growth and lower depreciation associated with increased residual values. Strong commercial

rental performance was driven by increased demand and higher pricing in North America, on a 7% larger average global fleet, partially offset by lower fleet utilization. Global rental power fleet utilization was 76.4% for the third quarter, down 160 basis points from the year-earlier period reflecting an increased number of out-of-service vehicles. Used vehicle sales results decreased due to lower volumes, particularly with power units, partially offset by higher but moderating pricing. FMS earnings before tax as a percentage of operating revenue were 12.8% in the third quarter of 2015, down 20 basis points from 13.0% in the same quarter a year ago, driven by lower used vehicle sales results.

In the DTS business segment, third quarter 2015 operating revenue (revenue excluding fuel and subcontracted transportation), was $184.2 million, up 9% compared with the year-earlier period. DTS operating revenue grew as a result of new business, as well as higher volumes and pricing. Total revenue in the third quarter of 2015 was $226.9 million, consistent with the year-earlier period, as increased operating revenue was offset by lower fuel costs passed through to customers.

DTS earnings before tax of $13.3 million increased 12% in the third quarter of 2015 compared with $11.9 million in 2014, as the benefits of higher operating revenue were partially offset by increased self-insurance costs. DTS earnings before tax as a percentage of operating revenue were 7.2% in the third quarter of 2015, up from 7.0% in the year-earlier period.

In the SCS business segment, third quarter 2015 operating revenue (revenue excluding fuel and subcontracted transportation) was $318.8 million, up 5% (or 9% excluding foreign exchange) compared with the year-earlier period. SCS operating revenue grew as a result of new business, higher pricing, and increased volumes. Total revenue was down 1% to $387.3 million, compared with $390.2 million the same quarter a year ago, as increased operating revenue was more than offset by lower purchased transportation costs and lower fuel costs passed through to customers.

SCS earnings before tax of $26.6 million increased 9% in the third quarter of 2015 compared with $24.3 million in 2014 due to increased operating revenue. SCS earnings before tax as a percentage of operating revenue were 8.3% in the third quarter of 2015, up 30 basis points from 8.0% in the year-earlier period.

Corporate Financial Information

Central Support Services

Central Support Services (CSS) are overhead costs incurred to support all business segments and product lines. Most CSS costs are allocated to the business segments. In the third quarter of 2015, unallocated CSS costs were $10.1 million, down from $13.6 million in the year-earlier period due to marketing-related costs now being allocated to the businesses.

Items Excluded from Comparable Earnings

Non-operating components of pension costs are excluded from both comparable earnings and segment earnings before tax in order to more accurately reflect the operating performance of the business. Non-operating pension costs totaled $4.8 million ($2.7 million after tax) or $0.05 per diluted share in the third quarter of 2015, up from $2.5 million ($1.4 million after tax) or $0.03 per diluted share in the year-earlier period. This increase was due to lower expected asset returns and new mortality assumptions adopted at the end of 2014. Third quarter 2015 results also included net recoveries of approximately $0.01 per diluted share primarily associated with adjustments to multi-employer pension settlements.

Income Taxes

The Company’s effective income tax rate from continuing operations for the third quarter of 2015 was 35.1% of pre-tax earnings, consistent with the year-earlier period. The comparable effective income tax rate for the third quarter of 2015 was 35.3% of earnings before tax, consistent with the year-earlier period.

Capital Expenditures

Capital expenditures from continuing operations increased to $2.11 billion for the third quarter of 2015, compared with $1.74 billion in the same period of 2014. The increase in capital expenditures primarily reflects planned investments in the full service lease and commercial rental fleets. Net capital expenditures (including proceeds from the sale of assets) from continuing operations were $1.79 billion in...


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