Ryder(R) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Ryder System, Inc.'s unaudited condensed consolidated financial statements and notes for Q3 2022 ITEM 1. Financial Statements (unaudited) Ryder System, Inc. reported strong financial performance for the three and nine months ended September 30, 2022, with significant increases in total revenue, net earnings, and diluted EPS from continuing operations. The balance sheet shows growth in total assets, driven by cash, receivables, and strategic acquisitions, while shareholders' equity also increased despite share repurchases. Cash flows from operations improved, but investing activities saw a substantial increase in cash usage due to acquisitions and capital expenditures Condensed Consolidated Statements of Earnings This statement details Ryder's revenues, net earnings, and diluted EPS from continuing operations for the three and nine months ended September 30, 2022 and 2021 | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenue | $3,035,464 | $2,459,049 | $8,922,988 | $7,062,908 | | Net earnings | $245,995 | $138,054 | $660,982 | $337,984 | | Earnings from continuing operations | $246,420 | $138,659 | $662,584 | $339,811 | | Diluted EPS from continuing operations | $4.82 | $2.58 | $12.86 | $6.33 | Condensed Consolidated Statements of Comprehensive Income This statement presents Ryder's net earnings and other comprehensive income (loss), leading to total comprehensive income for the specified periods | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net earnings | $245,995 | $138,054 | $660,982 | $337,984 | | Other comprehensive (loss) income, net of taxes | $(50,321) | $(18,799) | $(82,752) | $10,724 | | Comprehensive income | $195,674 | $119,255 | $578,230 | $348,708 | Condensed Consolidated Balance Sheets This statement provides a snapshot of Ryder's assets, liabilities, and shareholders' equity as of September 30, 2022, and December 31, 2021 | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $14,499,029 | $13,834,323 | | Total liabilities | $11,488,268 | $11,036,377 | | Total shareholders' equity | $3,010,761 | $2,797,946 | | Cash and cash equivalents | $456,291 | $233,961 | | Goodwill | $867,756 | $570,905 | | Intangible assets, net | $298,495 | $170,205 | Condensed Consolidated Statements of Cash Flows This statement outlines Ryder's cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities from continuing operations | $1,786,414 | $1,684,891 | | Net cash used in investing activities from continuing operations | $(1,351,229) | $(860,910) | | Net cash used in financing activities from continuing operations | $(600,388) | $(768,054) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(217,034) | $51,442 | Condensed Consolidated Statements of Shareholders' Equity This statement details changes in Ryder's total shareholders' equity, including common stock, comprehensive income, dividends, and repurchases | Metric | Sep 30, 2022 (in thousands) | Jan 1, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total shareholders' equity | $3,010,761 | $2,797,946 | | Common stock outstanding (shares) | 50,251,092 | 53,789,036 | | Comprehensive income (9 months) | $578,230 | N/A | | Common stock dividends declared (9 months) | $(93,076) | N/A | | Common stock repurchases (9 months) | $(300,280) | N/A | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements 1. GENERAL This note outlines the basis of financial statement preparation, reclassifications, and Ryder's operating segments - The financial statements are prepared in accordance with GAAP and should be read with the 2021 Annual Report on Form 10-K. Certain prior period amounts were reclassified for consistent presentation[23] - Ryder operates through three business segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS)[24] - The company announced its intention to exit the FMS U.K. business by mid-2023[24] 2. RECENT ACCOUNTING PRONOUNCEMENTS This note discusses Ryder's evaluation of recent accounting pronouncements, specifically ASU No. 2020-04 related to reference rate reform - Ryder is evaluating ASU No. 2020-04, Reference Rate Reform, for contracts referencing LIBOR or other discontinued rates[25] - The guidance is effective through December 31, 2022, and will be applied if relevant contracts are modified[25] 3. SEGMENT REPORTING This note provides financial performance data by Ryder's operating segments: Fleet Management Solutions, Supply Chain Solutions, and Dedicated Transportation Solutions - Segment financial performance is measured by "Earnings from continuing operations before income taxes" (EBT), including allocated Central Support Services (CSS) costs[26] | Segment | 3 Months Ended Sep 30, 2022 Revenue (in thousands) | 3 Months Ended Sep 30, 2021 Revenue (in thousands) | 9 Months Ended Sep 30, 2022 Revenue (in thousands) | 9 Months Ended Sep 30, 2021 Revenue (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Fleet Management Solutions | $1,581,870 | $1,436,340 | $4,732,193 | $4,180,066 | | Supply Chain Solutions | $1,206,508 | $802,357 | $3,469,008 | $2,284,687 | | Dedicated Transportation Solutions | $454,328 | $380,357 | $1,329,504 | $1,055,575 | | Segment | 3 Months Ended Sep 30, 2022 EBT (in thousands) | 3 Months Ended Sep 30, 2021 EBT (in thousands) | 9 Months Ended Sep 30, 2022 EBT (in thousands) | 9 Months Ended Sep 30, 2021 EBT (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Fleet Management Solutions | $265,301 | $186,391 | $798,822 | $408,244 | | Supply Chain Solutions | $63,974 | $22,161 | $150,833 | $96,159 | | Dedicated Transportation Solutions | $28,150 | $11,324 | $71,517 | $37,468 | 4. REVENUE This note details Ryder's total revenue, U.S. revenue, and Supply Chain Solutions revenue by industry, along with contracted unrecognized revenue | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenue | $3,035,464 | $2,459,049 | $8,922,988 | $7,062,908 | | U.S. Revenue (3 months) | $2,814,008 | $2,213,140 | N/A | N/A | | U.S. Revenue (9 months) | N/A | N/A | $8,193,052 | $6,327,826 | | SCS Industry | 3 Months Ended Sep 30, 2022 Revenue (in thousands) | 3 Months Ended Sep 30, 2021 Revenue (in thousands) | 9 Months Ended Sep 30, 2022 Revenue (in thousands) | 9 Months Ended Sep 30, 2021 Revenue (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Consumer packaged goods and retail | $565,822 | $316,876 | $1,604,521 | $876,362 | | Automotive | $391,929 | $303,923 | $1,134,659 | $882,977 | | Technology and healthcare | $131,379 | $103,387 | $380,990 | $310,422 | | Industrial and other | $117,378 | $78,171 | $348,838 | $214,926 | - Contracted not recognized revenue was $2.3 billion as of September 30, 2022, representing future revenue from performance obligations[39] 5. RECEIVABLES, NET This note provides a breakdown of Ryder's net receivables, including trade and sales-type lease receivables, and the allowance for credit losses | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Receivables, net | $1,620,837 | $1,464,737 | | Trade receivables | $1,473,328 | $1,280,766 | | Sales-type lease receivables | $117,618 | $148,134 | | Allowance for credit losses and other | $37,801 | $31,304 | - Changes to provisions for credit losses increased by $21.7 million for the nine months ended September 30, 2022, compared to a decrease of $5.1 million in the prior year[41] 6. REVENUE EARNING EQUIPMENT, NET This note details Ryder's revenue-earning equipment, net, including trucks, tractors, trailers, and equipment held for sale, along with depreciation and used vehicle sales gains | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Revenue earning equipment, net | $8,273,608 | $8,323,039 | | Trucks (net) | $3,225,181 | $3,167,992 | | Tractors (net) | $4,041,930 | $4,196,796 | | Trailers and other (net) | $895,780 | $911,667 | | Held for sale (net) | $110,717 | $46,584 | - Depreciation expense related to estimate changes decreased to $50 million for the three months and $147 million for the nine months ended September 30, 2022, from $76 million and $239 million, respectively, in the prior year[44] - Used vehicle sales, net, resulted in gains of $113 million for the three months and $356 million for the nine months ended September 30, 2022, including $15 million and $43 million, respectively, from U.K. vehicle sales related to the FMS U.K. business exit[44][47] 7. ACCRUED EXPENSES AND OTHER LIABILITIES This note provides a breakdown of Ryder's accrued expenses and other liabilities, including operating lease liabilities, deferred revenue, and insurance obligations | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Accrued Expenses and Other Liabilities | $2,785,824 | $2,434,006 | | Operating lease liabilities | $648,310 | $355,805 | | Deferred revenue | $550,560 | $593,442 | | Insurance obligations | $501,600 | $497,658 | 8. INCOME TAXES This note discusses Ryder's effective income tax rate from continuing operations and factors influencing its changes, including the FMS U.K. business exit and valuation allowance release | Metric | 3 Months Ended Sep 30, 2022 (%) | 3 Months Ended Sep 30, 2021 (%) | 9 Months Ended Sep 30, 2022 (%) | 9 Months Ended Sep 30, 2021 (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Effective income tax rate from continuing operations | 26.3% | 24.3% | 28.3% | 25.7% | - The increase in the effective tax rate was due to incremental U.S. tax on higher foreign earnings related to the FMS U.K. business exit and a shift in the mix of earnings subject to tax in different jurisdictions[50] - A valuation allowance of $8 million on U.K. deferred tax assets was released during the third quarter of 2022, as these assets were determined to be more-likely-than-not realizable[51] 9. LEASES This note details Ryder's lease income from ChoiceLease and commercial rental, interest income from net investment in leases, and changes in net investment in sales-type leases | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Lease income related to ChoiceLease | $367,009 | $383,669 | $1,127,391 | $1,159,930 | | Lease income related to commercial rental | $332,568 | $287,612 | $955,927 | $752,994 | | Interest income related to net investment in leases | $11,986 | $10,925 | $32,941 | $36,380 | - Net investment in sales-type leases decreased to $570.6 million as of September 30, 2022, from $626.0 million at December 31, 2021[54] 10. DEBT This note provides a breakdown of Ryder's total debt, including short-term, long-term, and U.S. commercial paper, along with details on recent note issuances and credit facilities | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total debt | $6,334,142 | $6,579,669 | | Short-term debt and current portion of long-term debt | $1,049,109 | $1,333,363 | | Long-term debt | $5,285,033 | $5,246,306 | | U.S. commercial paper | $849,269 | $531,157 | - The company issued $450 million unsecured medium-term notes at 2.85% interest in February 2022 and $300 million unsecured medium-term notes at 4.30% interest in May 2022[60] - As of September 30, 2022, $551 million was available under the global revolving credit facility and $174 million under the trade receivables financing program. The debt to consolidated net worth ratio was 157%, below the 300% covenant[58][59] 11. SHARE REPURCHASE PROGRAMS This note details Ryder's share repurchase activities, including the completion of an accelerated share repurchase program and the status of other active programs - Ryder completed a $300 million accelerated share repurchase program in September 2022, repurchasing approximately 4 million shares at an average price of $74.47 per share[62][158] - Two additional share repurchase programs are active: a 2021 Discretionary Program for up to 2.0 million shares and a 2021 Anti-Dilutive Program for up to 2.5 million shares, both expiring October 14, 2023. No shares were repurchased under these programs during the nine months ended September 30, 2022[63] 12. ACCUMULATED OTHER COMPREHENSIVE LOSS This note provides a breakdown of Ryder's accumulated other comprehensive loss, including cumulative translation adjustments, net actuarial loss, and unrealized gains/losses from cash flow hedges | Metric | Sep 30, 2022 (in thousands) | Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Accumulated other comprehensive loss | $(771,993) | $(806,481) | | Cumulative translation adjustments | $(264,598) | $(157,446) | | Net actuarial loss and prior service cost | $(515,069) | $(638,575) | | Unrealized gain (loss) from cash flow hedges | $7,674 | $(10,460) | 13. EARNINGS PER SHARE This note presents Ryder's basic and diluted earnings per common share from continuing operations and weighted average common shares outstanding | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Earnings from continuing operations per common share — Basic | $4.92 | $2.64 | $13.12 | $6.46 | | Earnings from continuing operations per common share — Diluted | $4.82 | $2.58 | $12.86 | $6.33 | | Weighted average common shares outstanding — Diluted (in thousands) | 51,073 | 53,514 | 51,278 | 53,419 | 14. EMPLOYEE BENEFIT PLANS This note details Ryder's net pension expense, expected return on plan assets, interest cost, and contributions to pension plans | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net pension expense | $2,772 | $126 | $8,524 | $335 | | Expected return on plan assets | $(18,264) | $(21,702) | $(55,330) | $(65,187) | | Interest cost | $15,653 | $14,496 | $47,262 | $43,514 | - The company contributed $19 million to its pension plans during the nine months ended September 30, 2022, with no additional contributions expected for the year[68] 15. OTHER ITEMS IMPACTING COMPARABILITY This note outlines various items impacting financial comparability, including restructuring, gains on sale of U.K. equipment and properties, and commercial claim recoveries | Item | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Restructuring and other, net | $(3,331) | $4,137 | $21,225 | $9,742 | | Gains on sale of U.K. revenue earning equipment | $(14,938) | $0 | $(43,309) | $0 | | Gains on sale of U.K. properties | $(10,205) | $(5,411) | $(33,789) | $(42,179) | - Restructuring and other, net for the third quarter of 2022 included a $14 million recovery from a commercial claim, partially offset by $9 million in professional fees and $2 million in U.K. severance costs related to the FMS U.K. business exit[71] - For the nine months ended September 30, 2022, restructuring and other, net included $20 million in professional fees for a commercial claim, offset by a $14 million recovery, plus $9 million in U.K. severance costs and $5 million in transaction costs for the Whiplash acquisition[71] 16. CONTINGENCIES AND OTHER MATTERS This note discusses Ryder's involvement in various legal claims and proceedings, including a securities class action lawsuit and related shareholder derivative complaints - Ryder is a party to various claims and proceedings, including commercial, employment, environmental, and risk management matters. Loss provisions are established for probable and estimable losses[74] - A securities class action lawsuit, alleging misrepresentation of depreciation policy and residual value estimates, is ongoing, with the court denying Ryder's motion to dismiss in May 2022. Discovery is set to complete by October 2023, and trial in June 2024[76] - Five shareholder derivative complaints, based on the securities class action allegations, are stayed pending resolution of the securities class action[77] 17. SUPPLEMENTAL CASH FLOW INFORMATION This note provides supplemental cash flow details, including interest and income taxes paid, and cash flows related to operating leases | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Interest paid | $157,039 | $155,358 | | Income taxes paid | $96,061 | $21,177 | | Operating cash flows from operating leases | $133,434 | $70,047 | | Right-of-use assets obtained (Operating leases) | $228,660 | $71,555 | 18. ACQUISITIONS This note details Ryder's acquisition of Whiplash, expanding its e-commerce fulfillment network, and other business combinations - Ryder acquired PLG Investments I, LLC (Whiplash) on January 1, 2022, for approximately $483 million, expanding its e-commerce and omnichannel fulfillment network in the SCS segment[80] | Whiplash Acquisition (Jan 1, 2022) | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Goodwill | $280,615 | | Customer relationships and other intangible assets | $157,400 | | Net assets acquired | $482,769 | - For the nine months ended September 30, 2022, Ryder paid $27 million for other business combinations, resulting in $20 million in goodwill and $2 million in intangible assets[84] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Ryder's Management Discussion and Analysis highlights strong financial performance for Q3 and the nine months ended September 30, 2022, driven by increased demand for outsourcing solutions amid supply chain disruptions and labor shortages. All business segments (FMS, SCS, DTS) reported significant revenue and earnings growth, supported by strategic acquisitions, pricing adjustments, and favorable market conditions for used vehicles and rentals. The company maintains a solid liquidity position, actively manages debt, and engages in shareholder return programs like share repurchases and dividends OVERVIEW This section provides a general overview of Ryder's competitive market landscape and key business trends influencing its performance General This note describes Ryder's competitive market environment, where customers prioritize service quality, price, technology, and offerings - Ryder operates in highly competitive markets, with customers choosing based on service quality, price, technology, and service offerings[87] - Customers can also provide services themselves or use other third-party vendors as alternatives[87] Business Trends This note highlights how supply chain disruptions and labor shortages have increased demand for Ryder's outsourcing solutions, benefiting FMS, SCS, and DTS segments - Supply chain disruptions and labor shortages increased demand for Ryder's services, driving companies to seek long-term outsourcing solutions[88] - FMS benefited from strong demand and pricing in used vehicle sales and rental markets, though a decline in sequential used vehicle pricing is anticipated[89] - SCS and DTS experienced strong outsourcing trends, new contract wins, and significant revenue growth from recent acquisitions, with pricing adjustments and cost recovery initiatives helping them return to target earnings levels[90] SELECTED OPERATING PERFORMANCE ITEMS This section presents key consolidated financial metrics, including total revenue, operating revenue, diluted EPS, and comparable EBT, highlighting significant growth | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Total revenue | $3,035,464 | $2,459,049 | $8,922,988 | $7,062,908 | 23% | 26% | | Operating revenue (non-GAAP) | $2,346,942 | $1,982,855 | $6,869,635 | $5,723,038 | 18% | 20% | | Diluted EPS from continuing operations | $4.82 | $2.58 | $12.86 | $6.33 | 87% | 103% | | Comparable EBT (non-GAAP) | $308,377 | $181,784 | $876,588 | $436,023 | 70% | 101% | - Total and operating revenue increases were primarily due to higher revenue across all business segments and SCS acquisitions (Whiplash and Midwest), along with higher subcontracted transportation and fuel revenue[96] - EBT and comparable EBT increases were primarily due to higher gains on used vehicles sold in North America, higher commercial rental results, and a declining impact of depreciation expense from prior residual value estimate changes[97] CONSOLIDATED RESULTS This section provides a detailed analysis of Ryder's consolidated financial performance across various revenue and cost categories Lease & Related Maintenance and Rental This note analyzes revenue, cost, and gross margin for Ryder's lease and related maintenance and rental services, highlighting impacts from pricing and depreciation | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Lease & related maintenance and rental revenue | $1,044,547 | $1,013,968 | $3,119,136 | $2,941,084 | 3% | 6% | | Cost of lease & related maintenance and rental | $691,030 | $719,150 | $2,077,765 | $2,151,738 | (4)% | (3)% | | Gross margin | $353,517 | $294,818 | $1,041,371 | $789,346 | 20% | 32% | | Gross margin % | 34% | 29% | 33% | 27% | N/A | N/A | - Revenue increase was primarily driven by increases in commercial rental pricing and demand[99] - Cost decrease was primarily due to declining depreciation expense impacts from prior residual value estimate changes[100] Services This note examines revenue, cost, and gross margin for Ryder's services segment, driven by acquisitions, higher volumes, new business, and pricing adjustments | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Services revenue | $1,811,134 | $1,320,761 | $5,258,258 | $3,762,389 | 37% | 40% | | Cost of services | $1,545,764 | $1,161,889 | $4,512,594 | $3,251,696 | 33% | 39% | | Gross margin | $265,370 | $158,872 | $745,664 | $510,693 | 67% | 46% | | Gross margin % | 15% | 12% | 14% | 14% | N/A | N/A | - Revenue growth was due to increases in SCS and DTS from acquisitions, higher volumes, new business, and higher pricing[102] - Services gross margin as a percentage of revenue increased in Q3 2022 due to pricing adjustments and cost-recovery efforts[104] Fuel This note analyzes Ryder's fuel services revenue and costs, noting that fuel is largely a pass-through to customers with minimal gross margin | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Fuel services revenue | $179,783 | $124,320 | $545,594 | $359,435 | 45% | 52% | | Cost of fuel services | $179,716 | $124,347 | $539,887 | $356,506 | 45% | 51% | | Gross margin % | 0% | 0% | 1% | 1% | N/A | N/A | - Revenue and cost increases primarily reflect higher fuel prices passed through to customers[105][106] - Fuel services gross margin remained relatively breakeven, as fuel is largely a pass-through to customers with minimal margin changes during steady market prices[107] Selling, General and Administrative Expenses This note details changes in Ryder's SG&A expenses, attributing increases to incentive compensation, acquisition-related amortization, and other operational costs | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | SG&A expenses | $349,611 | $287,971 | $1,052,307 | $866,362 | 21% | 21% | | Percentage of total revenue | 12% | 12% | 12% | 12% | N/A | N/A | - Increase in SG&A was mainly due to higher incentive-based compensation, amortization of intangibles from Whiplash and Midwest acquisitions, and higher bad debt and travel expense[108] Non-Operating Pension Costs, net This note explains the increase in Ryder's non-operating pension costs due to lower asset returns and higher interest expense, partially offset by lower amortization | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Non-operating pension costs, net | $2,647 | $(148) | $8,015 | $(530) | - The increase was due to lower return on assets from a shift in mix of assets and higher interest expense from a higher discount rate, partially offset by lower amortization expense[109] Used Vehicle Sales, net This note analyzes Ryder's net used vehicle sales, including gains from the U.K. business exit and changes in proceeds per unit for tractors and trucks | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Used vehicle sales, net | $(113,485) | $(69,303) | $(356,045) | $(149,788) | 64% | 138% | - Used vehicle sales, net, included gains of $15 million for the three months and $43 million for the nine months ended September 30, 2022, associated with the exit of the U.K. business[110] | Vehicle Type | Proceeds per unit change (3 Months) (%) | Proceeds per unit change (9 Months) (%) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Tractors | 14% | 72% | | Trucks | 26% | 69% | Interest expense This note details the increase in Ryder's interest expense, driven by higher average outstanding debt and fixed debt interest rates | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Interest expense | $57,802 | $53,752 | $165,490 | $162,613 | 8% | 2% | | Effective interest rate | 3.6% | 3.5% | 3.4% | 3.4% | N/A | N/A | - The increase in interest expense was due to higher average outstanding debt and a higher fixed debt interest rate, partially offset by a higher mix of variable rate debt at lower interest rates[112] Miscellaneous income, net This note explains changes in Ryder's miscellaneous income, net, influenced by gains on property sales and investment income fluctuations | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Miscellaneous income, net | $(8,494) | $(5,952) | $(22,696) | $(55,198) | 43% | (59)% | - Q3 2022 increase was due to higher gains on sales of properties, partially offset by lower investment income[113] - Nine-month decrease was primarily due to lower investment income and higher gains on sale of properties in the prior year[113] Restructuring and other items, net This note summarizes Ryder's restructuring and other items, net, including commercial claim recoveries, professional fees, and U.K. severance costs | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Restructuring and other items, net | $(3,331) | $4,137 | $21,225 | $22,463 | NM | (6)% | - Refer to Note 15, "Other Items Impacting Comparability," for detailed discussion[115] Provision for income taxes This note discusses Ryder's provision for income taxes and effective tax rate, referencing detailed explanations in Note 8 | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Provision for income taxes | $87,784 | $44,547 | $261,862 | $117,235 | 97% | 123% | | Effective tax rate on continuing operations | 26.3% | 24.3% | 28.3% | 25.7% | N/A | N/A | - Changes in the provision for income taxes and effective tax rate are discussed in Note 8, "Income Taxes"[117] OPERATING RESULTS BY BUSINESS SEGMENT This section analyzes the financial performance of Ryder's Fleet Management Solutions, Supply Chain Solutions, and Dedicated Transportation Solutions segments Fleet Management Solutions This note details FMS revenue, operating revenue, and EBT, highlighting contributions from used vehicle sales, rental results, and depreciation changes | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | FMS total revenue | $1,581,870 | $1,436,340 | $4,732,193 | $4,180,066 | 10% | 13% | | FMS operating revenue (non-GAAP) | $1,303,226 | $1,247,581 | $3,892,333 | $3,640,367 | 4% | 7% | | FMS EBT | $265,301 | $186,391 | $798,822 | $408,244 | 42% | 96% | - FMS EBT increased primarily from higher used vehicle sales and rental results, reflecting benefits from tight truck capacity and initiatives to improve returns[129] - Increased gains on used vehicles sold and declining depreciation expense from prior residual value estimate changes contributed $55 million and $255 million to higher year-over-year earnings for the three and nine months, respectively[129] - Used vehicle inventory levels increased to 4,700 vehicles due to increased U.K. inventory related to the exit plan, but remained below the target range of 7,000 - 9,000 vehicles[129] Supply Chain Solutions This note analyzes SCS revenue, operating revenue, and EBT, emphasizing organic growth and the impact of acquisition-related amortization expense | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | SCS total revenue | $1,206,508 | $802,357 | $3,469,008 | $2,284,687 | 50% | 52% | | SCS operating revenue (non-GAAP) | $834,878 | $559,290 | $2,371,399 | $1,596,446 | 49% | 49% | | SCS EBT | $63,974 | $22,161 | $150,833 | $96,159 | 189% | 57% | - SCS operating revenue organically grew 23% for both the third quarter and nine months ended September 30, 2022[139] - SCS EBT benefited from non-cash amortization expense of $6 million and $22 million during the three and nine months ended September 30, 2022, respectively, due to acquisitions[140] Dedicated Transportation Solutions This note details DTS revenue, operating revenue, and EBT, driven by higher pricing and new business initiatives | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | DTS total revenue | $454,328 | $380,357 | $1,329,504 | $1,055,575 | 19% | 26% | | DTS operating revenue (non-GAAP) | $317,027 | $271,557 | $919,046 | $764,245 | 17% | 20% | | DTS EBT | $28,150 | $11,324 | $71,517 | $37,468 | 149% | 91% | - Revenue and EBT increases were primarily due to higher pricing and new business[142][143] Central Support Services This note outlines changes in total and unallocated CSS costs, attributed to strategic investments, incentive compensation, and professional fees | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | Change (3 Months) (%) | Change (9 Months) (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :---------------- | | Total CSS | $108,863 | $90,507 | $312,950 | $272,649 | 20% | 15% | | Unallocated CSS | $21,041 | $17,027 | $60,813 | $53,323 | 24% | 14% | - Increases in CSS costs were due to strategic investments in marketing and technology, increased incentive-based compensation, and professional fees[144] FINANCIAL RESOURCES AND LIQUIDITY This section discusses Ryder's cash flows, financing activities, and liquidity position, including debt management and shareholder return programs Cash Flows This note analyzes Ryder's cash flows from operating, investing, and financing activities, along with free cash flow and gross capital expenditures | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities from continuing operations | $1,786,414 | $1,684,891 | | Net cash used in investing activities from continuing operations | $(1,351,229) | $(860,910) | | Net cash used in financing activities from continuing operations | $(600,388) | $(768,054) | - Cash used in investing activities increased primarily due to the acquisition of Whiplash and an increase in cash paid for capital expenditures, partially offset by higher proceeds from the sale of revenue earning equipment[145] | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Free cash flow (non-GAAP) | $886,512 | $828,970 | | Gross capital expenditures | $2,032,421 | $1,495,886 | Financing and Other Funding Transactions This note describes Ryder's funding sources, including commercial paper and debt issuances, cash and cash equivalents, credit ratings, and the debt to equity ratio - Ryder utilizes commercial paper, long-term/medium-term debt, asset-backed securities, and bank credit facilities for funding[150] - Cash and cash equivalents totaled $456 million as of September 30, 2022, with $395 million held outside the U.S[151] - The company issued $450 million unsecured medium-term notes at 2.85% in February 2022 and $300 million unsecured medium-term notes at 4.30% interest in May 2022[154] | Rating Agency | Short-term Rating | Short-term Outlook | Long-term Rating | Long-term Outlook | | :-------------------------------- | :---------------- | :----------------- | :--------------- | :---------------- | | Standard & Poor's Ratings Services | A2 | — | BBB | Positive | | Moody's Investors Service | P2 | Stable | Baa2 | Stable | | Fitch Ratings | F2 | — | BBB+ | Stable | | DBRS | R-1 (Low) | Stable | A (Low) | Stable | - The debt to equity ratio decreased to 210% as of September 30, 2022, from 235% at December 31, 2021, due to increased earnings and debt reduction, partially offset by higher share repurchases[157] Share Repurchases and Cash Dividends This note details Ryder's share repurchase activities, including the completion of an accelerated program, and the declaration of quarterly cash dividends - The $300 million accelerated share repurchase program was completed in September 2022, resulting in the repurchase and retirement of approximately 4 million shares at an average price of $74.47 per share[158] - In October 2022, the board declared a quarterly cash dividend of $0.62 per share, a 7% increase compared to the $0.58 per share declared in October 2021[160] RECENT ACCOUNTING PRONOUNCEMENTS This section directs readers to Note 2 for detailed information on recent accounting pronouncements affecting Ryder's financial reporting - Refer to Note 2, "Recent Accounting Pronouncements," for details on recent accounting pronouncements[161] NON-GAAP FINANCIAL MEASURES This section defines and explains Ryder's non-GAAP financial measures, including operating revenue, comparable earnings, EBITDA, and cash flow measures, used for performance assessment Operating Revenue Measures This note defines operating revenue as total revenue excluding fuel, subcontracted transportation, and discontinued ChoiceLease liability insurance, for better comparability of ongoing operations - Operating revenue is defined as total revenue excluding fuel, subcontracted transportation, and revenue from the discontinued ChoiceLease liability insurance program[166] - These exclusions are made because fuel and subcontracted transportation are largely pass-through costs, and ChoiceLease liability insurance was a discontinued program, allowing for better comparability of ongoing operations[166] Comparable Earnings Measures This note defines comparable EBT, Earnings, and EPS, which exclude non-operating pension costs and other non-representative items for improved year-over-year performance comparison - Comparable EBT, Earnings, and EPS exclude non-operating pension costs, net, and other items impacting comparability to provide better year-over-year comparison of operating performance[167] - Non-operating pension costs are excluded as they are impacted by financial market performance and are outside the operational performance of the business[167] - Adjusted ROE is used as an internal measure of how effectively the company uses its owned capital, excluding other items impacting comparability[167] Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) This note defines Comparable EBITDA, an adjusted measure used to assess financial performance and debt servicing ability, while emphasizing it is not a GAAP alternative - Comparable EBITDA adjusts net earnings for discontinued operations, non-operating pension costs, other non-representative items, interest expense, income taxes, depreciation, used vehicle sales results, and amortization[168] - This measure is used to assess financial performance, ability to service debt, and to facilitate comparisons of operating results, but should not be considered an alternative to GAAP measures[168] Cash Flow Measures This note defines Total Cash Generated and Free Cash Flow as key measures of operating performance and liquidity, indicating cash available after capital investments - Total Cash Generated and Free Cash Flow are important measures of comparative operating performance and liquidity[168] - Total Cash Generated is the sum of net cash from operating activities, sales of revenue earning equipment, sales of operating property and equipment, and other investing inflows[168] - Free Cash Flow is Total Cash Generated less purchases of property and revenue earning equipment, indicating cash available for debt service and shareholders after capital investments[168] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section highlights that the report contains forward-looking statements subject to risks and uncertainties, and the company does not commit to updating them - The report contains forward-looking statements regarding expectations for business and financial results, including impacts of COVID-19, supply chain disruptions, market conditions, and strategic initiatives[186][187] - These statements are subject to risks, uncertainties, and assumptions, and actual results may differ significantly from those expressed[188] - The company does not intend to update or revise any forward-looking statements[192] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to Ryder's exposures to market risks since December 31, 2021. For a comprehensive discussion, readers are referred to the 2021 Annual Report on Form 10-K - No material changes to Ryder's market risk exposures since December 31, 2021[193] - Refer to the 2021 Annual Report on Form 10-K for a complete discussion of market risks[193] ITEM 4. Controls and Procedures Ryder's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2022, and concluded they were effective. There were no material changes in internal control over financial reporting during the nine months ended September 30, 2022 Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of Ryder's disclosure controls and procedures as of September 30, 2022, following evaluation by management - Ryder's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[195] - The evaluation was conducted under the supervision and with the participation of the CEO and CFO[195] Changes in Internal Control over Financial Reporting This section states that no material changes in internal control over financial reporting occurred during the nine months ended September 30, 2022 - No material changes in internal control over financial reporting occurred during the nine months ended September 30, 2022[196] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, exhibits, and official signatures ITEM 1. Legal Proceedings For a description of material pending legal proceedings, readers are directed to Note 16, "Contingencies and Other Matters," in the Notes to Condensed Consolidated Financial Statements - Material pending legal proceedings are described in Note 16, "Contingencies and Other Matters"[199] ITEM 1A. Risk Factors No material changes to the risk factors described in the 2021 Form 10-K have occurred, except for additional factual information disclosed in this report. The company acknowledges that other unknown or currently immaterial risk factors could affect its operations - No material changes to risk factors described in the 2021 Form 10-K, except for additional factual information in this report[201] - Operations could be affected by additional unknown or currently immaterial risk factors[201] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on common stock purchases made during the three months ended September 30, 2022. It highlights the completion of the $300 million accelerated share repurchase program in September 2022, which resulted in the repurchase of approximately 1 million additional shares during that month | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Number of Shares That May Yet Be Purchased Under the Discretionary and Anti-Dilutive Programs | Maximum Number of Dollars That May Yet Be Purchased Under the Accelerated Share Repurchase Program (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------- | | July 1 through July 31, 2022 | 23 | $75.10 | — | 4,500,000 | $65,272 | | August 1 through August 31, 2022 | — | — | — | 4,500,000 | $65,272 | | September 1 through September 30, 2022 | 976,130 | $67.98 | 975,960 | 4,500,000 | $— | | Total | 976,153 | $67.98 | 975,960 | N/A | N/A | - The $300 million accelerated share repurchase program was completed in September 2022, with approximately 1 million additional shares delivered and retired during that month[203] ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications (31.1, 31.2, 32) and XBRL-related documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) - The report includes certifications by Robert E. Sanchez and John J. Diez (Exhibits 31.1, 31.2, 32)[206] - XBRL instance and taxonomy extension documents are provided (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[206] SIGNATURE The report was duly signed on October 26, 2022, by John J. Diez, Executive Vice President and Chief Financial Officer, and Cristina Gallo-Aquino, Senior Vice President and Controller, confirming its submission in accordance with the Securities Exchange Act of 1934 - The report was signed by John J. Diez, Executive Vice President and Chief Financial Officer, and Cristina Gallo-Aquino, Senior Vice President and Controller, on October 26, 2022[208]