Ryder(R) - 2021 Q2 - Quarterly Report

Report Information Filing Details Ryder System, Inc.'s Q2 2021 quarterly report (Form 10-Q) details company information and 53.8 million shares outstanding - Ryder System, Inc. submitted its quarterly report (Form 10-Q) for the period ended June 30, 2021[1] Filing Details Key Data | Metric | Information | | :--- | :--- | | Registrant Name | RYDER SYSTEM, INC. | | State of Incorporation | Florida | | Telephone Number | (305) 500-3726 | | Trading Symbol | R | | Registered Exchange | New York Stock Exchange | | Shares Outstanding (June 30, 2021) | 53,773,599 | | Accelerated Filer Status | Large accelerated filer | PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) This section presents the company's unaudited condensed consolidated financial statements and their accompanying notes Condensed Consolidated Statements of Earnings The company achieved significant revenue and net income growth in Q2 and H1 2021, reversing prior-year losses Condensed Consolidated Statements of Earnings Key Data | Metric (USD thousands) | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Lease and Related Maintenance and Rental Revenue | 986,694 | 868,660 | 1,927,116 | 1,796,416 | | Service Revenue | 1,276,140 | 942,267 | 2,441,628 | 2,054,455 | | Fuel Services Revenue | 119,403 | 84,355 | 235,115 | 205,717 | | Total Revenue | 2,382,237 | 1,895,282 | 4,603,859 | 4,056,588 | | Earnings (Loss) from Continuing Operations Before Income Taxes | 203,573 | (94,777) | 273,840 | (208,411) | | Net Earnings (Loss) from Continuing Operations | 149,568 | (73,705) | 201,152 | (182,834) | | Net Earnings (Loss) | 149,105 | (74,099) | 199,930 | (183,712) | | Diluted Earnings (Loss) Per Share from Continuing Operations | 2.78 | (1.41) | 3.75 | (3.50) | - In Q2 and H1 2021, the company achieved net gains from used vehicle sales, contrasting with net losses in the prior-year periods, reflecting improved market conditions[8] Condensed Consolidated Statements of Comprehensive Income The company reported positive comprehensive income in Q2 and H1 2021, reversing prior-year comprehensive losses Condensed Consolidated Statements of Comprehensive Income Key Data | Metric (USD thousands) | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings (Loss) | 149,105 | (74,099) | 199,930 | (183,712) | | Other Comprehensive Income (Loss), Net of Tax | 15,085 | 10,305 | 29,523 | (68,149) | | Comprehensive Income (Loss) | 164,190 | (63,794) | 229,453 | (251,861) | - In H1 2021, changes in cumulative translation adjustments and unrealized losses on cash flow hedges resulted in positive gains, compared to negative losses in the prior-year period[10] Condensed Consolidated Balance Sheets As of June 30, 2021, total assets slightly decreased, while cash and current debt increased, and long-term debt decreased Condensed Consolidated Balance Sheets Key Data | Metric (USD thousands) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 267,992 | 151,294 | | Accounts Receivable, Net | 1,298,905 | 1,182,350 | | Inventories | 62,707 | 61,191 | | Prepaid Expenses and Other Current Assets | 159,260 | 200,694 | | Total Current Assets | 1,788,864 | 1,595,529 | | Revenue Earning Equipment, Net | 8,531,099 | 8,777,015 | | Total Assets | 12,903,036 | 12,931,954 | | Short-Term Debt and Current Portion of Long-Term Debt | 1,362,669 | 516,581 | | Accounts Payable | 672,553 | 547,389 | | Accrued Expenses and Other Current Liabilities | 1,020,832 | 989,178 | | Total Current Liabilities | 3,056,054 | 2,053,148 | | Long-Term Debt | 4,873,002 | 6,093,655 | | Total Liabilities | 10,484,822 | 10,676,397 | | Total Shareholders' Equity | 2,418,214 | 2,255,557 | - As of June 30, 2021, cash and cash equivalents increased by 77.1% compared to December 31, 2020[13] - As of June 30, 2021, short-term debt and the current portion of long-term debt significantly increased by 163.8% compared to December 31, 2020, while long-term debt decreased by 20.0%[13] Condensed Consolidated Statements of Cash Flows In H1 2021, operating cash flow remained stable, while investing cash outflow increased and financing cash flow turned negative Condensed Consolidated Statements of Cash Flows Key Data | Metric (USD thousands) | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities from Continuing Operations | 1,131,233 | 1,098,785 | | Net Cash Used in Investing Activities from Continuing Operations | (533,408) | (492,266) | | Net Cash Provided by (Used in) Financing Activities from Continuing Operations | (478,971) | 154,732 | | Cash and Cash Equivalents, End of Period | 267,992 | 831,469 | - In H1 2021, net cash provided by operating activities from continuing operations was largely consistent with the prior-year period, but cash outflow from investing activities increased, primarily due to higher expenditures for property and revenue-earning equipment[15] - In H1 2021, cash outflow from financing activities significantly increased, mainly reflecting higher net repayments of commercial paper and other debt, and reduced debt issuances[15] Condensed Consolidated Statements of Shareholders' Equity As of June 30, 2021, total shareholders' equity increased, driven by comprehensive income, despite dividends and share repurchases Condensed Consolidated Statements of Shareholders' Equity Key Data (H1 2021) | Metric (USD thousands) | Balance January 1, 2021 | Comprehensive Income (Loss) | Common Stock Dividends | Stock Issuances | Stock Repurchases | Share-Based Compensation | Balance June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock (Shares) | 53,732,033 | — | — | 679,567 | (638,001) | — | 53,773,599 | | Common Stock (Amount) | 26,866 | — | — | 339 | (319) | — | 26,886 | | Additional Paid-in Capital | 1,132,954 | — | — | 20,213 | (13,194) | 23,294 | 1,163,267 | | Retained Earnings | 1,912,942 | 199,930 | (61,664) | — | (35,465) | — | 2,015,743 | | Accumulated Other Comprehensive Loss | (817,205) | 29,523 | — | — | — | — | (787,682) | | Total Shareholders' Equity | 2,255,557 | 229,453 | (61,664) | 20,552 | (48,978) | 23,294 | 2,418,214 | - In H1 2021, the company repurchased 638,001 shares of common stock for a total of USD 48,978 thousand[20] - In H1 2021, the company declared and paid common stock dividends of USD 1.12 per share, totaling USD 61,664 thousand[20] Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering key financial areas and segment performance 1. GENERAL This note outlines the basis of preparation for the company's GAAP-compliant financial statements, noting COVID-19's impact - The company prepares its unaudited condensed consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP)[23] - The company categorizes its financial performance into three business segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS)[24] - The COVID-19 pandemic negatively impacted the company's business in H1 2020 and may continue to affect business and financial results, as well as key judgments and estimates regarding goodwill, residual values, and deferred income taxes[25] 2. RECENT ACCOUNTING PRONOUNCEMENTS This note discusses recent FASB accounting standard updates on reference rate reform and leases - FASB issued ASU No. 2020-04, providing simplified accounting for contracts, hedging relationships, and transactions affected by LIBOR or other reference rate reform, effective through December 31, 2022[26] - FASB issued ASU No. 2021-05, requiring lessors to classify leases with variable lease payments that do not depend on an index or rate as operating leases if they would result in a sales loss when classified as sales-type or direct financing leases, with the company expecting no material impact on financial position, operating results, and cash flows from its adoption[27] 3. REVENUE This note details the company's revenue disaggregated by geographic market and business segment, showing growth across all segments Total Revenue by Geographic Market (USD thousands) | Geographic Market | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | United States | 2,131,624 | 1,703,799 | 4,114,686 | 3,621,438 | | Canada | 127,291 | 97,536 | 249,449 | 216,882 | | Europe | 68,142 | 56,249 | 135,230 | 128,200 | | Mexico | 55,180 | 37,698 | 104,494 | 90,068 | | Total Revenue | 2,382,237 | 1,895,282 | 4,603,859 | 4,056,588 | SCS Business Segment Revenue by Industry (USD thousands) | Industry | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Automotive | 307,499 | 147,749 | 579,054 | 397,674 | | Technology and Healthcare | 109,950 | 84,766 | 207,035 | 175,899 | | Consumer Products and Retail | 286,262 | 236,499 | 559,486 | 466,431 | | Industrial and Other | 71,919 | 50,304 | 136,755 | 107,761 | | Total SCS Revenue | 775,630 | 519,318 | 1,482,330 | 1,147,765 | - As of June 30, 2021, Contracted Not Recognized Revenue amounted to USD 2.5 billion[34] 4. RECEIVABLES, NET This note provides the composition of receivables and changes in the allowance for credit losses Receivables, Net (USD thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Trade Receivables | 1,160,076 | 1,051,618 | | Sales-Type Leases | 137,535 | 132,003 | | Other | 41,926 | 41,753 | | Total | 1,339,537 | 1,225,374 | | Allowance for Credit Losses and Other | (40,632) | (43,024) | | Total | 1,298,905 | 1,182,350 | Changes in Allowance for Credit Losses (USD thousands) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Beginning Balance | 43,024 | 22,761 | | Changes in Allowance for Credit Losses | (1,076) | 32,600 | | Adoption of New Accounting Standard, Write-offs, and Other Impacts | (1,316) | (10,453) | | Ending Balance | 40,632 | 44,908 | 5. REVENUE EARNING EQUIPMENT, NET This note details revenue-earning equipment, depreciation policies, and net gains from used vehicle sales Revenue Earning Equipment, Net (USD thousands) | Equipment Type | Net as of June 30, 2021 | Net as of December 31, 2020 | | :--- | :--- | :--- | | Held for Use: Trucks | 3,250,324 | 3,242,672 | | Held for Use: Tractors | 4,206,413 | 4,160,004 | | Held for Use: Trailers and Other | 996,657 | 1,242,762 | | Held for Sale | 77,705 | 131,577 | | Total | 8,531,099 | 8,777,015 | - The company completed its review of residual values and useful lives for revenue-earning equipment in Q2 2021, primarily adjusting residual value estimates for certain tractors and useful lives for certain equipment categories, affecting approximately 15% of the total fleet, but with no material impact on current operating results[38] Used Vehicle Sales, Net (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Gains on Vehicle Sales, Net | (54,721) | (1,528) | (86,593) | (2,352) | | Valuation Adjustment Losses | 3,087 | 11,016 | 6,108 | 32,524 | | Used Vehicle Sales, Net | (51,634) | 9,488 | (80,485) | 30,172 | 6. ACCRUED EXPENSES AND OTHER LIABILITIES This note presents the detailed composition of the company's accrued expenses and other non-current liabilities Accrued Expenses and Other Liabilities (USD thousands) | Liability Type | Total as of June 30, 2021 | Total as of December 31, 2020 | | :--- | :--- | :--- | | Salaries and Wages | 167,568 | 158,122 | | Deferred Compensation | 90,588 | 82,940 | | Pension Benefits | 262,128 | 268,954 | | Other Postretirement Benefits | 18,876 | 21,626 | | Other Employee Benefits | 13,755 | 20,599 | | Insurance Obligations | 474,668 | 462,234 | | Operating Taxes | 215,741 | 205,980 | | Income Taxes | 19,459 | 20,186 | | Interest | 38,129 | 38,887 | | Deposits | 93,363 | 82,854 | | Operating Lease Liabilities | 253,034 | 265,214 | | Deferred Revenue | 613,136 | 629,739 | | Restructuring Liabilities | 3,293 | 7,683 | | Other | 128,147 | 128,021 | | Total | 2,391,885 | 2,393,039 | - Insurance obligations primarily include self-insured claims liabilities[44] - Operating taxes include certain payroll tax deferrals allowed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)[45] 7. INCOME TAXES This note discloses the company's effective income tax rate from continuing operations, which was 26.5% in Q2 and H1 2021 Effective Income Tax Rate from Continuing Operations | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Effective Income Tax Rate | 26.5% | 22.2% (Benefit) | 26.5% | 12.3% (Benefit) | - In Q2 and H1 2020, the tax rate was impacted by accelerated depreciation expenses and reduced earnings due to the negative economic effects of COVID-19[47] - In H1 2020, the tax rate was also affected by the recognition of a USD 13 million valuation allowance related to UK deferred tax assets and a USD 7 million expense related to expiring state net operating losses[47] 8. LEASES This note provides the composition of the company's lease revenue as a lessor, showing growth in Q2 and H1 2021 Lease Revenue Composition (USD thousands) | Lease Type | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Operating Leases: ChoiceLease Rental Revenue | 386,650 | 385,639 | 776,261 | 785,227 | | Operating Leases: Commercial Rental Revenue | 255,098 | 161,220 | 465,382 | 356,915 | | Sales-Type Leases: Interest Income from Net Investment in Leases | 11,040 | 12,080 | 25,455 | 23,724 | | Variable Lease Revenue (Excluding Commercial Rental) | 72,129 | 58,882 | 144,122 | 124,389 | - Commercial rental revenue includes both fixed and variable lease revenue, with variable lease revenue accounting for approximately 15% to 25% of total commercial rental revenue[48] 9. DEBT This note details the company's debt composition, showing decreased total debt, increased short-term debt, and reduced long-term debt Debt Composition (USD thousands) | Debt Type | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | U.S. Commercial Paper | 55,522 | 214,375 | | Canadian Commercial Paper | 25,004 | 62,800 | | Unsecured U.S. Notes — Medium-Term Notes | 5,152,922 | 5,174,180 | | Asset-Backed U.S. Obligations | 611,275 | 682,383 | | Total Debt | 6,235,671 | 6,610,236 | | Short-Term Debt and Current Portion of Long-Term Debt | (1,362,669) | (516,581) | | Long-Term Debt | 4,873,002 | 6,093,655 | - As of June 30, 2021, USD 1.3 billion was available under global revolving credit facilities, and USD 300 million was available under the trade receivables program[53][166] - As of June 30, 2021, the debt-to-equity ratio was 177%, well below the 300% maintenance ratio requirement[53] 10. SHARE REPURCHASE PROGRAMS This note describes the company's share repurchase program, authorized in December 2019 to offset employee stock plan dilution - In December 2019, the Board of Directors authorized a share repurchase program to offset the dilutive effect of shares issued under employee stock plans, with a repurchase limit of 1.5 million shares[55] Share Repurchase Activity (Thousands of Shares/USD thousands) | Period | Shares Repurchased | Amount Repurchased | | :--- | :--- | :--- | | H1 2021 | 638 | 49,000 | | H1 2020 | 303 | 12,000 | 11. ACCUMULATED OTHER COMPREHENSIVE LOSS This note lists the components of accumulated other comprehensive loss Accumulated Other Comprehensive Loss Components (USD thousands) | Component | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Cumulative Translation Adjustments | (132,115) | (228,121) | | Net Actuarial Losses and Prior Service Costs | (644,008) | (658,866) | | Unrealized Gains (Losses) on Cash Flow Hedges | (11,559) | (17,653) | | Accumulated Other Comprehensive Loss | (787,682) | (904,640) | 12. EARNINGS PER SHARE This note details the calculation of basic and diluted earnings per share from continuing operations Earnings Per Share from Continuing Operations Calculation (Thousands of Shares/USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Earnings (Loss) from Continuing Operations | 149,568 | (73,705) | 201,152 | (182,834) | | Earnings (Loss) from Continuing Operations Attributable to Common Stockholders | 148,865 | (73,835) | 200,212 | (183,082) | | Basic Weighted-Average Common Shares Outstanding | 52,378 | 52,355 | 52,333 | 52,320 | | Diluted Weighted-Average Common Shares Outstanding | 53,591 | 52,355 | 53,372 | 52,320 | | Basic EPS from Continuing Operations | 2.84 | (1.41) | 3.83 | (3.50) | | Diluted EPS from Continuing Operations | 2.78 | (1.41) | 3.75 | (3.50) | 13. SHARE-BASED COMPENSATION PLANS This note provides information on share-based compensation expense, income tax benefits, and equity awards Share-Based Compensation Expense and Income Tax Benefit (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Share-Based Compensation Expense | 12,617 | 7,539 | 23,294 | 10,630 | | Income Tax Benefit | (1,981) | (1,307) | (3,513) | (1,485) | | Share-Based Compensation Expense, Net of Tax | 10,636 | 6,232 | 19,781 | 9,145 | - As of June 30, 2021, total unrecognized pre-tax share-based compensation expense was USD 64 million, expected to be recognized over a weighted-average period of 2.1 years[60] - Equity awards granted in Q1 2021 included 391 thousand time-vested restricted stock units and 119 thousand performance-vested restricted stock units[61] 14. EMPLOYEE BENEFIT PLANS This note lists the components of the company's pension expense, showing significantly lower net pension expense in Q2 and H1 2021 Net Pension Expense Components (USD thousands) | Component | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Service Cost | 180 | 2,741 | 548 | 5,954 | | Interest Cost | 14,483 | 17,353 | 29,018 | 34,885 | | Expected Return on Plan Assets | (21,791) | (23,948) | (43,485) | (48,211) | | Amortization of Net Actuarial Loss and Prior Service Cost | 7,031 | 7,622 | 14,128 | 15,524 | | Multi-Employer Plans | 2,539 | 2,798 | 5,180 | 5,577 | | Net Pension Expense | 2,442 | 6,566 | 5,389 | 13,729 | - In H1 2021, the company contributed USD 2 million to its pension plans, with total contributions for 2021 expected to be approximately USD 7 million[64] 15. OTHER ITEMS IMPACTING COMPARABILITY This note presents specific items management believes do not represent ongoing segment operating performance Other Items Impacting Comparability (USD thousands) | Item | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Restructuring and Other, Net | 2,577 | 26,168 | 5,605 | 46,789 | | ERP Implementation Costs | 5,090 | 11,032 | 12,721 | 21,358 | | Gains on Property Sales | (35,263) | — | (36,768) | — | | ChoiceLease Liability Insurance Income | — | (7,409) | (777) | (16,767) | | Other Items Impacting Comparability, Net | (27,596) | 29,792 | (19,219) | 51,381 | - In H1 2021, restructuring and other, net, primarily included professional fees related to pursuing specific commercial claims, while in H1 2020, it mainly included costs related to the ChoiceLease liability insurance program and severance costs[71] - In H1 2021, gains on property sales primarily resulted from the sale of FMS properties in the UK[71] 16. CONTINGENCIES AND OTHER MATTERS This note discloses various claims, lawsuits, and legal proceedings, with accrued reserves for probable losses - The company is a party to various claims, complaints, and lawsuits, including commercial and employment claims, environmental matters, risk management matters, and administrative assessments[67] - The company has accrued loss reserves for probable and reasonably estimable losses and believes the resolution of these matters will not materially impact the condensed consolidated financial statements[67] - The company faces securities class action and shareholder derivative lawsuits related to residual value estimates, which the company believes lack merit and intends to vigorously defend[69][70][71][73] 17. SUPPLEMENTAL CASH FLOW INFORMATION This note provides supplemental cash flow information, including interest and income taxes paid, and capital expenditures Supplemental Cash Flow Information (USD thousands) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Interest Paid | 104,417 | 123,258 | | Income Taxes Paid | 15,812 | 4,997 | | Right-of-Use Assets Obtained Through Lease Obligations: Finance Leases | 5,622 | 5,511 | | Right-of-Use Assets Obtained Through Lease Obligations: Operating Leases | 30,274 | 52,640 | | Capital Expenditures Incurred But Not Yet Paid | 167,587 | 75,576 | 18. SEGMENT REPORTING This note provides financial information for the company's business segments, including revenue, EBT, and capital expenditures - The company categorizes its financial performance into three business segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS)[24][80] Revenue by Business Segment (USD thousands) | Business Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | FMS | 1,408,241 | 1,198,177 | 2,743,726 | 2,538,414 | | SCS | 775,630 | 519,318 | 1,482,330 | 1,147,765 | | DTS | 354,711 | 293,944 | 675,218 | 628,832 | | Total Revenue | 2,382,237 | 1,895,282 | 4,603,859 | 4,056,588 | Earnings (Loss) from Continuing Operations Before Income Taxes by Business Segment (USD thousands) | Business Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | FMS | 158,451 | (103,735) | 221,853 | (218,309) | | SCS | 41,041 | 36,916 | 73,998 | 67,941 | | DTS | 13,162 | 21,233 | 26,144 | 33,413 | | Earnings (Loss) from Continuing Operations Before Income Taxes | 203,573 | (94,777) | 273,840 | (208,411) | Capital Expenditures by Business Segment (USD thousands) | Business Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | FMS | 503,874 | 256,216 | 871,582 | 679,332 | | SCS | 14,450 | 13,868 | 22,980 | 19,874 | | DTS | 256 | 339 | 562 | 763 | | Central Support Services | 4,768 | 3,547 | 9,275 | 4,961 | | Acquisition of Property and Revenue-Earning Equipment | 523,348 | 273,970 | 904,399 | 704,930 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed discussion and analysis of the company's financial condition and operating results OVERVIEW This overview introduces Ryder as a leading logistics and transportation company, highlighting significant revenue and EBT growth - Ryder is a leading logistics and transportation company with primary business segments including Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS)[80] Financial Highlights (USD thousands, except per share amounts) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 2,382,237 | 1,895,282 | 4,603,859 | 4,056,588 | | Operating Revenue (Non-GAAP) | 1,922,820 | 1,623,244 | 3,740,183 | 3,394,491 | | Earnings (Loss) from Continuing Operations Before Income Taxes (EBT) | 203,573 | (94,777) | 273,840 | (208,411) | | Comparable EBT (Non-GAAP) | 175,604 | (64,049) | 254,239 | (154,873) | | Diluted Earnings (Loss) Per Share (EPS) — Continuing Operations | 2.78 | (1.41) | 3.75 | (3.50) | | Comparable EPS (Non-GAAP) | 2.40 | (0.95) | 3.49 | (2.33) | | Comparable EBITDA (Non-GAAP) | 624,055 | 547,644 | 1,191,470 | 1,065,339 | - In Q2 and H1 2021, total revenue grew by 26% and 13% respectively, and operating revenue grew by 18% and 10% respectively, primarily due to revenue growth across all business segments and recovery in commercial rental and automotive businesses from COVID-19 impacts[88] - In H1 2021, cash flow provided by operating activities was USD 1.1 billion, and free cash flow slightly decreased to USD 602 million, mainly due to increased capital expenditures[92] - As of June 30, 2021, the debt-to-equity ratio was 258%, a decrease from 293% as of December 31, 2020[93] CONSOLIDATED RESULTS This section analyzes the company's consolidated revenue and cost items, showing revenue growth and improved gross margins Lease and Related Maintenance and Rental Revenue and Costs (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 986,694 | 868,660 | 1,927,116 | 1,796,416 | | Costs | 708,737 | 775,350 | 1,438,881 | 1,593,642 | | Gross Margin | 277,957 | 93,310 | 488,235 | 202,774 | | Gross Margin Percentage | 28% | 11% | 25% | 11% | Service Revenue and Costs (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,276,140 | 942,267 | 2,441,628 | 2,054,455 | | Costs | 1,091,725 | 793,353 | 2,091,517 | 1,747,782 | | Gross Margin | 184,415 | 148,914 | 350,111 | 306,673 | | Gross Margin Percentage | 14% | 16% | 14% | 15% | Fuel Services Revenue and Costs (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 119,403 | 84,355 | 235,115 | 205,717 | | Costs | 109,450 | 77,980 | 224,156 | 198,429 | | Gross Margin | 9,953 | 6,375 | 10,959 | 7,288 | | Gross Margin Percentage | 8% | 8% | 5% | 4% | - In Q2 and H1 2021, net used vehicle sales resulted in net gains, compared to net losses in the prior-year periods, primarily due to increased gains on used vehicle sales and reduced valuation adjustment losses[109] Used Vehicle Average Selling Price Change (YoY) | Vehicle Type | Q2 2021 | H1 2021 | | :--- | :--- | :--- | | Tractors | 73% | 47% | | Trucks | 72% | 54% | - In Q2 and H1 2021, interest expense decreased by 20% and 16% respectively, primarily reflecting a reduction in average outstanding debt[111] - In Q2 and H1 2021, miscellaneous (income) loss, net, was positive income, mainly due to increased gains on UK property sales[112] OPERATING RESULTS BY BUSINESS SEGMENT This section analyzes the operating results of the company's business segments, showing varied revenue and EBT performance Total Revenue by Business Segment (USD thousands) | Business Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | FMS | 1,408,241 | 1,198,177 | 2,743,726 | 2,538,414 | | SCS | 775,630 | 519,318 | 1,482,330 | 1,147,765 | | DTS | 354,711 | 293,944 | 675,218 | 628,832 | | Total | 2,382,237 | 1,895,282 | 4,603,859 | 4,056,588 | Earnings (Loss) from Continuing Operations Before Income Taxes by Business Segment (USD thousands) | Business Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | FMS | 158,451 | (103,735) | 221,853 | (218,309) | | SCS | 41,041 | 36,916 | 73,998 | 67,941 | | DTS | 13,162 | 21,233 | 26,144 | 33,413 | | Total | 193,468 | (53,331) | 290,535 | (134,769) | Fleet Management Solutions (FMS) The FMS segment achieved significant revenue growth in Q2 and H1 2021, with EBT shifting from loss to profit FMS Revenue Composition (USD thousands) | Revenue Type | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | ChoiceLease | 802,832 | 766,161 | 1,599,920 | 1,558,367 | | SelectCare | 136,503 | 125,851 | 267,171 | 261,997 | | Commercial Rental | 266,969 | 169,171 | 489,978 | 374,937 | | Fuel Services | 183,568 | 117,253 | 350,163 | 290,588 | | Total FMS Revenue | 1,408,241 | 1,198,177 | 2,743,726 | 2,538,414 | | FMS Operating Revenue | 1,224,673 | 1,073,515 | 2,392,786 | 2,231,059 | FMS EBT and Margin | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | FMS EBT (USD thousands) | 158,451 | (103,735) | 221,853 | (218,309) | | FMS EBT as % of Total Revenue | 11.3% | (8.7)% | 8.1% | (8.6)% | | FMS EBT as % of Operating Revenue | 12.9% | (9.7)% | 9.3% | (9.8)% | - Commercial rental pricing increased by 13% in Q2 2021 and 11% in H1 2021[128] - Rental power fleet utilization increased from 56% to 80% in Q2 2021 and from 60% to 76% in H1 2021[130] - In Q2 2021, the company adjusted residual value estimates for certain tractors and useful lives for certain categories of revenue-earning equipment, expecting an USD 18 million increase in depreciation expense for 2021, with no material impact on current operating results[131] Supply Chain Solutions (SCS) The SCS segment achieved significant revenue growth in Q2 and H1 2021, with EBT increasing but margins slightly declining SCS Revenue Composition (USD thousands) | Revenue Type | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Automotive | 179,849 | 109,119 | 351,721 | 280,860 | | Technology and Healthcare | 57,529 | 54,950 | 112,234 | 112,616 | | Consumer Products and Retail | 233,791 | 196,683 | 454,277 | 384,719 | | Industrial and Other | 63,389 | 44,305 | 118,924 | 94,173 | | Subcontracted Transportation | 211,879 | 102,208 | 392,013 | 237,936 | | Fuel | 29,193 | 12,053 | 53,161 | 37,461 | | Total SCS Revenue | 775,630 | 519,318 | 1,482,330 | 1,147,765 | | SCS Operating Revenue | 534,558 | 405,057 | 1,037,156 | 872,368 | SCS EBT and Margin | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | SCS EBT (USD thousands) | 41,041 | 36,916 | 73,998 | 67,941 | | SCS EBT as % of Total Revenue | 5.3% | 7.1% | 5.0% | 5.9% | | SCS EBT as % of Operating Revenue | 7.7% | 9.1% | 7.1% | 7.8% | - The global semiconductor supply shortage impacted automotive client production activities in H1 2021[146] Dedicated Transportation Solutions (DTS) The DTS segment experienced revenue growth in Q2 and H1 2021, but EBT declined due to rising labor costs DTS Revenue Composition (USD thousands) | Revenue Type | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Total DTS Revenue | 354,711 | 293,944 | 675,218 | 628,832 | | Subcontracted Transportation | (59,765) | (41,827) | (110,902) | (108,052) | | Fuel | (39,097) | (24,186) | (71,628) | (56,164) | | DTS Operating Revenue | 255,849 | 227,931 | 492,688 | 464,616 | DTS EBT and Margin | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | DTS EBT (USD thousands) | 13,162 | 21,233 | 26,144 | 33,413 | | DTS EBT as % of Total Revenue | 3.7% | 7.2% | 3.9% | 5.3% | | DTS EBT as % of Operating Revenue | 5.1% | 9.3% | 5.3% | 7.2% | - DTS EBT declined primarily due to increased labor costs driven by a tight driver labor market, higher insurance costs, and strategic investments[149] Central Support Services (CSS) Central Support Services costs significantly increased in Q2 and H1 2021 due to higher incentive compensation and strategic investments Central Support Services Costs (USD thousands) | Cost Type | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Human Resources | 5,954 | 4,651 | 11,542 | 10,504 | | Finance and Procurement | 19,092 | 16,358 | 37,988 | 35,597 | | Information Technology | 29,246 | 22,285 | 55,665 | 47,650 | | Marketing | 7,629 | 3,655 | 16,750 | 8,930 | | Total CSS Costs | 93,584 | 63,936 | 182,142 | 137,817 | | CSS Allocated to Business Segments | (75,720) | (53,218) | (145,846) | (117,713) | | Unallocated CSS | 17,864 | 10,718 | 36,296 | 20,104 | - Total CSS costs increased by 46% in Q2 2021 and 32% in H1 2021, primarily due to higher incentive compensation-related expenses and ongoing strategic investments in technology and marketing[151] FINANCIAL RESOURCES AND LIQUIDITY This section discusses the company's cash flow, capital expenditures, financing activities, and liquidity Cash Flow Summary (USD thousands) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 1,131,233 | 1,098,785 | | Net Cash Used in Investing Activities | (533,408) | (492,266) | | Net Cash Provided by (Used in) Financing Activities | (478,971) | 154,732 | | Net Change in Cash and Cash Equivalents | 116,485 | 758,229 | Free Cash Flow Calculation (USD thousands) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 1,131,233 | 1,098,785 | | Sales of Revenue-Earning Equipment | 330,277 | 214,189 | | Sales of Operating Property and Equipment | 44,409 | 4,231 | | Other Cash Inflows | 691 | — | | Total Cash Generated | 1,506,610 | 1,317,205 | | Acquisition of Property and Revenue-Earning Equipment | (904,399) | (704,930) | | Free Cash Flow | 602,211 | 612,275 | - In H1 2021, total capital expenditures increased by 61% to USD 963 million, primarily reflecting increased planned investments in the rental fleet[159] - As of June 30, 2021, the company held USD 268 million in cash and cash equivalents, with approximately USD 101 million held outside the U.S.[162] - As of June 30, 2021, the debt-to-equity ratio was 258%, down from 293% as of December 31, 2020[167] - In July 2021, the Board of Directors declared a quarterly cash dividend of USD 0.58 per share of common stock[169] NON-GAAP FINANCIAL MEASURES This section defines the company's non-GAAP financial measures, reconciles them to GAAP metrics, and explains their usefulness - Operating revenue is defined as total revenue less fuel, subcontracted transportation, and ChoiceLease liability insurance revenue, used to assess core business operating performance[175] - Comparable EBT, comparable earnings, and comparable EPS exclude non-operating pension costs and other significant items not representative of business operations, to provide better year-over-year comparability[176] - Comparable EBITDA is used to measure financial performance and debt service capacity, excluding interest, taxes, depreciation, used vehicle sales results, and amortization[177] - Free cash flow is defined as net cash generated from operating and investing activities (excluding acquisitions), measuring cash available for debt service and shareholders[177] GAAP to Non-GAAP Earnings Measures Reconciliation (USD thousands, except per share amounts) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | EBT | 203,573 | (94,777) | 273,840 | (208,411) | | Non-Operating Pension Costs, Net | (373) | 936 | (382) | 2,157 | | Restructuring and Other, Net | 2,577 | 26,168 | 5,605 | 46,789 | | ERP Implementation Costs | 5,090 | 11,032 | 12,721 | 21,358 | | Gains on Property Sales | (35,263) | — | (36,768) | — | | ChoiceLease Liability Insurance Income | — | (7,409) | (777) | (16,767) | | Comparable EBT | 175,604 | (64,049) | 254,239 | (154,873) | | Net Earnings (Loss) from Continuing Operations | 149,568 | (73,705) | 201,152 | (182,834) | | Comparable Earnings | 129,138 | (49,457) | 187,328 | (121,561) | | Diluted Earnings (Loss) Per Share | 2.78 | (1.41) | 3.75 | (3.50) | | Comparable EPS | 2.40 | (0.95) | 3.49 | (2.33) | GAAP to Non-GAAP Tax Rate Reconciliation | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Effective Income Tax Rate from Continuing Operations | 26.5% | 22.2% | 26.5% | 12.3% | | Comparable Tax Rate | 26.5% | 22.8% | 26.3% | 21.5% | GAAP Earnings (Loss) to Comparable EBITDA Reconciliation (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings (Loss) | 149,105 | (74,099) | 199,930 | (183,712) | | Earnings (Loss) from Continuing Operations Before Income Taxes (EBT) | 203,573 | (94,777) | 273,840 | (208,411) | | Comparable EBT | 175,604 | (64,049) | 254,239 | (154,873) | | Interest Expense | 54,155 | 67,285 | 108,861 | 129,851 | | Depreciation | 444,259 | 532,947 | 905,420 | 1,056,171 | | Used Vehicle Sales, Net | (51,634) | 9,488 | (80,485) | 30,172 | | Amortization | 1,671 | 1,973 | 3,435 | 4,018 | | Comparable EBITDA | 624,055 | 547,644 | 1,191,470 | 1,065,339 | Total Revenue to Operating Revenue Reconciliation (USD thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 2,382,237 | 1,895,282 | 4,603,859 | 4,056,588 | | Subcontracted Transportation | (271,644) | (144,035) | (502,915) | (345,988) | | Fuel | (187,773) | (120,594) | (359,984) | (299,342) | | ChoiceLease Liability Insurance Income | — | (7,409) | (777) | (16,767) | | Operating Revenue | 1,922,820 | 1,623,244 | 3,740,183 | 3,394,491 | Adjusted Return on Equity (Trailing 12 Months) | Metric | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Adjusted Net Earnings (Loss) [A] (USD thousands) | 281,007 | (237,108) | | Adjusted Average Shareholders' Equity [B] (USD thousands) | 2,297,571 | 2,420,936 | | Adjusted Return on Equity [A/B] | 12.2% | (9.8)% | SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section contains forward-looking statements about the company's future expectations, subject to risks and uncertainties - Forward-looking statements involve projections of future plans, strategies, anticipated events, or trends, and are not historical facts[191] - Important risk factors include changes in market conditions (e.g., decreased demand, reduced profit margins), increased competition, impaired profitability (e.g., lower-than-expected sales volumes or customer retention), financing issues (e.g., increased borrowing costs), and accounting matters (e.g., reduced residual values or useful lives)[194][195] - The company undertakes no obligation to update or revise any forward-looking statements[197] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section states no material changes in market risk exposures since December 31, 2020 - There have been no material changes in Ryder's market risk exposures since December 31, 2020[198] - For a complete discussion of market risk, refer to the 2020 Annual Report on Form 10-K[198] ITEM 4. Controls and Procedures This section discloses the evaluation of disclosure controls and procedures, deemed effective as of Q2 2021 - As of the end of Q2 2021, the company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective[200] - In Q2 2021, the company implemented a new Enterprise Resource Planning (ERP) system financial module, replacing existing core financial systems, leading to related changes in internal control over financial reporting[201] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings This section refers to Note 16 of the financial statements for a description of the company's significant pending legal proceedings - For a description of the company's significant pending legal proceedings, refer to Note 16, "Contingencies and Other Matters," to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report[204] ITEM 1A. Risk Factors This section states no material changes to risk factors from the 2020 Annual Report on Form 10-K - Except for additional factual information disclosed in this quarterly report, there have been no material changes to the risk factors described in the company's 2020 Annual Report on Form 10-K[206] - The company's operations may also be affected by other risk factors currently unknown or deemed immaterial[206] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the company's common stock repurchases in Q2 2021, aimed at offsetting the dilutive effect of employee stock plans Common Stock Repurchase Information (Q2 2021) | Period | Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares That May Yet Be Purchased Under Anti-Dilution Plan | | :--- | :--- | :--- | :--- | :--- | | April 1 to April 30 | 8,627 | USD 78.35 | — | 575,045 | | May 1 to May 31 | 350,044 | USD 84.71 | 350,044 | 225,001 | | June 1 to June 30 | 304 | USD 78.37 | — | 225,001 | | Total | 358,975 | USD 84.55 | 350,044 | | - In December 2019, the Board of Directors authorized a share repurchase program to offset the dilutive effect of shares issued under employee stock plans, with a repurchase limit of 1.5 million shares valid until December 11, 2021[207] ITEM 6. Exhibits This section lists the exhibits filed with this quarterly report, including management certifications and XBRL taxonomy files - Exhibits include management certifications (e.g., certifications by Robert E. Sanchez and John J. Diez) and XBRL instance documents, taxonomy extension schema documents, and others[208] SIGNATURE Signature This quarterly report was formally signed by Ryder System, Inc. on July 28, 2021, by its key financial officers - This report was signed on July 28, 2021[212] - Signatories include Executive Vice President and Chief Financial Officer John J. Diez and Senior Vice President and Controller Cristina Gallo-Aquino[212]