Ryder(R) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) Presents unaudited condensed consolidated financial statements for Q1 2024, showing decreased net earnings and EPS, increased assets and long-term debt, and higher investing cash outflows from acquisitions Condensed Consolidated Statements of Earnings Net earnings and diluted EPS decreased in Q1 2024 despite a 5% revenue increase, driven by lower earnings, reduced used vehicle gains, and higher interest expenses Condensed Consolidated Statements of Earnings (in millions, except per share) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Services revenue | $2,038 | $1,821 | 11.9% | | Lease & related maintenance and rental revenue | $936 | $979 | (4.4%) | | Fuel services revenue | $124 | $152 | (18.3%) | | Total revenue | $3,098 | $2,952 | 5.0% | | Used vehicle sales, net | $(20) | $(72) | (72.2%) | | Interest expense | $92 | $65 | 41.5% | | Earnings from continuing operations before income taxes | $114 | $201 | (43.3%) | | Provision for income taxes | $29 | $61 | (52.4%) | | Earnings from continuing operations | $85 | $140 | (39.3%) | | Net earnings | $85 | $139 | (38.8%) | | Diluted EPS (Continuing operations) | $1.89 | $2.95 | (35.9%) | Condensed Consolidated Statements of Comprehensive Income Comprehensive income significantly decreased in Q1 2024 due to lower net earnings and negative changes in translation adjustments and cash flow hedge gains Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Net earnings | $85 | $139 | (38.8%) | | Other comprehensive income, net of taxes | $1 | $14 | (92.9%) | | Comprehensive income | $86 | $153 | (43.8%) | Condensed Consolidated Balance Sheets Total assets increased by 4.4% due to equipment, goodwill, and intangible assets, while total liabilities rose from increased long-term debt Condensed Consolidated Balance Sheets (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | Change (%) | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------- | | Cash and cash equivalents | $234 | $204 | 14.7% | | Receivables, net | $1,814 | $1,714 | 5.8% | | Total current assets | $2,406 | $2,265 | 6.2% | | Revenue earning equipment, net | $8,977 | $8,892 | 0.9% | | Goodwill | $1,017 | $940 | 8.2% | | Intangible assets, net | $569 | $396 | 43.7% | | Operating lease right-of-use assets | $1,190 | $1,016 | 17.1% | | Total assets | $16,481 | $15,778 | 4.4% | | Short-term debt and current portion of long-term debt | $741 | $1,583 | (53.2%) | | Total current liabilities | $2,918 | $3,649 | (20.0%) | | Long-term debt | $6,802 | $5,531 | 23.0% | | Other non-current liabilities | $2,063 | $1,871 | 10.3% | | Total liabilities | $13,416 | $12,709 | 5.6% | | Total shareholders' equity | $3,065 | $3,069 | (0.1%) | Condensed Consolidated Statements of Cash Flows Operating cash flow increased by 10%, but investing cash outflow more than doubled due to acquisitions, while financing activities shifted to a net provision Condensed Consolidated Statements of Cash Flows (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Net earnings | $85 | $139 | (38.8%) | | Depreciation expense | $424 | $445 | (4.7%) | | Net cash provided by operating activities from continuing operations | $526 | $478 | 10.0% | | Purchases of property and revenue earning equipment | $(686) | $(641) | 7.0% | | Acquisitions, net of cash acquired | $(297) | $— | NM | | Net cash used in investing activities from continuing operations | $(810) | $(377) | 114.9% | | Net borrowings (repayments) of commercial paper and other | $288 | $(216) | NM | | Debt proceeds | $896 | $664 | 35.0% | | Debt repayments | $(763) | $(471) | 62.0% | | Net cash provided by (used in) financing activities from continuing operations | $316 | $(126) | NM | | Increase (decrease) in Cash and cash equivalents | $30 | $(14) | NM | Condensed Consolidated Statements of Shareholders' Equity Total shareholders' equity remained stable in Q1 2024, as comprehensive income was offset by dividends and share repurchases Condensed Consolidated Statements of Shareholders' Equity (in millions) | Metric | As of January 1, 2024 (in millions) | As of March 31, 2024 (in millions) | | :-------------------------------- | :---------------------------------- | :--------------------------------- | | Total Shareholders' Equity | $3,069 | $3,065 | | Comprehensive income | — | $86 | | Common stock dividends declared | — | $(32) | | Common stock repurchases | — | $(51) | Notes to Condensed Consolidated Financial Statements Detailed disclosures cover accounting policies, segment performance, revenue, assets, liabilities, debt, share repurchases, and acquisitions, highlighting market conditions and liquidity 1. GENERAL This note details Ryder's GAAP-compliant interim financial statements and identifies its three core business segments: FMS, SCS, and DTS - Ryder operates three business segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS)[26] - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and should be read in conjunction with the 2023 Annual Report on Form 10-K[25] 2. SEGMENT REPORTING Segment performance is measured by EBT, including CSS costs but excluding specific items; Q1 2024 saw FMS EBT decrease, SCS EBT grow, and DTS EBT decline - The primary measure of segment financial performance is 'Earnings from continuing operations before income taxes' (EBT), which includes allocated Central Support Services (CSS) costs and excludes non-operating pension costs, intangible amortization, and certain other items impacting comparability[27] Segment Revenue and EBT (in millions) | Segment | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Revenue: | | | | | Fleet Management Solutions | $1,455 | $1,503 | (3.2%) | | Supply Chain Solutions | $1,302 | $1,201 | 8.4% | | Dedicated Transportation Solutions | $563 | $454 | 24.0% | | Earnings from continuing operations before income taxes (EBT): | | | | | Fleet Management Solutions | $100 | $182 | (45.0%) | | Supply Chain Solutions | $64 | $17 | 276.5% | | Dedicated Transportation Solutions | $18 | $29 | (37.9%) | Capital Expenditures by Segment (in millions) | Capital Expenditures | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Fleet Management Solutions | $654 | $621 | | Supply Chain Solutions | $27 | $12 | | Dedicated Transportation Solutions | $1 | $— | | Central Support Services | $4 | $8 | | Purchases of property and revenue earning equipment | $686 | $641 | 3. REVENUE Revenue disaggregation indicates growth from the U.S. market and SCS industries, with $2.9 billion in contracted unrecognized revenue for future maintenance Revenue by Geographical Market (in millions) | Geographical Market | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------ | :--------------------------------------------- | :--------------------------------------------- | | United States | $2,883 | $2,753 | | Canada | $135 | $129 | | Mexico | $80 | $70 | | Total revenue | $3,098 | $2,952 | SCS Revenue by Industry (in millions) | SCS Industry | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :---------------------- | :--------------------------------------------- | :--------------------------------------------- | | Omnichannel retail | $417 | $453 | | Automotive | $406 | $393 | | Consumer packaged goods | $290 | $227 | | Industrial and other | $189 | $128 | | Total SCS revenue | $1,302 | $1,201 | - Contracted not recognized revenue was $2.9 billion as of March 31, 2024, primarily for future maintenance services related to ChoiceLease[39] 4. RECEIVABLES, NET Net receivables increased to $1,814 million, while the allowance for credit losses slightly decreased as write-offs surpassed new provisions Receivables, Net (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------- | :----------------------------- | :----------------------------- | | Trade | $1,595 | $1,505 | | Sales-type lease | $142 | $140 | | Other, primarily warranty and insurance | $115 | $111 | | Allowance for credit losses and other | $(38) | $(42) | | Receivables, net | $1,814 | $1,714 | Allowance for Credit Losses (in millions) | Allowance for Credit Losses | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Balance as of beginning of period | $42 | $41 | | Changes to provisions for credit losses | $7 | $8 | | Write-offs and other | $(11) | $(12) | | Balance as of end of period | $38 | $37 | 5. REVENUE EARNING EQUIPMENT, NET Net revenue earning equipment increased to $8,977 million, with no adjustments to residual values, while used vehicle sales gains decreased due to lower pricing Revenue Earning Equipment, Net (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------- | :----------------------------- | :----------------------------- | | Held for use, net | $8,796 | $8,724 | | Held for sale, net | $181 | $168 | | Total Revenue earning equipment, net | $8,977 | $8,892 | - No adjustments were made to the estimated residual values and useful lives of existing revenue earning equipment for the three months ended March 31, 2024 and 2023[43] Used Vehicle Sales, Net (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Gains on used vehicle sales, net | $(30) | $(75) | | Losses from valuation adjustments | $10 | $3 | | Used vehicle sales, net | $(20) | $(72) | 6. ACCRUED EXPENSES AND OTHER LIABILITIES Total accrued expenses and other liabilities increased to $3,386 million, driven by higher operating lease liabilities, self-insurance, and deferred revenue Accrued Expenses and Other Liabilities (in millions) | Liability Type | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------- | :----------------------------- | :----------------------------- | | Salaries and wages | $138 | $200 | | Self-insurance | $518 | $459 | | Operating lease liabilities | $1,232 | $1,034 | | Deferred revenue | $553 | $545 | | Other | $387 | $338 | | Total | $3,386 | $3,104 | 7. LEASES ChoiceLease income increased, commercial rental income decreased, and net investment in sales-type leases rose in Q1 2024 Lease Revenue Components (in millions) | Lease Revenue Component | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Lease income related to ChoiceLease | $381 | $360 | | Lease income related to commercial rental | $219 | $288 | | Interest income related to net investment in leases | $17 | $15 | | Variable lease income excluding commercial rental | $72 | $72 | Sales-Type Leases Net Investment (in millions) | Sales-Type Leases Net Investment | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------- | :----------------------------- | :----------------------------- | | Net investment in the lease | $795 | $766 | | Estimated loss allowance | $(3) | $(4) | | Total | $792 | $762 | 8. DEBT Total debt increased to $7,543 million due to new $900 million unsecured notes, maintaining a healthy 190% debt-to-net worth ratio Debt by Type (in millions) | Debt Type | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------------------ | :----------------------------- | :----------------------------- | | U.S. commercial paper | $860 | $572 | | Unsecured medium-term notes (various maturities) | $6,075 | $5,125 | | Asset-backed U.S. obligations | $355 | $382 | | Finance lease obligations and other | $56 | $49 | | Total debt | $7,543 | $7,114 | - Issued two tranches of unsecured medium-term notes in February 2024 totaling $900 million ($350M at 5.30% due 2027, $550M at 5.38% due 2029)[52][141] - The debt to consolidated net worth ratio was 190% as of March 31, 2024, well below the 300% covenant[58] 9. SHARE REPURCHASE PROGRAMS Ryder has two 2 million share repurchase programs expiring in October 2025, repurchasing 0.5 million shares for $51 million in Q1 2024 - Two share repurchase programs approved in October 2023: a 2 million share anti-dilutive program and a 2 million share discretionary program, both expiring October 12, 2025[60] Share Repurchases (in millions) | Program | Three months ended March 31, 2024 (Shares in millions) | Amount (in millions) | | :-------------------------- | :--------------------------------------------- | :------------------- | | Anti-Dilutive Programs | 0.3 | $37 | | Discretionary Programs | 0.1 | $14 | | Total | 0.5 | $51 | 10. ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive loss remained stable at $(654) million, with a net current-period gain of $1 million Accumulated Other Comprehensive Loss (in millions) | Component | January 1, 2024 (in millions) | March 31, 2024 (in millions) | | :-------------------------------- | :---------------------------- | :--------------------------- | | Currency Translation Adjustments | $(18) | $(25) | | Net Actuarial (Loss) Gain and Prior Service Costs | $(637) | $(631) | | Unrealized Gain (Loss) from Cash Flow Hedges | $— | $2 | | Accumulated Other Comprehensive (Loss) Gain | $(655) | $(654) | - Net current-period other comprehensive gain (loss), net of tax, was $1 million for the three months ended March 31, 2024[64] 11. EARNINGS PER SHARE Basic and diluted EPS from continuing operations significantly decreased in Q1 2024 due to lower earnings Earnings Per Share | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Earnings from continuing operations per common share — Basic | $1.93 | $3.00 | | Earnings from continuing operations per common share — Diluted | $1.89 | $2.95 | | Weighted average common shares outstanding — Diluted (in thousands) | 45,000 | 47,474 | 12. SHARE-BASED COMPENSATION PLANS The company granted 0.2 million share-based awards in Q1 2024 at a weighted average fair value of $118.59 per share, a decrease from Q1 2023 Share-Based Awards Granted (in millions, except per share) | Award Type | Shares Granted (Q1 2024, in millions) | Weighted Average Fair Market Value Per Share (Q1 2024) | Shares Granted (Q1 2023, in millions) | Weighted Average Fair Market Value Per Share (Q1 2023) | | :-------------------------------- | :------------------------------------ | :----------------------------------------------------- | :------------------------------------ | :----------------------------------------------------- | | Time-vested restricted stock rights | 0.1 | $117.11 | 0.2 | $96.38 | | Performance-based restricted stock rights | 0.1 | $121.10 | 0.1 | $101.25 | | Total | 0.2 | $118.59 | 0.3 | $98.16 | 13. EMPLOYEE BENEFIT PLANS Net pension expense slightly increased in Q1 2024 due to interest cost and actuarial loss amortization, with no expected contributions in 2024 Net Pension Expense (in millions) | Component | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Interest cost | $22 | $22 | | Expected return on plan assets | $(19) | $(19) | | Amortization of net actuarial loss and prior service cost | $8 | $7 | | Net pension expense | $11 | $10 | - Ryder does not expect to contribute to its pension plans in 2024[68] 14. OTHER ITEMS IMPACTING COMPARABILITY Comparability items shifted from a $(32) million net gain in Q1 2023 to a $4 million net cost in Q1 2024, due to acquisition costs Other Items Impacting Comparability, Net (in millions) | Item | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Acquisition costs | $5 | $— | | FMS U.K. exit, primarily net commercial claim proceeds | $— | $(31) | | Other, net | $(1) | $(1) | | Other items impacting comparability, net | $4 | $(32) | 15. CONTINGENCIES AND OTHER MATTERS Ryder is involved in legal proceedings, including class action and derivative suits, with settlements expected to be insurance-covered and not materially impact financials - A putative securities class action was preliminarily approved for settlement on February 20, 2024, with the settlement amount expected to be covered by insurance and not material to financial statements[73] - An agreement in principle was reached in September 2023 to resolve shareholder derivative cases in exchange for corporate reforms, with plaintiffs' attorneys' fees and expenses expected to be covered by insurance and not material[74] 16. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow data shows increased interest paid and cash paid for operating lease liabilities in Q1 2024 Supplemental Cash Flow Information (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Interest paid | $78 | $63 | | Income taxes paid | $7 | $17 | | Cash paid for operating lease liabilities | $88 | $55 | | Capital expenditures acquired but not yet paid | $274 | $361 | 17. ACQUISITIONS Ryder acquired Cardinal Logistics for $297 million on February 1, 2024, to boost DTS growth, recording $74 million goodwill and $165 million intangible assets - Acquired CLH Parent Corporation (Cardinal Logistics) on February 1, 2024, for a purchase price of $297 million[76] - The acquisition is expected to increase scale and network density and accelerate growth in the DTS segment[77] - Preliminary estimated goodwill of $74 million and intangible assets, net of $165 million, were recorded for the Cardinal Logistics acquisition[78] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial condition and operations, highlighting challenging used vehicle and rental markets, offset by SCS and DTS growth from acquisitions, impacting profitability and liquidity OVERVIEW Ryder operates in competitive markets across diverse industries, with customer choices driven by service quality, price, technology, and offerings - Ryder operates in highly competitive markets, with customers selecting services based on factors including service quality, price, technology, and service offerings[80] - The customer base spans various industries such as food and beverage, transportation and logistics, retail, automotive, industrial, housing, technology, and business and personal services[80] SELECTED OPERATING PERFORMANCE ITEMS Weakening used vehicle and rental markets persist, but Ryder benefits from logistics trends and acquisitions driving SCS and DTS growth, despite decreased diluted and comparable EPS - Market conditions for used vehicle sales and commercial rental continued to weaken in Q1 2024, with a freight recessionary environment anticipated through most of 2024[82][83] - Favorable secular trends in logistics and transportation solutions, including supply chain disruptions, provide long-term growth opportunities for SCS and DTS[82] - Recent acquisitions (IFS Holdings, LLC and CLH Parent Corporation (Cardinal Logistics)) are performing in line with expectations, driving revenue growth in SCS and DTS[82][84] Selected Operating Performance Items (in millions, except per share) | Metric | Three months ended March 31, 2024 (in millions, except per share) | Three months ended March 31, 2023 (in millions, except per share) | Change (%) | | :------------------------------------------ | :------------------------------------------------------------- | :------------------------------------------------------------- | :--------- | | Total revenue | $3,098 | $2,952 | 5% | | Operating revenue (non-GAAP) | $2,495 | $2,346 | 6% | | Earnings from continuing operations before income taxes (EBT) | $114 | $201 | (43%) | | Comparable EBT (non-GAAP) | $129 | $179 | (28%) | | Diluted EPS (Continuing operations) | $1.89 | $2.95 | (36%) | | Comparable EPS (non-GAAP) | $2.14 | $2.81 | (24%) | | Adjusted Return on Equity (ROE) (non-GAAP, trailing twelve months) | 17% | 27% | (1000 bps) | | Net cash provided by operating activities from continuing operations | $526 | $478 | NM | | Free cash flow (non-GAAP) | $13 | $101 | NM | CONSOLIDATED RESULTS Q1 2024 consolidated results show a 5% total revenue increase from services, but profitability declined 43% in EBT due to lower used vehicle gains and higher interest expense Services Revenue Services revenue increased by 12% in Q1 2024, driven by DTS and SCS acquisitions, with gross margin percentage improving due to prior year impairment and SCS pricing Services Revenue (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Services revenue | $2,038 | $1,821 | 12% | | Cost of services | $1,743 | $1,607 | 8% | | Gross margin | $295 | $214 | 38% | | Gross margin % | 14% | 12% | 200 bps | - Services revenue increased due to increases in DTS and SCS revenue, primarily driven by recent acquisitions[89] - Services gross margin and gross margin percentage increased due to a prior year SCS asset impairment charge and increased pricing in SCS[91] Lease & Related Maintenance and Rental Lease and related maintenance and rental revenue decreased by 4% due to lower commercial rental demand, with gross margin declining from reduced utilization Lease & Related Maintenance and Rental (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Lease & related maintenance and rental revenue | $936 | $979 | (4%) | | Cost of lease & related maintenance and rental | $669 | $674 | (1%) | | Gross margin | $267 | $305 | (12%) | | Gross margin % | 29% | 31% | (200 bps) | - Revenue decreased primarily due to lower rental demand, partially offset by ChoiceLease growth[92] - Gross margin percentage decreased primarily due to lower rental utilization[94] Fuel Fuel services revenue decreased by 18% in Q1 2024 due to lower prices and reduced volume, while gross margin remained consistent Fuel Services Revenue (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Fuel services revenue | $124 | $152 | (18%) | | Cost of fuel services | $121 | $149 | (19%) | | Gross margin | $3 | $3 | 0% | | Gross margin % | 2% | 2% | 0 bps | - Fuel services revenue decreased primarily reflecting lower fuel prices passed through to customers and a lower volume of gallons sold[95] Selling, General and Administrative Expenses (SG&A) SG&A expenses increased by 4% in Q1 2024 due to acquisitions, offset by lower marketing, maintaining 12% of total revenue Selling, General and Administrative Expenses (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Selling, general and administrative expenses | $378 | $363 | 4% | | Percentage of total revenue | 12% | 12% | 0 bps | Non-Operating Pension Costs, Net Non-operating pension costs, net, increased slightly by 10% in Q1 2024 Non-Operating Pension Costs, Net (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Non-operating pension costs, net | $11 | $10 | 10% | Used Vehicle Sales, net Used vehicle sales, net, significantly decreased in Q1 2024 due to lower pricing, despite higher volumes, with average proceeds for tractors and trucks declining Used Vehicle Sales, Net (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Gains on used vehicle sales, net | $(20) | $(72) | (72%) | Average Proceeds Per Unit (YoY Change) | Average Proceeds Per Unit (YoY Change) | Three months ended March 31, 2024 | | :------------------------------------- | :-------------------------------- | | Tractors | (34%) | | Trucks | (30%) | Interest Expense Interest expense increased by 42% in Q1 2024 due to higher debt borrowings for acquisitions and increased market interest rates Interest Expense (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Interest expense | $92 | $65 | 42% | | Effective interest rate | 5.0% | 4.1% | 90 bps | Miscellaneous Income, net Miscellaneous income, net, decreased by 25% in Q1 2024, primarily due to lower gains from property sales Miscellaneous Income, Net (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Miscellaneous income, net | $(15) | $(20) | (25%) | Restructuring and Other Items, net Restructuring and other items shifted from a $(25) million net gain in Q1 2023 to a $5 million net cost in Q1 2024, due to acquisition costs Restructuring and Other Items, Net (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Restructuring and other items, net | $5 | $(25) | Provision for Income Taxes Provision for income taxes decreased by 52% in Q1 2024, with the effective tax rate falling to 25.4% due to prior year FMS U.K. exit tax charges Provision for Income Taxes | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Provision for income taxes (in millions) | $29 | $61 | | Effective tax rate from continuing operations | 25.4% | 30.5% | | Comparable effective tax rate on continuing operations (non-GAAP) | 25.2% | 25.5% | - The prior year effective income tax rate was impacted by tax charges related to the exit of FMS U.K. operations[107] OPERATING RESULTS BY BUSINESS SEGMENT This section details segment revenue and EBT: FMS EBT declined, SCS EBT grew significantly from acquisitions, and DTS revenue increased from acquisitions but EBT decreased due to integration costs Segment Performance (Q1 2024, in millions) | Segment | Total Revenue (Q1 2024, in millions) | Change YoY (%) | Operating Revenue (Q1 2024, in millions) | Change YoY (%) | EBT (Q1 2024, in millions) | Change YoY (%) | | :-------------------------------- | :----------------------------------- | :------------- | :--------------------------------------- | :------------- | :------------------------- | :------------- | | Fleet Management Solutions | $1,455 | (3%) | $1,251 | (1%) | $100 | (45%) | | Supply Chain Solutions | $1,302 | 8% | $972 | 11% | $64 | 267% | | Dedicated Transportation Solutions | $563 | 24% | $427 | 33% | $18 | (38%) | Equipment Contribution by Segment (in millions) | Equipment Contribution | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Supply Chain Solutions | $9 | $10 | (1%) | | Dedicated Transportation Solutions | $19 | $15 | 33% | | Total | $28 | $25 | 19% | Fleet Management Solutions (FMS) FMS total revenue decreased by 3%, and EBT declined 45% due to lower used vehicle gains and weaker rental demand, with rental fleet utilization falling to 66% FMS Performance (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | ChoiceLease | $842 | $776 | 9% | | Commercial rental | $231 | $304 | (24%) | | Fuel services revenue | $204 | $241 | (15%) | | FMS total revenue | $1,455 | $1,503 | (3%) | | FMS operating revenue | $1,251 | $1,262 | (1%) | | FMS EBT | $100 | $182 | (45%) | | FMS EBT as a % of FMS operating revenue | 8.0% | 14.4% | (640 bps) | - FMS EBT decreased primarily due to lower gains on used vehicle sales (used truck pricing down 30%, used tractor pricing down 34%) and weaker rental demand[119] - Rental power fleet utilization decreased to 66% in Q1 2024 from 75% in Q1 2023[119][123] - The active ChoiceLease fleet (end of period) increased by 7% year-over-year to 138,500 units[123] Supply Chain Solutions (SCS) SCS total revenue increased by 8% and operating revenue by 11% due to acquisitions, with EBT growing 267% from prior year impairment, automotive performance, and acquisitions SCS Performance (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | SCS total revenue | $1,302 | $1,201 | 8% | | SCS operating revenue | $972 | $879 | 11% | | SCS EBT | $64 | $17 | 267% | | SCS EBT as a % of SCS operating revenue | 6.6% | 1.9% | 470 bps | - SCS operating revenue increased primarily by recent acquisitions[126] - SCS EBT growth was due to a prior year $30 million asset impairment charge, stronger automotive performance, and recent acquisitions[127] Dedicated Transportation Solutions (DTS) DTS total revenue increased by 24% and operating revenue by 33% from the Cardinal Logistics acquisition, but EBT decreased by 38% due to integration and insurance costs DTS Performance (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | DTS total revenue | $563 | $454 | 24% | | DTS operating revenue | $427 | $322 | 33% | | DTS EBT | $18 | $29 | (38%) | | DTS EBT as a % of DTS operating revenue | 4.2% | 9.0% | (480 bps) | - DTS revenue growth was primarily due to the Cardinal Logistics acquisition[130] - DTS EBT decreased due to Cardinal Logistics' acquisition integration and other related costs, as well as higher insurance costs[130] Central Support Services (CSS) Total Central Support Services (CSS) costs decreased by 3% in Q1 2024 due to prior year marketing investments, resulting in a slight decrease in unallocated CSS Central Support Services (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Total CSS | $100 | $103 | (3%) | | Unallocated CSS | $14 | $15 | (12%) | FINANCIAL RESOURCES AND LIQUIDITY Operating cash flow increased, but free cash flow declined due to lower asset sales and higher capital expenditures for acquisitions; Ryder issued $900 million in notes, maintaining strong liquidity and a 246% debt-to-equity ratio Cash Flows Operating cash flow increased by 10%, but investing cash outflow more than doubled due to the Cardinal Logistics acquisition, leading to a significant decline in free cash flow Cash Flow Summary (in millions) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities from continuing operations | $526 | $478 | | Net cash used in investing activities from continuing operations | $(810) | $(377) | | Net cash provided by (used in) financing activities from continuing operations | $316 | $(126) | | Free cash flow (non-GAAP) | $13 | $101 | | Gross capital expenditures | $716 | $802 | - Net cash used in investing activities increased significantly due to the acquisition of Cardinal Logistics and lower proceeds from sales of property and revenue earning equipment[132] - Gross capital expenditures decreased primarily reflecting lower investments in commercial rental[137] Financing and Other Funding Transactions Ryder issued $900 million in new notes, maintaining strong debt ratings and liquidity with a 246% debt-to-equity ratio, and declared a $0.71 per share quarterly dividend - Issued two tranches of unsecured medium-term notes in February 2024 with aggregate principal amounts of $350 million and $550 million[141] Debt Ratings | Rating Agency | Short-term Rating | Short-term Outlook | Long-term Rating | Long-term Outlook | | :-------------------------- | :---------------- | :----------------- | :--------------- | :---------------- | | Standard & Poor's Ratings Services | A2 | — | BBB+ | Stable | | Moody's Investors Service | P2 | Stable | Baa2 | Stable | | Fitch Ratings | F2 | — | BBB+ | Positive | Available Funding (as of March 31, 2024, in millions) | Available Funding (as of March 31, 2024) | Amount (in millions) | | :--------------------------------------- | :------------------- | | Global revolving credit facility | $540 | | Trade receivables financing program | $197 | - The debt-to-equity ratio was 246% as of March 31, 2024, up from 232% at December 31, 2023[144] - A quarterly cash dividend of $0.71 per share of common stock was declared in February 2024, an increase from $0.62 per share in February 2023[145] NON-GAAP FINANCIAL MEASURES This section defines and reconciles non-GAAP measures like Operating Revenue, Comparable Earnings, EBITDA, and Free Cash Flow, which exclude specific items for clearer core business performance and comparability - Non-GAAP financial measures include Operating Revenue, Comparable Earnings Before Income Taxes (EBT), Comparable Earnings, Comparable Earnings per Diluted Common Share (EPS), Comparable Tax Rate, Adjusted Return on Equity (ROE), Total Cash Generated, and Free Cash Flow[148][150][151] - Operating revenue excludes fuel and subcontracted transportation to focus on core business performance[150] - Comparable earnings measures exclude non-operating pension costs, net, and other significant items not representative of business operations for better year-over-year comparison[150] - Comparable EBITDA is a standard measure used to assess financial performance and ability to service debt, adjusting net earnings for various non-cash and non-operating items[151] - Free Cash Flow provides insight into cash available for debt service and shareholders after capital investments, calculated from operating activities and asset sales less equipment purchases[151] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section cautions that forward-looking statements are subject to risks and uncertainties across market, competition, and financial factors, and the company does not intend to update them - Forward-looking statements are based on current plans and expectations and are subject to risks, uncertainties, and assumptions that could cause actual results to differ significantly[167][170] - Key risk factors include changes in general economic and financial conditions, decreases in freight demand, competition, lower sales volumes or customer retention, lower used vehicle sales pricing, higher borrowing costs, and reductions in residual values or useful lives of revenue earning equipment[170][171][172] - The company does not intend, or assume any obligation, to update or revise any forward-looking statements[173] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposures since December 31, 2023; refer to the 2023 Annual Report on Form 10-K for comprehensive discussion - No material changes to Ryder's exposures to market risks since December 31, 2023[174] - Refer to the 2023 Annual Report on Form 10-K for a complete discussion of market risks[174] ITEM 4. Controls and Procedures Ryder's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - Ryder's disclosure controls and procedures were effective as of March 31, 2024, based on an evaluation by management, including the CEO and CFO[176] - No material changes in Ryder's internal control over financial reporting occurred during the three months ended March 31, 2024[177] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings This section refers to Note 15 for material pending legal proceedings, which are not expected to materially affect consolidated financial statements - For a description of material pending legal proceedings, refer to Note 15, 'Contingencies and Other Matters,' in the Notes to Condensed Consolidated Financial Statements[179] ITEM 1A. Risk Factors No material changes to risk factors from the 2023 Annual Report on Form 10-K, though other unknown or immaterial risks could affect operations - No material changes in the risk factors described in the 2023 Annual Report on Form 10-K, except to the extent additional factual information is disclosed in this Quarterly Report[181] - Operations could be affected by additional risk factors not presently known or currently considered not material[181] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds Ryder repurchased 639,275 shares for $114.59 per share in Q1 2024, with 3,019,102 shares remaining available under repurchase programs Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------- | :----------------------------- | :--------------------------- | | January 1 through January 31, 2024 | 371 | $111.71 | | February 1 through February 29, 2024 | 638,164 | $114.58 | | March 1 through March 31, 2024 | 740 | $118.77 | | Total (Q1 2024) | 639,275 | $114.59 | - As of March 31, 2024, 3,019,102 shares remained available for repurchase under the discretionary and anti-dilutive programs[182] ITEM 5. Other Information Officers and directors participate in Ryder's dividend reinvestment and 401(k) plans, and may engage in Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - Certain officers and directors participate in Ryder's dividend reinvestment plan and 401(k) savings plan[184] - Officers and directors may engage in Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements[184] ITEM 6. Exhibits This section lists Form 10-Q exhibits, including certifications (e.g., Rule 13a-14(a), 18 U.S.C Section 1350) and XBRL documents - Exhibits include certifications by Robert E. Sanchez and John J. Diez (31.1, 31.2, 32) and various XBRL taxonomy extension documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[187] SIGNATURE The Form 10-Q report was signed on April 23, 2024, by John J. Diez, EVP and CFO, and Cristina Gallo-Aquino, SVP and Controller - The report was signed by John J. Diez, Executive Vice President and Chief Financial Officer, and Cristina Gallo-Aquino, Senior Vice President and Controller[190] - The signing date for the report was April 23, 2024[190]