Ryder System, Inc. (R)

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Ryder System (R)

Q4 2012 Earnings Call

January 31, 2013 11:00 am ET

Executives

Robert S. Brunn - Vice President of Corporate Strategy & Investor Relations

Gregory T. Swienton - Executive Chairman

Art A. Garcia - Chief Financial Officer and Executive Vice President

Robert E. Sanchez - Chief Executive Officer, President and Director

Dennis C. Cooke - President of Global Fleet Management Solutions

John H. Williford - President of Global Supply Chain Solutions

Analysts

Kevin W. Sterling - BB&T Capital Markets, Research Division

John R. Mims - FBR Capital Markets & Co., Research Division

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division

Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division

Thomas Kim - Goldman Sachs Group Inc., Research Division

Scott H. Group - Wolfe Trahan & Co.

Matthew S. Brooklier - Longbow Research LLC

A. Brad Delco - Stephens Inc., Research Division

Presentation

Operator

Good morning, and welcome to Ryder System, Inc. Fourth Quarter 2012 Earnings Release Conference Call. [Operator Instructions] Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce Mr. Bob Brunn, Vice President, Corporate and Strategy, and Investor Relations for Ryder. Mr. Brunn, you may begin.

Robert S. Brunn

Thanks very much. Good morning, and welcome to Ryder's fourth quarter 2012 earnings and 2013 forecast conference call.

I'd like to remind you that during this presentation you'll hear some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political and regulatory factors. More detailed information about these factors is contained in this morning's earnings release and in Ryder's filings with the Securities and Exchange Commission.

Presenting on today's call are Greg Swienton, Executive Chairman; Robert Sanchez, President and Chief Executive Officer; and Art Garcia, Executive Vice President and Chief Financial Officer. Additionally, Dennis Cooke, President of Global Fleet Management Solutions; and John Williford, President of Global Supply Chain Solutions, are on the call today and available for questions following the presentation.

With that, let me turn it over to Greg.

Gregory T. Swienton

Thank you, Bob, and good morning, everyone. Today we'll recap our fourth quarter 2012 results, review the asset management area and discuss our current outlook and forecast for 2013. And then after our initial remarks, as always, we'll open up the call for questions. But before I get into the actual numbers, please allow me to make a few personal comments.

As you are aware, in December, we announced our organization plans and that I'll be retiring as Chairman after our annual shareholders meeting on May 3, and we've transitioned to Robert Sanchez as our new CEO effective the first of this year. And as you've known him in various positions at Ryder over the years as CIO, CFO, President of FMS and Chief Operating Officer of the company, I know you agree he's an ideal and a great choice.

For myself, it's hard to believe how time flies by. But today, I am presenting Ryder results for the 55th consecutive quarter. And in reaching almost 14 years, I wanted to say how privileged and grateful I've been to not only to serve Ryder and our customers and our employees, but also to thank all of you as investors and analysts for the relationships and the time we

[Audio Gap]

Improving our business model and direction and results that this was time very well spent together. We've not only worked on improving our performance and credibility, but we've also diligently worked at always providing solid and improved disclosure so you could understand our business.

We are unique in our portfolio of business and structure, and therefore believe that the better you understand us and our business model and its subtleties, the better you could be at analysis and investment, which ultimately serves both of our mutual interests. We believe in telling it to you straight, in good times or bad times, with challenged results or with great results. And though I may not be the one personally delivering the earnings report in the future, those commitments from the team at Ryder will not change.

So with that, let me move on to our presentation.

On Page 4, fourth quarter results, net earnings per diluted share from continuing operations were $1.07 for the fourth quarter 2012, up from $0.92 in the prior-year period. Fourth quarter results included a $0.10 charge for vehicle-related losses from Superstorm Sandy, and these vehicles were owned by Full Service Lease customers for which Ryder had liability under certain agreements. We're currently pursuing recovery of these losses under the applicable insurance programs. But at this time, recovery remains uncertain. We since enhanced our insurance coverage in order to mitigate this type of risk going forward.

In 2011, the fourth quarter included a $0.05 charge for acquisition-related restructuring costs. So excluding these items in each year, comparable EPS was $1.17 in the fourth quarter 2012, up from $0.97 in the prior year. And this is an improvement of $0.20 or 21% over the prior-year period.

Our results also represent outperformance of $0.06 to $0.11 versus our fourth quarter forecast of $1.06 to $1.11. And our outperformance this quarter primarily reflects better-than-expected rental demand, and we estimate that Superstorm Sandy recovery efforts benefited operating results by approximately $0.03, largely due to increased rental demand, as well as some additional used vehicle sales.

Total revenue increased 3% over the prior year. And operating revenue, which excludes FMS fuel and all subcontracted transportation revenue, increased 4%. The increase in revenue reflects organic growth in Full Service Lease, as well as increased volumes in new business in the SCS automotive sector.

Page 5 includes some additional financial statistics for the fourth quarter. The average number of diluted shares outstanding for the quarter increased slightly to 50.8 million shares. During the fourth quarter, we did not purchase any shares under our $2 million share anti-dilutive program, which expires in December 2013. As of December 31, there were 51.4 million shares outstanding, of which 50.8 million are included in the diluted share calculation.

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