Ryder System, Inc. (R)

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Ryder Systems Inc (R)

Q4 2010 Earnings Call

February 03, 2011 11:00 am ET

Executives

Gregory T. Swienton - Chairman and CEO

Art A. Garcia - Executive Vice President and CFO

Robert D. Fatovic - Executive Vice President, Chief Legal Officer and Corporate Secretary

Robert E. Sanchez - President of Global Fleet Management Solutions

Bob Brunn, Vice President of Investor Relations and Public Affairs

John H. Williford - President of Global Supply Chain Solutions

Analysts

John Barnes - RBC Capital Market

David Ross - Stifel Nicolaus

Jon Langenfeld - Baird

Ed Wolfe - Wolfe Trahan

Jeff Kauffman – Stearn Agee & Leach

Art Hatfield - Morgan Keegan

Matthew Brooklier - Piper Jaffray

George Pickral - Stephens

Peter Nesvold - Jefferies

David Campbell - Thompson, Davis & Company

Presentation

Operator

Good morning and welcome to Ryder Systems Inc. Fourth Quarter 2010 Earnings Release Conference Call. All lines are in a listen-only mode until after the presentation. As a remainder, if you are using a headset or a speaker phone, please pick up your handset before asking your question. Today’s call is being recorded. If you have any objections, please disconnect at this time.

I would like to introduce Bob Brunn, Vice President of Investor Relations and Public Affairs for Ryder. Mr. Brunn, you may begin.

Bob Brunn

Thanks very much. Good morning and welcome to Ryder’s Fourth Quarter 2010 Earnings and 2011 Forecast Conference Call. I’d like to begin with a reminder that in this presentation, you will hear some forward looking statements within the meaning of Private Securities Litigation Reform Act of 1995. These statements are based on management’s preferred 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. For detailed information about these factors is contained in this morning’s earnings and in Ryder’s filings with the Securities and Exchange Commission.

Presenting on today’s call are Greg Swienton, Chairman and Chief Executive Officer and Art Garcia, Executive President and Chief Financial Officer. Additionally, Robert Sanchez, 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 Swienton

Thank you Bob and good morning everyone. This morning we’ll recap our fourth quarter 2010 results, review our asset management area and discuss our outlook and forecast for 2011. And after our additional remarks we’ll open the call for questions. So, let me get into an overview of our fourth quarter results beginning on page four for those of you following on the power point.

Net earnings per diluted share from continuing operations were $0.80 for the fourth quarter 2010, up from $0.43 for the prior year period. Both periods included income tax benefits partially offset by restructuring and other items. Excluding these, comparable EPS was $0.65 in the fourth quarter 2010, up from $0.41 in the prior year.

Fourth quarter EPS was also above our forecast range of $0.58 to $0.63. Total revenue was up by 5% from the prior year reflecting a 4% increase in operating revenue and higher fuel services revenue. Operating revenue which excludes FMS fuel and all subcontracted transportation revenue increased due to higher commercial rental and supply chain solutions revenue partially offset by lower full service lease revenue.

On page 5, in fleet management total revenue increased 5% versus the prior year. Total FMS revenue includes a 10% increase in fuel services revenue reflecting higher fuel cost pass throughs. FMS operating revenue which excludes fuel increased by 4% due to higher commercial rental revenue.

Contractual revenue which includes both full service lease and contract maintenance was down 2% due to fewer contracted units in the fleet as compared to the prior year.

Commercial rental revenue was up by 31%. Rental revenue benefited from improving global demand, higher pricing and an increase in the fleet size. Net before tax earnings in fleet management are up by 55%, fleets management earnings as a percent of operating revenue increased by 220 basis points to 6.8%.

FMS earnings were positively impacted by improved commercial rental performance better used vehicle results and lower expenses in our retirement plans. These improvements were partially offset by higher maintenance cost and an older lease fleet. Fewer vehicles in the lease fleet increased compensation expense and investments in sales and information technology initiative.

Turning to supply. chain solutions segment on page 6, total revenue was up 8/% and operating revenue grew by 4% due to increased volumes and new business in the high-tech and automotive sectors. SCS net before tax earnings were up by 5%. Supply chain’s net before tax earnings as a percent of operating revenue increased by 10 basis points to 4.8%.

Higher SCS earnings resulted from improved operating results particularly in the high-tech sector partially offset by increased compensation pension cost. In dedicated contract carriage, total revenue was up by 2% and operating revenue was up by 5% reflecting higher fuel cost pass throughs and new business.

DCC’s net before tax earnings decreased by 6% while earnings as a percent of our operating revenue were down by 60 basis points to 5.5% reflecting higher driver cost.

Page 7, highlights key financial statistics for the fourth quarter. I already discussed our quarterly revenue results. So let me start with EPS. Comparable EPS from continuing operations were $0.65 in the current quarter, up by $0.24 or 59% from $0.41 in the prior year. Including discontinued operations earnings per share for the quarter was $0.72, up $0.57 or 380% from $0.15 last year.

The average number of diluted shares outstanding for the quarter declined by 3.2 million shares to 51 million. During the fourth quarter, we completed our $100 million share repurchase program purchasing approximately 565,000 shares at an average price of $44.01 per share. We also purchased approximately 145,000 shares at an average price of $43.88 under the separate 2 million share anti-dilutive program during the fourth quarter. This program remains active with a little over 1.4 million shares available under the program at year end.

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