Ryder System, Inc. — FY2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021. Ryder provides fleet leasing, rental and maintenance; supply-chain logistics; and dedicated transportation services through Fleet Management Solutions (FMS), Supply Chain Solutions (SCS) and Dedicated Transportation Solutions (DTS). Figures below are in U.S. dollars; “operating revenue,” comparable earnings and free cash flow are company-defined non-GAAP measures.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|
| Total revenue | $9.663 billion | $8.420 billion |
| Operating revenue (non-GAAP) | $7.828 billion | $7.024 billion |
| EBT from continuing operations | $692.6 million | $(130.4) million |
| Earnings from continuing operations | $521.6 million | $(112.0) million |
| Net earnings | $519.0 million | $(122.3) million |
| Diluted EPS from continuing operations | $9.70 | $(2.15) |
| Comparable diluted EPS (non-GAAP) | $9.58 | $(0.27) |
| Cash from operating activities, continuing operations | $2.175 billion | $2.181 billion |
| Free cash flow (non-GAAP) | $1.056 billion | $1.587 billion |
| Gross capital expenditures | $2.012 billion | $1.070 billion |
| Interest expense | $213.9 million | $261.3 million |
- Revenue increased 15%; operating revenue rose 11%. The largest earnings recovery came from FMS, including stronger rental performance, improved lease results and used-vehicle gains.
- Lease and related maintenance and rental gross margin rose to 27% from 16%; services gross margin declined to 13% from 15%, reflecting higher labor and subcontracted transportation costs.
- At year-end, cash and cash equivalents were $234 million; total debt was $6.580 billion, and debt-to-equity was 235%, down from 293%. The filing separately reports $439 million of restricted cash related to the Whiplash acquisition.
- Available funding included $862 million under the revolving credit facility and $284 million under the trade-receivables financing program. The company reported $6.6 billion of outstanding indebtedness in its risk discussion.
Segment results and changes versus FY2020
| Segment | FY2021 revenue | Change | FY2021 EBT | FY2020 EBT |
|---|
| FMS | $5.679 billion | +10% | $663.1 million | $(142.0) million |
| SCS | $3.155 billion | +24% | $117.4 million | $159.9 million |
| DTS | $1.457 billion | +19% | $49.1 million | $73.4 million |
- FMS: EBT improved sharply. Commercial rental revenue increased 34%; rental power-fleet utilization rose to 80% from 67%. Used-vehicle sales generated $257 million of net gains versus less than $1 million in FY2020. Higher pricing and utilization helped, while average ChoiceLease fleet size was 3% lower.
- SCS: Revenue growth reflected new business and higher volumes, but EBT fell 27%. Automotive customer production was affected by semiconductor-related supply disruptions, while labor and technology/marketing costs increased.
- DTS: Revenue grew on new business, volume and pricing, but EBT fell 33%, primarily due to labor, subcontracted transportation and insurance costs, as well as strategic investment.
Outlook, management commentary and risks
- Management expected 2022 operating cash flow of approximately $2.25 billion and free cash flow of $200–$300 million. It forecast capital expenditures of approximately $2.7–$2.8 billion, mainly for ChoiceLease fleet investment and delayed OEM vehicle deliveries.
- Management expected labor-shortage pressures to continue through at least the first half of 2022, with SCS/DTS pricing adjustments expected to help offset costs in the second half. Automotive supply-chain disruptions were also expected to persist through at least the first half.
- Ryder reported record new contract wins in SCS and DTS and anticipated benefits from higher ChoiceLease pricing as contracts renew. It also cautioned that vehicle shortages could constrain fleet growth and used-vehicle sales volumes.
- The company intends to exit its lower-return U.K. FMS business over 12–18 months, subject to U.K. consultation requirements. It recorded $8 million of related costs in 2021 and estimated total exit costs of $20–$32 million if it proceeds.
- Acquisitions: Ryder acquired Midwest Warehouse and Distribution in November 2021 for approximately $284 million. It acquired Whiplash on January 1, 2022 for approximately $481 million. Integration and realization of expected growth and synergies remain execution risks.
- Key risks include economic and freight cyclicality; vehicle and parts supply constraints; volatile used-vehicle residual values; labor and driver shortages; contract pricing that may not keep pace with costs; customer concentration in SCS/DTS; cybersecurity and ERP implementation risks; regulatory, environmental and climate changes; and insurance, litigation and pension exposure.
- Residual values are a material estimate: a hypothetical 10% reduction in estimated residual values would increase depreciation over the fleet’s remaining life by approximately $310 million. The filing estimates prior residual-value changes will add about $190 million to 2022 depreciation expense.
- Ryder disclosed securities and derivative litigation relating to past residual-value estimates; the company said it believes the claims are without merit and intends to defend them. Management stated that ordinary-course legal matters, in aggregate, were not expected to materially affect consolidated financial condition or liquidity. Environmental matters could be material to results in an individual year, though management did not expect a material adverse effect on financial condition or liquidity.
Most important facts for investors to verify
- Whether used-vehicle gains and unusually strong pricing persist, and how residual-value assumptions affect future depreciation and fleet sale proceeds.
- Whether labor, insurance and subcontracted transportation costs ease, and whether planned SCS/DTS pricing actions recover those costs without harming retention or volumes.
- Whether OEM deliveries, fleet investment and working-capital needs support the 2022 outlook, particularly the forecast decline in free cash flow.
- Whether SCS/DTS growth and the Midwest and Whiplash acquisitions deliver expected margins, synergies and returns, given customer and automotive-sector concentration.
- Progress and final costs of the proposed U.K. FMS exit, and developments in residual-value-related litigation and other contingencies.
- The filing presents audited FY2021 statements and reports effective internal control over financial reporting; investors should review the full debt maturity schedule, covenant terms and non-GAAP reconciliations alongside these summary figures.
