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Ryder System Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 24, 2012 05:12PM
Ryder System Inc. (R) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:Earnings from continuing operations and earnings per diluted common share (EPS) from continuing operations in the first quarter of 2012 increased 35% to $34.9 million and 36% to $0.68 per diluted common share, respectively. Earnings from continuing operations in 2012 included an income tax benefit of $5.0 million, or $0.10 per diluted common share, relating to the favorable resolution of a tax item from prior periods. Earnings from continuing operations in 2012 and 2011 also included acquisition-related restructuring charges of $0.6 million, or $0.01 per diluted common share and $0.5 million, or $0.01 per diluted common share, respectively. Excluding these items, comparable earnings and EPS from continuing operations both increased 16% to $30.6 million and $0.59 per diluted common share, respectively. We believe that comparable earnings from continuing operations and comparable earnings per diluted common share from continuing operations measures provide useful information to investors because they exclude significant items that are unrelated to our ongoing business operations.
Net earnings and EPS increased 37% in the first quarter of 2012 to $34.3 million and 40% to $0.67 per diluted common share, respectively. Net earnings in the first quarter of 2012 and 2011 were negatively impacted by losses from discontinued operations of $0.6 million, or $0.01 per diluted common share, and $0.7 million, or $0.02 per diluted common share, respectively. EPS growth in the first quarter of 2012 exceeded the earnings growth reflecting the impact of the share repurchase program.
SG&A expenses increased 13% to $196.0 million in the first quarter of 2012. SG&A expenses as a percent of total revenue rose to 13% in the first quarter of 2012. Salaries and employee-related costs, which primarily impact SG&A expenses, increased 8% in the first quarter of 2012 compared to 2011 because of an increase in headcount from acquisitions and organic growth as well as higher commissions from new sales activity. Pension expense, which primarily impacts SG&A expenses, increased $4.2 million in the first quarter of 2012. The increase in pension expense primarily reflects lower than expected pension asset returns in 2011 and lower assumed returns in 2012.
NYE units represent new vehicles on hand that are being prepared for deployment to a lease customer or into the rental fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. NYE units increased compared to March 2011 primarily reflecting the replacement and growth of the lease fleet. NYE units increased compared to December 2011 reflecting the seasonal refresh and modest growth of the rental fleet. NLE units represent vehicles held for sale and vehicles for which no revenue has been earned in the previous 30 days. NLE units increased compared to year-end due to increased lease replacement activity, and to a lesser extent, outservicing of the rental fleet. We expect NLE levels to continue at the current level throughout the year as lease replacement activity continues.
We periodically enter into sale-leaseback transactions in order to lower the total cost of funding our operations, to diversify our funding among different classes of investors and to diversify our funding among different types of funding instruments. These sale-leaseback transactions are often executed with third-party financial institutions. In general, these sale-leaseback transactions results in a reduction in revenue earning equipment and debt on the balance sheet, as proceeds from the sale of revenue earning equipment are primarily used to repay debt. Accordingly, sale-leaseback transactions will result in reduced depreciation and interest expense and increased equipment rental expense. These leases contain limited guarantees by us of the residual values of the leased vehicles (residual value guarantees) that are conditioned upon disposal of the leased vehicles prior to the end of their lease term. The amount of future payments for residual value guarantees will depend on the market for used vehicles and the condition of the vehicles at time of disposal. We did not enter into any sale-leaseback transactions during the three months ended March 31, 2012 or 2011.
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