Ryder System, Inc. (R) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Ryder System, Inc. Annual Meeting. [Operator Instructions] I would now like to hand the conference over to Robert Sanchez. Please go ahead.

Good morning, ladies and gentlemen. My name is Robert Sanchez, and I'm the Chairman and Chief Executive Officer of Ryder System. It is approximately 10:00 a.m. and in accordance with the notice of the meeting, I call to order the 2020 annual meeting of shareholders. It's my pleasure to welcome you to our annual meeting. We are all in a very unique moment in time as we grapple with the ongoing effects of the COVID-19 pandemic. Therefore, I begin -- I want to pass along my thoughts and best wishes to those affected by the disease and those suffering from its social and economic fallout. At Ryder, we remain steadfast in our support of our employees, customers and the communities in which we live and work as our country and the world fights this pandemic. On behalf of the entire Board of Directors and Ryder's nearly 40,000 employees, I want to express our sincere thanks for taking the time to be with us today virtually and for your interest in the company. At this time, I'd like to introduce Scott Parker, our Executive Vice President and Chief Financial Officer; and Bob Fatovic, our Executive Vice President, Chief Legal Officer and Corporate Secretary. We also have present, [ Bob Stern ] as the representative from the company's independent audit firm, PricewaterhouseCoopers. It is now my pleasure to introduce all the directors in attendance on this call today. Robert Eck, Robert Hagemann, Michael Hilton, Tamara Lundgren, Luis Nieto, David Nord, Abbie Smith, E. Follin Smith, Dmitri Stockton and Hansel Tookes. Thank you very much. I would now like to ask Bob Fatovic to take us through the matters to be acted upon at this meeting. Bob?

Thank you, Robert. Good morning, everyone. As the world comes together to fight the COVID-19 pandemic, and as part of our unconditional commitment to safety at Ryder and in compliance with social distancing and various mandates, this year we are conducting our first virtual meeting of shareholders. Before we address our management and shareholder proposals, I will go over some procedural matters. The inspector of election is [ Ray Dunn ] from the independent company of Broadridge Financial Solution. Broadridge has certified that notice of this meeting and the related proxy materials were duly distributed. Based on the proxies we have received thus far, a quorum is present to conduct the business of the meeting. A list of those shareholders who are entitled to vote by virtue of their having own stock as of the record date is available for inspection by shareholders using the registered shareholder list link found on the virtual meeting website. This meeting is now duly convened, and the polls are now open for each matter to be voted upon. All shareholders entitled to vote at this meeting have the ability to do so online. If you are a shareholder entitled to vote and have not yet voted or if you want to change your previously cast vote, you may do so now by clicking the Vote Here button on the bottom of this site and following the instructions there. As a reminder, if you previously voted, it is not necessary to vote again unless you wish to change your vote. There are 5 proposals to be voted upon today. The first proposal is the election of 11 directors to serve until the annual meeting of shareholders in 2021 and until any successors are duly elected and qualified. The company recommends that shareholders vote for all director nominees as set forth in our proxy statement. No other persons have been nominated in accordance with the company's bylaws, and the nominations are now closed. Proposal #2 to be voted upon at this meeting is the ratification of the selection of PricewaterhouseCoopers as the company's independent registered public accounting firm for the 2020 fiscal year. The third proposal is the approval on an advisory basis of the compensation of our named executive officers as described in the proxy statement. The fourth proposal is management's proposal to approve the amended and restated employee stock purchase plan. The final matter to be voted upon is proposal #5. A shareholder proposal for shareholder approval of bylaw amendment. The Board recommends that shareholders vote against this proposal. The Board's full statement of opposition to this proposal #5 is included in the proxy statement. In a moment, we will connect with Mr. John Chevedden, the shareholder who submitted this proposal so he may read it for the record. Out of respect for the other shareholders in attendance and to allow time for Q&A, we ask you, Mr. Chevedden, to please limit your comments to a period of 3 minutes and abide by our rules of conduct. I'll ask the operator now if you could kindly unmute Mr. Chevedden. And Mr. Chevedden, you are now online, so please proceed.

Hello. This is John Chevedden. Can you hear me?

We can hear you fine.

This is Proposal 5: let shareholders vote on bylaw amendments. Shareholders request that the Board of Directors amend the bylaws to require that any amendment to the bylaws that is approved by the Board shall be subject to a nonbinding shareholder vote as soon as practical, unless such amendment is already subject to a binding shareholder vote. It is important that bylaw amendments take into consideration the impact that such amendments can have on limiting the rights of shareholders or on reducing accountability of directors and managers. For example, directors could adopt a narrowly crafted exclusive forum bylaw to suit the unique circumstances facing management. It is important to consider this proposal, especially since our stock price is way down from its $90 price 5 years ago. A proxy adviser recently adopted a policy to vote against directors who unilaterally adopt bylaw provisions or amendments to the articles of incorporation that materially diminish shareholder rights. This proposal is in support of greater transparency for management. Please vote yes, let shareholders vote on bylaw amendments, proposal 5.

Thank you, Mr. Chevedden, for your comments. We appreciate that. And although our Board opposes the shareholder proposal, it is our Board's policy to review the results of any shareholder vote and take them into account in making future decisions. This will conclude the introduction of proposals to be presented at the meeting, and the polls are about to close, so if you have not yet voted, I will give the folks on the website a moment to do so. [Voting]

Okay. Since everyone has had the opportunity to vote, I hereby declare the polls for voting at our 2020 Annual Meeting closed. I have been provided a preliminary report of the inspector of election. And based on this preliminary report, sufficient votes have been cast so far, such that proposal #1, all nominees for Director have been elected. And proposals #2 through 4 have been approved. Proposal #5, the shareholder proposal, has not received the majority of votes cast, with approximately 2% of Ryder's shares cast in support. The final voting results for all the proposals at today's meeting will be reported on a Form 8-K filed within 4 business days of this meeting. Since we have not received proper notice of any other business to come before this meeting, I hereby declare the 2020 Annual Meeting of Shareholders of Ryder System adjourned. Now in a moment I'll hand it over to Robert Sanchez to conduct a question-and-answer session. I would like to remind everyone that some of the statements made at this meeting may be considered forward looking and are subject to certain risks and uncertainties that are described in our filings with the SEC, including our most recent annual report on Form 10-K. Please note, we will attempt to answer as many questions as time allows, and only questions that follow our rules of conduct will be addressed. Now I will ask Mr. Sanchez to address some questions we have received online today.

And the first question, Robert, is did management or a director first noticed that COVID-19 could seriously impact Ryder? And how has COVID-19 changed or affected the risk management practices of Ryder?

Yes. I'd like to answer that. Initially, just -- in terms of who initially saw that or noticed that the COVID-19 could impact our business, I would say it was really a combination of both management and the directors. I'm in -- in addition to the regularly scheduled meetings, I'm in regular communication with the directors, most -- also with the lead director. And as we got into March and we saw the impacts that COVID-19 was beginning to have on the economy here and the impacts it could have on the business, we -- I would say, we jointly realized the impact it could have on Ryder and quickly began to adjust the business to the extent that we could. In terms of is it going to change the risk management process, for Ryder, I would say we have a very robust process within Ryder for risk management that we -- not only within the management team of Ryder but also working closely with the Board. We monitor and adjust for enterprise risk on a regular basis. We monitor a very long list of potential risk that we evaluate on an ongoing basis to make sure that we are adequately prepared. This obviously rose to the top now as this pandemic really took hold. So I would say it doesn't really change the process, but it certainly becomes a higher risk attribute within our process.

Thank you, Robert. We have another question here that is -- that I can answer, which is what is the minimum stock ownership requirements for directors and executive officers at the company? And for the CEO, the minimum stock ownership requirement is 6x its base salary, and for the NEOs, it is 3x, and for the directors it is 3x. There's another question here that asks whether 2019 is the first year of no related party transactions. And the answer is no. It's not -- we typically do not have related party transactions. We have a robust process for reviewing potential related party transactions. And our principles of business conduct require that our directors and executive officers report any actual or potential conflicts of interest, including potential related party transactions. So we have none this year, and we've had none in the recent past. And then finally, we have a question regarding how contact with shareholders is initiated under the shareholder outreach program. And I'll answer that one, too, Robert. Our shareholder outreach program is robust. We typically write letters to our top shareholders to be anywhere from 50 to 75 of our top holders each year, asking them if they want to participate in any engagement around our governance or compensation or any other questions they may have with the company. And in addition to that, we have a very robust investor relations program. We hold 15 investor conferences a year. And any shareholder can reach out to our investor relations group through [email protected] or investors.ryder.com. So again, we have a robust program both in letter writing and through any shareholder who wants to contact us through Investor Relations. So with that, I see no more questions that we're prepared to answer at this time. And I'll turn it back over to you, Rob.

All right. Thank you, Bob. Thank you all for coming and getting on this call. This completes the company's question-and-answer period and the 2020 Annual Meeting of Shareholders. Thank you all, and stay safe.

Thank you. This does conclude today's conference call. You may now disconnect.