Ryder System, Inc. (NYSE:R) Q2 2019 Earnings Conference Call - Final Transcript
Jul 30, 2019 • 11:00 am ET
Robert E. Sanchez
under a two-year 1.5 million share anti-dilutive repurchase program in February of 2018. During the quarter, we brought approximately 119,000 shares at an average price of $59.20.
Excluding pension costs and other items, the comparable tax rate was 26.9% for the second quarter of 2019, down slightly from the prior year's rate. The return on capital spread was 20 basis points, down from 40 basis points spread in the prior year, primarily reflecting lower used vehicle sales results. Return on equity was approximately 13%.
I'll now turn to Page 6 and discuss key trends that we saw in each business segment. Fleet Management Solutions operating revenue, which excludes fuel, increased 9% organically from the prior year, driven by growth in all product lines. ChoiceLease revenue increased 9% primarily due to fleet growth and to a lesser extent higher rates on replacement vehicles. The lease fleet increased by 3,800 vehicles during the quarter. Growth in the lease fleet this quarter benefited from earlier than anticipated vehicle deliveries from the OEMs.
We continue to effectively penetrate the non-outsourced market with approximately 40% of year-to-date fleet growth coming from customers new to outsourcing. We also continue to see growth from customers expanding their fleet sizes. We remain on track to achieve organic lease fleet growth this year of at least 11,000 vehicles, which would be a new record for the Company.
SelectCare revenue increased 9%, reflecting higher ancillary maintenance activity. The average SelectCare full-service and preventive fleet grew by nearly 600 vehicles from the prior year. Commercial rental revenue was up 9%, driven by higher demand and pricing. Global rental demand on power units was up 8% and pricing was up 2%. Rental utilization was 75.3%, down from 79.4% in the prior year, primarily reflecting lower than expected tractor demand on a 10% larger average fleet and very strong prior-year comparisons.
Our strategy to capture higher e-commerce driven demand for medium-duty trucks remains on track. Late in the second quarter, however, we saw softer demand for heavy-duty tractors, which impacted utilization for the quarter against very strong prior-year comparisons. Used vehicle results for the quarter were down year-over-year. I'll discuss those results separately in a minute.
Overall, FMS earnings decreased, reflecting lower used vehicle results, including higher depreciation of $8 million from residual value changes and higher valuation adjustments of $10 million. Results were also negatively impacted by higher overheads, including higher than normal levels of bad debt and to a lesser extent, the impact from the adoption of the new lease accounting standards.
Results benefited from lease growth and benefits from our maintenance cost initiative. Earnings before tax in FMS decreased 25%. FMS earnings as a percent of operating revenue were 4.9%, down 220 basis points from the prior year, primarily reflecting lower used vehicle sales results.
Page 7 summarizes key results for used vehicle sales. Used vehicle results for the quarter were down, as increased pricing and volume were more than offset by higher valuation adjustments on larger inventory. We sold