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Fitch Lwrs Ryder's Sr Debt Rtg To `BBB+'; Rtg Outlook Stable

    NEW YORK--April 30, 2001--Fitch has lowered Ryder System Inc.'s (Ryder) senior debt rating from 'A-' to 'BBB+'. The company's commercial paper rating was affirmed at 'F2'. This rating action reflects the company's modest profitability and diminished debt protection measures despite several restructuring initiatives implemented in recent years. Ryder's ratings continue to reflect the company's leading franchise within the full service truck leasing and logistics industries, solid operating cash flow, conservative liquidity and liability management and new management team focused on improving efficiency and profitability. Ryder's Rating Outlook is now Stable.
    Ryder's operating strategy has sought to leverage its core competencies in the highway transportation and logistics business-to-business market as well as focus on businesses that have long-term contractual relationships and generate a more stable revenue stream. While narrowing the company's business focus, this strategy has resulted in only modest improvements to Ryder's operating results, in part due to intense competition within the company's remaining core businesses. Positively, Ryder's new management team has restructured operations and heightened the company's focus on profitability and Economic Value Added, rather than merely top line revenue growth. As part of this process, Ryder has streamlined internal processes, integrated sales and delivery capabilities, implemented risk-based pricing for its products and services, introduced expense reduction measures throughout the organization and heightened discipline with respect to capital spending. Longer-term, Ryder's profitability should improve as the actions outlined above begin to take hold. Nevertheless, given that these restructuring initiatives are taking place in the context of a difficult operating environment, Fitch believes meaningful profitability improvement could be constrained over the near to intermediate term.
    The cyclical downturn within Ryder's core businesses, coupled with restructuring charges related to the initiatives noted above, continues to weigh on operating results. Notable challenges include the company's elevated backlog of used vehicles, weakness in the new and used truck and tractor markets and production cutbacks in key economically sensitive customer industries. During the first quarter of fiscal 2001, these factors continued to impact operating results as the company reported contribution margin declines across its different business segments. Pre-tax earnings, before unusual items, totaled $17 million for the period, representing nearly a 46% decline compared to the prior year.
    Despite several restructuring initiatives, Ryder's debt protection measures have failed to return to pre-1997 levels. Earnings before interest, taxes, depreciation, amortization and rent expense (EBITDAR) to interest and rent expense totaled 2.45 times (x) in fiscal 2000, compared to 2.57x in fiscal 1999, 2.93x in fiscal 1998, and 3.09x in fiscal 1997. Positively, Ryder is conservatively managing its financial structure, holding leverage at reasonable levels and maintaining good funding diversity. Fitch believes financial leverage will continue its downward trend over the intermediate-term in part due to reduced capital expenditure requirements. At Dec. 31, 2000, leverage, measured as debt including off balance sheet commitments to equity, totaled 2.74x.
    Established in 1937 and headquartered in Miami, Ryder is the world's largest provider of highway transportation services with operations in North America, Europe, Latin America and Asia. Product offerings range from full-service leasing, commercial truck rental and programmed maintenance of vehicles, to integrated logistics services such as dedicated contract carriage, carrier management and supply chain management. At Dec. 31, 2000, Ryder managed a fleet of approximately 176,300 vehicles and had 33,089 employees worldwide.