Ryder System, Inc. Announces Second Quarter 2001 Results
MIAMI--July 25, 2001--Ryder System, Inc. , a global leader in transportation management and supply chain solutions, today reported that second quarter 2001 earnings per diluted share, before restructuring and other charges, were $0.53, compared with $0.50 in the second quarter of 2000. Included in the second quarter 2001 earnings per share is an unanticipated, one-time benefit of $0.11 related to a reduction in the Company's deferred income taxes in Canada (due to a June 2001 change in Canadian tax law). Excluding the one-time income tax benefit, earnings per share before restructuring and other charges were $0.42, and are in line with the Company's projections for the quarter of $0.40-$0.44, and above consensus Wall Street projections of $0.36 per diluted share.Pre-tax earnings from continuing operations, before restructuring and other charges, were $40.1 million in the second quarter of 2001, compared with $47.0 million in the year-earlier period.
The Company generated $1.29 billion in revenue for the three months ending June 30, 2001, down 2.9 percent from $1.33 billion in the comparable period last year.
Ryder recorded restructuring and other charges of $19.4 million, or $0.20 per share, during the second quarter of 2001, related to ongoing strategic initiatives intended to strengthen the Company. The charges consisted primarily of severance and employee-related costs generated by the previously announced downsizing, as well as charges for facilities that are being closed.
Ryder's net income was $19.9 million, or $0.33 per diluted share, during the second quarter of 2001, compared with $29.6 million, or $0.50 per diluted share, in the second quarter of 2000.
Ryder's second quarter earnings were impacted by the ongoing economic slowdown in the U.S. and in some other countries where Ryder does business. These deteriorating economic conditions led to lower commercial vehicle rental demand in Ryder's Fleet Management Solutions business unit, as well as volume reductions in some Supply Chain Solutions business segments in the U.S. and in nations such as Argentina and Brazil.
C.J. Nelson, Ryder's Senior Executive Vice President and Chief Financial Officer, said, "We're pleased that Ryder continued to reduce capital expenditures and spending in corporate and field overhead through ongoing cost-containment initiatives which helped offset the impact of current economic conditions."
Gregory T. Swienton, Ryder's President and Chief Executive Officer, stated, "Similar to so many other companies, Ryder's revenue and profitability have been impacted by the economy. As a great number of our customers experience business downturns, Ryder has also been affected. Nonetheless, Ryder employees continue to work diligently to improve the Company's results through cost-saving and bottom-line improvement initiatives. We continue to improve our business processes and reduce costs at every level consistent with the initiatives we announced in February."
Second Quarter Business Segment Operating Results
Fleet Management Solutions
Ryder's Fleet Management Solutions (FMS) combine several capabilities into a comprehensive package that provides one-stop outsourcing of the acquisition, maintenance, management and disposal of vehicles. Ryder's commercial rental service offers customers a method to expand their fleets in order to address specific or short-term capacity needs.
In the FMS business segment, full service lease and programmed maintenance revenue was up 1.0 percent, but was more than offset by a 10.6 percent decline in commercial rental revenue, caused by continued softness in the U.S. economy. Overall FMS dry revenue (revenue excluding fuel) in the second quarter of 2001 was $685.0 million, down 2.0 percent compared with the second quarter of 2000. Also, because of a reduction in fuel sales volume, fuel revenue decreased 6.0 percent in the second quarter of 2001 compared with same period of 2000.
Contribution margin dollars decreased 10.8 percent, to $87.1 million in the second quarter of 2001, compared with $97.7 million in the same period of 2000, due primarily to lower rental utilization rates and lower pension income. The decrease was partially offset by reductions in FMS field overhead costs.
Supply Chain Solutions
Supply Chain Solutions (SCS) enable Ryder customers to improve shareholder value and their customers' satisfaction by enhancing supply chain performance and reducing costs. The solutions involve management of the logistics pipeline as a synchronized, integrated process - from raw material supply to finished goods distribution. By improving business processes and employing new technologies, the flow of goods and cash is made faster and consumes less capital.
In the SCS business segment, second quarter 2001 gross revenue totaled $387.8 million, down 3.6 percent from the comparable period in 2000. Second quarter 2001 operating revenue (gross revenue less freight under management) was $281.1 million, down 3.8 percent from the comparable period a year ago. In the U.S., SCS was led by a quarterly operating revenue increase of 19.9 percent in the electronics, high tech and telecommunications group, as companies in those areas outsource more of their supply chain needs. But volume reductions and fewer miles driven and charged in the automotive sector and lost business in the consumer packaged goods sector resulting from the economic slowdown held overall North American results to a net decrease in operating revenue of 1.3 percent. International operating revenue was also down, attributable primarily to the continued decline in the economies of Argentina and Brazil, the sale of the Company's Brazilian outbound logistics business in the first quarter and the impact of exchange rate changes in the United Kingdom.
The economic downturn has had an uneven impact on SCS. For example, U.S. services-based revenue increased over 2 percent in a quarterly comparison, while U.S. vehicle-based revenue decreased almost 5 percent in the second quarter of 2001 compared with the same quarter in 2000. In general, services-based revenue reflects broader, more complex offerings such as network management and supplier logistics centers, while vehicle-based revenue reflects work performed in the manufacturing and industrial sectors.
Contribution margin dollars were $16.2 million in the second quarter of 2001, compared with $17.8 million in the same quarter of 2000. The decrease was due primarily to volume reductions resulting from slowdowns in many industries in the U.S. and Latin America.
Dedicated Contract Carriage
Ryder's Dedicated Contract Carriage (DCC) segment provides customers with vehicles, drivers, management and administrative support, with the assets committed to a specific customer for a specified contractual term. DCC supports customers with both basic and sophisticated logistics and transportation needs, including routing and scheduling, specialized driver services and extensive logistical engineering support.
In the DCC business segment, second quarter gross revenue totaled $128.6 million, down 4.0 percent from the second quarter of 2000. Due to cost containment initiatives in various overhead spending categories, contribution margin dollars increased to $14.5 million, compared with $14.2 million in the second quarter of 2000.
Corporate Financial Information
Central Support Services
Central support services are those corporate overhead costs incurred to support all business segments and product lines. In the second quarter of 2001, central support services costs were down 7.2 percent to $66.1 million, from $71.2 million in the comparable quarter of 2000. The decrease was attributable primarily to various strategic cost-containment initiatives the Company has undertaken across all departments.
Capital Expenditures
Improved processes, controls and cost-containment initiatives continued to reduce gross capital expenditures to $179.0 million in the second quarter of 2001, down 48.1 percent when compared with $345.0 million in the same quarter last year. The reduction in capital spending is directly related to the Company's emphasis on investing new capital in projects that will provide positive returns to the Company and re-deploying capital, where feasible, to further enhance those returns.
Outlook
"In regard to the second half of the year, based on the economy's expected impact on the Company's business segments as well as actual results to date, we are forecasting revenue to decline by 4 to 5 percent from 2000 results," Swienton stated. "However, we also expect to partially offset that impact by continuing the implementation of our cost-reduction initiatives throughout the year."
He continued, "Based on current information, we anticipate earnings per diluted share, before restructuring and other charges, of $0.47 to $0.49 in the third quarter, $0.48 to $0.51 in the fourth quarter and $1.66 to $1.71 for the full year. However, given the ongoing sluggishness of the economy and the potential for further significant economic changes, there is certainly a possibility that actual results may differ from these estimates. As events warrant, we will update these forecasts going forward."
Company Description
Ryder provides a continuum of leading-edge logistics, supply chain, transportation and fleet management solutions worldwide. Ryder's product offerings range from full-service leasing, commercial rental and programmed maintenance of vehicles to integrated services such as dedicated contract carriage and carrier management. Additionally, Ryder offers comprehensive supply chain solutions, lead logistics management services and e-Commerce solutions that support customers' entire supply chains, from sourcing of inbound raw materials through distribution and delivery of finished goods. Ryder serves customer needs throughout North America, in Latin America, Europe and Asia.
For the fifth consecutive year, Ryder was ranked among Fortune's Most Admired Companies in the publication's 2001 survey of corporate reputations, and Ryder has consistently ranked among the top five in its industry category since 1997. Forbes named Ryder "Best in Transportation and Logistics" as one of its "Magnetic 40" listing of companies that "create a network of partnerships that can spur growth, innovation and most important, serve customers better." InternetWeek named Ryder one of the top 100 U.S. companies for its effectiveness in using the Internet to achieve tangible business benefits. For the third consecutive year, Inbound Logistics recognized Ryder in 2000 as the top third-party logistics provider.
Ryder's stock is a component of the Dow Jones Transportation Average and the Standard & Poor's 500 Index. With 2000 revenue of $5.34 billion, Ryder was ranked 333rd on the Fortune 500 list and 319th on the Forbes 500 in 2001.
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS - UNAUDITED
Periods ended June 30, 2001 and 2000
(In millions, except per share data)
Three Months Six Months
------------------- -------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Revenue $ 1,294.1 1,332.2 $ 2,575.6 2,640.8
--------- --------- --------- ---------
Operating expense 868.8 896.5 1,755.1 1,805.1
Freight under management
expense 108.0 111.3 209.7 209.4
Depreciation expense 132.8 139.3 270.3 291.5
Gains on vehicle sales (3.9) (4.1) (7.0) (13.3)
Equipment rental 119.7 98.9 223.3 185.7
Interest expense 29.3 38.7 63.6 80.7
Miscellaneous expense
(income) (0.7) 4.6 3.5 3.2
Unusual items -
restructuring and other
charges 19.4 - 29.9 -
--------- --------- --------- ---------
1,273.4 1,285.2 2,548.4 2,562.3
Earnings before income
taxes 20.7 47.0 27.2 78.5
Provision for income
taxes (0.8) (17.4) (3.2) (29.1)
--------- --------- --------- ---------
Net earnings $ 19.9 29.6 $ 24.0 49.4
========= ========= ========= =========
Diluted earnings per
common share $ 0.33 0.5 $ 0.40 0.8
========= ========= ========= =========
Average common
shares - diluted 60.7 59.7 60.5 59.6
========= ========= ========= =========
Supplemental earnings
per share information:
Earnings prior to
unusual charges and
tax rate changes $ 0.42 0.50 $ 0.60 0.83
Benefit of income tax
rate change in Canada 0.11 - 0.11 -
Earnings prior to --------- --------- --------- ---------
unusual charges $ 0.53 0.50 $ 0.71 0.83
Restructuring and other
charges (0.20) - (0.31) -
--------- --------- --------- ---------
Net earnings $ 0.33 0.50 $ 0.40 0.83
========= ========= ========= =========
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - PRELIMINARY AND UNAUDITED
(In millions)
June 30, December 31,
2001 2000
----------- ------------
Assets:
Current assets $ 1,093.8 928.3
Revenue earning equipment 2,601.3 3,012.8
Operating property and equipment 602.8 612.6
Other assets 944.8 921.2
------------ ------------
$ 5,242.7 5,474.9
============ ============
Liabilities and Shareholders' Equity:
Current liabilities (including
current portion of long-term debt) $ 1,012.9 1,302.3
Long-term debt 1,675.8 1,604.2
Other non-current liabilities
(including deferred income taxes) 1,301.7 1,315.7
Shareholders' equity 1,252.3 1,252.7
------------ ------------
$ 5,242.7 5,474.9
============ ============
SELECTED KEY RATIOS
June 30, December 31,
2001 2000
------------ ------------
Debt to equity 155% 161%
Total obligations to equity (a) 220% 258%
Total obligations to equity, including
securitizations (a) 258% 274%
Twelve months ended
June 30,
----------------------------
2001 2000
------------ ------------
Return on average common equity 5.1% 6.6%
Return on average assets 1.2% 1.5%
Average asset turnover 97.6% 88.4%
Return on total capital 5.1% 5.5%
(a) - Total obligations represent both on and off-balance sheet debt
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
Periods ended June 30, 2001 and 2000
(In millions)
(unaudited)
Three Months Six Months
------------------------ ------------------------
2001 2000 B(W) 2001 2000 B(W)
------- ------- ------- ------- ------- -------
Revenue:
Fleet management
solutions:
Full service lease
and program
maintenance $ 468.8 464.3 1.0% $ 933.9 924.4 1.0%
Commercial
rental 121.1 135.4 (10.6%) 230.4 256.6 (10.2%)
Fuel 175.5 186.8 (6.0%) 357.9 383.4 (6.7%)
Other 95.1 99.3 (4.2%) 192.5 203.3 (5.3%)
Total fleet --------- -------- -------- -------- -------- -------
management
solutions 860.5 885.8 (2.9%) 1,714.7 1,767.7 (3.0%)
Supply chain --------- -------- -------- -------- -------- -------
solutions 387.8 402.3 (3.6%) 773.1 788.9 (2.0%)
Dedicated contract
carriage 128.6 134.0 (4.0%) 259.2 267.6 (3.1%)
E-Commerce 1.6 - N/A 2.7 - N/A
Eliminations (84.4) (89.9) 6.1% (174.1) (183.4) 5.1%
--------- -------- -------- -------- -------- -------
Total revenue $ 1,294.1 1,332.2 (2.9%) $ 2,575.6 2,640.8 (2.5%)
========= ======== ======== ======== ======== =======
Contribution
margin:
Fleet
management
solutions $ 87.1 97.7 (10.8%) $ 162.7 178.5 (8.9%)
Supply chain
solutions 16.2 17.8 (9.0%) 23.8 32.4 (26.5%)
Dedicated
contract
carriage 14.5 14.2 2.1% 25.7 28.2 (8.9%)
E-Commerce (2.4) (1.1) (118.2%) (5.0) (1.6)(212.5%)
Eliminations (9.2) (10.4) 11.5% (18.0) (20.8) 13.5%
--------- -------- -------- -------- -------- -------
106.2 118.2 (10.2%) 189.2 216.7 (12.7%)
Central support
services (66.1) (71.2) 7.2% (132.1) (138.2) 4.4%
--------- -------- -------- -------- -------- -------
Earnings from
continuing
operations before
unusual items and
income taxes 40.1 47.0 (14.7%) 57.1 78.5 (27.3%)
Restructuring and
other charges (19.4) - N/A (29.9) - N/A
--------- -------- -------- -------- -------- -------
Earnings before
income taxes 20.7 47.0 (56.0%) 27.2 78.5 (65.4%)
Provision for
income taxes (0.8) (17.4) 95.4% (3.2) (29.1) 89.0%
--------- -------- -------- -------- -------- -------
Net earnings $ 19.9 29.6 (32.8%) $ 24.0 49.4 (51.4%)
========= ======== ======== ======== ======== =======
RYDER SYSTEM, INC. AND SUBSIDIARIES
SEGMENT CONTRIBUTION MARGIN
Periods ended June 30, 2001 and 2000
(In millions)
(unaudited)
Three Months Six Months
------------------------ --------------------------
2001 2000 B(W) 2001 2000 B(W)
------- ------- ------- --------- --------- -------
Fleet Management
Solutions
Total revenue $ 860.5 885.8 (2.9%) $ 1,714.7 1,767.7 (3.0%)
Fuel revenue (175.5) (186.8) (6.0%) (357.9) (383.4) (6.7%)
-------- ------- ------- ---------- -------- -------
Dry revenue $ 685.0 699.0 (2.0%) $ 1,356.8 1,384.3 (2.0%)
======== ======= ======= ========== ======== =======
Contribution
margin $ 87.1 97.7 (10.8%) $ 162.7 178.5 (8.9%)
======== ======= ======= ========== ======== =======
Contribution
margin as % of
total revenue 10.1% 11.0% 9.5% 10.1%
======== ======= ========== ========
Contribution
margin as % of
dry revenue 12.7% 14.0% 12.0% 12.9%
======== ======= ========== ========
Supply Chain Solutions
Total revenue $ 387.8 402.3 (3.6%) $ 773.1 788.9 (2.0%)
Freight Under
Management
(FUM) expense (106.7) (110.0) (3.0%) (207.0) (207.2) (0.1%)
-------- ------- ------- ---------- -------- -------
Operating revenue $ 281.1 292.3 (3.8%) $ 566.1 581.7 (2.7%)
======== ======= ======= ========== ======== =======
Contribution
margin $ 16.2 17.8 (9.0%) $ 23.8 32.4 (26.5%)
======== ======= ======= ========== ======== =======
Contribution
margin as % of
total revenue 4.2% 4.4% 3.1% 4.1%
======== ======= ========== ========
Contribution
margin as % of
operating revenue 5.8% 6.1% 4.2% 5.6%
======== ======= ========== ========
Dedicated Contract
Carriage
Total revenue $ 128.6 134.0 (4.0%) $ 259.2 267.6 (3.1%)
Freight Under
Management
(FUM) expense (1.3) (1.3) 0.0% (2.7) (2.2) 22.7%
-------- ------- ------- ---------- -------- -------
Operating revenue $ 127.3 132.7 (4.1%) $ 256.5 265.4 (3.4%)
======== ======= ======= ========== ======== =======
Contribution
margin $ 14.5 14.2 2.1% $ 25.7 28.2 (8.9%)
======== ======= ======= ========== ======== =======
Contribution
margin as % of
total revenue 11.3% 10.6% 9.9% 10.5%
======== ======= ========== ========
Contribution
margin as % of
operating revenue 11.4% 10.7% 10.0% 10.6%
======== ======= ========== ========