Ryder Announces First Quarter 2002 Results; Earnings Per Share Improve 44%; Revenue Down Due to Slow Economy, But Expenses Lower As Well
MIAMI--April 24, 2002--Ryder System, Inc. , a global leader in supply chain and transportation management solutions, today reported that first quarter 2002 earnings per share, before unusual items, improved 44 percent to $0.26, compared with $0.18 in the first quarter of 2001. Revenue for the three months that ended March 31, 2002 was $1.15 billion, down 10 percent from $1.28 billion in the comparable period last year.Pre-tax earnings before unusual items increased 47 percent to $25.1 million in the first quarter of 2002, compared with $17.1 million in the year-earlier period.
Ryder also recorded the recovery of prior years' restructuring charges of $1.2 million, adding $0.01 per share, during the first quarter of 2002, compared with charges of $10.6 million, or $0.11 per share in the year-earlier quarter. Therefore, total earnings per share were $0.27 in the first quarter of 2002, compared with $0.07 in the same period last year. Net earnings were $16.8 million in the first quarter of 2002, compared with $4.1 million in the first quarter of 2001.
The Company's first quarter 2002 results benefited from lower than planned U.S. pension expense of $4.0 million, due to better than anticipated pension asset returns in the fourth quarter of 2001. This positive plan variance, which added $0.04 per diluted share after tax, will continue at a comparable quarterly rate for the balance of the year (for a total of $0.16).
Revenue was impacted by the continuing slow economic conditions in the U.S. and in several other nations where Ryder does business. These conditions led to reduced transportation miles run and continued weak leasing and rental demand, though rental utilization was slightly better than anticipated. The economic downturn has also caused volume reductions in the Dedicated Contract Carriage business segment, in some parts of the U.S. Supply Chain Solutions business segment and in international areas with weaker economies, such as Brazil and Argentina.
"Ryder's revenue continued to be impacted by economic conditions which have yet to materially improve," said Gregory T. Swienton, President and Chief Executive Officer. "While we weathered a continued softness in all of our business segments during the first quarter of 2002, there were a few signs of improvement. Among them were a slight increase in rental utilization, a substantial improvement in the Supply Chain Solutions business segment's margins and an increase in used truck sales volume. In addition, our cost management and process improvement initiatives continue to have a positive impact on Ryder's bottom line."
Goodwill and Other Intangible Assets
Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (FAS) No. 142, "Goodwill and Other Intangible Assets," which, among other things, eliminates the amortization of goodwill. Pre-tax goodwill amortization in the first quarter of 2001 amounted to $3.3 million, or $0.05 per diluted share after tax. Excluding goodwill amortization in the first quarter of 2001, pre-tax earnings before unusual items and related after-tax earnings per share increased 23 percent and 13 percent, respectively. To facilitate the comparison of segment operating results, prior-year goodwill amortization is now treated as a corporate rather than a segment cost. The adoption of FAS 142 also requires an impairment evaluation of existing goodwill. Goodwill for Ryder totals $167.7 million. The Company has completed its assessment of almost 90 percent of existing goodwill and no impairment charge was required. The Company is continuing to evaluate the remaining $18.9 million of goodwill associated with the Supply Chain Solutions operation in Asia. This evaluation will be completed in the second quarter of 2002. In accordance with FAS 142, any impairment loss resulting from the evaluation will be recognized as a cumulative effect of an accounting change.
First Quarter Business Segment Operating Results
As discussed in the 2001 Annual Report, beginning in 2002, the primary measurement of segment financial performance includes an allocation of Central Support Services and excludes the amortization of goodwill. This new measurement, described as "Net before Tax," provides management more clarity on the profitability of each business segment and enables more segment accountability for the allocated share of centralized expenses. Prior-year segment results have been reclassified to conform to the new measurement standard.
Fleet Management Solutions
Ryder's Fleet Management Solutions (FMS) business unit combines 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.
Full service lease, programmed maintenance, commercial rental and other revenue remained lower quarter over quarter because of the continued softness of the U.S. economy.
In the first quarter of 2002, total FMS dry revenue (revenue excluding fuel) was $630.4 million, down 6 percent compared with the first quarter of 2001. Also, primarily because of price reductions, fuel revenue decreased 26 percent in the first quarter of 2002 compared with same period of 2001.
In FMS, net before taxes (NBT) decreased 7 percent, from $39.4 million in 2001 to $36.6 million in 2002. This was due primarily to reduced revenue levels, the impact of lower pricing of used vehicles held for sale (both owned and leased) and increased pension costs, offset partially by reductions in operating expenses stemming from Ryder's cost management and process improvement initiatives and lower interest 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, first quarter 2002 gross revenue totaled $337.1 million, down 12 percent from the comparable period in 2001. First quarter 2002 operating revenue was $245.9 million, down 8 percent from the comparable period a year ago. Revenue declined due to volume reductions, primarily in the electronics, high tech and telecommunications sector and continued economic softness in Brazil and Argentina. Revenue also declined due to cancellation of certain unprofitable business.
The SCS business segment's NBT was a deficit of $2.2 million in the first quarter of 2002, compared with a deficit of $8.6 million in the same quarter of 2001. The improvement was due primarily to better operating performance across all industry groups (particularly automotive) reflecting margin improvement initiatives, elimination of certain unprofitable business and cost management controls implemented throughout the SCS segment.
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, first quarter gross revenue totaled $125.6 million, down 6 percent from the first quarter of 2001. The business segment's NBT decreased to $5.0 million, compared with $5.7 million in the year-earlier period. The decreases were due to reduced activity and volumes of DCC business attributable to the current economic environment. Segment NBT was also impacted by higher safety and insurance costs which offset improvements in other operational areas.
Corporate Financial Information
Capital Expenditures
Improved processes, controls, cost management initiatives and slower market demand continued to reduce Ryder's gross capital expenditures. Capital expenditures totaled $125.4 million in the first quarter of 2002, compared with $250.2 million in the same quarter last year.
Central Support Services
Central Support Services (CSS) are overhead costs incurred to support all business segments and product lines. In the first quarter of 2002, central support services costs were reduced again, down 9 percent to $56.7 million, compared with $62.2 million in the first quarter of 2001 (adjusted for reclassification). The decrease was attributable primarily to various strategic cost management initiatives undertaken across all departments. Substantially all CSS costs are now allocated to the various business segments. Net unallocated CSS costs were $6.0 million in the first quarter of 2002, down 19 percent from $7.4 million in the first quarter of 2001.
C.J. Nelson, Ryder's Senior Executive Vice President and Chief Financial Officer, said, "The cost management initiatives that have been underway for more than a year now continue to have a positive impact on the Company. We will continue to seek innovative ways to spend our capital wisely while generating additional sources of revenue."
Outlook
"Significant economic recovery has not yet become a reality for Ryder or its customers," Swienton indicated. "Until we see substantial positive signs, we remain conservative in our estimates and our expenditures. However, we are forecasting earnings per diluted share of $0.41 to $0.43 for the second quarter, slightly above the estimate we provided in December 2001."
He continued, "Despite economic uncertainty, our forecast for earnings per share in the second half of the year is $0.98 to $1.02, and our forecast for full-year 2002 is $1.49 to $1.55 (without the pension benefit of $0.16 for the full year) and $1.65 to $1.71 (with the pension benefit). The ongoing implementation of our cost management initiatives and process improvements should continue to generate short- and long-term benefits. Earnings may also be better if there is an actual increase in economic activity during the second half of the year."
About Ryder
Ryder provides leading-edge logistics, supply chain and transportation 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, consulting, lead logistics management services and e-Business solutions that support customers' entire supply chains, from inbound raw materials and parts through distribution and delivery of finished goods. Ryder serves customer needs throughout North America, in Latin America, Europe and Asia.
For the sixth consecutive year, Ryder was featured in the 2002 Fortune Most Admired Companies survey of corporate reputations. Forbes named Ryder to its "Magnetic 40" as "Best in Transportation and Logistics" for creating a "network of partnerships that can spur growth, innovation and most important, serve customers better." InternetWeek named Ryder as one of the top 100 U.S. companies for effectiveness in using the Internet to achieve tangible business benefits. For the fourth consecutive year, Inbound Logistics recognized Ryder in 2001 as the top third-party logistics provider. The National Safety Council selected Ryder to receive the 2002 Green Cross for Safety Medal - its highest honor - for exemplary commitment to workplace safety and corporate citizenship.
Ryder's stock is a component of the Dow Jones Transportation Average and the Standard & Poor's 500 Index. With 2001 revenue of $5.01 billion, Ryder ranks 341st on the Fortune 500 and 326th on Barron's 500.
For more information on Ryder System, Inc., visit www.ryder.com.
Note: Certain statements and information included in this release are "forward-looking statements" under the Federal Private Securities Litigation Reform Act of 1995. Accordingly, we advise that these forward-looking statements be evaluated with consideration given to the many uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Important factors that could cause such differences include, among others, the competitive pricing environment applicable to the Company's businesses, customer retention levels, changes in customers' business environments, changes in market conditions affecting the sale of used vehicles, greater than expected expenses associated with the Company's activities and changes in general economic conditions.
Note:
The first quarter 2002 earnings webcast is scheduled for April 24, 2002 at 11:00 a.m. (EDT). To access the call via the Internet, visit Ryder's home page at http://www.ryder.com. Speakers will be Gregory T. Swienton, President and Chief Executive Officer, and Corliss J. Nelson, Senior Executive Vice President and Chief Financial Officer.
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS - UNAUDITED
Periods ended March 31, 2002 and 2001
(In millions, except per share data)
Three Months
2002 2001
Revenue $ 1,149.9 1,281.5
-------- --------
Operating expense 473.7 560.5
Salaries and employee-related costs 311.8 315.4
Freight under management expense 92.2 116.4
Depreciation expense 132.9 137.5
Gains on vehicle sales, net (1.9) (3.1)
Equipment rental 94.4 99.3
Interest expense 24.2 34.3
Miscellaneous (income) expense, net (2.5) 4.1
Unusual items - (recovery) restructuring
and other charges, net (1.2) 10.6
-------- --------
1,123.6 1,275.0
-------- --------
Earnings before income taxes 26.3 6.5
Provision for income taxes 9.5 2.4
-------- --------
Net earnings $ 16.8 4.1
======== ========
Diluted earnings per common share $ 0.27 0.07
======== ========
Average common shares - diluted 61.9 60.3
======== ========
Supplemental earnings per share information:
Earnings prior to goodwill amortization
and unusual items $ 0.26 0.23
Goodwill amortization -- (0.05)
-------- --------
Earnings prior to unusual charges 0.26 0.18
Recovery (restructuring and other charges), net 0.01 (0.11)
-------- --------
Net earnings $ 0.27 0.07
======== ========
NOTE: Earnings per share amounts are calculated independently for
each component and may not be additive due to rounding.
Certain amounts have been reclassified to conform to current
presentation.
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - PRELIMINARY AND UNAUDITED
(In millions)
March 31, December 31,
2002 2001
Assets:
Current assets $ 881.1 982.5
Revenue earning equipment 2,434.2 2,479.1
Operating property and equipment 557.6 566.9
Other assets 888.0 895.1
-------- --------
$ 4,760.9 4,923.6
======== ========
Liabilities and Shareholders' Equity:
Current liabilities (including
current portion of long-term debt) $ 958.4 1,013.9
Long-term debt 1,242.0 1,391.6
Other non-current liabilities
(including deferred income taxes) 1,308.2 1,287.4
Shareholders' equity 1,252.3 1,230.7
-------- --------
$ 4,760.9 4,923.6
======== ========
SELECTED KEY RATIOS
March 31, December 31,
2002 2001
Debt to equity 120% 139%
Total obligations to equity (a) 178% 199%
Total obligations to equity,
including securitizations (a) 211% 234%
Twelve months ended
March 31,
2002 2001
Return on average common equity 2.5% 5.9%
Return on average assets 0.6% 1.3%
Average asset turnover 96.6% 95.6%
Return on total capital 3.3% 4.9%
(a) - Total obligations represent debt plus off-balance sheet
equipment obligations.
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT REVENUE AND EARNINGS
Periods ended March 31, 2002 and 2001
(In millions)
(unaudited)
Three Months
2002 2001 B(W)
Revenue:
Fleet Management Solutions:
Full service lease and program
maintenance $ 447.5 465.1 (3.8%)
Commercial rental 99.0 109.3 (9.4%)
Fuel 134.7 182.4 (26.2%)
Other 83.9 97.4 (13.9%)
------- ------- ------
Total Fleet Management
Solutions 765.1 854.2 (10.4%)
Supply Chain Solutions 337.1 383.4 (12.1%)
Dedicated Contract Carriage 125.6 133.6 (6.0%)
Eliminations (77.9) (89.7) 13.2%
------- ------- ------
Total revenue $ 1,149.9 1,281.5 (10.3%)
======= ======= ======
Business segment earnings:
Earnings before income taxes:
Fleet Management Solutions $ 36.6 39.4 (7.1%)
Supply Chain Solutions (2.2) (8.6) 74.4%
Dedicated Contract Carriage 5.0 5.7 (12.3%)
Eliminations (8.3) (8.7) 4.6%
------- ------- ------
31.1 27.8 11.9%
Unallocated Central Support Services (6.0) (7.4) 18.9%
Goodwill amortization - (3.3) 100.0%
------- ------- ------
Earnings before unusual items
and income taxes 25.1 17.1 46.8%
Unusual items - recovery
(restructuring and other charges) 1.2 (10.6) N/A
------- ------- ------
Earnings before income taxes 26.3 6.5 304.6%
Provision for income taxes 9.5 2.4 (295.8%)
------- ------- ------
Net earnings $ 16.8 4.1 309.8%
======= ======= ======
NOTE: In 2001, segment earnings before income taxes exclude
goodwill amortization.
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
Periods ended March 31, 2002 and 2001
(In millions)
(unaudited)
Three Months
2002 2001 B(W)
Fleet Management Solutions
Total revenue $ 765.1 854.2 (10.4%)
Fuel revenue (134.7) (182.4) 26.2%
-------- ------- -------
Dry revenue $ 630.4 671.8 (6.2%)
======== ======= =======
Earnings before income taxes $ 36.6 39.4 (7.1%)
======== ======= =======
Earnings before income taxes as
% of total revenue 4.8% 4.6%
======== =======
Earnings before income taxes as
% of dry revenue 5.8% 5.9%
======== =======
Supply Chain Solutions
Total revenue $ 337.1 383.4 (12.1%)
Freight Under Management (FUM) expense (91.2) (115.0) 20.7%
-------- ------- -------
Operating revenue $ 245.9 268.4 (8.4%)
======== ======= =======
Earnings before income taxes $ (2.2) (8.6) 74.4%
======== ======= =======
Earnings before income taxes as
% of total revenue -0.7% -2.2%
======== =======
Earnings before income taxes as
% of operating revenue -0.9% -3.2%
======== =======
Dedicated Contract Carriage
Total revenue $ 125.6 133.6 (6.0%)
Freight Under Management (FUM) expense (1.0) (1.4) 28.6%
-------- ------- -------
Operating revenue $ 124.6 132.2 (5.7%)
======== ======= =======
Earnings before income taxes $ 5.0 5.7 (12.3%)
======== ======= =======
Earnings before income taxes as
% of total revenue 4.0% 4.3%
======== =======
Earnings before income taxes as
% of operating revenue 4.0% 4.3%
======== =======
NOTE: In 2001, segment earnings before income taxes exclude
goodwill amortization.