Ryder Announces Second Quarter 2002 Results
MIAMI--July 24, 2002--Ryder System, Inc. , a global leader in supply chain and transportation management solutions, today reported second quarter 2002 net earnings improved 48 percent to $29.5 million, compared with $19.9 million in the second quarter of 2001. Revenue for the three months that ended June 30, 2002 was $1.21 billion, down 7 percent from $1.29 billion in the comparable period last year.Earnings per share increased 42 percent to $0.47 in the second quarter of 2002, compared with $0.33 in the year-earlier period. Earnings per share in the year-earlier period included a $0.20 per share charge for restructuring and other items, a $0.05 per share charge for goodwill amortization which was eliminated effective January 1, 2002, as well as an $0.11 per share one-time tax benefit related to a change in Canadian tax law.
Revenue was impacted by the continuing slow economic conditions in the U.S. and other parts of the world. These conditions led to reduced transportation miles run and continued weak leasing and rental demand, although rental utilization continued to show quarterly improvement. The economic downturn has also caused volume reductions in the Dedicated Contract Carriage business segment, within some industry sectors of the Supply Chain Solutions business segment and in international areas such as Argentina.
"Ryder's revenue continued to show the effects of a sluggish, uneven global economy that has provided few signs of sustained improvement," said Gregory T. Swienton, Chairman, President and Chief Executive Officer. "Ryder's revenue was also impacted by the Company's focused effort to no longer accept revenue that does not provide adequate returns for Ryder's shareholders. We did, however, see modest quarterly revenue improvement in each business segment and are somewhat encouraged by several positive indicators in our business. Among the positive indicators were a modest increase in rental utilization, continued steady volumes in the automotive sector and improved used truck sales in the U.S., as well as improvements in Ryder's leasing, rental and supply chain solutions businesses in the U.K. In addition, our emphasis on continuous cost management and process improvement has been embraced throughout the organization and continues to have a positive impact on Ryder's bottom line."
Year-to-Date Operating Results
Revenue for the first half of 2002 was $2.36 billion, down 8 percent from $2.58 billion for the same period in 2001. Ryder's earnings, before goodwill accounting changes, for the six months ended June 30, 2002, were $46.3 million, up 93 percent compared with $24.0 million for the same period in 2001. Earnings per share, before goodwill accounting changes, increased 85 percent to $0.74 for the first six months of 2002, from $0.40 for the same period last year. Earnings per share for the first six months of 2002 included a $0.01 per share recovery on restructuring and other items. Earnings per share in the year-earlier period included a $0.31 per share charge for restructuring and other items, a $0.10 charge for goodwill amortization which was eliminated effective January 1, 2002, as well as an $0.11 per share one-time tax benefit related to a change in Canadian tax law.
As previously announced, year-to-date 2002 earnings per share include a $0.30 one-time charge related to a change in accounting for goodwill effective January 1, 2002. Ryder completed adoption of Statement of Financial Accounting Standards (FAS) No. 142, "Goodwill and Other Intangible Assets," and recorded a non-cash goodwill impairment charge of $18.9 million associated with the Asian operations of its Supply Chain Solutions business segment. The charge resulted from application of the new impairment methodology prescribed by FAS No. 142 and will have no effect on the Company's operations. The new accounting standard also eliminated the amortization of goodwill, effective January 1, 2002.
Second Quarter Business Segment Operating Results
Ryder's primary measurement of segment financial performance, Net Before Tax (NBT), allocates Central Support Services to each business segment and excludes the amortization of goodwill and intangibles. Introduced by Ryder in the first quarter of 2002, NBT provides 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 this measurement standard.
Fleet Management Solutions
Ryder's Fleet Management Solutions (FMS) business segment 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 than the prior-year period because of the continued softness of the U.S. economy.
In the second quarter of 2002, total FMS dry revenue (revenue excluding fuel) was $657.0 million, down 4 percent compared with the second quarter of 2001. The second quarter year-over-year decline in dry revenue represents improvement from the 6 percent rate of decline in the first quarter. Also, because of price and volume reductions, fuel revenue decreased 17 percent in the second quarter of 2002 compared with the same period of 2001.
The FMS business unit's NBT increased 9 percent to $55.4 million in the second quarter of 2002, from $50.9 million in the same period of 2001, despite higher pension expense of $5.9 million. The NBT increase was due primarily to improvements in operating expenses stemming from Ryder's cost management and process improvement actions, increased rental utilization, improvement in used truck sales 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, second quarter 2002 gross revenue totaled $358.3 million, down 7 percent from the comparable period in 2001. Second quarter 2002 operating revenue was $251.3 million, down 6 percent from the comparable period a year ago. Revenue declined due to volume reductions, primarily in the electronics, high tech and telecommunications sector, and, to a lesser extent, the cancellation of certain unprofitable business in prior periods. Revenue also declined due to the impact of currency devaluation and economic slowdown in Argentina.
The SCS business segment's NBT had a deficit of $2.2 million in the second quarter of 2002 (flat with the first quarter of 2002), compared with a deficit of $0.6 million in the same quarter of 2001. The year-over-year decline for the quarter was due primarily to start-up costs associated with several substantial new SCS contracts and uneven performance among international business units. These factors offset improved operating performance in the automotive sector, overhead cost management actions and benefits from the elimination of certain unprofitable accounts.
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 $127.7 million, down 4 percent from the second quarter of 2001. The second quarter year-over-year decline in gross revenue represents a lower rate of decline than the 6 percent experienced in the first quarter. The business segment's NBT decreased to $8.4 million compared with $9.2 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 increased investment in sales and marketing, which offset improvements in other operational areas.
Corporate Financial Information
Capital Expenditures
Improved processes, controls, cost management and slower market demand continued to reduce Ryder's gross capital expenditures. Capital expenditures for the six months ended June 30, 2002 totaled $280.0 million, compared with $429.6 million for the same period last year.
Central Support Services
Central Support Services (CSS) are overhead costs incurred to support all business segments and product lines. In the second quarter of 2002, CSS costs were reduced for the sixth straight quarter, down 6 percent to $58.3 million compared with $61.8 million in the second quarter of 2001. The decrease was attributable primarily to various strategic cost management actions undertaken across all departments. Substantially all CSS costs are now allocated to the various business segments. Net unallocated CSS costs were $6.8 million in the second quarter of 2002 and were flat compared with the year-earlier period.
C.J. Nelson, Ryder's Senior Executive Vice President and Chief Financial Officer, said, "The cost management focus and capital investment philosophy that were introduced over the past several years are becoming part of Ryder's ongoing business practices and culture; we continue to see the positive impact these are having on the Company. We will continue to seek innovative ways to invest our capital wisely and generate greater value from what we do invest, as we work to generate additional sources of profitable revenue. Additionally, Ryder's 2002 year-to-date free cash flow was approximately $194 million - consisting of $99 million in the first quarter and $95 million in the second quarter - an improvement of $277 million over the comparable period in 2001."
Outlook
"We are seeing no evidence of a sustained economic recovery from our broad customer base or the transportation usage patterns of these customers," Swienton indicated. "We are, however, organizationally prepared to compete as effectively as possible in these current conditions. Until we see substantial positive signs of an economic recovery, we remain conservative in our estimates and our expenditures."
He continued, "Our forecast for earnings per share in the third quarter is $0.48 to $0.50. At this time, due to the uncertain economic environment, we see no reason to revise the second half forecast provided in April. Despite those uncertainties, Ryder's ongoing implementation of cost management practices and process improvements should continue to generate short- and long-term benefits. Earnings could also improve if there is an actual increase in economic activity as we continue through 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.
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. 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.
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 http://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 second quarter 2002 earnings webcast is scheduled for July 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, Chairman, 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 June 30, 2002 and 2001
(In millions, except per share data)
Three Months Six Months
2002 2001 2002 2001
Revenue $ 1,209.3 1,294.1 $ 2,359.2 2,575.6
--------- ------- --------- -------
Operating expense 489.6 553.8 963.2 1,114.3
Salaries and employee-
related costs 319.1 307.3 630.9 622.7
Freight under management
expense 108.0 120.8 200.2 237.2
Depreciation expense 139.4 132.8 272.4 270.3
Gains on vehicle sales, net (4.2) (3.9) (6.2) (7.0)
Equipment rental 87.4 114.6 181.8 213.9
Interest expense 23.9 29.3 48.1 63.6
Miscellaneous (income)
expense, net (0.4) (0.7) (2.8) 3.5
Unusual items - (recovery)
restructuring and other
charges, net - 19.4 (1.2) 29.9
--------- ------- --------- -------
1,162.8 1,273.4 2,286.4 2,548.4
--------- ------- --------- -------
Earnings before income taxes 46.5 20.7 72.8 27.2
Provision for income taxes (17.0) (0.8) (26.5) (3.2)
--------- ------- --------- -------
Net earnings before
cumulative effect of change
in accounting principle 29.5 19.9 46.3 24.0
Cumulative effect of change
in accounting principle - - (18.9) -
--------- ------- --------- -------
Net earnings $ 29.5 19.9 $ 27.4 24.0
========= ======= ========= =======
Diluted earnings
per common share $ 0.47 0.33 $ 0.44 0.40
========= ======= ========= =======
Average common shares
- diluted 63.0 60.7 62.4 60.5
========= ======= ========= =======
Supplemental earnings per
share information:
Earnings prior to goodwill
amortization, one-time tax
benefit, recovery (charge)
and cumulative change in
accounting principle $ 0.47 0.47 $ 0.73 0.70
Goodwill amortization - (0.05) - (0.10)
--------- ------- --------- -------
Earnings prior to one-time
tax benefit, recovery
(charge) and change in
acct principle 0.47 0.42 0.73 0.60
One-time tax benefit - 0.11 - 0.11
--------- ------- --------- -------
Earnings prior to recovery
(charge) and change in
acct principle 0.47 0.53 0.73 0.71
Recovery (restructuring
and other charges) - (0.20) 0.01 (0.31)
--------- ------- --------- -------
Earnings prior to
cumulative change in
accounting principle 0.47 0.33 0.74 0.40
Cumulative change in
accounting principle - - (0.30) -
--------- ------- --------- -------
Net earnings $ 0.47 0.33 $ 0.44 0.40
========= ======= ========= =======
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)
June 30, December 31,
2002 2001
----------- ------------
Assets:
Current assets $ 1,017.6 982.5
Revenue earning equipment 2,457.4 2,479.1
Operating property and equipment 551.2 566.9
Other assets 846.0 897.2
----------- ------------
$ 4,872.2 4,925.7
=========== ============
Liabilities and Shareholders' Equity:
Current liabilities (including
current portion of long-term debt) $ 895.5 1,016.9
Long-term debt 1,370.4 1,391.6
Other non-current liabilities
(including deferred income taxes) 1,327.4 1,286.5
Shareholders' equity 1,278.9 1,230.7
----------- ------------
$ 4,872.2 4,925.7
=========== ============
NOTE: Certain amounts have been reclassified to conform to current
presentation.
SELECTED KEY RATIOS
June 30, December 31,
2002 2001
----------- ------------
Debt to equity 122% 139%
Total obligations to equity (a) 167% 199%
Total obligations to equity,
including securitizations (a) 197% 234%
Twelve months ended
June 30,
2002 2001
----------- ------------
Return on average common equity (b) 3.3% 5.1%
Return on average assets (b) 0.8% 1.2%
Average asset turnover 96.6% 97.6%
Return on total capital (b) 3.6% 5.1%
(a) - Total obligations represent debt plus off-balance sheet
equipment obligations.
(b) - Excludes the effect of change in accounting principle in 2002.
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT REVENUE AND EARNINGS
Periods ended June 30, 2002 and 2001
(In millions)
(unaudited)
Three Months Six Months
2002 2001 B(W) 2002 2001 B(W)
------- ------ ------ ------- ----- -----
Revenue:
Fleet Management Solutions:
Full service lease and
program maintenance $ 452.1 468.8 (3.6%) $ 899.6 933.9 (3.7%)
Commercial rental 116.8 121.1 (3.6%) 215.8 230.4 (6.3%)
Fuel 146.4 175.5 (16.6%) 281.1 357.9 (21.5%)
Other 88.1 95.1 (7.4%) 172.0 192.5 (10.6%)
------- ------ ------ ------- ----- -----
Total Fleet Management
Solutions 803.4 860.5 (6.6%) 1,568.5 1,714.7 (8.5%)
Supply Chain Solutions 358.3 385.7 (7.1%) 695.4 769.1 (9.6%)
Dedicated Contract
Carriage 127.7 132.3 (3.5%) 253.3 265.9 (4.7%)
Eliminations (80.1) (84.4) 5.1% (158.0) (174.1) 9.2%
------- ------ ------ ------- ----- -----
Total revenue $1,209.3 1,294.1 (6.6%) $ 2,359.2 2,575.6 (8.4%)
Business segment earnings:
Earnings before
income taxes:
Fleet Management
Solutions $ 55.4 50.9 8.8% $ 92.0 90.3 1.9%
Supply Chain Solutions (2.2) (0.6)(266.7%) (4.4) (9.3) 52.7%
Dedicated Contract
Carriage 8.4 9.2 (8.7%) 13.4 15.0 (10.7%)
Eliminations (8.3) (9.3) 10.8% (16.6) (18.0) 7.8%
------- ------ ------ ------- ----- -----
53.3 50.2 6.2% 84.4 78.0 8.2%
Unallocated Central
Support Services (6.8) (6.8) 0.0% (12.8) (14.2) 9.9%
Goodwill amortization - (3.3) N/A - (6.6) N/A
------- ------ ------ ------- ----- -----
Earnings before unusual
items and income taxes 46.5 40.1 16.0% 71.6 57.2 25.2%
Unusual items - recovery
(restructuring and
other charges) - (19.4) N/A 1.2 (30.0) N/A
------- ------ ------ ------- ----- -----
Earnings before
income taxes 46.5 20.7 124.6% 72.8 27.2 167.6%
Provision for
income taxes (17.0) (0.8) N/A (26.5) (3.2) N/A
------- ------ ------ ------- ----- -----
Net earnings before
cumulative effect of
change in acct
principle 29.5 19.9 48.2% 46.3 24.0 92.9%
Cumulative effect of
change in accounting
principle - - N/A (18.9) - N/A
------- ------ ------ ------- ----- -----
Net earnings $ 29.5 19.9 48.2% $ 27.4 24.0 14.2%
======= ====== ====== ======= ===== =====
NOTE: In 2001, segment earnings before income taxes exclude goodwill
amortization.
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
Periods ended June 30, 2002 and 2001
(In millions)
(unaudited)
Three Months Six Months
2002 2001 B(W) 2002 2001 B(W)
------- ------ ------ ------- ----- -----
Fleet Management Solutions
Total revenue $ 803.4 860.5 (6.6%) $1,568.5 1,714.7 (8.5%)
Fuel revenue (146.4) (175.5) (16.6%) (281.1) (357.9)(21.5%)
------- ------ ------ ------- ----- -----
Dry revenue $ 657.0 685.0 (4.1%) $1,287.4 1,356.8 (5.1%)
======= ====== ====== ======= ===== =====
Earnings before
income taxes $ 55.4 50.9 8.8% $ 92.0 90.3 1.9%
======= ====== ====== ======= ===== =====
Earnings before income
taxes as % of
total revenue 6.9% 5.9% 5.9% 5.3%
======= ====== ======= =====
Earnings before income
taxes as % of
dry revenue 8.4% 7.4% 7.1% 6.7%
======= ====== ======= =====
Supply Chain Solutions
Total revenue $ 358.3 385.7 (7.1%) $ 695.4 769.1 (9.6%)
Freight Under Management
(FUM) expense (107.0)(119.5) 10.5% (198.2) (234.5) 15.5%
------- ------ ------ ------- ----- -----
Operating revenue $ 251.3 266.2 (5.6%) $ 497.2 534.6 (7.0%)
======= ====== ====== ======= ===== =====
Earnings before
income taxes $ (2.2) (0.6) (266.7%) $ (4.4) (9.3) 52.7%
======= ====== ====== ======= ===== =====
Earnings before income
taxes as % of
total revenue -0.6% -0.2% -0.6% -1.2%
======= ====== ======= =====
Earnings before income
taxes as % of
operating revenue -0.9% -0.2% -0.9% -1.7%
======= ====== ======= =====
Dedicated Contract Carriage
Total revenue $ 127.7 132.3 (3.5%) $ 253.3 265.9 (4.7%)
Freight Under Management
(FUM) expense (1.0) (1.3) 23.1% (2.0) (2.7) 25.9%
------- ------ ------ ------- ----- -----
Operating revenue $ 126.7 131.0 (3.3%) $ 251.3 263.2 (4.5%)
======= ====== ====== ======= ===== =====
Earnings before
income taxes $ 8.4 9.2 (8.7%) $ 13.4 15.0 (10.7%)
======= ====== ====== ======= ===== =====
Earnings before income
taxes as % of
total revenue 6.6% 7.0% 5.3% 5.6%
======= ====== ===== =====
Earnings before income
taxes as % of
operating revenue 6.6% 7.0% 5.3% 5.7%
======= ====== ===== =====
NOTE: In 2001, segment earnings before income taxes exclude goodwill
amortization.