Ryder Announces Third Quarter 2002 Results; Net Earnings of $33.8 Million Improve From Deficit in 2001
MIAMI--Oct. 23, 2002--Ryder System, Inc. , a global leader in supply chain and transportation management solutions, today reported third quarter 2002 net earnings improved to $33.8 million, compared with a net loss of $5.5 million in the third quarter of 2001. Earnings per diluted share were $0.54 compared with a $0.09 loss per diluted share in the third quarter of 2001. Revenue for the three months ended September 30, 2002 was $1.21 billion, down 2.4 percent from $1.24 billion in the comparable period last year.Earnings per share (EPS), before recovery on restructuring and other items, increased 8.2 percent to $0.53 in the third quarter of 2002, compared with $0.49 in the year-earlier period. EPS in the year-earlier period included a $0.05 per share charge for goodwill amortization, which was eliminated effective January 1, 2002. Revenue was impacted by the continuing slow economic conditions in the U.S. and other parts of the world. The downturn caused volume reductions in the Dedicated Contract Carriage business segment, within some industry sectors of the Supply Chain Solutions business segment and in certain international areas. These conditions led to reduced transportation miles run and continued weak leasing demand. Rental utilization, however, showed improvement for the third consecutive quarter and automotive volumes within the Supply Chain Solutions business increased.
"Ryder's revenue continued to experience the effects of a global economy in which many customers are on the sidelines and are not seeing the kind of sustained improvement they need in order to make investment decisions," said Gregory T. Swienton, Chairman, President and Chief Executive Officer. "We did, however, see improvement in our European operations and are somewhat encouraged by several other positive indicators in our business such as increased rental utilization, volume increases in the automotive sector, and improved used truck sales in the U.S. The cost management focus and continuous improvement processes have helped us deliver earnings in an otherwise difficult business environment."
Year-to-Date Operating Results
Revenue through the third quarter of 2002 was $3.57 billion, down 6.5 percent from $3.82 billion for the same period in 2001. Ryder's year-to-date earnings, before goodwill accounting changes, were $80.1 million, up more than three times the $18.5 million reported for the same period in 2001. Year-to-date EPS, before goodwill accounting changes, increased more than three times to $1.28, from $0.30 for the same period last year. EPS for the first nine months of 2002 included a $0.02 per share recovery on restructuring and other items. EPS in the year-earlier period included an $0.89 per share charge for restructuring and other items, a $0.15 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 EPS 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.
Third 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 for the third quarter remained lower than the prior-year period because of the continued softness of the U.S. economy. Rental utilization, however, showed improvement for the third consecutive quarter.
In the third quarter of 2002, total FMS dry revenue (revenue excluding fuel) was $662.0 million, down 2.9 percent compared with the third quarter of 2001. The third quarter year-over-year decline in dry revenue represents improvement from the 4.1 percent rate of decline in the second quarter. Also, because of price and volume reductions, fuel revenue decreased 8.4 percent in the third quarter of 2002 compared with the same period of 2001.
The FMS business unit's NBT increased 0.7 percent to $58.5 million in the third quarter of 2002, from $58.1 million in the same period of 2001. This improvement occurred in spite of increased pension expense for the third quarter of 2002 of $5.7 million over the year-earlier period. The NBT increase was due primarily to increased rental utilization, improvement in used truck sales, lower interest costs, and improvements in operating expenses stemming from Ryder's cost management and process improvement actions.
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, third quarter 2002 gross revenue totaled $348.5 million, up 0.8 percent from the comparable period in 2001. Third quarter 2002 operating revenue was $247.0 million, up 0.9 percent from the comparable period a year ago. Revenue increased due to higher volumes in the Company's automotive business, and its European and Mexican operations.
The SCS business segment's NBT experienced a deficit in the third quarter of 2002 of $0.7 million compared with a $1.4 million deficit in the same quarter of 2001. This also represented an improvement over the $2.2 million deficit in second quarter of 2002. Overhead and operating cost management actions contributed to this improvement.
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, third quarter gross revenue totaled $131.0 million, down 3.4 percent from the third quarter of 2001. NBT, however, improved to $9.9 million compared with $9.8 million in the year-earlier period. The NBT improvement was due to the non-renewal of certain unprofitable accounts and the Company's ongoing margin improvement program. 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 and slower market demand continued to reduce Ryder's gross capital expenditures. Capital expenditures for the nine months ended September 30, 2002 totaled $443 million, compared with $542 million for the same period last year.
C.J. Nelson, Ryder's Senior Executive Vice President and Chief Financial Officer, said, "Reduction in capital expenditures, in large part driven by our implementation of centralized asset management, continues to pay off. This more effective use of capital has been one of the key drivers of our ability to generate positive year-to-date free cash flow of $280 million, up more than four times the level for the same period last year. Importantly, Ryder has met its full-year free cash flow target within the first nine months of the year."
Central Support Services
Central Support Services (CSS) are overhead costs incurred to support all business segments and product lines. In the third quarter of 2002, CSS costs were reduced for the seventh consecutive quarter; down 4.3 percent to $60.1 million compared with $62.8 million in the third 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 $7.2 million in the third quarter of 2002 and were slightly improved compared with $7.5 million in the year-earlier period.
"Ryder's progress in reducing Central Support Services overhead has been accomplished by key leaders throughout the Company taking greater ownership of the activities and costs they drive in the organization," said Nelson.
Outlook
"We currently estimate fourth quarter 2002 EPS to be in the range of $0.48-0.52 (before restructuring, other items and the cumulative effect of a change in accounting principle); resulting in an EPS range of $1.74-1.78 for the full year 2002," said Swienton. "Our December 2001 guidance call provided a 2002 EPS estimate of $1.51-1.58, which was raised to $1.67-1.74 in April based on a reduction in pension expense. These original estimates were made in anticipation of improved economic conditions in the second half of the year. While an economic recovery has not occurred, we remain on course to meet or exceed our target due to our continuous focus on cost management and process improvement. Going forward we will remain conservative in our estimates, actions and expenditures, until we see substantial signs of a recovery."
Swienton added, "We will continue to closely monitor business conditions and, consistent with last year, will schedule a date in December to communicate our 2003 business plan and outlook."
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 fifth consecutive year, Inbound Logistics recognized Ryder in 2002 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 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 third quarter 2002 earnings webcast is scheduled for October 23, 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 September 30, 2002 and 2001
(In millions, except per share data)
Three Months Nine Months
----------------------------------
2002 2001 2002 2001
----------------------------------
Revenue $1,212.4 1,242.8 $3,571.6 3,818.4
----------------------------------
Operating expense 494.7 524.8 1,458.0 1,639.1
Salaries and employee-related costs 320.3 294.4 951.2 917.1
Freight under management expense 102.4 102.0 302.6 339.2
Depreciation expense 140.1 135.0 412.4 405.3
Gains on vehicle sales, net (3.6) (2.6) (9.8) (9.6)
Equipment rental 84.8 108.7 266.6 322.5
Interest expense 22.3 29.1 70.4 92.7
Miscellaneous (income) expense, net (0.6) 4.5 (3.4) 8.0
Restructuring and other unusual
(recoveries) charges, net (0.8) 53.8 (2.0) 83.8
----------------------------------
1,159.6 1,249.7 3,446.0 3,798.1
----------------------------------
Earnings before income taxes 52.8 (6.9) 125.6 20.3
Provision for income taxes (19.0) 1.4 (45.5) (1.8)
----------------------------------
Net earnings before cumulative
effect of change in accounting
principle 33.8 (5.5) 80.1 18.5
Cumulative effect of change in
accounting principle - - (18.9) -
----------------------------------
Net earnings $33.8 (5.5) $61.2 18.5
==================================
Diluted earnings per common share $0.54 (0.09) $0.98 0.30
==================================
Average common shares - diluted 62.8 60.2 62.6 60.6
==================================
Supplemental earnings per share
information:
Earnings prior to goodwill amortization,
one-time tax benefit, recovery (charge)
and cumulative change in
accounting principle $0.53 0.54 $1.26 1.23
Goodwill amortization - (0.05) - (0.15)
----------------------------------
Earnings prior to one-time tax
benefit, recovery (charge) and
change in acct principle 0.53 0.49 1.26 1.08
One-time tax benefit - - - 0.11
----------------------------------
Earnings prior to recovery (charge)
and change in acct principle 0.53 0.49 1.26 1.19
Restructuring and other unusual
recoveries (charges), net 0.01 (0.58) 0.02 (0.89)
----------------------------------
Earnings prior to cumulative change
in accounting principle 0.54 (0.09) 1.28 0.30
Cumulative change in accounting
principle - - (0.30) -
----------------------------------
Net earnings $0.54 (0.09) $0.98 0.30
==================================
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)
September December
30, 31,
2002 2001
---------------------
Assets:
Current assets $ 1,074.3 982.5
Revenue earning equipment 2,457.9 2,479.1
Operating property and equipment 539.2 566.9
Other assets 850.0 897.2
----------------------
$ 4,921.4 4,925.7
=====================
Liabilities and Shareholders' Equity:
Current liabilities (including current
portion of long-term debt) $ 965.2 1,016.9
Long-term debt 1,336.0 1,391.6
Other non-current liabilities (including
deferred income taxes) 1,317.6 1,286.5
Shareholders' equity 1,302.6 1,230.7
---------------------
$ 4,921.4 4,925.7
=====================
NOTE: Certain amounts have been reclassified to conform to current
presentation.
SELECTED KEY RATIOS
September December
30, 31,
2002 2001
-------------------
Debt to equity 119% 139%
Total obligations to equity (a) 155% 199%
Total obligations to equity, including
securitizations (a) 182% 234%
Twelve months
ended
September 30,
----------------
2002 2001
------- -------
Return on average common equity (b) 6.4% 3.7%
Return on average assets (b) 1.6% 0.9%
Average asset turnover 97.4% 97.9%
Return on total capital (b) 4.9% 4.0%
(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 September 30, 2002 and 2001
(In millions)
(unaudited)
Three Months Nine Months
----------------------- -----------------------
2002 2001 B(W) 2002 2001 B(W)
----------------------- -----------------------
Revenue:
Fleet Management
Solutions:
Full service lease and
program maintenance $451.4 465.3 (3.0%)$1,351.0 1,399.2 (3.4%)
Commercial rental 123.2 125.0 (1.4%) 339.0 355.4 (4.6%)
Fuel 147.9 161.4 (8.4%) 429.0 519.3 (17.4%)
Other 87.4 91.8 (4.8%) 259.4 284.3 (8.8%)
-----------------------------------------------
Total Fleet
Management
Solutions 809.9 843.5 (4.0%) 2,378.4 2,558.2 (7.0%)
Supply Chain
Solutions 348.5 345.6 0.8% 1,043.9 1,114.7 (6.4%)
Dedicated Contract
Carriage 131.0 135.6 (3.4%) 384.3 401.5 (4.3%)
Eliminations (77.0) (81.9) 6.0% (235.0) (256.0) 8.2%
-----------------------------------------------
Total revenue $1,212.4 1,242.8 (2.4%)$3,571.6 3,818.4 (6.5%)
===============================================
Business segment
earnings:
Earnings before
income taxes:
Fleet Management
Solutions $58.5 58.1 0.7% $150.5 148.4 1.4%
Supply Chain Solutions (0.7) (1.4) 50.0% (5.1) (10.7) 52.3%
Dedicated Contract
Carriage 9.9 9.8 1.0% 23.3 24.8 (6.0%)
Eliminations (8.5) (8.9) 4.5% (25.1) (26.9) 6.7%
-----------------------------------------------
59.2 57.6 2.8% 143.6 135.6 5.9%
Unallocated Central
Support Services (7.2) (7.5) 4.0% (20.0) (21.7) 7.8%
Goodwill amortization - (3.2) N/A - (9.8) N/A
-----------------------------------------------
Earnings before restructuring
and other unusual recoveries
(charges), net and
income taxes 52.0 46.9 10.9% 123.6 104.1 18.7%
Restructuring and
other unusual
recoveries
(charges), net 0.8 (53.8) N/A 2.0 (83.8) N/A
-----------------------------------------------
Earnings before
income taxes 52.8 (6.9) N/A 125.6 20.3 N/A
Provision for income
taxes (19.0) 1.4 N/A (45.5) (1.8) N/A
-----------------------------------------------
Net earnings before
cumulative effect of
change in acct
principle 33.8 (5.5) N/A 80.1 18.5 333.0%
Cumulative effect of
change in accounting
principle - - N/A (18.9) - N/A
-----------------------------------------------
Net earnings $33.8 (5.5) N/A $61.2 18.5 230.8%
===============================================
NOTE: In 2001, segment earnings before income taxes exclude goodwill
amortization.
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
Periods ended September 30, 2002 and 2001
(In millions)
(unaudited)
Three Months Nine Months
-------------------- -----------------------
2002 2001 B(W) 2002 2001 B(W)
-------------------- -----------------------
Fleet Management
Solutions
Total revenue $809.9 843.5 (4.0%)$2,378.4 2,558.2 (7.0%)
Fuel revenue (147.9)(161.4)(8.4%) (429.0) (519.3)(17.4%)
--------------------------------------------
Dry revenue $662.0 682.1 (2.9%)$1,949.4 2,038.9 (4.4%)
============================================
Earnings before income
taxes $58.5 58.1 0.7% $150.5 148.4 1.4%
============================================
Earnings before income
taxes as % of total
revenue 7.2% 6.9% 6.3% 5.8%
============== =================
Earnings before income
taxes as % of dry
revenue 8.8% 8.5% 7.7% 7.3%
============== =================
Supply Chain Solutions
Total revenue $348.5 345.6 0.8%$1,043.9 1,114.7 (6.4%)
Freight Under Management
(FUM) expense (101.5)(100.8)(0.7%) (299.7) (335.3) 10.6%
--------------------------------------------
Operating revenue $247.0 244.8 0.9% $744.2 779.4 (4.5%)
============================================
Earnings before income
taxes $(0.7) (1.4) 50.0% $(5.1) (10.7) 52.3%
============================================
Earnings before income
taxes as % of total
revenue -0.2% -0.4% -0.5% -1.0%
============== =================
Earnings before income
taxes as % of operating
revenue -0.3% -0.6% -0.7% -1.4%
============== =================
Dedicated Contract
Carriage
Total revenue $131.0 135.6 (3.4%) $384.3 401.5 (4.3%)
Freight Under Management
(FUM) expense (0.9) (1.2) 25.0% (2.9) (3.9) 25.6%
--------------------------------------------
Operating revenue $130.1 134.4 (3.2%) $381.4 397.6 (4.1%)
============================================
Earnings before income
taxes $9.9 9.8 1.0% $23.3 24.8 (6.0%)
============================================
Earnings before income
taxes as % of total
revenue 7.6% 7.2% 6.1% 6.2%
============== =================
Earnings before income
taxes as % of operating
revenue 7.6% 7.3% 6.1% 6.2%
============== =================
NOTE: In 2001, segment earnings before income taxes exclude goodwill
amortization.