Ryder Reports Higher Revenue in Third Quarter 2000
19 October 2000
Ryder Reports Higher Revenue in Third Quarter 2000
Business EditorsMIAMI--Oct. 19, 2000-- Ryder System, Inc. , a global leader in logistics and transportation management solutions, today reported revenue increased slightly over 6 percent to $1.34 billion for the three months ending September 30, 2000, up from $1.26 billion in the comparable period last year.
Pre-tax earnings from continuing operations, before other charges and unusual items, were $56.6 million in the third quarter, compared with $61.7 million in the year-earlier period. On a per diluted share basis, earnings from continuing operations before other charges and unusual items increased over 9 percent to $0.60 in the third quarter of 2000, compared with $0.55 in the third quarter of 1999.
Other charges and unusual items in the third quarter totaled $37.3 million, pre-tax, or $0.39 per diluted share after income taxes, as announced on October 6. There are primarily two components of the pre-tax charge. The first is a write-down of certain Ryder-owned unsold used tractors, reflecting the continuing industry-wide downturn in the market for new and used "Class 8" trucks and tractors (the largest heavy-duty tractors and straight trucks) and anticipated net sales proceeds. Ryder's unsold Class 8 inventory consists of units previously used by customers of the Company's full service commercial lease and short-term commercial rental programs.
Relating to that charge, there is also an increase in the Company's reserves for guaranteed termination values for equipment that Ryder leases rather than owns. The charge for the impacted owned and leased revenue-earning equipment represents less than one percent of Ryder's total asset base.
A secondary and small component of the charge is a write-down of assets impaired in connection with the settlement of a long-standing contract dispute.
Unusual items totaled $37.3 million in the third quarter of 2000, compared with $5.3 million in the same period last year. In the third quarter of 2000, unusual items included the charge referenced above. In the third quarter of 1999, unusual items included slightly more than $2 million in Y2K expenses and $3 million in restructuring costs. On a per diluted share basis, unusual items were $0.39 for the third quarter of 2000, compared with $0.05 a year ago. In addition, the third quarter of 1999 included a $335 million after-tax gain on the sale of Ryder's Public Transportation division (or $4.83 per diluted share) as well as a $9 million after-tax loss on discontinued operations (or $0.13 per diluted share).
Year to Date Results
For the first nine months of 2000, Ryder's revenue grew nearly 10 percent, to almost $4 billion, up from approximately $3.6 billion in the comparable period of 1999. Pre-tax earnings from continuing operations, before unusual items, were slightly over $135 million and essentially flat with the same period last year.
Unusual items were $37.3 million in the first nine months of 2000, compared with $28 million during the same period of 1999 (slightly over $23 million in Y2K expenses and almost $5 million in restructuring costs).
Results of the first nine months of 1999 also included the $335 million after-tax gain on the sale of the Public Transportation division referenced earlier, as well as $12 million in earnings from discontinued operations.
On a per diluted share basis, continuing operations, before unusual items, were up approximately 20 percent, to $1.43 in the first nine months of 2000, compared with $1.19 during the same period of 1999. Unusual items were $0.39 for the first nine months of 2000, compared with $0.24 in the same period of 1999. In addition, the first nine months of 1999 included a $4.75 gain on the sale of the Public Transportation division and $0.17 of earnings from continuing operations.
Third Quarter Business Segment Operating Results
"Ryder's operating results were in line with current estimates, despite continued competitive challenges and the industry-wide weakened used truck market," said Gregory T. Swienton, Ryder's President and Chief Operating Officer.
Logistics Solutions
Logistics solutions enable customers to improve their shareholder value and customer satisfaction by decreasing supply chain cycle times and 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 are made faster and consume less capital.
In the Logistics Solutions business segment, third quarter 2000 gross revenue totaled $394.3 million, up over 9 percent from the comparable period in 1999. Third quarter 2000 operating revenue was $295.1 million, up almost 12 percent from the comparable period a year ago. Revenue growth is attributable to the start-up of new business, as well as expansion of business with existing customers.
The Logistics Solutions' contribution margin was down in the third quarter of 2000, due primarily to increased costs related to Ryder's transportation management offering, which is being consolidated into a new national facility in the Dallas-Fort Worth metroplex, and one-time legal fees that will benefit future results. Contribution margin dollars were $16.8 million in the third quarter of 2000, compared with $19.1 million in the same quarter of 1999. The contribution margin as a percentage of operating revenue was 5.7 percent in the third quarter of 2000, compared with 7.2 percent in the same quarter of 1999.
Dedicated Contract Carriage
Ryder's Dedicated Contract Carriage (DCC) segment provides customers with vehicles, drivers, management and administrative support, with the assets being 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 Dedicated Contract Carriage business segment, third quarter gross revenue totaled $136.7 million, up over 3 percent from the third quarter of 1999. Operating revenue in the third quarter was $134.5 million, up 2.5 percent from the comparable period a year ago. The contribution margin in the third quarter of 2000 was $14.8 million, essentially flat on a year-over-year comparison with 1999. Contribution margin as a percentage of operating revenue was 11.0 percent compared with 11.5 percent last year. This percentage is down slightly as a result of increased salary expenses, as well as higher fuel costs. Since higher fuel costs are essentially passed through to customers, they have no impact on margin dollars, but they do decrease the margin as a percentage of revenue.
Commercial Leasing and Rental
Ryder's commercial leasing operations 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 Leasing and Rental business segment, dry revenue (revenue excluding fuel) in the third quarter of 2000 was $719.2 million, up over 3 percent from the third quarter of 1999. Leasing revenue was up almost 5 percent, while rental revenue was down almost 5 percent from a year ago. Rental growth has slowed as expected due to the arrival and subsequent delivery to customers of new lease vehicles, which are replacing rental vehicles used in the interim period. However, excluding this lease-support revenue, pure rental revenue increased almost 6 percent.
Due to the continuation of higher fuel prices, fuel revenue was up almost 24 percent over the third quarter of 1999. However, Ryder realized no additional margin from the fuel price increases.
Contribution margin dollars in the commercial leasing and rental segment increased 6.1 percent in the third quarter of 2000 compared with the same period of 1999. Contribution margin as a percentage of dry revenue was 14.9 percent in the third quarter of 2000 compared with 14.5 percent in third quarter of 1999. Contribution margins increased primarily due to stronger lease and contract maintenance margins in Ryder's domestic operations as well as lower employee benefit costs. Earnings were negatively impacted by lower rental margin dollars due to lower rental revenue, bad debt expenses and lower gains on the sale of equipment.
Corporate Financial Information
Capital Expenditures
Continuing the processes and controls put in place during the second half of 1999, gross capital expenditures were reduced by over 54 percent to $197.8 million in the third quarter of 2000, down significantly compared with the $431.9 million spent during the comparable quarter in 1999. Likewise, for the first nine months of 2000, gross capital expenditures were just over $1 billion, down 31.9 percent compared with the first nine months of 1999. Gross capital expenditures are offset by proceeds from the sale of revenue-earning equipment.
Central Support Services
Central support services are those costs incurred to support all product lines. In the third quarter of 2000, central support services were almost $72 million, compared with slightly more than $63 million in the third quarter of 1999. The cost increase was primarily for additional strategic investments in the Company. Expenditures were made for: management information systems; wages, professional fees and technology costs related to customer solutions; e-Commerce initiatives; and human resources and financial services initiatives.
Outlook
According to Swienton, "Although our corporate restructuring has reduced the overall impacts of business cycle factors on Ryder's results, we are experiencing signs of weakness in the economy, as evidenced by a slowing of our commercial rental business segment and bad debt and bankruptcies with some customers, as well as the previously mentioned depressed used truck market. Nonetheless, we are working diligently to grow our business in a profitable manner. In the last several days we have announced the acquisition of Ascent Logistics in Singapore, which will solidify our position in Asia. We announced a major logistics contract with Visteon, a huge supplier in the automotive sector, as well as the launch of another of our e-Business ventures, RyderFleetProducts.com."
Commenting further, Swienton said, "We continue to believe that the initiatives we have underway will improve Ryder's execution and long-term profitability and we anticipate continued growth across our lines of business."
Signs of softness appeared in Ryder's business segments in September as the third quarter drew to a close. Ryder management anticipates that external market trends and other events already noted could continue, and therefore it believes the Company's earnings per share for the fourth quarter of 2000 could be in the range of $0.45 to $0.50, yielding earnings per share for full year 2000 of $1.88 to $1.93.
Company Description
Ryder provides a continuum of 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, 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.
Fortune magazine ranked Ryder as the most admired company in the highway transportation industry in 1997 and 1998 and second in 1999. In 2000, Ryder received a higher overall rating than its competitors in the Fortune survey. For the third consecutive year, Inbound Logistics magazine 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. In 2000, Ryder ranked 309th on the Fortune 500 list and 332nd on the Forbes 500.
For additional information regarding Ryder System, Inc., please visit www.ryder.com.
NOTE:
The third quarter 2000 earnings webcast is scheduled for October 19, 2000 at 11:15 a.m. (EDT). To access the call via the Internet, visit Ryder's home page at www.ryder.com. Speakers will be:
M. Anthony Burns, Chairman and Chief Executive Officer Gregory T. Swienton, President and Chief Operating Officer 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, 2000 and 1999
(In millions, except per share data)
Three Months Nine Months
2000 1999 2000 1999
Revenue $1,338.8 1,261.6 $3,979.6 3,630.4
Operating expense 1,001.0 904.3 2,990.5 2,613.7
Freight under management
expense 101.4 98.4 310.8 305.1
Depreciation expense,
before gains 142.8 161.1 434.2 471.1
Gains on vehicle sales (3.7) (14.7) (17.0) (42.8)
Interest expense 36.6 50.1 117.3 144.1
Miscellaneous expense
(income) 4.1 0.7 8.7 3.9
Unusual items:
Restructuring and
other charges 37.3 3.0 37.3 4.7
Year 2000 expense 0.0 2.3 0.0 23.3
1,319.5 1,205.2 3,881.8 3,523.1
Earnings from continuing
operations before income
taxes 19.3 56.4 97.8 107.3
Provision for income taxes 7.2 21.3 36.2 40.7
Earnings from continuing
operations 12.1 35.1 61.6 66.6
Earnings from discontinued
operations -- (9.0) -- 11.8
Gain on sale of
discontinued operations -- 335.4 -- 335.4
Net earnings $ 12.1 361.5 $ 61.6 413.8
Diluted earnings per
common share:
Continuing operations $ 0.20 0.51 $ 1.03 0.94
Discontinued operations -- (0.13) -- 0.17
Gain on sale of
discontinued operations -- 4.83 -- 4.75
$ 0.20 5.21 $ 1.03 5.87
Average common
shares - diluted 59.8 69.4 59.7 70.5
Supplemental earnings
per share information:
Earnings from continuing
operations prior to
unusual items $ 0.60 0.55 $ 1.43 1.19
Restructuring and
other charges (0.39) (0.03) (0.39) (0.04)
Year 2000 expense -- (0.02) -- (0.20)
Continuing operations $ 0.20 0.51 $ 1.03 0.94
Discontinued operations -- (0.13) -- 0.17
Gain on sale of
discontinued operations -- 4.83 -- 4.75
$ 0.20 5.21 $ 1.03 5.87
NOTE: Earnings per share amounts are calculated independently for each
component and may not be additive due to rounding.
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - PRELIMINARY AND UNAUDITED
(In millions)
September 30, Dec. 31,
2000 1999
Assets:
Current assets $ 1,130.7 1,209.4
Revenue earning equipment 2,986.8 3,095.5
Operating property and equipment 579.4 581.1
Other assets 922.6 884.5
$ 5,619.5 5,770.5
Liabilities and
Shareholders' Equity:
Current liabilities (including
current portion of long-term debt) $ 1,450.3 1,449.5
Long-term debt 1,680.3 1,819.1
Other non-current liabilities
(including deferred income taxes) 1,258.9 1,297.0
Shareholders' equity 1,230.0 1,204.9
$ 5,619.5 5,770.5
SELECTED KEY RATIOS
September 30, Dec. 31,
2000 1999
Debt to equity 182% 199%
Total obligations
to equity (a) 278% 271%
Twelve months ended
September 30,
2000 1999
Return on average
common equity (b) 8.2% 12.9%
Return on average
assets (b) 1.6% 2.1%
Average asset turnover 91.3% 85.6%
(a) Total obligations represent both on and off-balance sheet debt
(b) Excludes Year 2000 expense and restructuring
RYDER SYSTEM, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
Periods ended September 30, 2000 and 1999
(In millions)
Three Months
------------------------------
2000 1999 B(W)
-------- ------- -------
Revenue:
Leasing and rental:
Full service lease
and program maintenance $ 484.3 461.6 4.9%
Commercial rental 137.7 144.4 (4.6%)
Fuel 189.2 152.8 23.8%
Other 97.2 90.4 7.5%
-------- ------- ------
Total leasing and rental 908.4 849.2 7.0%
-------- ------- ------
Logistics solutions 394.3 361.1 9.2%
Dedicated contract carriage 136.7 132.2 3.4%
Eliminations (100.6) (80.9) 24.4%
-------- ------- ------
Total revenue $ 1,338.8 1,261.6 6.1%
======== ======= ======
Contribution margin:
Leasing and rental $ 107.2 101.0 6.1%
Logistics solutions 16.8 19.1 (12.0%)
Dedicated contract carriage 14.8 15.1 (2.0%)
Eliminations (10.4) (10.2) 2.0%
-------- ------- ------
128.4 125.0 2.7%
Central support services (71.8) (63.3) 13.4%
-------- ------- ------
Earnings from continuing
operations before
unusual items and income
taxes 56.6 61.7 (8.3%)
Restructuring and other
charges (37.3) (3.0) 1143.3%
Year 2000 expense -- (2.3) (100.0%)
-------- ------- ------
Earnings before
income taxes 19.3 56.4 (65.8%)
Provision for income
taxes (7.2) (21.3) (66.2%)
-------- ------- ------
Earnings from
continuing operations 12.1 35.1 (65.5%)
Earnings from discontinued
operations -- (9.0) (100.0%)
Gain on sale of discontinued
operations -- 335.4 (100.0%)
-------- ------- ------
Net earnings $ 12.1 361.5 (96.7%)
======== ======= ======
Nine Months
------------------------------
2000 1999 B(W)
-------- ------- ------
Revenue:
Leasing and rental:
Full service lease
and program maintenance $ 1,433.8 1,352.9 6.0%
Commercial rental 394.3 400.2 (1.5%)
Fuel 563.1 418.8 34.5%
Other 295.4 269.4 9.7%
-------- ------- -----
Total leasing and rental 2,686.6 2,441.3 10.0%
-------- ------- -----
Logistics solutions 1,184.6 1,047.5 13.1%
Dedicated contract carriage 404.3 383.1 5.5%
Eliminations (295.9) (241.5) 22.5%
-------- ------- -----
Total revenue $ 3,979.6 3,630.4 9.6%
======== ======= =====
Contribution margin:
Leasing and rental $ 285.7 277.1 3.1%
Logistics solutions 52.1 39.9 30.6%
Dedicated contract carriage 43.0 42.2 1.9%
Eliminations (34.1) (30.0) 13.7%
-------- ------- -----
346.7 329.2 5.3%
Central support services (211.6) (193.9) 9.1%
-------- ------- -----
Earnings from continuing
operations before
unusual items and income
taxes 135.1 135.3 (0.1%)
Restructuring and other
charges (37.3) (4.7) 693.6%
Year 2000 expense -- (23.3) (100.0%)
-------- ------- -----
Earnings before
income taxes 97.8 107.3 (8.9%)
Provision for income
taxes (36.2) (40.7) (11.1%)
-------- ------- -----
Earnings from
continuing operations 61.6 66.6 (7.5%)
Earnings from discontinued
operations -- 11.8 (100.0%)
Gain on sale of discontinued
operations -- 335.4 (100.0%)
-------- ------- -----
Net earnings $ 61.6 413.8 (85.1%)
======== ======= =====
RYDER SYSTEM, INC. AND SUBSIDIARIES
SEGMENT CONTRIBUTION MARGIN
Periods ended September 30, 2000 and 1999
(In millions)
Three Months
-----------------------------
2000 1999 B(W)
-------- -------- -------
Leasing and Rental
Total revenue $ 908.4 849.2 7.0%
Fuel revenue (189.2) (152.8) 23.8%
------ ----- -----
Dry revenue $ 719.2 696.4 3.3%
====== ===== =====
Contribution margin $ 107.2 101.0 6.1%
====== ===== =====
Contribution margin as %
of total revenue 11.8% 11.9%
====== =====
Contribution margin as %
of dry revenue 14.9% 14.5%
====== =====
Logistics Solutions
Total revenue $ 394.3 361.1 9.2%
Freight Under Management
(FUM) expense (99.2) (97.3) 2.0%
------ ----- -----
Operating revenue $ 295.1 263.8 11.9%
====== ===== =====
Contribution margin $ 16.8 19.1 (12.0%)
====== ===== =====
Contribution margin as %
of total revenue 4.3% 5.3%
====== =====
Contribution margin as %
of operating revenue 5.7% 7.2%
====== =====
Dedicated Contract Carriage
Total revenue $ 136.7 132.2 3.4%
Freight Under Management
(FUM) expense (2.2) (1.0) 120.0%
------ ----- -----
Operating revenue $ 134.5 131.2 2.5%
====== ===== =====
Contribution margin $ 14.8 15.1 (2.0%)
====== ===== =====
Contribution margin as %
of total revenue 10.8% 11.4%
====== =====
Contribution margin as %
of operating revenue 11.0% 11.5%
====== =====
Nine Months
--------------------------------
2000 1999 B(W)
---------- ------- ------
Leasing and Rental
Total revenue $ 2,686.6 2,441.3 10.0%
Fuel revenue (563.1) (418.8) 34.5%
-------- ------- ----
Dry revenue $ 2,123.5 2,022.5 5.0%
======== ======= ====
Contribution margin $ 285.7 277.1 3.1%
======== ======= ====
Contribution margin as %
of total revenue 10.6% 11.4%
======== =======
Contribution margin as %
of dry revenue 13.5% 13.7%
======== =======
Logistics Solutions
Total revenue $ 1,184.6 1,047.5 13.1%
Freight Under Management
(FUM) expense (306.4) (301.8) 1.5%
-------- ------- ----
Operating revenue $ 878.2 745.7 17.8%
======== ======= ====
Contribution margin $ 52.1 39.9 30.6%
======== ======= ====
Contribution margin as %
of total revenue 4.4% 3.8%
======== =======
Contribution margin as %
of operating revenue 5.9% 5.4%
======== =======
Dedicated Contract Carriage
Total revenue $ 404.3 383.1 5.5%
Freight Under Management
(FUM) expense (4.4) (3.2) 37.5%
-------- ------- ----
Operating revenue $ 399.9 379.9 5.3%
======== ======= ====
Contribution margin $ 43.0 42.2 1.9%
======== ======= ====
Contribution margin as %
of total revenue 10.6% 11.0%
======== =======
Contribution margin as %
of operating revenue 10.8% 11.1%
======== =======