ryderfinal q407ryderearningsreport
DESCRIPTION
TRANSCRIPT
Fourth Quarter 2007 & 2008 ForecastEarnings Conference Call
February 1, 2008
2
Safe Harbor
Certain statements and information included in this presentation
are "forward-looking statements" under the Federal Private Securities Litigation Reform Act of 1995. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and 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, our ability to obtain adequate profit margins for our services, our inability to maintain current pricing levels due to customer
acceptance or competition, customer retention levels, unexpected volume declines, loss of key customers in the
Supply Chain Solutions (SCS) business segment, unexpected reserves or write-offs due to the deterioration of the credit worthiness or bankruptcy of customers, changes in financial, tax or regulatory requirements or changes in customers’
business environments that will limit their ability to commit to long-term vehicle leases, changes in economic and market conditions affecting the commercial rental market or the sale of used vehicles, the effect of severe weather events, labor strikes or work stoppages affecting our or our customers’
business operations, adequacy of accounting estimates, reserve and accruals particularly with respect to pension, taxes, insurance and revenue, changes in general economic conditions, sudden or unusual changes in fuel prices, availability of qualified drivers, our ability to manage our cost structure, new accounting pronouncements, rules or interpretations, changes in government regulations including regulations regarding vehicle emissions and the risks described in our filings with the Securities and Exchange Commission. The risks included here are not exhaustive. New risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the
impact of such risks on our business. Accordingly, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
3
Contents
► Fourth Quarter 2007 Results Overview► Asset Management Update► 2008 Forecast► Q & A
4
4th Quarter Results Overview
►
Earnings per diluted share were $1.24 versus $1.08 in 4Q06
–
4Q07 included a $0.06 benefit related primarily to Canada tax law changes
►
Comparable earnings per diluted share were $1.18, up 9% from $1.08 in 4Q06
►
Total revenue up 5% (and operating revenue up 4%) as a result of contractual revenue growth in all segments as well as favorable foreign exchange rate movements
►
Fleet Management Solutions (FMS) total revenue up 8% (and operating revenue up 3%) vs. prior year
–
Contractual revenue increased 7%
•
Full service lease revenue grew 7% and contract maintenance revenue grew 10%
–
Commercial rental revenue down 7%
–
Fuel revenue grew 21%
–
Foreign exchange impact accounts for 2 percentage points of total revenue growth of 8%
►
FMS net before tax earnings (NBT) up 8%
–
FMS NBT percent of operating revenue up 60 basis points to 13.4%
►
FMS earnings benefited from improved contractual business performance, and lower expenses for pension, safety and insurance, sales/marketing and depreciation policy changes. Improvements were partially offset by lower commercial rental and used vehicle sales results.
5
4th Quarter Results Overview (cont’d)
►
Supply Chain Solutions (SCS) total revenue up 1% (and operating revenue up 5%) vs. prior year, reflecting foreign exchange impact and new/expanded business, partially offset by net reporting of customer business previously presented on a gross basis, a previously disclosed automotive plant closure in 2Q07, and reduced activity with certain high-tech customers
►
SCS net before tax earnings (NBT) up 11%
–
SCS NBT percent of operating revenue up 30 basis points to 5.6%
►
SCS earnings positively impacted by improved international results, lower safety and insurance costs and lower incentive-based compensation, partially offset by the impact of reduced activity with certain high-tech customers
►
Dedicated Contract Carriage (DCC) total revenue up 3% (and operating revenue up 3%) vs. prior year due primarily to higher fuel cost pass-throughs
►
DCC net before tax earnings (NBT) up 9%
–
DCC NBT percent of operating revenue up 40 basis points to 8.7%
►
DCC earnings positively impacted by improved operating performance
6
Key Financial Statistics
2007 2006 % B/(W)
Operating Revenue (1)(2) 1,189.6$ 1,146.0$ 4%
Fuel Services and Subcontracted Transportation Revenue 476.6 448.1 6%
Total Revenue 1,666.2$ 1,594.1$ 5%
Earnings Per Share 1.24$ 1.08$ 15%
Comparable Earnings Per Share (1) 1.18$ 1.08$ 9%
Memo:Average Shares (Millions) - Diluted 58.1 61.2 Tax Rate 35.6% 35.3%
Fourth Quarter
(1)
Non-GAAP financial measure; refer to Appendix -
Non-GAAP Financial Measures. Comparable earnings per share exclude restructuring recoveries and tax law changes in 2007.(2)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the business and as a measure of sales activity. Fuel services
revenue net of related intersegment
billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass through to customers for which the Company realizes minimal
changes in profitability during periods of steady market fuel prices. Subcontracted transportation revenue is excluded from the operating revenue computation as it is largely
a pass through to customers and the Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
($ Millions, Except Per Share Amounts)
7
Key Financial Statistics
2007 2006 % B/(W)
Operating Revenue (1)(2) 4,636.6$ 4,454.2$ 4%
Fuel Services and Subcontracted Transportation Revenue 1,929.4 1,852.4 4%
Total Revenue 6,566.0$ 6,306.6$ 4%
Earnings Per Share 4.24$ 4.04$ 5%
Comparable Earnings Per Share (1) 4.21$ 3.99$ 6%
Memo:Average Shares (Millions) - Diluted 59.8 61.6 Tax Rate 37.4% 36.6%Adjusted Return on Capital (1) 7.4% 7.9%
Full Year
(1)
Non-GAAP financial measure; refer to Appendix -
Non-GAAP Financial Measures. Comparable earnings per share exclude restructuring costs, property gain and fourth quarter tax law changes in 2007 and tax law changes and pension charge in 2006.
(2)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the business and as a measure of sales activity. Fuel services revenue net of related intersegment
billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. Subcontracted transportation revenue is excluded from the operating revenue computation as it is largely a pass through to customers and the Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
($ Millions, Except Per Share Amounts)
8
Business Segment
2007 2006 % B/(W) 2007 2006 % B/(W)Operating Revenue (1):
Fleet Management Solutions 764.8$ 741.3$ 3% 1,085.4$ 1,005.4$ 8%Supply Chain Solutions 337.2 320.1 5% 545.8 543.1 1%Dedicated Contract Carriage 140.3 135.6 3% 144.3 140.2 3%Eliminations (52.7) (51.0) (3)% (109.3) (94.6) (16)% Total 1,189.6$ 1,146.0$ 4% 1,666.2$ 1,594.1$ 5%
Segment Net Before Tax Earnings:Fleet Management Solutions 102.3$ 94.5$ 8%Supply Chain Solutions 18.9 17.0 11%Dedicated Contract Carriage 12.3 11.2 9%Eliminations (8.1) (9.0) 12%
125.4 113.7 10%
Central Support Services (Unallocated Share) (14.0) (11.1) (26)%Earnings Before Restructuring and Income Taxes (1) 111.4 102.6 9%Restructuring and Other Recoveries/(Charges), Net and Other Items (2) 0.4 (0.8) NAEarnings Before Income Taxes 111.8 101.8 10%Provision for Income Taxes (39.9) (36.0) (11)%
Net Earnings 71.9$ 65.8$ 9%
Comparable Net Earnings (1) 68.3$ 65.8$ 4%
Memo: Total Revenue
Fourth Quarter
(1)
Non-GAAP financial measure; refer to Appendix -
Non-GAAP Financial Measures. Comparable net earnings exclude restructuring recoveries and fourth quarter tax law changes in 2007.
(2)
Our primary measure of segment financial performance excludes restructuring and other recoveries/(charges), net and other items including gain on sale of property in 2007 and pension accounting charge in 2006; however, the applicable portion of the restructuring and other recoveries/(charges),
net and other items that related to each segment was as follows: FMS –
$0.3 and SCS –
$0.1 in 2007; FMS –
$0.2, SCS –
($0.9) and CSS –
($0.1) in 2006.
($ Millions)
9
Business Segment
2007 2006 % B/(W) 2007 2006 % B/(W)Operating Revenue (1):
Fleet Management Solutions 2,979.4$ 2,921.1$ 2% 4,162.6$ 4,096.0$ 2%Supply Chain Solutions 1,314.5 1,182.9 11% 2,250.3 2,028.5 11%Dedicated Contract Carriage 552.9 548.9 1% 567.6 568.8 - Eliminations (210.2) (198.7) (6)% (414.5) (386.7) (7)% Total 4,636.6$ 4,454.2$ 4% 6,566.0$ 6,306.6$ 4%
Segment Net Before Tax Earnings:Fleet Management Solutions 373.7$ 368.1$ 2%Supply Chain Solutions 63.2 62.1 2%Dedicated Contract Carriage 47.4 42.6 11%Eliminations (31.2) (33.7) 7%
453.1 439.1 3%
Central Support Services (Unallocated Share) (44.4) (39.5) (13)%Earnings Before Restructuring and Income Taxes (1) 408.7 399.6 2%Restructuring and Other Recoveries/(Charges), Net and Other Items (2) (3.2) (6.6) NAEarnings Before Income Taxes 405.5 393.0 3%Provision for Income Taxes (151.6) (144.0) (5)%
Net Earnings 253.9$ 249.0$ 2%
Comparable Net Earnings (1) 251.9$ 245.9$ 2%
Memo: Total Revenue
Full Year
(1)
Non-GAAP financial measure; refer to Appendix -
Non-GAAP Financial Measures. Comparable net earnings exclude restructuring costs, property gain and fourth quarter tax law changes in 2007 and tax law changes and pension charge in 2006.
(2)
Our primary measure of segment financial performance excludes restructuring and other recoveries/(charges), net and other items including gain on sale of property in 2007 and pension accounting charge in 2006; however, the applicable portion of the restructuring and other recoveries/(charges), net and other items that related to each segment was as follows: FMS –
$4.5, SCS –
($5.6), DCC –
($1.1) and CSS –
($1.0) in 2007; and FMS –
($5.6), SCS –
($0.9) and CSS –
($0.1) in 2006.
($ Millions)
10
Capital Expenditures
2007 $2007 2006 O/(U) 2006
Full Service Lease 900$ 1,493$ (593)$
Commercial Rental 219 195 24
Operating Property and Equipment 76 72 4 Gross Capital Expenditures 1,195 1,760 (565)
Less: Proceeds from Sales (Primarily Revenue Earning Equipment) 374 333 41
Less: Proceeds from Sale and Leaseback of Revenue Earning Equipment 150 - 150
Net Capital Expenditures 671$ 1,427$ (756)$
Memo: Acquisitions 75$ 4$ 71$
Full Year
($ Millions)
11
Cash Flow
2007 2006Net Earnings 254$ 249$ Depreciation 816 743 Gains on Vehicle Sales, Net (44) (51) Amortization and Other Non-Cash Charges, Net 15 28
Changes in Working Capital and Deferred Taxes 62 (115) Cash Provided by Operating Activities 1,103 854
Proceeds from Sales (Primarily Revenue Earning Equipment) 374 333 Sale and Leaseback of Revenue Earning Equipment 150 - Collections of Direct Finance Leases 63 66 Other, Net 2 2
Total Cash Generated (1) 1,692 1,255
Capital Expenditures (2) (1,317) (1,695) Free Cash Flow (1)(3) 375$ (440)$
(1)
Non-GAAP financial measure; refer to Appendix –
Non-GAAP Financial Measures(2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment(3) Free Cash Flow excludes acquisitions
Full Year ($ Millions)
12
275%
157%168%151%
129%146%
201%
234%275%
0%
50%
100%
150%
200%
250%
300%
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 LongTerm
TargetMidpoint
Total Obligations to Equity
Balance Sheet Debt to Equity
Debt to Equity Ratio
12/31/07 12/31/06 Balance Sheet Debt 2,776$ 2,817$ Percent To Equity 147% 164%
Total Obligations (1) 2,954$ 2,895$ Percent To Equity (1) 157% 168%
Total Equity 1,888$ 1,721$
Note: Includes impact of accumulated net pension related equity
charge of $148 million as of 12/31/07 and $201 million as of 12/31/06.
(1)
Non-GAAP financial measure. Total obligations include the present value of minimum lease payments and guaranteed residual values under operating leases of $178 million at 12/31/07 and $78 million at 12/31/06.
(2)
Represents long term total obligations to equity target of 250
-
300% while maintaining a strong investment grade rating.
(1)
(2)
($ Millions)
13
Contents
► Fourth Quarter 2007 Results Overview► Asset Management Update► 2008 Forecast► Q & A
14
Asset Management Update (1)
(1)
All information presented on this page only is for the U.S. fleet and excludes Canadian and U.K. operations.
►
The number of used vehicles sold in the fourth quarter was 5,365, up 17% compared with prior year
►
Proceeds per unit for tractors and trucks were down 12% and 13%, respectively, in the fourth quarter compared with prior year
–
Excluding wholesaling type activity, retail pricing for tractors
and trucks was down 3% and 1%, respectively, from the prior year
►
Units held for sale were 6,434 at quarter end; down 15% from 7,607 units held for sale at the end of the third quarter
–
Units held for sale were down 16% from 7,643 in the prior year
►
Vehicles no longer earning revenue were 6,335 at quarter end; down 1,303 from the end of the third quarter
–
Vehicles no longer earning revenue were down 2,162 vs. prior year driven primarily by a lower used truck center inventory
►
Average total commercial rental fleet was down 12% year-over-year
15
Contents
► Fourth Quarter 2007 Results Overview► Asset Management Update► 2008 Forecast► Q & A
16
2008 Overall Environment
Baseline Assumptions Opportunities (+) / Risks (-)
●
Overall economy soft without further weakening
−
Broader economic decline
●
Stable real interest rates +
Federal funds rates lowered
●
Strength and currency stability in key foreign markets
−
U.S. dollar strengthening (primarily impacts revenue)
●
Positive free cash flow +
Stronger free cash flow if economy slows
Modest Inflation Moderate GDP Growth
17
FMS Assumptions
Baseline Assumptions Opportunities (+) / Risks (-)
●
Positive lease / contract maintenance revenue momentum from organic sales and closed acquisitions
●
Retention and sales initiatives
−
Potential for softer freight demand−
Customer fleet downsizing−
Softening rental demand−
Fewer miles driven
+
Additional acquisitions
●
Stable used vehicle pricing and improving vehicle residual values with lower inventory levels
−
Declining used vehicle pricing
●
Ongoing maintenance cost reduction initiatives
18
SCS / DCC Assumptions
Baseline Assumptions Opportunities (+) / Risks (-)
●
Stable volumes with existing customers
−
Potential for current customer volume declines and plant closures
●
Focus on customer retention and business development
−
Potential for softer freight demand and reduced new business
●
Grow new geographic markets (i.e. China and others)
●
Increase penetration of consumer goods vertical segment
+
Geographic / industry vertical expansion above baseline
+
Acquisitions
●
Technology investments to enhance product offerings and reduce back office costs
19
Key Financial Statistics
2007 % B / (W)Revenue:
Operating (1) (2) $ 4,770 - 4,930 4,637$ 3 - 6%Fuel Services and Subcontracted Transportation (3) 1,310 - 1,350 1,929 (30 - 32)%Total Revenue (3) $ 6,080 - 6,280 6,566$ (4 - 7)%
Earnings: Earnings Before Income Taxes $ 418 - 432 405$ 3 - 7%Earnings $ 255 - 263 254$ 0 - 4%Comparable Earnings (1) $ 255 - 263 252$ 1 - 4%
Earnings Per Share (EPS):EPS $ 4.50 - 4.65 4.24$ 6 - 10%Comparable EPS (1) $ 4.50 - 4.65 4.21$ 7 - 10%
Memo: Average Shares (Millions) - Diluted 56.6 59.8 Tax Rate 39.1% 37.4%Adjusted Return on Capital (1) 7.6% 7.4%
2008Forecast
(1)
Non-GAAP financial measure; refer to Appendix –
Non-GAAP Financial Measures. Comparable earnings and comparable EPS exclude restructuring costs, property gain, and fourth quarter tax law changes in 2007.
(2)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the business and as a measure of sales activity. Fuel services revenue net of related intersegment
billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass through to customers for which the Company realizes minimal changes in profitability during periods of
steady market fuel prices. Subcontracted transportation revenue is excluded from the operating revenue computation as prior to 2008 it was largely a pass through to customers and the Company realized minimal changes in profitability as a result of fluctuations in subcontracted transportation.
(3)
Includes impact of net revenue reporting in 2008 for subcontracted transportation revenues previously reported on a gross basis.
Note: Earnings per share amounts are calculated independently for each component and may not be additive due to rounding.
($ Millions, Except Per Share Amounts)
20
Business Segment Revenue
2008 Forecast% Growthvs. 2007
Fleet Management Solutions:Gross Revenue (1) 3%Operating Revenue 4%
- Contractual Revenue (2) 5%- Commercial Rental Revenue 0 - 2%
Supply Chain Solutions:Gross Revenue (3)(4) (22 - 24)%Operating Revenue 5 - 10%
Dedicated Contract Carriage:Gross Revenue (4) 3 - 5%Operating Revenue 3 - 5%
(1)
Includes fuel revenue.(2)
Includes full service lease and contract maintenance.(3)
Includes impact of net revenue reporting in 2008 for revenues previously reported on a gross basis.(4)
Includes subcontracted transportation revenue.
21
2007Comparable
EPS
Tax Rate Cost Increases 2007HeadcountReductions
AssetManagement
ShareRepurchases
Acquisitions Revenue &Operational
Improvements
2008 EPSForecast
2008 Causes of EPS Change
(1)
2007 Comparable EPS is a non-GAAP financial measure; refer to Appendix –
Non-GAAP Financial Measures. 2007 Comparable EPS excludes $0.03 impact from restructuring costs, property gains and fourth quarter tax law changes.
($ Earnings Per Share)
- Safety & Insurance Costs
- Incentive Compensation
$4.21 (1) (0.07)(0.33)
0.21
0.15
0.14
0.13 – 0.28 $4.50 - $4.65
0.06
+ Pollock+ Lily+ $200M
Program Rollover
+ Partial $300M Program
- Gains+ Carrying
Costs
22
Business Segment Earnings
Full Year
9.55.9 6.7 6.0 8.7
9.0 9.0 9.0
13.012.512.612.411.2
7.58.27.3
5
7
9
11
13
15
2001 2002 2003 2004 2005 2006 2007 2008 ForecastMidpoint
Fleet Management
Solutions
Supply Chain Solutions
Dedicated Contract Carriage
2.8 3.12.42.72.9
(0.4)(0.6)
4.4
(0.6)(0.8)
4.8 5.33.94.04.2
5.4
-1
1
3
5
2001 2002 2003 2004 2005 2006 2007 2008 ForecastMidpoint
8.78.4
7.56.5
5.86.8
6.06.2
8.98.67.8
6.75.9
6.96.16.3
5
7
9
2001 2002 2003 2004 2005 2006 2007 2008 ForecastMidpoint
Segment NBT as % of Total Revenue
Segment NBT as % of Operating Revenue (1)
(1)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the business and as a measure of sales activity. Fuel services
revenue net of related intersegment
billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. Subcontracted transportation revenue is excluded from the operating revenue computation as prior to 2008 it was largely a pass through to customers and the Company realized minimal changes in profitability as a result of fluctuations in subcontracted transportation.
23
Capital Expenditures
Full Service Lease:►
Capital for lease vehicles is committed after contracts are signed with customers
►
2008 lease capital expenditures include:
●
Replacement spending of $1,015 -
$1,045 million
●
Growth spending of $100 -
$170 million
Growth capital represents an investment which results in $20 - $30 million of incremental 2008 revenue or $40 - $60 million of annualized revenue
Commercial Rental:►
2008 rental capital expenditures include:
●
Replacement spending of $140 million
24
Capital Expenditures, Cash Flow & Leverage
2008Forecast 2007
Full Service Lease - Replacement $1,015 - 1,045 Full Service Lease - Growth 100 - 170
Full Service Lease 1,115 - 1,215 900$ Commercial Rental 140 219 Operating Property and Equipment 130 76
Gross Capital Expenditures 1,385 - 1,485 1,195 Less: Proceeds from Sales 335 374 Less: Proceeds from Sale and Leaseback of
Revenue Earning Equipment - 150 Net Capital Expenditures $1,050 - 1,150 671$
Assets Under Management $8,295 - 8,395 8,053$
Cash Provided by Operating Activities $1,165 - 1,265 1,103$ Total Cash Generated (1) $1,555 - 1,655 1,692$ Free Cash Flow (1)(2) $ 185 - 220 375$
Total Obligations to Equity (1) 158% 157%
Full Year
(1)
Non-GAAP financial measure; refer to Appendix -
Non-GAAP Financial Measures.(2)
Free Cash Flow excludes acquisitions. Acquisitions totaled $75 million in full year 2007 and $91 million in 2008 year-to-date.
($ Millions)
25
EPS Forecast
First Quarter Full Year
2008 EPS Forecast $ 0.84 - 0.87 $ 4.50 - 4.65
2007 Comparable EPS 0.84$ 4.21$ (1)
(1)
Non-GAAP financial measure. 2007 Comparable EPS excludes impact from
restructuring costs in the third and fourth quarters, property gain in the third quarter and the fourth quarter tax law changes in totaling a $0.03 benefit.
($ Earnings Per Share)
26
Summary
►
Focus on strong customer retention, new business development and sales/marketing initiatives
►
Continue growth in full service lease/contract maintenance, supply chain solutions and dedicated contract carriage product lines
►
Manage through cyclical impacts in commercial rental product line
►
Utilize balance sheet capacity to support growth and financial leverage targets
►
Sustain focus on cost management and process improvements, while investing in sales and operational capabilities
Drive growth from customer outsourcing in contractual product lines while managing through cyclical impacts
27
Q&A
28
Appendix
Business Segment Detail
Central Support Services
Balance Sheet
Asset Management
Financial Indicators Forecast
Non-GAAP Financial Measures & Reconciliations
29
Fleet Management Solutions (FMS)
2007 2006 % B/(W) Full Service Lease 503.9$ 472.4$ 7%Contract Maintenance 41.6 37.9 10%
Contractual Revenue 545.5 510.3 7%
Contract-related Maintenance 48.5 48.7 (1)%Commercial Rental 152.0 163.4 (7)%Other 18.8 18.9 (1)%Operating Revenue (a) 764.8 741.3 3%Fuel Services Revenue 320.6 264.1 21%
Total Revenue 1,085.4$ 1,005.4$ 8%
Segment Net Before Tax Earnings (NBT) 102.3$ 94.5$ 8%Segment NBT as % of Total Revenue 9.4% 9.4%Segment NBT as % of Operating Revenue (a) 13.4% 12.8%
Fourth Quarter($ Millions)
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the FMS business segment and as a measure of sales activity. Fuel services revenue, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on market fuel costs.
30
Fleet Management Solutions (FMS)
2007 2006 % B/(W) Full Service Lease 1,965.3$ 1,848.3$ 6%Contract Maintenance 159.6 141.9 12%
Contractual Revenue 2,124.9 1,990.2 7%
Contract-related Maintenance 198.8 193.1 3%Commercial Rental 583.3 665.7 (12)%Other 72.4 72.1 - Operating Revenue (a) 2,979.4 2,921.1 2%Fuel Services Revenue 1,183.2 1,174.9 1%
Total Revenue 4,162.6$ 4,096.0$ 2%
Segment Net Before Tax Earnings (NBT) 373.7$ 368.1$ 2%Segment NBT as % of Total Revenue 9.0% 9.0%Segment NBT as % of Operating Revenue (a) 12.5% 12.6%
Full Year
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the FMS business segment and as a measure of sales activity. Fuel services revenue, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on market fuel costs.
($ Millions)
31
Supply Chain Solutions (SCS)
2007 2006 % B/(W) U.S. Operating Revenue Automotive & Industrial 141.3$ 127.4$ 11% High Tech & Consumer Industries 69.4 74.1 (6)% Transportation Management 8.2 8.3 - U.S. Operating Revenue (a) 218.9 209.8 4%International Operating Revenue (a) 118.3 110.3 7%Operating Revenue (a) 337.2 320.1 5%Subcontracted Transportation 208.6 223.0 (6)%Total Revenue 545.8$ 543.1$ 1%
Segment Net Before Tax Earnings (NBT) 18.9$ 17.0$ 11%Segment NBT as % of Total Revenue 3.5% 3.1%Segment NBT as % of Operating Revenue (a) 5.6% 5.3%
Memo: Fuel Costs 35.6$ 24.9$ (43)%
Fourth Quarter
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the SCS business segment and as a measure of sales activity. Subcontracted transportation
is deducted from total revenue to arrive at operating revenue as subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
($ Millions)
32
Supply Chain Solutions (SCS)
2007 2006 % B/(W) U.S. Operating Revenue Automotive & Industrial 551.7$ 495.4$ 11% High Tech & Consumer Industries 288.9 291.9 (1)% Transportation Management 32.6 30.7 6%U.S. Operating Revenue (a) 873.2 818.0 7%International Operating Revenue (a) 441.3 364.9 21%Operating Revenue (a) 1,314.5 1,182.9 11%Subcontracted Transportation 935.8 845.6 11%Total Revenue 2,250.3$ 2,028.5$ 11%
Segment Net Before Tax Earnings (NBT) 63.2$ 62.1$ 2%Segment NBT as % of Total Revenue 2.8% 3.1%Segment NBT as % of Operating Revenue (a) 4.8% 5.3%
Memo: Fuel Costs 124.5$ 104.2$ (19)%
Full Year
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the SCS business segment and as a measure of sales activity. Subcontracted transportation
is deducted from total revenue to arrive at operating revenue as subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
($ Millions)
33
Dedicated Contract Carriage (DCC)
2007 2006 % B/(W)
Operating Revenue (a) 140.3$ 135.6$ 3% Subcontracted Transportation 4.0 4.6 (14)%Total Revenue 144.3$ 140.2$ 3%
Segment Net Before Tax Earnings (NBT) 12.3$ 11.2$ 9%Segment NBT as % of Total Revenue 8.5% 8.0%Segment NBT as % of Operating Revenue (a) 8.7% 8.3%
Memo: Fuel Costs 29.3$ 24.3$ (21)%
Fourth Quarter
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the DCC business segment and as a measure of sales activity. Subcontracted transportation
is deducted from total revenue to arrive at operating revenue as subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
($ Millions)
34
Dedicated Contract Carriage (DCC)
2007 2006 % B/(W)
Operating Revenue (a) 552.9$ 548.9$ 1% Subcontracted Transportation 14.7 19.9 (26)%Total Revenue 567.6$ 568.8$ -
Segment Net Before Tax Earnings (NBT) 47.4$ 42.6$ 11%Segment NBT as % of Total Revenue 8.4% 7.5%Segment NBT as % of Operating Revenue (a) 8.6% 7.8%
Memo: Fuel Costs 107.1$ 104.6$ (2)%
Full Year
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of
the DCC business segment and as a measure of sales activity. Subcontracted transportation
is deducted from total revenue to arrive at operating revenue as subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of fluctuations in subcontracted transportation.
($ Millions)
35
Central Support Services (CSS)
2007 2006 % B/(W)
Allocated CSS Costs 37.3$ 37.8$ 2%Unallocated CSS Costs 14.0 11.1 (26)%Total CSS Costs 51.3$ 48.9$ (5)%
Fourth Quarter($ Millions)
36
Central Support Services (CSS)
2007 2006 % B/(W)
Allocated CSS Costs 146.1$ 151.5$ 4%Unallocated CSS Costs 44.4 39.5 (13)%Total CSS Costs 190.5$ 191.0$ -
Full Year($ Millions)
37
Balance Sheet
December 31, December 31,2007 2006
Cash and Cash Equivalents 116$ 129$
Other Current Assets 1,106 1,133
Revenue Earning Equipment, Net 4,501 4,509
Operating Property and Equipment, Net 519 499
Other Assets 613 559
Total Assets 6,855$ 6,829$
Short-Term Debt / Current Portion Long-Term Debt 223$ 333$
Other Current Liabilities 797 935
Long-Term Debt 2,553 2,484
Other Non-Current Liabilities 1,394 1,356
Shareholders' Equity 1,888 1,721
Total Liabilities and Shareholders' Equity 6,855$ 6,829$
($ Millions)
38
1,094
6,253
5,313
5,650
967
4,938
4,167
4,750
3,042
1,584
5,008
4,596
3,9964,104
4,539
1,646
4,360
3,572
1,890
3,839
1,913
4,669
4,195 4,261
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Redeployments Extensions Early Terminations Early Replacements
FY02 FY03 FY04 FY05 FY06 FY07
Asset Management Update (a)
(a)
U.S. only(b)
Excludes early terminations where customer purchases vehicle
(b)
39
Assets Under Management (a)
ForecastMidpoint
2000 2001 2002 2003 2004 2005 2006 2007 2008 (b)
Revenue Earning Equipment 4,588$ 4,148$ 4,493$ 5,809$ 6,352$ 6,658$ 7,335$ 7,225$ 7,520$
Direct Finance Leases 637 640 622 656 649 624 592 582 580
Operating Leases 1,805 2,140 1,511 286 300 252 214 246 245
Assets Under Management 7,030$ 6,928$ 6,626$ 6,751$ 7,301$ 7,534$ 8,141$ 8,053$ 8,345$
(a) Assets under management represent the original cost of all vehicles owned and held under lease by Ryder.(b) Excludes impact of foreign exchange movements in 2008.
($ Millions)
40
Financial Indicators Forecast (1)
(1)
Obligations to Equity and Assets Under Management include acquisitions. Free Cash Flow and Gross Capital Expenditures exclude acquisitions.(2)
Non-GAAP financial measure; refer to Appendix -
Non-GAAP Financial Measures.(3)
Includes $176 million payment to the IRS related to full resolution of 1998 -
2000 tax period matters.
Significant and predictable cash generation
Invest in growth
Increase assets under management
Increase financial leverage
$1,054$835
$949$1,091
$1,381$1,183 $1,255
$1,692 $1,605
Total Cash Generated (2)
2000 2001 2002 2003 2004 2005 2008ForecastMidpoint
2006 2007
Gross Capital Expenditures
$1,289
$600$725
$1,165
$657
$1,411$1,195
2000 2001 2002 2003 2004 2005 2008ForecastMidpoint
Memo: Free Cash Flow (2)
131 367 260 140 (231)(3) 375(270)
Revenue Earning Equipment
PP&E/Other
$1,760
2006
(444)
2007
$1,435
205Total Obligations to Equity Ratio (2)
2000 2001 2002 2003 2004 2006 2008ForecastMidpoint
Memo: Assets Under Management6,928 6,626 6,751 7,301 7,534 8,0537,030
275%
201%
146%129%
234%
151% 157%
Equity
Total Obligations (2)
2005
168%
8,141
2007
158%
8,345
($ Millions)
41
Non-GAAP Financial Measures
►
This presentation includes “non-GAAP financial measures” as defined by SEC rules. As required by SEC rules, we provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and an explanation why management believes that presentation of the non-GAAP financial measure provides useful information to investors. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP.
►
Specifically, the following non-GAAP financial measures are included in this presentation:
Non-GAAP Financial Measure Comparable GAAP MeasureReconciliation & Additional Information Presented on Slide Titled Page
Operating Revenue Total Revenue Key Financial Statistics 6 - 7, 19
Comparable Earnings Per Share / ComparableNet Earnings
Net Earnings / Net Earnings Per Share EPS and Net Earnings Reconciliation 42
Earnings Before Restructuring and Income Taxes Net Earnings Business Segment 8 - 9
Adjusted Return on Capital Net Earnings Adjusted Return on Capital Reconciliation 43
Total Cash Generated / Free Cash Flow Cash Provided by Operating Activities Cash Flow Reconciliation 44 - 45
Total Obligations / Total Obligations to Equity Balance Sheet Debt / Debt to Equity Debt to Equity RatioDebt to Equity Reconciliation
1246 - 47
FMS / SCS / DCC Operating Revenue and Segment NBT as % of Operating Revenue
FMS / SCS / DCC Total Revenue and Segment NBT as % of Total Revenue
Fleet Management Solutions / Supply Chain Solutions / Dedicated Contract Carriage
29 - 34
42
4Q07 - 4Q07 - FY07 - FY07 -Net Earnings EPS Net Earnings EPS
Net Earnings $ 71.9 $ 1.24 $ 253.9 $ 4.24
3Q07 and 4Q07 Restructuring (Recoveries)/Charges (0.3) - 7.5 0.13
Gain on Sale of Property - - (6.2) (0.10)
Tax Law Changes (3.3) (0.06) (3.3) (0.06)
Comparable Net Earnings $ 68.3 $ 1.18 $ 251.9 $ 4.21
4Q06 - 4Q06 - FY06 - FY06 -Net Earnings EPS Net Earnings EPS
Net Earnings $ 65.8 $ 1.08 $ 249.0 $ 4.04
Pension Accounting Charge - - 3.7 0.06
Tax Law Changes - - (6.8) (0.11)
Comparable Net Earnings $ 65.8 $ 1.08 $ 245.9 $ 3.99
EPS and Net Earnings Reconciliation($ Millions or $ Earnings Per Share)
* Earnings per share amounts are calculated independently for each component and may not be additive due to rounding
43
Adjusted Return on Capital Reconciliation
ForecastMidpoint12/31/08 12/31/07 12/31/06
Net Earnings (1) 259$ 254$ 249$
Restructuring and Other Items - 1 -
Income Taxes 166 152 144
Adjusted Earnings Before Income Taxes 425 407 393
Adjusted Interest Expense (2) 178 169 147
Adjusted Income Taxes (3) (236) (220) (207) Adjusted Net Earnings 367$ 356$ 333$
Average Total Debt 2,825$ 2,848$ 2,480$
Average Off-Balance Sheet Debt 155 150 99
Average Adjusted Total Shareholders' Equity (4) 1,889 1,792 1,605 Adjusted Average Total Capital 4,869$ 4,790$ 4,184$
Adjusted Return on Capital (5) 7.6% 7.4% 7.9%
(1) Earnings calculated based on a 12-month rolling period.(2) Interest expense includes implied interest on off-balance sheet vehicle obligations.(3) Income taxes were calculated using the effective income tax rate for the period exclusive of benefits from tax law changes recognized in 2006 and the fourth quarter of 2007.(4) Represents shareholders’
equity adjusted for the tax benefits in those periods.(5) The Company adopted adjusted return on capital, a non GAAP financial measure, as the Company believes that both debt (including off-balance sheet debt) and equity
should be included in evaluating how effectively capital is utilized across the business.
($ Millions)
44
Cash Flow Reconciliation
(1)
The Company uses total cash generated, a non-GAAP financial measure, because management considers it to be an
important measure of comparative operating performance. Management believes total cash generated provides investors with
an important measure of total cash inflows generated from our on-going business activities which include sales of revenue earning equipment, sales of operating property and equipment, sale and leaseback of revenue earning equipment, collections on direct finance leases and other cash inflows.
(2)
Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment.(3)
The Company uses free cash flow, a non-GAAP financial measure, because management considers it to be an
important measure of comparative operating performance. Management believes free cash flow provides investors with an important perspective on the cash available for debt service and shareholders
after making capital investments required to support ongoing business operations. The calculation of free cash flow may be different from the calculation used by other companies and
therefore comparability may be limited.(4)
Amounts have not been recasted
to give effect for the impact of foreign exchange movements on cash for which the impact is not expected to be significant.(5)
Free Cash Flow excludes acquisitions.
12/31/00 (4) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07
Cash Provided by Operating Activities 1,023$ 365$ 617$ 803$ 867$ 779$ 854$ 1,103$
Less: Changes in Balance of Trade Receivables Sold (270) 235 110 - - - - -
Collections of Direct Finance Leases 67 66 66 61 64 70 66 63
Proceeds from Sales (Primarily Revenue Earning Equipment) 230 173 152 210 331 334 333 374
Proceeds from Sale and Leaseback of Assets - - - 13 118 - - 150
Other Investing, Net 4 (4) 4 4 1 - 2 2
Total Cash Generated (1) 1,054 835 949 1,091 1,381 1,183 1,255 1,692
Capital Expenditures (2) (1,296) (704) (582) (734) (1,092) (1,399) (1,695) (1,317) Free Cash Flow (3)(5) (242)$ 131$ 367$ 357$ 289$ (216)$ (440)$ 375$
Memo:
Depreciation Expense 580$ 545$ 552$ 625$ 706$ 740$ 743$ 816$
Gains on Vehicle Sales, Net 19$ 12$ 14$ 16$ 35$ 47$ 51$ 44$
($ Millions)
45
Cash Flow Reconciliation
Midpoint12/31/08
Cash Provided by Operating Activities 1,215$ Collections of Direct Finance Leases 55 Proceeds from Sales (Primarily Revenue Earning Equipment) 335 Proceeds from Sale and Leaseback of Revenue Earning Equipment -
Total Cash Generated (1) 1,605
Capital Expenditures (2) (1,400) Free Cash Flow (3) 205$
(1)
The Company uses total cash generated, a non-GAAP financial measure, because management considers it to be an
important measure of comparative operating performance. Management believes total cash generated provides investors with an important measure of total cash inflows generated from our on-going business activities which include sales of revenue earning
equipment, sales of operating property and equipment, sale and leaseback of revenue earning equipment, collections on direct finance leases and other cash inflows.
(2)
Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment.
(3)
The Company uses free cash flow, a non-GAAP financial measure, because management considers it to be an
important measure of comparative operating performance. Management believes free cash flow provides investors with an important perspective on the cash available
for debt service and shareholders after making capital investments required to support ongoing business operations. The calculation of free cash flow
may be different from the calculation used by other companies and therefore comparability may be limited.
($ Millions)
46
Debt to Equity Reconciliation
% to % to % to % to % to % to % to % to12/31/00 Equity 12/31/01 Equity 12/31/02 Equity 12/31/03 Equity 12/31/04 Equity 12/31/05 Equity 12/31/06 Equity 12/31/07 Equity
Balance Sheet Debt $2,017 161% $1,709 139% $1,552 140% $1,816 135% $1,783 118% $2,185 143% $2,817 164% $2,776 147%
Receivables Sold 345 110 - - - - - -
PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 879 625 370 153 161 117 78 178
PV of contingent rentals under securitizations 209 441 311 - - - - -
Total Obligations (1) $3,450 275% $2,885 234% $2,233 201% $1,969 146% $1,944 129% $2,302 151% $2,895 168% $2,954 157%
Note: In connection with adopting FIN 46 effective July 1, 2003,
the Company consolidated the vehicle securitization trusts previously disclosed as off-balance sheet debt.
(1)
The Company uses total obligations and total obligations to equity, non-GAAP financial measures, which include certain off-balance sheet financial obligations relating to revenue earning equipment. Management believes these non-GAAP financial measures are useful to investors as they are more complete measures of the Company’s existing financial obligations and help investors better assess the Company’s overall leverage position.
($ Millions)
47
Debt to Equity Reconciliation
ForecastMidpoint % to
12/31/08 Equity
Balance Sheet Debt 2,870$ 151%
PV of minimum lease payments and guaranteed residual values under operating leases for vehicles 140
Total Obligations (1) 3,010$ 158%
(1)
The Company uses total obligations and total obligations to equity, non-GAAP financial measures, which include certain off-balance sheet financial obligations relating to revenue earning equipment. Management believes these non-GAAP financial measures are useful to investors as they are more complete measures of the Company’s existing financial obligations and help investors better assess the Company’s overall leverage position.
($ Millions)
48