03 February 2010

Supply Chain revenue forecast to decrease by 2% in 2010

Ryder System, Inc. reported earnings from continuing operations for the fourth quarter of 2009 of US$23.7 million, compared with US$50.5 million in the year-earlier period. Excluding special items, comparable earnings from continuing operations of US$22.2 million for the fourth quarter of 2009 were down 64.0% from US$61.6 million in the year-earlier period. The results reflect significantly lower pre-tax earnings in the Fleet Management Solutions (FMS) business segment. The decline was driven by decreased global results in full service lease, higher pension expense, reduced commercial rental performance, and lower results from used vehicle sales operations. To a lesser extent, Company earnings in Supply Chain Solutions (SCS) and Dedicated Contract Carriage (DCC) were impacted by higher self-insurance costs.

The Company previously announced a plan to discontinue SCS operations in South America and Europe. During the third quarter of 2009, the Company ceased customer operations in all South American markets and part of Europe. During the fourth quarter of 2009, the Company ceased SCS customer operations in all of Europe. Accordingly, results of these operations are reported as discontinued operations for all periods presented.

Total revenue from continuing operations for the fourth quarter of 2009 was US$1.25 billion, down 7.0% from US$1.34 billion in the same period in the prior year. Total revenue comparisons were adversely impacted by lower fuel volumes, partially offset by favourable foreign exchange rate movements. Operating revenue (revenue excluding FMS fuel and all subcontracted transportation) from continuing operations was US$1.02 billion, down 6.0% compared with US$1.09 billion in the year-earlier period. Operating revenue comparisons included a favorable fourth quarter 2009 foreign exchange impact of 1.0%. FMS business segment total revenue decreased 8.0% due primarily to lower fuel services revenue. FMS operating revenue decreased 5.0% due to lower revenue in full service lease and commercial rental, partially offset by favorable foreign exchange rate movements. Full service lease revenue was negatively impacted by customer fleet downsizing.

SCS business segment total revenue from continuing operations decreased 5.0% and operating revenue decreased 9.0% due to lower automotive volumes, partially offset by favourable foreign exchange rate movements. DCC business segment total revenue decreased 6.0% and operating revenue decreased 8.0% due to the non-renewal of customer contracts and reduced freight volumes.

Fleet Management Solutions customers continued to cope with reduced freight activity by downsizing their fleets, primarily at the end of their contractual term. There were a number of areas that showed some positive improvement.

As expected, Supply Chain Solutions automotive volumes were lower compared with the prior year. Additionally, the Company incurred shutdown costs from the termination of certain automotive operations. In line with our previously announced strategic actions, we also successfully completed all of our plans to disengage from underperforming Supply Chain Solutions operations in South America and Europe.

Full Year 2009 Operating Results

Total revenue from continuing operations for the full year 2009 was US$4.89 billion, down 19.0% from US$6.0 billion in the same period of 2008. Operating revenue from continuing operations for the full year 2009 was US$4.06 billion, down 11.0% from US$4.59 billion in 2008. Ryder's 2009 earnings from continuing operations were US$90.1 million, compared with US$257.6 million in the year-earlier period. Comparable 2009 earnings from continuing operations were US$94.6 million, down from US$267.1 million in the same period of 2008. Ryder's 2009 net earnings (including loss from discontinued operations) were US$61.9 million, compared with US$199.9 million in the year-earlier period.

Selected Q4 Segment Operating Results

Ryder's primary measurement of business segment financial performance, Net Before Tax (NBT) from continuing operations, allocates Central Support Services to each business segment and excludes restructuring and other items.

Supply Chain Solutions

In Ryder's Supply Chain Solutions (SCS) business segment, fourth quarter 2009 total revenue was US$302.1 million, down 5.0% from US$319.0 million in the comparable period in 2008. Fourth quarter 2009 operating revenue (revenue excluding subcontracted transportation) was US$247.6 million, down 9.0% compared with US$271.1 million in the comparable period a year ago. Both total revenue and operating revenue declined primarily due to lower automotive and other freight volumes, partially offset by favourable foreign exchange rate movements.

The SCS business segment's NBT was US$11.7 million in the fourth quarter of 2009, down 31.0% from US$17.1 million in the same quarter of 2008. Business segment earnings were impacted by US$4.0 million of higher self-insurance costs, compared with favourable claims experience in the prior year. Business segment earnings were also impacted by costs of US$2.0 million related to the termination of certain North American automotive operations. Fourth quarter 2009 NBT for the business segment as a percentage of operating revenue was 4.7%, down 160 basis points compared with 6.3% in the same quarter of 2008.

Dedicated Contract Carriage

In Ryder's Dedicated Contract Carriage (DCC) business segment, fourth quarter 2009 total revenue was US$119.3 million, down 6.0% compared with US$126.2 million in the fourth quarter of 2008. Operating revenue (revenue excluding subcontracted transportation) in the fourth quarter of 2009 was US$113.4 million, down 8.0% from US$123.6 million in the year-earlier period. Total revenue and operating revenue decreased due to the non-renewal of customer contracts and reduced freight volumes.

The DCC business segment's NBT in the fourth quarter of 2009 was US$6.9 million, down 46.0% compared with US$12.7 million in the fourth quarter of 2008. Business segment earnings were impacted by higher self-insurance costs of US$3.0 million, compared with favourable claims experience in the prior year. Business segment earnings were also impacted by the decline in revenue. Business segment NBT as a percentage of operating revenue was 6.1% in the fourth quarter of 2009, down 420 basis points from 10.3% in the year-earlier period.

2010 Forecast

Ryder forecasts full year 2010 earnings to be in the range of US$1.80 to US$1.95 per diluted share. Full year comparable EPS were US$1.70 in 2009. The anticipated EPS growth is expected from improved commercial rental performance, productivity initiatives, better used vehicle sales operations, stronger SCS results, lower annual pension expense and the benefit of 2009 stock repurchases.

Total revenue for the full year 2010 is forecast to be approximately US$4.9 billion which is flat compared with 2009. Operating revenue for the full year 2010 is forecast to be US$4.0 billion compared with US$4.1 billion in 2009. Total SCS revenue is forecast to decrease by 2.0%. SCS operating revenue is anticipated to decrease by 3.0%, or 6.0% excluding the impacts of foreign exchange and fuel, reflecting the impact of non-renewed contracts. Total DCC revenue is expected to be unchanged. DCC operating revenue is expected to decrease by 1.0%. Despite the moderate economic outlook, the Company expects to deliver improved returns in the Supply Chain Solutions business, resulting from recovering automotive volumes, new initiatives and strategic decisions undertaken in 2009.