• Q4 EPS from Continuing Operations Increase 15% to $0.92
• Q4 Comparable EPS from Continuing Operations Up 49% to $0.97
• Q4 Total Revenue Up 17%; Operating Revenue Grows 16%
• Full Year EPS from Continuing Operations Up 40% to $3.31
• Full Year Comparable EPS from Continuing Operations Up 57% to $3.49
• Full Year Total Revenue Grows 18% to $6.1 Billion
• 2012 Comparable EPS Forecast of $4.00 to $4.10
• 2012 Forecast Includes $0.18 Increase in Pension Expense
MIAMI, February 02, 2012 -- (EON: Enhanced Online News)--Ryder System, Inc. (NYSE: R), a leader in transportation and supply chain management solutions, today reported earnings per diluted share from continuing operations for the three-month period ended December 31, 2011 were $0.92, compared with $0.80 in the year-earlier period. Earnings from continuing operations for the fourth quarter of 2011 were $47.7 million, compared with $41.5 million in the year-earlier period. Earnings per diluted share and earnings from continuing operations in the fourth quarter of 2011 included a charge of $0.05 and $2.4 million, respectively, for planned restructuring costs related to the integration of an acquisition. Earnings per diluted share and earnings from continuing operations in the year-earlier period included a net benefit of $0.15 and $7.6 million, respectively, related to certain tax benefits, partially offset by restructuring and other items. Excluding these items in both periods, comparable earnings per diluted share from continuing operations for the fourth quarter of 2011 were $0.97, up 49% from $0.65 in the year-earlier period, and comparable earnings from continuing operations of $50.1 million increased 48% from $33.8 million in the year-earlier period. The increase in comparable earnings primarily reflects strong organic growth in commercial rental, the benefit of acquisitions in all business segments, better used vehicle sales results, as well as organic growth in the Supply Chain Solutions (SCS) segment.
Total revenue for the fourth quarter of 2011 was $1.54 billion, up 17% from $1.31 billion in the same period in the prior year, reflecting the benefit of acquisitions, organic growth and fuel services. Operating revenue (revenue excluding Fleet Management Solutions fuel and all subcontracted transportation) from continuing operations of $1.24 billion, rose 16% from $1.06 billion in the year-earlier period. Fleet Management Solutions (FMS) business segment total revenue improved 13% due to higher operating revenue, and to a lesser extent increased fuel services revenue. FMS operating revenue grew 12% due to acquisitions and higher organic commercial rental revenue. In the Company’s SCS business segment, total and operating revenue increased 26% due to an acquisition and new business. DCC business segment total revenue grew 29% and operating revenue grew 23% reflecting an acquisition, and the pass-through of higher fuel costs.
Net earnings per diluted share, including discontinued operations for the three-month period ended December 31, 2011 were $0.93 versus $0.72 in the year-earlier period. Earnings per diluted share from discontinued operations (previously announced in 2009) for the fourth quarter of 2011 totaled $0.01 compared with a loss of $0.08 in the same period of 2010. Net earnings for the fourth quarter of 2011 were $48.1 million versus $37.1 million in the year-earlier period.
Commenting on the Company’s full-year 2011 performance, Ryder Chairman and CEO Greg Swienton said, “In 2011, we delivered significantly higher, double-digit growth in both revenue and earnings despite volatile economic conditions. Our transactional products, including commercial rental and used vehicle sales, continued to perform exceptionally well, showing improvement not only in volumes, but commanding better pricing as well. In our contractual business, our largest product line, full service lease, began to show organic fleet growth in the latter part of the year, and we also saw significant organic improvement in Supply Chain Solutions. Although Dedicated Contract Carriage earnings showed an increase for the year, segment results were lower than our expectations. We generated very strong performance from the integration of five immediately accretive acquisitions completed since December of 2010. We also achieved a positive spread between our return on capital and cost of capital, and improved our return on equity by 350 basis points to 11.9%. In view of these factors, we have entered 2012 with good momentum, specific initiatives in place to accelerate organic growth, and confidence in our ability to deliver increased revenue and earnings even with only modest economic improvement anticipated in 2012.”
Fourth Quarter Business Segment Operating Results
Fleet Management Solutions
In the FMS business segment, total revenue in the fourth quarter of 2011 was $1.07 billion, up 13%. Fuel services revenue in the fourth quarter of 2011 increased 18%, due to higher fuel prices passed through to customers. Operating revenue (revenue excluding fuel) in the fourth quarter of 2011 was $813.3 million, up 12%. Full service lease revenue increased 5%, driven by acquisitions. Commercial rental revenue grew 38%, reflecting improving global market demand and higher pricing.
The FMS business segment’s earnings before tax (EBT) were $69.9 million in the fourth quarter of 2011, up 41% from $49.5 million in the same period of 2010. Increased earnings reflect significantly better commercial rental performance, the benefit of the four FMS acquisitions closed in 2011 and improved used vehicle sales results. These items were partially offset by higher maintenance costs on an older lease fleet, investments in sales and marketing initiatives and higher compensation-related expenses. Commercial rental performance improved as a result of increased market demand on a 31% larger average fleet (13% excluding acquisitions) and higher pricing. Rental power fleet utilization was 79% for the fourth quarter of 2011, an improvement of 100 basis points from the year-earlier period. Used vehicle sales results were favorably impacted by higher pricing. Business segment earnings before tax as a percentage of operating revenue were 8.6% in the fourth quarter of 2011, up 180 basis points compared with 6.8% in the same quarter a year ago.
Supply Chain Solutions
In the SCS business segment, fourth quarter 2011 total revenue was $408.7 million, up 26%. Fourth quarter 2011 operating revenue (revenue excluding subcontracted transportation) was $324.7 million, an increase of 26%. SCS total revenue and operating revenue comparisons benefited from the acquisition of Total Logistic Control (TLC) in December of 2010. Operating revenue also benefited from new business.
The SCS business segment’s earnings before tax of $17.8 million in the fourth quarter of 2011 rose 44%, from $12.3 million in the same quarter of 2010. The improvement was driven by the TLC acquisition, favorable insurance claims development and new business. Fourth quarter 2011 earnings before tax for the business segment as a percentage of operating revenue were 5.5%, up 70 basis points from 4.8% in the same quarter of 2010.
Dedicated Contract Carriage
In the DCC business segment, fourth quarter 2011 total revenue of $156.6 million improved 29%. Operating revenue (revenue excluding subcontracted transportation) in the fourth quarter of 2011 was $147.1 million, an increase of 23%. Total revenue and operating revenue increased due to the acquisition of The Scully Companies in January 2011 and the pass-through of higher fuel costs.
The DCC business segment’s earnings before tax in the fourth quarter of 2011 were $7.0 million, up 7% compared with $6.5 million in the fourth quarter of 2010. The improvement was driven by favorable insurance claims development, partially offset by lower operating performance. Business segment earnings before tax as a percentage of operating revenue were 4.8% in the fourth quarter of 2011, down 70 basis points from 5.5% in the year-earlier period.
Corporate Financial Information
Central Support Services
Central Support Services (CSS) are overhead costs incurred to support all business segments and product lines. Most CSS costs are allocated to the business segments. In the fourth quarter of 2011, CSS costs were $52.0 million, compared with $48.0 million in the year-earlier period, primarily driven by higher compensation-related expenses, investments in information technology initiatives, and increased professional fees.
Restructuring and Other Items
Pre-tax restructuring and other items from continuing operations in the fourth quarter of 2011 totaled $3.3 million ($2.4 million after tax), or $0.05 per diluted share. The charge represents restructuring costs associated with the integration of the Hill Hire acquisition. In the first quarter of 2012, Ryder expects restructuring and other items of approximately $1.4 million ($0.9 million after tax), or $0.02 per diluted share, related to the integration of the Hill Hire acquisition. Pre-tax restructuring and other items from continuing operations in the fourth quarter of 2010 totaled $3.2 million (also $3.2 million after tax), or $0.06 per diluted share. The charge included costs incurred on the acquisition of Total Logistic Control in December 2010, partially offset by a gain on the sale of an international supply chain facility.
The Company’s effective income tax rate from continuing operations for the fourth quarter of 2011 was 34.8% of pre-tax earnings, compared with 16.4% in the year-earlier period. The year-earlier period income tax rate reflected a benefit of $10.8 million (21.7% of pre-tax earnings), or $0.21 per diluted share, related to the favorable settlement of prior tax years as well as the expiration of a statute of limitations. Excluding the prior year benefit, the effective income tax rate from continuing operations decreased in 2011 primarily due to adjustments related to annual foreign and state tax filings.
As planned, capital expenditures from continuing operations were $1.76 billion for 2011, compared with $1.09 billion in the same period of 2010. Net capital expenditures (including proceeds from the sale of assets) were $1.42 billion for 2011, up from $853.0 million in the same period of 2010. The increase in capital expenditures reflects investments to refresh and grow the lease and commercial rental fleets.
Operating cash flow from continuing operations in 2011 was $1.04 billion, up 1% from $1.03 billion in the same period of 2010, due primarily to higher cash-based earnings, partially offset by changes in working capital needs. Total cash generated (including proceeds from used vehicle sales) from continuing operations in 2011 was $1.44 billion, up 9% from $1.33 billion in the same period of 2010. Free cash flow from continuing operations in 2011 was negative $256.8 million, down from a positive $257.6 million in the same period of 2010, due primarily to increased vehicle investments.
Balance sheet debt as of December 31, 2011 increased by $635.1 million compared with year-end 2010, due primarily to acquisitions and increased investment in vehicles. The leverage ratio for balance sheet debt as of December 31, 2011 was 257%, compared with 196% at year-end 2010. Total obligations to equity as of December 31, 2011 were 261%, up from 203% at year end 2010. This increase reflects growth in the business and a pension equity charge. Total obligations to equity remain within Ryder’s long-term target range of 250% to 300%.
Full-Year 2011 Operating Results
Total revenue from continuing operations for the full-year 2011 was $6.05 billion, up 18% from $5.14 billion in 2010. Operating revenue from continuing operations for the full-year 2011 was $4.81 billion, up 16% from $4.16 billion in 2010.
Ryder’s 2011 earnings from continuing operations were $171.4 million, compared with $124.6 million in the year-earlier period. Earnings per diluted share from continuing operations were $3.31 for 2011, up 40% versus $2.37 in 2010. Comparable 2011 earnings from continuing operations were $180.6 million, an improvement of 54% from $117.0 million in 2010. Comparable 2011 earnings per diluted share from continuing operations of $3.49 rose 57% from $2.22 in 2010. Comparable earnings and earnings per share from continuing operations excluded restructuring and other items, and certain tax items in both 2011 and 2010.
Ryder’s 2011 net earnings, including discontinued operations, were $169.8 million, up 44% compared with $118.2 million in 2010. Earnings per diluted share were $3.28 for 2011, an improvement of 46% from $2.25 in 2010.
2012 Earnings Forecast
Commenting on the Company’s outlook, Mr. Swienton said, “We expect to build on the significant progress Ryder made in 2011. Even with an economic outlook that calls for only modest growth in 2012, we plan to deliver increased revenue and solid earnings leverage. In Fleet Management Solutions, we are forecasting organic growth in our full service lease fleet, with maintenance costs continuing at somewhat higher levels, resulting from a slightly older fleet. Our commercial rental product should continue to perform very well and we plan to grow that portion of our fleet, while also maintaining improved pricing. Our used vehicle sales activity is expected to generate higher volumes with stable pricing. During the first half of the year, Fleet Management Solutions earnings comparisons will also reflect the benefit of the Hill Hire acquisition completed in June of 2011. In our Supply Chain Solutions business segment, which is now integrated to include all dedicated activity, we expect 2012 performance to benefit from new business and higher volumes. We are forecasting pension expense to increase by $0.18, well above our prior assumption. This increase is based on lower actual and projected pension asset returns. The impact of increased pension expense is already included in our forecast. At this early stage of the multi-year vehicle replacement cycle, we plan to invest significant capital to refresh and grow both the lease and commercial rental fleets. These investments will benefit revenue and earnings in 2012 as well as in future years.”
Based on this outlook, Ryder forecasts full-year 2012 comparable earnings to be in the range of $4.00 to $4.10 per diluted share, excluding $0.02 per share of acquisition-related restructuring costs anticipated in the first quarter. This represents a mid-point increase of 16% over Ryder’s comparable full-year 2011 earnings from continuing operations of $3.49 per diluted share. The Company is also establishing a first quarter 2012 comparable earnings forecast of $0.55 to $0.58 per diluted share. Total revenue for the full-year 2012 is forecast to be approximately $6.3 billion, up 4% from $6.05 billion in 2011. Operating revenue (revenue excluding FMS fuel and all subcontracted transportation) for the full-year 2012 is forecast to be approximately $5.1 billion, up 6% from $4.81 billion in 2011.
Ryder System, Inc. is a FORTUNE 500® commercial transportation, logistics and supply chain management solutions company. Ryder’s stock (NYSE: R) is a component of the Dow Jones Transportation Average and the Standard & Poor’s 500 Index. The Company’s financial performance is reported in the following three, inter-related business segments:
• Fleet Management Solutions – The FMS business segment combines several capabilities into a comprehensive package that provides one-stop outsourcing of the acquisition, financing, maintenance, management, and disposal of vehicles. Ryder’s commercial rental service offers customers a method to expand their fleets in order to address short-term capacity needs.
• Supply Chain Solutions – The SCS business segment offers a broad range of innovative logistics management services that are designed to optimize a customer’s supply chain and address key customer business requirements. These solutions involve strategically designed processes that direct the movement of materials and related information from the acquisition of raw materials to the delivery of finished products to the end user.
• Dedicated Contract Carriage – The DCC business segment provides customers with vehicles, drivers, management, and administrative support, with the assets committed to a specific customer for a contractual term. DCC supports customers with both basic and sophisticated logistics and transportation needs, including routing and scheduling, specialized driver services, and logistics engineering support.
Earnings Before Tax (EBT): Ryder’s primary measurement of business segment financial performance, earnings before tax (EBT), allocates Central Support Services to each business segment and excludes restructuring and other items.
Capital Expenditures: In Ryder’s business, capital expenditures are generally used to purchase revenue earning equipment (trucks, tractors, and trailers) primarily to support the full service lease product line and secondarily to support the commercial rental product line within Ryder’s FMS business segment. The level of capital required to support the full service lease product line varies directly with customer contract signings for replacement vehicles and growth. These contracts are long-term agreements that result in ongoing revenues and cash flows to Ryder, typically over a three- to ten-year term. The commercial rental product line utilizes capital for the purchase of vehicles to replenish and expand the Company’s fleet available for shorter-term use by contractual or occasional customers.