SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 12, 2001
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Florida 1-4364 59-0739250
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
3600 NW 82nd Avenue, Miami, Florida 33166
(Address of principal executive offices) (Zip Code)
(305) 500-3726
(Registrant's telephone number, including area code)
Page 1 of 9
This report consists of 9 consecutively numbered pages.
ITEM 9. REGULATION FD DISCLOSURE
Ryder System, Inc. (the Company) has made this filing to
provide answers to questions that were submitted by analysts
and investors prior and subsequent to the Company's February
7, 2001, earnings conference call. The Company will also
publish the question and answer document (Q and A) on its web
site (www.ryder.com).
The content of the Q and A is furnished below in accordance
with the requirements of Regulation FD.
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Ryder System, Inc.
Questions and Answers
1) Major truck OEMs, such as Freightliner, have recently announced additional
cutbacks. Is this a sign things are continuing to deteriorate in the used
truck market or do you believe the worst of it is behind us?
Answer: Our view of this national problem is that the used truck market
has not yet bottomed out. Industry estimates are that the peak
imbalance between supply and demand for used Class 8 vehicles will
occur in the 2001-2002 time period. Production cutbacks of new class 8
vehicles will help correct this imbalance by reducing the supply of new
vehicles. However, it will still take some time for the overall market
to correct.
2) You had previously (on the third quarter earnings call) mentioned that it
would be at least 8-10 months before improvement occurs in the used truck
market. Is this still the case or do you believe a recovery could be
further out?
Answer: To clarify, during the third quarter earnings call (October 19,
2000), we stated that based on our specific action plans, we believed
we could achieve the Company's targeted level of used truck inventory
in an 8 to 10 month timeframe. In contrast, we did not say that the
used truck market would improve by that time. In fact, as mentioned
above, industry estimates are that the weakness of the used truck
market will continue into 2002. However, based on our specific actions
to slow the number of vehicles coming into inventory as well as our
initiatives to increase our used truck sales volume, we believe we can
still achieve our targeted level of used truck inventory in the third
quarter of 2001 in spite of the continued weak market.
3) Can you provide an update to total number of units not yet earning revenue
and the number of units no longer earning revenue and available for sale or
re-lease?
Answer:
December 31, 2000
-----------------
Not Yet Earning vehicle count 2,400
No Longer Earning vehicle count 8,300
We included a graph of these numbers in the appendix to the fourth
quarter 2000 conference call presentation. If you do not have a copy of
the presentation, it is available on the Company's website at
www.ryder.com. Not Yet Earning vehicles represent those which are being
prepared (e.g. decals, liftgates) for delivery to a specific new lease
customer or for commercial rental application. No Longer Earning
vehicles represent 1) vehicles at Ryder's Used Truck Centers available
for sale, 2) vehicles being prepared for sale whose related lease terms
have been fulfilled or 3) vehicles that have remaining economic life
and are targeted for redeployment to a new lease customer, to
commercial rental or to another application, such as dedicated contract
carriage.
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4) What are gross capital expenditures and proceeds from the sale of equipment
for 2000? What are these amounts expected to be for 2001?
Answer:
Year Ended December 31,
---------------------------------
2000 Actual 2001 Plan
----------- ---------
(in millions)
Gross capital expenditures, inc. acquisitions $1,318 $1,149
Proceeds from the sale of property and equipment 230 269
------ ------
Net capital expenditures $1,088 $ 880
====== ======
5) What was the gain on sale of equipment in the fourth quarter of 2000? What
do you expect gains to be in FY2001?
Answer: As shown in our press release tables, gains on the sale of
equipment were $2 million in the fourth quarter of 2000. Gains are
projected to be approximately $15 million for the full year 2001.
6) The depreciation run rate was adjusted in the fourth quarter of 2000 by
approximately $0.07-$0.10. Was this a one-time adjustment or is there an
ongoing adjustment to deprecation to address used truck market issues?
Answer: When we recorded the third quarter charge relating to the
impaired inventory, we also adjusted the residual values for certain
Class 8 vehicles that would be coming out of service over the following
21 months through June 30, 2002. The depreciation run rate was adjusted
such that each of these vehicles will have an adjusted (i.e. lower)
residual value on the scheduled date of lease expiration. Therefore,
this increased level of depreciation of about $25 to $30 million will
be spread over the 21-month period, with a heavier weighting toward the
front-end and declining over time. This increased depreciation has been
factored into our 2001 business plan projections.
7) What impact have bad debt expense and bankruptcies had on leasing results
in the fourth quarter of 2000?
Answer: The impact of bad debt expense and bankruptcies on fourth
quarter 2000 Fleet Management Solutions' results was approximately $2.5
million compared to $2.1 million in the fourth quarter of 1999. Please
note, the Leasing and Rental segment has been renamed Fleet Management
Solutions (FMS) to better reflect our strategic vision for this
business.
8) Have you completed any additional off-balance sheet financing in the
fourth quarter of 2000?
Answer: We executed approximately $7 million of closed-end operating
lease financing during the fourth quarter of 2000. Although no
sale-leaseback transactions occurred during the fourth quarter, the
Company raised $426 million in the public asset backed market on March
1, 2001. This sale-leaseback transaction securitizes truck, tractor and
trailer leases and residuals (through the issuance of $410 million of
'AAA' rated notes and $16 million of 'A' rated notes) with an advance
rate of more than 91%. The transaction provides financing at interest
rates substantially below those currently available to the Company in
the public unsecured debt market.
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9) What were the 12/31 levels of total debt, shareholders equity, cash?
Answer:
Dec. 31, 2000
(in millions)
Total On-Balance Sheet Debt $2,017
Total Off-Balance Sheet Debt 1,224
------
Total On and Off-Balance Sheet Debt $3,241
======
Shareholders' equity $1,253
======
Cash $ 122
======
10) At the beginning of last year, analysts' earnings estimates (based on
guidance from management) were $2.15 from recurring operations, and now it
appears that the correct figure, ex non-recurring items, is closer to
$1.50. What accounted for the shortfall?
Answer: At the beginning of 2000, we estimated that "earnings before
unusual items" for the full year 2000 would be $2.15 per share, and we
ultimately reported $1.93 per share. The difference between the $2.15
estimate and the $1.93 actual result was primarily due to the weakness
of the used truck market being greater than we had originally
anticipated. In addition, some of the reduction was also due to greater
than expected overhead costs, some operational shortfalls in Supply
Chain Solutions (SCS) and Dedicated Contract Carriage (DCC) and some
higher than expected bad debt experience due to the slowing economy.
11) How did the $42 million of pension income in 2000 break out by segment?
Answer: Over 80% of the 2000 pension income related to FMS. The
remainder of the pension income was spread between DCC, SCS and Central
Support Services.
12) Regarding logistics, can you quantify the start-up costs with the Dallas
transportation management center (TMC) in the fourth quarter of 2000 and
provide forward guidance related to such costs?
Answer: The TMC is the centralized command/control center, which now
manages about $1.7 billion of procured freight for our customers using
state-of-the-art optimization software. This center can also provide
tremendous value to our DCC and full service lease (FSL) customers. By
providing visibility into our DCC and FSL customers' fleet capacity and
freight movements, the TMC can provide back-haul opportunities as well
as the most cost effective freight haulage opportunities available. In
addition to reducing our customers' costs, the TMC also provides
on-line shipment tracking and tracing, shipper compliance, flexible
management reporting and automated freight bill audit and payment
services. The amount of fourth quarter start-up costs was approximately
$450,000. The TMC became operational in October 2000, and we do not
expect significant additional start-up costs, outside of normal
operating costs, related to this project.
13) What does the pipeline look like for SCS?
Answer: Our press release tables included a schedule of net sales for
each of our business segments. Net sales for SCS were $107 million for
2000. The new revenue associated with these sales typically starts
being recorded anywhere from 3 to 6 months after the reported sale, and
may not ramp up to full volume for another 3 to 6 months. Thus we have
a strong new sales base from 2000 that helps support our revenue and
margin forecasts for SCS in 2001. In addition, the pipeline of SCS
sales opportunities is also strong, as companies continue to seek
assistance from logistics service providers to enhance supply chain
performance.
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14) How does the Vector SCM joint venture between GM (General Motors) and
CNF (Emery/Menlo) affect Ryder?
Answer: It is our understanding that the Vector SCM joint venture has
initially been focusing on GM's outbound distribution, which is a
business that with very few exceptions we exited in 1997. Our primary
supply chain solutions role in the automotive industry overall...and
with GM...is on inbound delivery, parts distribution and related
network design and management. In fact we continue to receive new or
expanded business from GM in these areas for both North America and
overseas. Nonetheless we do expect that GM will assign all contracts
for distribution and transportation services to Vector for management,
starting with North America, and that we will ultimately have to
re-compete to retain or expand our share.
15) Can you provide quarterly revenue breakdowns for SCS by industry and type
of service for 2000 and 1999?
Answer:
Industry Breakdown 2000
(in Millions) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Full Year
------------- -------- -------- -------- -------- ---------
U.S Operating Revenue
Automotive, Aerospace & Industrial $110 $117 $109 $111 $447
Electronics, High Tech and Telecom 58 55 64 70 247
Consumer Packaged Goods 26 28 29 27 110
Other 3 4 3 3 13
---- ---- ---- ---- ------
Total U.S. Operating Revenue 197 204 205 211 817
International Operating Revenue 94 88 91 103 376
---- ---- ---- ---- ------
Total Operating Revenue 291 292 296 314 1,193
Freight Under Management 97 110 99 109 415
---- ---- ---- ---- ------
Gross Revenue $388 $402 $395 $423 $1,608
==== ==== ==== ==== ======
Industry Breakdown 1999
(in Millions) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Full Year
------------- -------- -------- -------- -------- ---------
U.S Operating Revenue
Automotive, Aerospace and Industrial $ 94 $ 99 $ 99 $110 $402
Electronics, High Tech and Telecom 44 45 48 54 191
Consumer Packaged Goods 24 26 29 29 108
Other 3 3 3 3 12
---- ---- ---- ---- ------
Total U.S. Operating Revenue 165 173 179 196 713
International Operating Revenue 67 76 85 89 317
---- ---- ---- ---- ------
Total Operating Revenue 232 249 264 285 1,030
Freight Under Management 97 107 98 120 422
---- ---- ---- ---- ------
Gross Revenue $329 $356 $362 $405 $1,452
==== ==== ==== ==== ======
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Services Breakdown:
Our U.S. operating revenue in SCS may be broadly categorized as
"vehicle-based revenue" and "services-based revenue". Vehicle-based
revenue is the revenue related to the DCC service offering included
within certain SCS customer contracts. Services-based revenue includes
the revenue from all other services provided in SCS customer contracts,
and includes services such as lead logistics management, supply chain
design and consultation, transportation management, warehouse
management, distribution and fulfillment.
Since discrete information on vehicle-based and services-based revenue
is not maintained by the Company, some assumptions and allocations have
been made, on a consistent basis, in compiling the information
presented below. The Company believes that such assumptions and
allocations are reasonable and that the information presented
represents fair estimates of the quarterly results. However, the
estimates are not necessarily indicative of the results that would have
occurred had the Company maintained discrete information on
vehicle-based and services-based revenue. Additionally, the Company
does not prepare or maintain contribution margin information on this
basis.
Services Breakdown 2000
(in Millions) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Full Year
------------- -------- -------- -------- -------- ---------
Automotive, Aerospace and Industrial
Vehicle-Based $72 $72 $70 $71 $ 285
Services-Based 38 45 39 40 162
Electronics, High Tech and Telecom
Vehicle-Based 28 27 27 28 110
Services-Based 30 28 37 42 137
Consumer Packaged Goods
Vehicle-Based 11 11 12 11 45
Services-Based 15 17 17 16 65
Other
Services-Based 3 4 3 3 13
Total U.S. Operating Revenue
Vehicle-Based 111 110 109 110 440
Services-Based 86 94 96 101 377
----- ----- ----- ----- -----
Total $ 197 $ 204 $ 205 $ 211 $ 817
===== ===== ===== ===== =====
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Services Breakdown 1999
(in Millions) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Full Year
------------- -------- -------- -------- -------- ---------
Automotive, Aerospace and Industrial
Vehicle-Based $72 $74 $70 $72 $ 288
Services-Based 22 25 29 38 114
Electronics, High Tech and Telecom
Vehicle-Based 27 26 26 27 106
Services-Based 17 19 22 27 85
Consumer Packaged Goods
Vehicle-Based 11 11 12 12 46
Services-Based 13 15 17 17 62
Other
Services-Based 3 3 3 3 12
Total U.S. Operating Revenue
Vehicle-Based 110 111 108 111 440
Services-Based 55 62 71 85 273
----- ----- ----- ----- -----
Total $ 165 $ 173 $ 179 $ 196 $ 713
===== ===== ===== ===== =====
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.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RYDER SYSTEM, INC.
(Registrant)
Date: March 12, 2001 /s/ Corliss J. Nelson
---------------------
Corliss J. Nelson
Senior Executive Vice President
and Chief Financial Officer
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