萊德系統 (R) 2002 Q1 法說會逐字稿

Good morning and welcome to the Ryder first quarter 2002 earnings conference call. All lines will be in the listen-only mode until today's presentation. At the request of Ryder, today's call is being tape-recorded. I would like to introduce to today's host Mrs. Amy Wagner, director of investor relations for Ryder. Ms. Wagner, you may begin.

Good morning. And welcome to this conference call. As a reminder, the statements which will be made in today's call may include forward-looking statements as defined under the U.S. federal securities laws. These statements are based upon the company's current beliefs and expectations, and are subject to risks, uncertainties, and other factors which can materially affect actual results.

Presenting on the call today is Gregory Swienton, president, chief executive officer and chairman elect and corky Nelson, senior executive vice president and chief financial officer.

Additionally, tracey Leinbach, executive vice president of fleet management solutions (inaudible) and Gene Tyndall, executive vice president, president of global chain supply solutions will be available to answer any questions you may have at the conclusion of our presentation.

I would now like to turn the call over to Greg.

Thank you very much, and good morning everyone. I (inaudible) four areas. I'm going to ask corky Nelson to review sort of an overview on our situation analysis in the first quarter, including the specific numbers. I'll then comment on our key initiatives and take up a couple of other subjects on asset management, and something else that is timely, and that is, the October 2002EPA emissions standards. I will briefly discuss our future estimates by quarter, and then we will open it up for questions.

So now, I'll turn it over and (inaudible) corky.

Thank you, Greg, and at a high level, I want to provide you with a brief overview of what we have experienced in the quarter. As you've read in the press release, revenues were soft in all segments of the business and (inaudible) for the quarter, as compared to the prior quarter, and we've also seen noted improvement on a month over month within the quarter. Supply solutions saw significant increases in margins as the (inaudible) and the purging of underperforming accounts began to positively impact results. And we've also continued emphasis on our cost management activity, which has positively impacted all everhead spending categories throughout the company. Additionally, we've seen additional sales activities and we've used truck volume has improved, and as Greg touched on earlier, he will, in a later part of the presentation, discussing our used truck market and how the new EPA standards could positively potentially help Ryder work through some of the used inventories at a quicker pace.

Also, Ryder benefitted from the (inaudible) based on the final 2001 equity market valuation performance. This benefit additionally impacted subsequent quarters, and we'll be giving you guidance on how to update your forecasts, representing this earnings pickup. Finally, effective January 1 of this year, the company adopted SFAS142, the accounting for goodwill and other intangible assets, which, among other things, eliminated goodwill amortization. So assist you in making a relative year-over-year comparison, we've elected to reclassify goodwill amortization in the business segments and the earnings for 2001. Goodwill amortization is now reported below segment MBT for 2001.

With that high-level overview, let's drill down a little more into detail. Earnings per share for unusual items of -- were 26 cents, and included a 4-cent benefit from reduced pension expense not previously anticipated. Earnings per share of 26 cents compares to the first quarter of 2001 earnings per share of 23 cents, and again, 23 cents has been adjusted for the amortization expense associated with goodwill, which was about a nickel. Reported earnings per share for the quarter was 27 cents, including a one-cent recovery benefit for prior years' restructuring accruals. This earnings per share of 27 cents compared favorably to the 2001 quarterly reported earnings per share of 7 cents, which, as you may recall, included an 11-cent charge for restructuring activities.

If those of you following along on the PowerPoint presentation on the webcast, let's turn to Page 5 and discuss the quarter-over-quarter comparisons. Specifically, when comparing last year's results to the previous first quarter (inaudible) results, quarter, consolidated revenue was down (inaudible) while pretax earnings before unusual items increased 47%. As previous quarters, revenue was soft in the first quarter, clearly indicative of a continued (inaudible) the case of our sales in our used truck centers. However, miles and fuel consumption continue to be down. Lease and maintenance product lines were soft, and our product volume in many of our supply chain business industries we support were down. Earnings performance was once again primarily driven by the team's commitment to cost management and to the process improvement initiatives that are well under way. Significant improvement in our supply chain solutions business segments margins also assisted and helped improve the quarter-over-quarter results and we'll talk about those in more detail. The positive earnings result helped mitigate negative impact by reduced U.S. pension benefits of approximately 6.4 million on a quarter-over-quarter basis. U.S. pension expense for the quarter was 3.6 million versus pension income of 2.8 million, the first quarter of 2001. And at this point, I'd like to step aside and mention that our revised pension expense for the year is approximately $15 million, compared to the 30 million that we had forecasted and given guidance on when we put the plan together in December. And this, again, compares to pension income of 2001 of approximately 12 million and in 2000 of 48 million. 48 million pension income.

During the first quarter of 2002, we recognized 1.2 million of recovery items relating to change in prior years' restructuring accruals. In our corporate tax rate for the quarter is 36% compared to 37% in the prior year, and in line with our previous guidance. The increase in shares outstanding has grown from 60.3 million to 61.9 million, and is due in large part to the stock options being exercised and to the increased number of options that are in the money, and that result in -- as a result of the share price appreciation. For those of you following on the PowerPoint presentation on the webcast, Page 6 depicts the quarter performance in our various business segments. Fleet management solutions, supply chain solutions, and dedicated contract carriage businesses. As we've previously indicated, we have gone to a more fully allocated presentation in our business segment earnings and will no longer report on a contribution margin basis. Each business now reflects all costs required to operate the business, and includes all allocation of support -- central support services. Without spending a lot of time on this page, revenue was down quarter over quarter in every business segment. In fleet management solutions, we saw continued revenue decline. In lease and rental and other sales and service activities, and in fuel.

U.S. rental utilization was 63.8% for the quarter, slightly up from 63.3% in the prior year. Additionally, we -- as I mentioned earlier -- are encouraged about the month-over-month pickup in utilization experienced within (inaudible) positive proactively right-sizing the fleet to address the softening demand. The company's worldwide fleet rental fleet was down approximately 38 units, about 6% reduction, and negative net sales, even though revenues were down 10%, segment NBT was down to a lesser degree by about six or seven percent as a result of continued focus on cost management activities and decrease in (inaudible) -- in interest expense resulting from lower interest rates and reduced debt. There are some (inaudible) negatively impacted by volume reductions across most of the purging of (inaudible) operations in Brazil and Argentina. Even though revenues were down some 12% on a quarter over quarter basis, significant segment margin improvement initiatives, including the purging of unprofitable accounts and increased margins on existing accounts largely account for this improved -- significant improvement in performance.

In our dedicated contract carriage business, we saw a 6% decline on a quarter-over-quarter basis and (inaudible) also as a result of a slower volume -- as I previously mentioned. To facilitate comparison of segment operating results, (inaudible) capital which was not required in the first quarter of 2002.

As you may recall from previous calls, our U.S. rental capital requirements will be sourced from surplus equipment this year.

As I previously discussed, we do not foresee our full-year capital spend to exceed $580 million, which is basically our maintenance and replacement levels for required capital.

Even though the economy -- even when the economy does rebound to a more normalized basis, we will not anticipate spend to be at the company's historical 1 billion-dollar plus level, due to our continued focus on prudent capital spending and our capital allocation process. As I have also mentioned previously, we would anticipate capital spending during a more normalized economy to be in the 700 to 900 million-dollar range going forward. And for those of you not having access to the PowerPoint presentation, let me quickly recap capital expenditures at a very high level for the first quarter of 2002.

Total lease expenditures were about 90 million. Total rental, about 5 million. Property, plant, and equipment, about 11 million. And securititization of vehicles, about 20 million. For a total of 125 million. Next, let's turn to our free cash flow, and our presentation there. The company recognized approximately 75 million in free cash flow for the quarter, and I should say on a preliminary consolidated basis, as compared to a negative free cash flow of 135 million in the previous year's period. As the full year plan suggests, we remain committed to improvement in our free cash flow generation, and will monitor it very closely and continue to share that data with you.

Our full-year plan stands at 221 million. In wrapping up, page -- the next page, 6, provides a -- or 9 provides a graphic depiction of the company's current and historical debt ratios. For the most current quarter, our balance sheet debt-to-equity is about 120%. Total obligations, excluding securitization, is about 178%, and total obligations with securitization, about 211%. And to put a little meat and substance around it, total debt outstanding is a little over 1.5 billion. Total obligations, 2.2 billion. And total obligations with securitization, about 2.6 billion.

And again, our equity is a little over 1.2 billion. As you can see, we continue to work on the balance sheet and to improve our debt-to-equity ratios, as shown on the improvement year over year, and at this point, I'd like to turn the presentation back to Greg, who will take you through an update on our key initiatives in the asset allocation or the asset management overview.

Thank you. Let me begin with the 2002 key initiatives. I think especially we have (inaudible) we have for robust revenue growth, we still will continue to focus on cost initiatives this calendar year. And that, we've highlighted before.

Maybe help further reduce our used vehicle inventories because this on the ground equipment which is grandfathered could, in fact, begin to look considerably more attractive. We've just tried to lay out what the issue is, and there are pluses and minuses and I know there's another question that came in in advance and that will be answered also during the course of this call.

In terms of forecasts and expectations, frankly it is difficult to look ahead for sure and know what the economic environment is going to be. It's a little difficult to look out one quarter. It's a little bit difficult to look out into the second half of the year. And in fact, especially since we had somewhat of a strong quarter in the first quarter -- that is, was four cents better than anticipated -- and that was just from operations, that didn't come from the pension value, we're not sure how strong our initiatives can be in offsetting what could be softness in revenue or volume. So we have to make some estimates. I don't think it would serve you or us well if we just put question marks and "to be determined" in there, so we have tried to make (inaudible) and have guessed at perhaps there is some business softness. So our December 2001 estimate was in the range of 39 to 41 cents, anticipating that there could be business softness, we've modified that by two cents, and when you look at the lower pension expense, improving things by 4 cents, that takes our estimate to almost unchanged at 41, or maybe to an up side of 43.

So there are still some unknowns (inaudible) in the economy.

The second half, I think, becomes even more difficult because we're looking out further, and as you hear from other organizations, I think there is uncertainty as to how strong the economy will be. But I -- again, I think we had to try to make some guesses.

So if we start with our December 2001 estimate that we shared with all of you for the second half of the year, that was 94 to 98 cents. Without having a better inclination at this point, we've suggested that there could be a business softness, again, for the second half of the year. That was 2 cents a quarter or 4 cents for the second half. And we also know that we have announced the lower pension expense of 8 cents, which again takes the second half estimate to 98 cents to a dollar 2. Now. The second half estimate is largely dependent upon revenue growth, so these estimates could be stronger or lower, but it all depends on the anticipated economic recovery and also if there is more softness that we anticipated, how well we can do on cost initiatives.

You know, at some point, obviously, the prognosticators about the return of the economy are going to be more right than they are today, and (inaudible) know exactly when that will be.

Before I actually turn over the instructions for the Q and A, and before we open it up for questions and take the questions we received in advance, I want to cover one point, both as a question and as a statement. And it has to do while we're on these forecast pages.

Because there is a question that we've asked ourselves, and we've also received a couple of inquiries from outsiders after the release came out (inaudible) and saw our forecast estimates. And the basic question is: Is it beneficial or worthwhile to make adjustments that are basically the equivalent of 2 cents a share on a full-year basis?

And that is -- and the way we get to that number, or the way the questions get to that number, is that we were 4 cents over in the first quarter, so we had a very good quarter by expectations and estimates. 4 cents over. And if we do the adjustments or if the softness is there, as we've included in the statement, of 2 cents a quarter for the next three quarters, you net out to 2 cents per share difference.

So the question we get, or even ask ourselves, is: Is 2 cents (inaudible)? Are we being too conservative? Is this, in fact, potentially rounding error? Could we not possibly even make it up by additional initiatives. Or would this even be irrelevant if we just had ranges if our estimates?

And maybe the more important question that is asked is: Are we signaling something else? Are we signaling greater softness or a downgrade or something else going on.

So I want to address that.

Let me, first of all, for those first questions, is it worth mentioning, is it too conservative, is 2 cents rounding error, could we make it up, are we being conservative? In a way, we probably are being a little bit cautious and conservative. Especially as you compare that to how we've done in the first quarter.

I want to remind all of you about the principals that we have been trying to establish here for the last two years.

We have been attempting to be as clear and as transparent as possible in everything we do and report.

For example, in December, we provided some very specific quarterly estimates with some very (inaudible) ranges. We've also, as you'll recall, shared some waterfall charts that showed all the pluses and the minuses of where earnings were coming from, not coming from, and initiative. As has already been reviewed in this call, we have fully allocated our net before tax by business segment, so we have made all of that much more clear and transparent.

We have been detailing initiatives for the last year and a half, and we have been reporting on our progress against all of those. And as already (inaudible) said, both in advance and by some identified nonoperating items -- for example, the pension input -- we said if things like that would change, we would isolate those and we just wouldn't bury them in our actual operating costs.

So that's our philosophy, and commitment. Now, perhaps that's a little bit of a detail trap, but because we've shared a lot of detail, we did, in that context, make this forecast, and I suppose that some would call it a bit cautiousnary because we don't know for sure how deep or when economic recovery will be. And I think that's the reality, not just for us but for most of the (inaudible) most of the world and I suppose that someone would call it a bit cautionary because we don't know for sure how deep or when economic recovery will be. And I think that's the reality, not just for us but for most of the world. And businesspeople in general have had a modest view, and I think -- and I think that we take the same approach.

Are we signaling something else in evaluations? And in these reports, in these sessions that we have with you, we are not here to hype or to dampen or to do things in clever stages. My style and I think the style of this team is to be straightforward. We will share what we know or believe when we know it and when we can or should disclose it. So I think especially in this business environment today, to expect I and we and can be and have been accused even on these calls of being a little bit conservative, but I think that honest caution better serves our owners and potential owners.