萊德系統 (R) 2004 Q1 法說會逐字稿

Good morning and welcome to Ryder System First Quarter 2004 Earnings Release Conference Call. All lines will be in a listen-only mode until after the presentation. Today's call is being recorded. I would like to introduce Mr. Bob Brunn, Director of Investors Relations for Ryder. Mr. Brunn, you may begin.

Thank you. Good morning and welcome to Ryder's First Quarter 2004 Earnings Conference Call. We'd like to begin with a reminder that in this presentation, you will hear some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations and are subject to uncertainties and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political and regulatory factors. More detailed information about these factors is contained in this morning's release and in Ryder's filings with the Security and Exchange Commission.

Presenting on the call are Greg Swienton Chairman, President and Chief Executive Officer, and Tracy Leinbach, Executive Vice President and Chief Financial Officer. Additionally, Dick Carson, Senior Vice President of Fleet Management Solutions, Tony Tegnelia, Executive Vice President of U.S. Supply Chain Solutions, and Bobby Griffin, Executive Vice President of International Operations, are available to answer any questions you may have at the conclusion of our presentation.

With that, I'll turn the call over to Greg.

Thank you, Bob. Good morning to everyone. I certainly want to welcome each of you to today's call. This morning we will review our first quarter results. We will update you on a number of other items, including our outlook for 2004. And then as always, we'll open it up for questions.

Let me begin with an overview of our first quarter results. And as many of you do follow along on the webcast, we'll begin on page 4.

As an overview of the quarter earning per diluted share were 53 cents for the first quarter 2004 which compares to 33 cents in the comparable prior year period last year. You'll note the first quarter 2004 also includes a 1 cent credit for the sale of a facility not related to operations of the company.

Weak management solutions posted a growth of 4% versus the prior year. U.S. lease revenue increased for the quarter due to our recent acquisitions of General Car and Truck Leasing and Ruan Leasing Company. Lease revenues also increased in Canada and and the U.K.

Lease sales also improved in the quarter with the highest level of contract signings for new and replacement business in the past three years. We're pleased customers are finally feeling confident enough to expand their long-term contractual business with Ryder. Revenue associated with these contract signings has not yet begun to impact our P&L, due to the usual time lag between the sim we sign contracts and the time new equipment is delivered from the manufacturers.

We also posted very strong year-over-year growth in commercial rental again this quarter at 16%, which is the sixth consecutive quarter of improvement. The growth rate for rental this quarter was significantly higher than we originally anticipated. We believe this is a good indicator of improved market conditions. The increase in rental revenues for the quarter resulted from both improved pricing and higher levels of demand and rental activity.

From an earning standpoint, Fleet Management's results benefited from recent acquisitions, from improve rental performance, and lower pension expense in the quarter. I would also like to note in the FMS results included approximately $4 million in acquisition related costs that were below the expected future run rate. These items were primarily related to lower initial financing and lower maintenance costs for the acquisitions than we would expect for future period. We're pleased that this quarter in particular demonstrated the strong earnings leverage from FMS.

On page 5, continuing the overview, Supply Chain Segment total revenue was down for the quarter. In the U.S., the supply chain revenue was down due to certain customer contracts that were not renewed last year. As well as reduced volume in customer segments, particularly U.S. automotive manufacturers. The decline in revenue, however, was not as significant as we had anticipated coming into the quarter. And the operating revenue and supply chain was slightly up versus the prior year. We do expect pressure on the supply chain revenues to continue, but we're focused on winning and converting a good pipeline of new business opportunities, so they'll convert as quickly as possible.

In the International area, our operations in Canada, Latin America and Asia posted increases in revenues for the quarter. Revenues were also positively impacted by favorable exchange rates.

Earnings in Supply Chain Solutions were up slightly, by $200,000 as compared to the first quarter of 2003. The impact of lower revenue was offset by cost reduction activities in that segment. In Dedicated Contract Carriage, revenue was down due to nonrenewals of some accounts, and this negatively impacted segment margins.

Finally, the cost management focus that has become a part of our regular process has continued. We're on track to realize the $13 to $18 million of initiative savings we planned for the year. Our focus again helped us to reduce central support services cost this quarter for the 13th consecutive quarter. These reductions contribute not only to the earnings, but they also continue to enhance our competitiveness in the marketplace.

On page six, the earnings per share page. EPS increased by 20 cents to 53 cents as compared to 33 cents per share last year. In the first quarter 2003, you'll also note there was a negative 2 cents from the cumulative effect of an accounting change, so real bottom line EPS in the first quarter of 2003 was 31 cents.

As also noted in the footnote, the 53 cents earning per share in this year's first quarter included a 1 cent credit resulting from the sale of the facility I previously mentioned. We've also highlighted in the footnote the impact on EPS of pension expense that totaled 16 cents per share for the first quarter 2004. And that compares to 21 cents per share in the prior year's quarter.

Note there are 3.3 million more shares and the average number of shares outstanding calculation versus the prior year's quarter. That's due primarily to the number of stock options exercised. And also to the impact of the higher stock price on our employee stock purchase and option plan. The increase in the Ryder share prices increased the fully diluted share calculations as more options are now in the money in than at any time in the recent past.

As you're also aware, we previously announced a $90 million stock buyback plan which is intended to largely offset the dilution caused by stock exercises that have occurred since January 1, 2003. In this first quarter, we repurchased approximately 1,030,000 shares in the program. Bringing our total repurchasing to the program for date at approximately 1,150,000 shares.

On page seven, we'll highlight the business segment results. Total revenues for the quarter up 1.5%. Pre-tax earnings increased strongly by over $23 million, or 71%.

In Fleet Management, revenue was up by 4%. FMS earning up $22 million or 69%. As mentioned, the increase was largely driven by the impact of the acquisitions, strong commercial rental performance and reduced pension costs.

Also note that in 2004, we made a change to the way certain sales related costs were allocated between FMS and DCC. We have recast our prior year reporting to be consistent with this change. And this resulted in $900,000 of costs in the quarter moving from DCC to FMS. So to be consistent, we have recast those two quarters. And a summary of these changes are included in the appendix on page 22 of the web presentation.

In Supply Chain Solutions, gross or total revenue was down 4%. But operating revenue, which excludes freight under management, slightly increased $1.1 million in the quarter. You can see the detail on page 19 of the appendix.

Supply Chain net before tax earnings were $7.5 million for the quarter compared to $7.3 million last year. So on a percentage basis, NVT as a percent of operating revenue, stayed the same at 3.2%.

In Dedicated Contract Carriage we saw a 2% decline in revenue primarily due to the nonrenewal of certain contracts. And DCC were therefore negatively impacted by the reductions in revenue.

Earnings after all essential support services costs improved by 69%. So earnings improved by 69% to $54.9 million versus $32.4 million last year.

Our quarterly net after-tax earnings were up 77%. At $35 million for the quarter compared to $19.8 million in the previous year.

At this point, I'll turn the call over to Tracy who will cover a number of items beginning with capital expenditures.

Thanks, Greg.

Turning to page 8, first quarter capital expenditures before acquisitions totaled $276 million. Up $128 million from the prior year. Higher capital spending was driven by increased activity in our lease business and the early timing of purchases for your commercial rental fleet. This higher level of capital spend is in line with our plan expectations. Our capital plan for the year anticipated decreasing levels of redeployment and term extensions as customers began to replace lease units at a higher rate. We started to see this trend towards higher replacement activity, in the first quarter, along with some capital spending for additions to customers fleet, as well as for new customers.

In commercial rental, we are receiving this year's new rental vehicles earlier than last year. We expect most of our planned rental spending to take place in the first and second quarters of this year as compared to the second and third quarters last year.

The $147 million in acquisition expenditures relate primarily to the purchase of the Ruan Leasing Operation which closed at the beginning of March. We anticipate our full-year capital requirements, excluding acquisitions, to be approximately $1.2 billion, as further outlined on page 24 of the appendix to this presentation.

On page 9, you can see our total debt levels remain fairly constant with the fourth quarter of 2003. Balance sheet debt is up $30 million for the quarter, due to the impact of higher capital spending, but is down as a percent to equity. Ryder's total obligations of $2 billion are flat with the beginning of this year. Total obligations as a percent of equity at the end of the quarter were 142%, down from 146% at the beginning of the year. The company's variable rate portion of debt at the end of the quarter represented about 29% of total debt. That percent was higher during the quarter as we funded the General and Ruan acquisitions for commercial paper, which we subsequently replaced with fixed-rate debt prior to the end of the first quarter.

Moving to equity, that balance was up $41 million from the beginning of the year, to $1.385 billion at the end of the quarter.

Turning to the next page, you'll see based on our preliminary consolidation, the company used $7 million in free cash flow for the quarter, as compared to generating $65 million in the prior year. The year-over-year reduction of $72 million was driven by the increase in capital expenditures and the acquisition spending I previously mentioned. The improvements in our net earnings and proceeds from sales of assets contributed positively to free cash flow. Cash flow also benefited from changes in working capital, specifically higher account payable levels related to the increase in capital expenditures. Finally, our first quarter free cash flow benefited from the adoption of FIN 46 by approximately $22 million, due to increased depreciation expense of $21 million and higher proceeds on vehicle sales of $1 million.

Turning to page 12, I would like to update you on our asset management area. Our performance in this area has a significant impact on our earnings as well as on our capital efficiency and free cash flow.

Those of you who have followed us know the company has placed a lot of emphasis over the last several years on asset management, and we plan to maintain the same level of focus going forward. This year we anticipate managing a higher volume of vehicles through our used vehicle sales network. We've expanded our used vehicles sales network to facilitate this higher level vehicles. And as a result of our efforts, we sold over 4,000 units in the first quarter, which was up 27% over the last year.

At the same time, we continued to see tractor prices firm in the marketplace. Our per unit proceeds were up 13% over last year. And we expect this trend to continue throughout the year. We continue to focus on reducing the number of non-revenue earning vehicles in our fleet, and we brought this number down by 2% versus last year. The non-revenue earning vehicles in our fleet are made up of two components. First the new vehicles which are just coming into the company, which have not yet begun to earn revenue. And secondly, used vehicles that are no longer earning revenue, which are waiting redeployment or sale through our used vehicle network.

The number of vehicles not yet earning revenue increased during the quarter as expected reflecting the higher level of leased sales activity. We would expect this number to grow as the volume of lease activity increases. But I do want to highlight that these new vehicles, leased vehicles coming in are for customers who have already signed contracts for these vehicles.

Moving to the no longer earning revenue category, this number was down versus the prior year. And as I mentioned previously, our focus will be on continuing to expand our sales efforts to manage this fleet count.

Turning to page 13, you can see in the first quarter, redeployments of used vehicles were flat versus last year. And lease term extensions were down by 25%, as anticipated in our plan. We continue to reduce the number of early replacement and early termination vehicles that we take back in our fleet. We believe these numbers should continue to remain low as part of our ongoing business model as we're committed to realizing the full cash value of our lease contracts.

At this time, I'd like to turn the call back over to Greg and he'll take you through our earnings outlook.

Thank you, Tracy. On page 15, we do have the forecast. And I'll first remind you, last December when we presented our business plan, we provided a forecast for 2004 EPS of $2.35 to $2.45 a share. We have increased our full-year EPS forecast three times since then.

First in January, we announced the closing of a General acquisition and we increased our forecast by 5 cents.

Second, during our fourth quarter 2003 earnings call we increased our EPS earnings forecast by 6 cents. This increase reflected a reduction in our final 2004 pension expense. And was partially offset by a higher forecast in the number of fully diluted shares outstanding.

Third, in March, when we announced the closing of the Ruan acquisition, we increased our forecast by another 6 cents bringing our forecast to $2.52 to $2.64.

We are now increasing our forecast for a fourth time by 18 cents per share, bringing our full year 2004 forecast to a range of $2.70 to $2.82 per share. We are also establishing a second quarter forecast of 66 to 70 cents per share.

We're certainly seeing a lot of positive signs of growth in our Fleet Management Solutions segment. Commercial rental growth has increased, and customers are signing for higher levels of replacements and new vehicle additions in full-service lease. In the near term, we are looking primarily to this FMS segment to deliver the strong earnings leverage that we believe exists throughout the company. Our outlook for the remainder of 2004 in Supply Chain Solutions and Dedicated Contract Carriage is more measured, until we begin to see higher levels of contract signings in higher volume level materialize from our customers.

With that, that will conclude our formal prepared remarks and presentation, and we'll now turn it back over to the operator to open it up for questions from the audience.

Thank you. And at this time we would begin the question and answer session. If you would like to ask a question, press star one. You will be announced prior to asking your question. Again, press star one. To withdraw your question, you may press star two. One moment for the first question. First question comes from John Langenfeld. Your line is open, and state your company name, please.

Good morning. Robert W. Baird. First on the full service lease side, can you describe more qualitatively some of the business coming on-line? Are you seeing it throughout your different asset types? What is the average commitment of these contracts?

I'm going to let Dick Carson speak to some of that. He's here on the call. And he's closer to our regional activity. And he may want to comment a little bit on that detail.

Sure. Thank you, Greg. We are seeing it pretty much throughout the customer -- makeup of the customer base. A lot more activity around manufacturers than in recent history. But it is fairly robust in most of the segments we deal with. The average contract we size between six and seven years. And all types of equipment, from light duty all the way up through class eight equipment. And all of those classes are also active. Marketplace is active around all of that.

Does that answer your question, John?

Okay. Thank you. The next question, John Larkin your line is open and state your company name, please.

It is John Larkin at Legg Mason. Good morning, everyone.

Good morning, John.

Good morning.

I would like to bore a little bit more into the increased lease activity that you're experiencing. It seems to me there are probably three and perhaps some more ways that you can grow that. First is just taking some of the older equipment and replacing it. Second might be an increased number of vehicles with existing customers. And then the third way would be to add -- .

One moment, please.

--- How the new business is spread across those three different alternatives and whether there is any difference in profitability in each of those three types of business.

John, we had a technical malfunction for just a moment. I may ask you if you're on-line to repeat some of that. You started indicating that there are three ways we can get increased lease activity. One was replacement of older vehicles. The other was an increase in the number of vehicles added to the fleet. And then you started to say add something, and your line went dead. Can you start from there?

The third method would be just adding a new customer by perhaps convincing them that they ought to outsource their private fleet to you, or perhaps you would simply take market share from a small regional competitor or perhaps one of your larger competitors. I was interested in understanding how the new growth was spread across those three alternatives and whether there was a difference in profitability across those three.

Let me make a few general comments and then I'll ask Dick to comment on some. There may be some level of detail that we may not be able to fully share.

First, you're right. First replacements are improving. And that was a big first step. Some clients, some customers are definitely adding to their fleet. And when we've mentioned the capital expenditures, that was one of the components of the increased capital. Not only were they replacing old equipment. They were adding to the fleets. And I think that is a good sign.

Certainly part of our mission is to add new customers. And this is a fairly robust segment. And in total, we haven't, you know, fully penetrated as much as we would like. And it is a big capable outsourcing component. We think we have a lot to offer. And this is where we want to head our sales organization.

I would add a fourth. And that is we also are had a good performance from the acquisition. So that's been another area of growth. And I think that's gone extremely well.

With that as an overview, Dick, if you wanted to add anything else.

Yeah. We have, between what we call new and add, meaning new customers and customers we have now that add equipment. That segment is up above 60% from the same level of activity in the first quarter of last year.

Replacement activity is much stronger than that. Mostly because we delayed a lot of replacement around the bottom of the business cycle, because customers weren't ready to commit to full-term leases. So we do a lot of extension of equipment. So that activity is running about 250% ahead of last -- first quarter. So it is much more replacement activity than it was new and add. But new and add being up 60%, we're looking forward to seeing that revenue stream come on-line later in the year. We like the amount of activity in that part of the business, too.

As far as profitability, it really doesn't break by whether it is new business or renewed business. Much differently. We set a certain target of return. We try to get it across everything we do, where we have to discount. We try to have good reason where we're going to get additional volume. Or it is going to absorb capacity we have in a place that it would add to the well-being of the location or the operation we're putting it into.

So we are reaching our targets. We're hitting our targets for profitability in the sales arena. The market is very busy.

The only other thing I would add, John, is that we don't get too finite in the breakdown for competitive reasons on the profitability. I think know you and others know from following us, we have certain hurdles we want to meet. We want to get the right return on assets. You know we measure the EVA performance. And that's something we're commited to in the asset side of the business.

Thank you. Next question, Greg Burns. Your line is open. State your company name, please.

J.P. Morgan. Hi, guys. Just wanted to go into the margin outlook at the full-service division. I'm just curious. Did I hear right that you picked up a sort of one-time benefit from the acquisitions or something about costs that maybe aren't sustainable? If that's not correct, how much better can margins get and what is your goal there?

I think you did hear it right. I'm going to let Tracy speak to some of that. I did mention about a $4 million or 4 cents EPS impact that came from lower than anticipated costs that we don't think will stay in the current run rate. We thought that was important to distinguish. Tracy I'll let you comment on where that came from.

The $4 million really relates to two areas, maintenance and interest. Our maintenance costs for the first quarter, related to the acquisition vehicles, were lower than we would expect as an ongoing run rate. And that's because during the first quarter, our focus was really on integrating the fleet into our shop, and taking care of maintenance items for which a purchase price adjustment was obtained. So it was really critical we get these repairs completed within a limited period of time.

On the interest side, we did fund both of these acquisitions with commercial paper. We did replace that with fixed rate debt before we ended the first quarter. So we did have an interest pick-up in the first quarter that we don't expect to continue. And those were the two areas that made up the $4 million amount that Greg talked about.

Thank you. Next question. Ed Wolfe your line is open. And state your company name, please.

Bear Stearns. Hello. Can you talk a little bit about the contribution both to revenue and to profitability or contribution margin from the two acquisitions in the quarter? Just trying to figure out when we look at full-service lease and commercial rental, how much of that was acquisition and how much of that was internal, both at the revenue and the profitability line?

I would say on the acquisitions we are on track relative to the revenue numbers that we shared when we closed these deals. And we shared annualized numbers. But on track relative to the first quarter. And I would say that our earnings were better than anticipated even when you adjust for the $4 million that we don't think should be part of the run rate. So I think we've been pleased with the speed of the integration and the level of synergies that we were able to capture very quickly. I think as Dick talked about before, we did not have to add as many people or facilities that we originally anticipated. That's been a plus relative to the expectations that we laid out there initially. But I don't think we're going to get into any more specifics than that.

Can you talk about how many days you had each of them in the quarter? Because the revenue growth of 4% implies that the core leasing business was down quite a bit. I realize it takes a while to ramp up. Can you give us the number of days? Both Ruan, and if you had it in the quarter in General?

General we had for the entire quarter. We closed that transaction on December 31, last year. And we had Ruan for the entire month of March.

All right. Just switching gears for a second, can you talk a little bit about the utilization of commercial rental and how much capacity. You grew 16% revenue in the quarter. How quickly could you grow that business if the economy keeps kicking the way it is? Are you kind of tapped out there? Can it grow even more than this?

We think we've still got more capacity for growth. It comes from two places, three places really. One is improved utilization. Although that is moving considerably up compared to a year ago. There still some room for price in the marketplace. And we've also added to the fleet or are adding to the fleet. Dick, anything you want to add?

No. I think about half of the improvement we saw in the first quarter came from better pricing and half of it came from better utilization. We think there is more room in both of those as we go forward.

Thank you.

Thank you. Next question, Thaniel Haziodas. State your company name, please.

Thaniel Haziodas with Lockhart Capital. Can you give us more color on how much the pension benefited you at Fleet Management Solutions this quarter versus a year ago? And also could you talk a little bit about what is your full-year margin guidances to get you to the $2.70 to $2.82?

The pension impact was 5 cents. Most of that goes to FMS. So you would see most of that contribute there. And on the full-year guidance, I don't know that we have or ever have given that kind of specificity in advance.

So that would be another $4 million in benefit at Fleet Management Solutions for the pension versus last year?

In the first quarter.

Probably closer to $5 million.

Okay. Thank you.

You're welcome.

Next question, John Langenfeld. Your line is open. State your company name.

Robert W. Baird. Couple of follow-ups here. On the DCC side, what gives Ryder the confidence your positioned to capture the business, capturing the benefiting economy here? Are there signs you see within your business that aren't necessarily showing on the top line whether it is pipeline, customer conversation? Maybe if you could answer that. And then maybe the same question applied to SCS.

I'll let Tony Tegnelia answer both of those. He's got, in his management team, both of those activities.

On the DCC side, we are working on that business model. To take better advantage of the growth that we see on the dedicated capacity side. There is a slight difference between DCC, the Dedicated Contract Carriage which we perform all dedicated assets for one specific customer, in contrast to dedicated capacity which is much more mixed. So we do see growth in that area. We are making some different changes to our business model to accommodate that.

We're also working very hard to improve our sales capacity and marketing capability in that area as well. There is opportunity out there. We work very closely with our FMS organization as well for a lot of good leads and conversion. And we still see lots of opportunities there as well in order to take advantage of the changing economy and growing economy.

On the supply chain side, we did have a good sales quarter. For business side in 2004, much higher than it was in 2003. Our pipeline on the supply chain side, where we have actual proposals in the hands of customers, is up dramatically from where it was at this time last year. And right now, we do have a much heavier start-up schedule than we've had for some time as well. As far as new business is concerned, we feel very good, particularly in the SCS area going out into the year.

Where Greg had mentioned previously about being measured, originally we had anticipated that there would be a lot of quick-hit revenue growth from volume increases from existing customers. In a number of instances, it's been very dramatic with several accounts. And we've enjoyed that. But generally speaking, it is not as broad based as we would really like to see it, particularly in our automotive domestic inbound operations where actual production levels are down about 20 to 22%. Again, we see good prospects on the sales side. As you know, the time cycle for new sales does take a bit longer than the quick-hit volume increases from the existing customer base.

Before we leave that subject, I'll also going to get Bobby Griffin comment. Bobby is responsible for international operations. So that includes FMS in Canada and the U.K. But supply chain and everywhere outside the U.S. There has been good growth in international and Supply Chain areas in many of the international regions. I want you to get a flavor directly from him.

Specifically speaking on the supply chain product line as Greg mentioned, we are seeing sustained strength in the operations recently around the world where we separate on a Supply Chain basis. And unlike the U.S., even in some of the sectors that are weak, we are starting to see strength, particularly in Canada and other regions. The automotive section remains fairly decent. And we're seeing that same strength across the board. Our pipeline has really grown. In fact, beginning I would say the third quarter last year, Ryder saw a significant improvement with the number of customers that we signed. We continue to do that in 2004. We expect a pretty decent outlook for the remainder of the year. Thanks.

Thank you. That was great color. On the tax rate, 37.5% in the quarter, is that a good run rate moving forward? I think that is higher than when we talked at the end of the year. Is that relative to the revenue mix?

Yeah. That rate we do expect for the remainder of the year. It is part of our full-year forecast. And that reflects the several updates we've made around the tax rate since we first talked in December.

Okay. Thank you.

You're welcome.

Thank you. Next question. Greg Burns. Your line is open. And state your company name.

J.P. Morgan. I just want to follow up on the supply chain. Sounds like things are going well internationally there. Greg, it sounded like from your comment, you alluded to revenue pressure going forward. And I'm just curious. On the domestic supply chain , is there anything in the pipeline or recently terminated contracts that are causing you to be a little conscious on the revenue line.

There is nothing new that is causing me to be cautious. Our caution came from before the completion of the year 2003 when we had a couple of contracts term out. And there is nothing else that is new that causes us to have any concerns. And I would let Tony provide some additional information.

Yes. On Greg's point on the contracts, we did have the opportunity to retain those accounts. But they would not have been a good value prop for Ryder. So we elected not to retain the business and let the contracts term out. What we are seeing though, is, particularly our automotive inbound assembly business is a bit lower than we had originally anticipated last year. There will be new model introductions later in the year. And we're hopeful that that will pick up. In the first quarter, we did see lower levels of assembly activity than originally anticipated. As you may or may not know, the automotive inbound operations in the U.S., represents 30% of the revenue for supply chain.

But on the contracts that were let go, is all of that fully reflected in the first quarter so we can extrapolate the trends or --

Absolutely. They both termed out at 12/31.

Great. Thank you.

Thank you. Next question, Edmond Griffin, your line is open and state your company name.

Yes, good morning. Black Rock. One quick question. Could you comment on your sensitivity of earnings to interest rates.

Sure. Tracy.

Sure. I think I mentioned at quarter end, about 29% of our debt was variable based. So in rough figures, 100 basis point increase would have about a $6 million impact on an annual basis to our interest expense.

Now we mitigate those type of moves in a number of ways. First all of the lease contracts that we sign, replacement and new business, reflect current funding rates. Typically we try to look at a match fund rate. So probably in the six year category. So whenever we sign leases, it reflects the current interest rate conditions in the marketplace to fix for that roughly six-year period. Our existing contracts have CPI clauses. Over the last several years, we've become very disciplined about implements those. So that gives us protection on the existing base of business we've written.

The $6 million, is that before or after tax?

I'm sorry. That's a pre-tax number.

Pre-tax. Okay. Great. Thank you.

You're welcome.

Our final question comes from ed Wolfe. Your line is open. And state your company name.

Bear Stearns. Just a follow-up, Tracy. You said the number of shares you had purchased in the quarter or year to date were how many?

I think in the quarter it was a little over a million, just over a million 1,030,000.

And the program to date was 1.1 million, something like that.

And the average price is then?

Pardon?

Do you know what the average buyback price was?

$35.85. I think it was roughly $35.85.

Okay. And just one last thing. Just directionally. I know you probably don't have a CapEx budget for '05 yet, but directionally, is there any reason why '05 would be much different than '04 one way or another, assuming the economy is similar?

No. We would expect, again, the replacement cycle we're in to remain strong for the next couple of years. And then I think the flex point will be to what extent we can grow the business, taking share from other lease competitors or from the private fleet side. All of which their fleets are going through replacement cycles as well. So growth would be the only thing that would really look to drive that number either higher or lower.

To for now if we use 1.2 billion for both, that's a fair place to be?

I think that's reasonable.

Okay. Thank you.

Thank you. That concludes today's question-and-answer session. I would now like to turn the conference over to Mr. Swienton.

If there is no further questions, we're pleased we got through them all. Everybody that was on and was in queue got a chance to have those answered. So thank you all for participating. As always, have a good safe day. Good-bye now.

That concludes today's conference. You may now disconnect.