萊德系統 (R) 2009 Q4 法說會逐字稿

Good morning and welcome to the Ryder System, Incorporated, fourth quarter 2009 earnings release conference call. All lines are in a listen-only mode until after the presentation. (Operator Instructions). Today's call is being recorded.

I would like to introduce Mr. Bob Brunn, Vice President of Investor Relations and Public Affairs Provider, Mr. Brunn, you may begin.

Thanks very much. Good morning and welcome to Ryder's fourth quarter 2009 earnings and 2010 forecast conference call. I'd like to begin with a reminder that in this presentation, you'll hear some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty 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 earnings release and in Ryder's filings with the Securities and Exchange Commission. Presenting on today's call are Greg Swienton, Chairman and Chief Executive Officer, and Robert Sanchez, Executive Vice President and Chief Financial Officer. Additionally, Tony Tegnelia, President of Global Fleet Management Solutions, and John Williford, President of Global Supply Solutions, are on the call today and are available for questions following the presentation. With that, let me turn it over to Greg.

Thank you, Bob, and good morning everyone. Today we'll recap our fourth quarter 2009 results and full year 2009 results, review the asset management area, and discuss our outlook and forecast for 2010 and after our initial remarks, we'll open up the call for questions.

So let me get right into an overview of our fourth quarter results. For those of you who are following online with a PowerPoint on page four, net earnings per diluted share from continuing operations were $0.43 for the fourth quarter 2009 as compared to $0.91 in the prior year period. The fourth quarter of 2009 included a net $0.02 benefit to EPS this. This resulted from a $0.07 benefit related to Canadian income tax changes, partially offset by a $0.05 charge primarily related to an international facility which is expected to be sold in the first quarter of 2010. In 2008, the fourth quarter included a $0.19 net charge related to restructuring and other items which were partially offset by benefits from a reversal of tax accruals. So excluding these items in each year comparable EPS from continuing operations were $0.41 as compared to $1.10 in 2008.

During the fourth quarter, we successfully closed the remaining part of our European supply chain businesses in accordance with our previous announcements. As such, results from our former South American and European supply chain businesses, which have all been fully closed, are reflected in discontinued operations in the financial statement. On page five, total revenue for the company was down 7% from the prior year. Total revenue reflects lower fuel services revenue and lower operating revenue, partially offset by favorable foreign exchange rate movements. Operating revenue, which excludes FMS fuel and all subcontracted transportation revenue, declined by 6%. Operating revenue was negatively impacted by lower revenues in commercial rental, SCS and DCC fuel pass-throughs, SCS automotive volumes, and FMS contractual revenues.

These items were partially offset by favorable foreign exchange rates. In fleet management, total revenue decreased 8% versus the prior year. Total FMS revenue includes a 16% decrease in fuel services revenue, primarily reflecting lower volumes. FMS operating revenue, which excludes fuel, declined by 5% due to both lower rental and contract revenue. Contractual revenue, which includes both full service fleets and contract maintenance was down 2% or down 4% excluding foreign exchange.

Commercial rental revenue decreased 14%, reflecting continuing weakness in overall freight demand and modestly lower pricing. Net before tax earnings in fleet management were lowered by 63%. Fleet management earnings as a percent of operating revenue decreased by 710 basis points to 4.6%. FMS earnings were negatively impacted by lower full service lease performance, due to fewer vehicles in the fleet, and higher maintenance costs on an older fleet. FMS earnings were also negatively impacted by higher pension expense, lower commercial rental results, and lower used vehicle results. These negative impacts were partially offset by cost reduction initiatives.

Turning to the supply chain solutions segment on page six, total revenue was down 5%, operating revenue, which excludes subcontracted transportation revenue was down by 9%. The revenue decline was due to lower automotive and other freight volumes, partially offset by favorable foreign exchange rates. SCS was solidly profitable in the fourth quarter, with earnings of $11.7 million, although down 31% from last year, but significantly up from the first half of 2009. Supply chain's net before tax earnings as a percent of operating revenue decreased by 160 basis points over 2008's strong fourth quarter to 4.7%. SCS earnings were negatively impacted by $4 million of higher self-insurance costs, due to favorable comparisons in the prior year. Earnings were also impacted by $2 million related to the termination of certain North American automotive operations.

In dedicated contract carriage total revenue was down by 6% and operating revenue was down 8%. The revenue decline was related to contract nonrenewals and lower freight volumes. Net before tax earnings in DCC decreased by 46%. Earnings in the quarter were negatively impacted by $3 million of higher self-insurance costs due to favorable comparisons in the prior year as well as revenue decline. DCCs net before tax earnings as a percent of operating revenue declined by 420 basis points to 6.1%. This decline reflects the higher self-insurance costs which are more heavily weighted in the fourth quarter. Given the timing of these costs, it's appropriate to evaluate DCC's margin performance on a rolling four quarter basis.

Page seven highlights key financial statistics for the fourth quarter. I already highlighted our quarterly revenue results, so let me start with EPS. Comparable EPS from continuing operations was $0.41 in the current quarter, down from $1.10 in the prior year. Comparable EPS from continuing ops for the fourth quarter 2009 included pension costs of $0.19 which were $0.18 higher than in the prior year.

The average number of diluted shares outstanding for the quarter declined by 1 one million shares to 54.2 million. In December, 2007, we announced both a $300 million discretionary share repurchase program, and a two million share anti-dilutive repurchase program. During fourth quarter we repurchased 2.3 million shares at an average price of 42.54 per share under the $300 million program. This brought purchases during the entire program since December, 2007 to a little over 4.96 million shares at an average price of $54.30 per share. During the fourth quarter, we purchased an additional 377,000 shares at an average price of $43.12 under the two million anti-dilutive share program. This brought the entire program purchase for that program to a little over 1.74 million shares at an average price of $58.99 per share. Both of these programs expired in December, 2009.

In December we announced a new two million share anti-dilutive program. No shares were purchased under this new program in the fourth quarter, and as of December 31st, there were 53.4 million shares outstanding. The fourth quarter 2009 tax rate was 25.6% as compared to 33% in the prior year. Excluding the Canadian tax benefit in 2009 and the tax impact of restructuring and other items in both years, the comparable tax rates would be 35.5% in 2009 versus 37.4% in 2008.

Page eight highlights key financial statistics for the full year. Operating revenue declined by 11%. Comparable earnings per share from continuing operations were $1.70, down from $4.68 per share in the prior year. 2008's comparable EPS has been restated to reflect the impact of discontinued operations for the full year period. The average number of diluted shares outstanding were 55.1 million, down by 1.4 million shares. Adjusted return on capital, which is calculated on a rolling 12-month basis, was 4.1% in 2009 versus 7.3% in 2008, reflecting lower earnings.

I'll now turn to page nine to discuss our fourth quarter results for the business segments. In fleet management solutions, total revenue declined by 8% and included the impact of lower fuel volumes. Operating revenue, which by definition excludes fuel, decreased by 5% and this decline reflects both lower commercial rental and contract revenue. Contractual revenue, which includes full service lease and contract maintenance, was down 2% or 4% lower excluding foreign exchange. Contract revenue was negatively impacted by slower new lease sales and nonrenewals of expiring leases due to continued customer fleet downsizing. Miles driven per day per vehicle on US leased power units decreased 2% versus the fourth quarter 2008.

Lease mileage comparisons continued to stabilize, however, improving from the 6% decline we saw in the third quarter 2009, and also improving sequentially during the fourth quarter. Rental revenue was lowered by 14% on a 12% smaller average fleet. Global pricing on power units decreased by 4%, an improvement over the 6% decline we saw last quarter. Global commercial rental utilization on power units was 72.4%, up 330 basis points from 69.1% in 2008. Importantly, these quarterly comparisons turned positive for the first time in 2009. This improvement reflects the actions we've taken to right size our rental fleet.

Fleet management solutions earnings declined 63% due to lower full service lease results. Lease results reflect both a lower fleet count resulting from customer nonrenewals of leases, primarily at end of their term, as well as higher maintenance costs on an older average fleet. Lower FMS earnings also reflect higher pension costs, lower commercial rental results, and lower used vehicle results. These negative impacts were partially offset by cost reduction initiatives.

In supply chain solutions, operating revenue decreased 9% in the quarter. Automotive volumes with plants we serve were down significantly versus the prior year, but were similar to the third quarter and in line with our expectations. Operating revenue was also negatively impacted by lower volumes in the non-auto sectors, but was partially offset by favorable foreign exchange rates. SCS realized solid earnings of $11.7 million in the quarter. Earnings were down, however, by 31% from a very strong quarter in the prior year. SCS earnings in the fourth quarter 2009 included a $4.4 million in higher comparative self-insurance costs, and $2 million in closure costs from certain underperforming North American auto operations.

In dedicated contract carriage, operating revenue declined 8% due to lower overall freight volumes and contract nonrenewals. DCC's net before tax earnings were down by 46%. Net before tax margin decreased by 420 basis points to 6.1%. DCC earnings were negatively impacted by higher comparative self-insurance costs of $3 million and lower revenues.

As shown in the appendix to this presentation, quarter four total central support services costs were virtually unchanged reflecting lower spending across all functional areas, but offset by professional fees associated with cost saving initiatives. The portion of central support costs allocated to the business segments and included in the segment net earnings was down by $2.3 million. The unallocated share, which is shown separately on this P&L while we're on page nine, was up by $2.2 million due primarily to professional fees related to future cost reduction initiatives. Earnings from continuing operations were $23.7 million including after tax restructuring and other charges of $2.6 million and tax benefits of $4.1 million. Comparable earnings from continuing operations were $22.2 million as compared to $61.6 million in the prior year.

Page ten highlights our full year results by business segment, and in the interest of time I won't review these results in full detail but will just highlight the bottom line results. Comparable full year earnings from continuing operations were $94.6 million as compared to $267.1 million in the prior year or down by 65% or $172.5 million. This decline reflects the significant impact of the prolonged freight recession, primarily on our FMS business as well as more modest impacts on our SCS and DCC businesses and at this point, I'll turn the call over to our Chief Financial Officer Robert Sanchez, to cover several items beginning with capital expenditures.

Thanks, Greg.

Turning to page 11, full year gross capital expenditures totaled $611 million, down approximately $650 million from the prior year. Spending on leased vehicles declined $438 million, or 44%. Leased capital is down due to lower new and replacement lease sales as customers downsize their fleets throughout 2009. Lease spending is also down due to the successful implementation of our strategy this year to increase the number of lease term extensions and increase the use of surplus and other mid life vehicles to fulfill new lease sales. These actions reduce the requirement for new vehicle purchases to fulfill customer fleet needs in the lease product line.

Full year gross capital spending was also down due to lower spending on rental vehicles of $164 million in line with our plan to spend virtually no capital in rental in 2009. We realize full year proceeds primarily from sales of revenue earnings equipment of $216 million, declining by $46 million from the prior year. This decline primarily reflects lower used vehicle pricing. Including proceeds from sales full year net capital expenditures were $396 million, down by a little over $600 million from the prior year. We also spent $89 million on acquisitions primarily on fleet management's acquisition of Edart Leasing in the northeast US in the first quarter.

Turning to the next page, we generated cash from operating activity of a $1 billion in 2009 which was $248 million below the prior year. The decrease is mainly due to lower net earnings of $168 million and $110 million of higher pension contributions partially offset by a higher depreciation of $45 million. We elected to make a voluntary contribution to our pension plans in fourth quarter of $102 million, which accounted for the majority of the pension contribution increase. Depreciation increased largely due to higher adjustments for the carrying value of used vehicles plus some impact from acquisitions and higher per unit investment on new vehicles. These increases were partially offset by the impact of foreign exchange rates and a lower number of owned vehicles.

As you may know, our normal processes to annually revise depreciation rates for the coming year on all vehicles to reflect the used market valuation change over time. In addition to this normal process, we started in the second quarter of 2009 to increase the depreciation rates on vehicles expected to be sold through December of 2010. The change increased depreciation expense by $4 million in the quarter or $10 million in the full year. Included in the impact of used vehicle sales we generated $1.3 billion of total cash, down by $289 million from the prior year. Cash payment for capital expenditures were $652 million, a decrease of 578 million versus the prior year. Including our cash capital spending, the company generated $630 million of positive free cash flow in the current year. This was an increase of $289 million from the prior year due primarily to lower vehicle purchases in both lease and rental.

On page 13, total obligations of approximately $2.6 billion are down by a little over $400 million as compared to the year-end 2008. The decrease debt level is largely due to the use of positive free cash flow to pay down debt. Balance sheet debt to equity was 175% as compared to 213% at the end of the prior year. Total obligations of a percent of equity as the end of the quarter were 183% versus 225% at the end of 2008.

Our equity balance at the end of the quarter was $1.43 billion, up by $82 million versus the year-end 2008. The equity increase was due to net earnings of $62 million and foreign currency translation gains of $97 million which more than offset dividends of $53 million net share repurchases of $109 million. As you may recall in 2008, we took a $330 million equity charge related to the decline in asset values in our pension plans for that year. Due to the increase in our pension plan asset values in 2009, we had a credit to equity of about $68 million. This credit also contributed to the increase in our equity balance in 2009.

At this point, I'll hand the call back over to Greg to provide an asset management update.

Thank you, Robert. Page 15 summarizes key results for our asset management area globally. At year end our global used vehicle inventory for sale was 6,900 vehicles, down by 800 units from the prior year-end, and down by 900 units from the end of the third quarter 2009. We're very pleased by the reduction we've achieved in our used vehicle inventories which are solidly within our target range.

We sold 5,200 vehicles during the quarter up over 40% from the prior year and in line with our third quarter 2009 sales. Used vehicle sales were relatively stable throughout the fourth quarter. Compared to the fourth quarter 2008, proceeds per vehicle sold decreased by 16 to 17%, compared to the third quarter 2009, however, proceeds were up by 1% as overall prices stabilized in many asset classes. At the end of the quarter, approximately 9,800 vehicles were classified as no longer earning revenue. This was down by 800 units from the prior year and down by 1,200 units from the third quarter 2009. The decrease versus the prior quarter reflects a decrease in the number of vehicles held for sale and an improvement in rental utilization.

We've continued to successfully implement our strategy to increase the number of lease contracts on existing vehicles that are extended beyond their original lease term. For the full year, the number of these lease extensions was up by approximately 2,400 units or 46% versus the prior year. Increasing lease extensions is a beneficial strategy in the current soft market environment, as it retains the revenue stream with the customer, reduces the number of used trucks we need to sell, and lowers new capital expenditures requirements. Our global commercial rental fleet in the fourth quarter declined on average by 14% from the prior year. We successfully executed our plan in 2009 to reduce the size of our rental fleet and are comfortable that it's well aligned with current market demand.

Let me move into a discussion of our 2010 outlook. Pages 17 and 18 highlight some of the key assumptions in the development of the 2010 earnings forecast I'll review shortly. Our 2010 plan anticipates a stable but continuing weak overall economy and freight environment with moderate improvement in the second half of the year. We assumed interest rates will modestly increase, based on the yield curve. We forecasted foreign exchange rates to be modestly favorable, but if the US dollar were to be stronger than we forecast, there would be a negative impact, primarily on reported revenue, but that generally would not materially impact earnings.

In the fleet management area, we expect higher new contractual sales and improving customer retention levels in the second half of 2010. Due to this assumption, and the time required for new vehicles to be delivered from the OEMs after contracts are signed with our customers, these improved sales would primarily benefit revenue and earnings in 2011 but not in 2010. We do expect, however, that higher miles driven per unit on our contractual lease fleet will benefit revenues starting in 2010. In commercial rental, we anticipate higher rental demand and better utilization with some pricing improvement throughout the year. In the used vehicle area we expect that the number of vehicles sold will be stable with the solid levels we saw in 2009 but with improved pricing primarily in the second half of the year.

Turning to page 18, in supply chain and dedicated, we expect that revenue will be negatively impacted by some of the account and operating location rationalization we've undertaken, as well as closures and some account nonrenewals in dedicated. We anticipate that we'll see modestly higher year-over-year automotive volumes, with the operations that are ongoing and that we continue to serve. We forecasted that volumes in our nonautomotive accounts will be stable. We also expect that we'll continue to increase our penetration of nonautomotive segments in line with our long term strategy in the supply chain segment, and finally as has been our practice for many years, our forecast does not assume any benefits from potential new acquisitions that have not been announced, or from any additional share repurchase plans.

Given a relatively more stabilized economic and freight environment, we're resuming providing quantitative earnings guidance at this time. Page 19 provides a summary of some of the key financial statistics in our forecast for 2010. Based on the assumptions I just outlined, we expect operating revenue to decline by 1 to 3% this year. Comparable earnings from continuing operations are forecast to increase by 2 to 11% to a range of $97 million to $105 million in 2010. Comparable earnings per share are expected to increase by 6 to 15% to a range of $1.80 to $1.95 in 2010 as compared to $1.70 in 2009. Our average share count is forecast to decline to 53.2 million diluted shares outstanding from 55.1 million in the prior year. The share count decline results primarily from the share repurchases made in the fourth quarter 2009 and as I mentioned previously, we are not assuming any new share repurchase programs in our forecast.

We project the 2010 tax rate of 41.3%. This is up from the 37.3% in 2009, where we benefited from some tax law changes and the reversal of tax reserves for a comparable 39.7% excluding these items. Our return on capital is forecast to increase from 4.1% in 2009 to a range of 4.4 to 4.6% this year due to higher projected earnings. And the next page 20 outlines our revenue expectations by business segment. We've shown the change in forecasted revenue both on an as reported basis and also excluding the impacts of foreign exchange in fuel in order to help identify the underlying drivers of our projections.

In fleet management, contractual revenue and lease and contract maintenance is forecasted to be down by 5%, excluding foreign exchange. This reflects the cumulative impact of customer fleet downsizing we've been seeing. We normally see earlier benefits from a modestly improving economy in commercial rental, where we're forecasting rental operating revenue growth of 7% excluding foreign exchange. Supply chain operating revenue is expected to decline by 6% excluding fuel and foreign exchange impacts. The forecasted revenue decline is driven by the rationalization of certain operating locations I mentioned earlier, partially offset by modestly higher auto volumes and new sales.

Dedicated operating revenue is forecast to decline by 2% excluding fuel. This forecast reflects slightly lower forecasted volumes with ongoing locations. Page 21 provides a waterfall chart outlining the key changes in our comparable EPS forecast from 2009 to 2010. By far, the most significant headwind we faced this year is the impact of fleet downsizing by our lease and contract maintenance customers. This results in lower revenue, somewhat higher maintenance costs on a relatively older fleet, and negative operating leverage in our facility infrastructure. We're forecasting a negative 60-cent EPS impact from contractual FMS business this year prior to any benefits of productivity initiatives.

As is our normal process, we've modified our residual value estimates to reflect the impact of recently lower used vehicle prices and this will result in higher depreciation expense of $0.15 in 2010. We currently expect to partially restore some compensation that was lowered in 2009, and this is forecast to be an $0.11 impact in EPS. Finally we expect a negative $0.05 impact from a higher tax rate. We expect improvements in several areas to more than offset these headwinds. On the positive side. we'll benefit by $0.06 from the share repurchases we made in late 2009.

We expect improved results in supply chain and dedicated totaling $0.10 due to improved auto volumes, a reduction in shutdown costs versus the prior year and the actions we've taken to address underperforming accounts. We expect a net $0.18 benefit from our retirement plan driven largely by the increase in asset values in 2009 in our pension plans, all of which are now frozen. In 2009, we had a negative year-over-year impact of $0.75 from our pension plans, though we're recovering some but not nearly all of this prior increase in 2010 due to improved asset values.

We expect a $0.20 benefit from higher used vehicle prices and lower inventory. Modestly higher commercial rental demand on our now right sized fleet is forecast to improve EPS by $0.30 to $0.40 per share for the year. And finally, we continue to focus on driving productivity improvements in our operations and these are expected to benefit EPS by $0.17 to $0.22. So in total these items are expected to result in comparable EPS of $1.80 to $1.95 in 2010 and I'll turn it over to Robert again now to cover the next few pages.

Thank you, Greg.

Turning to page 22, I'd like to review our retirement plan's expense for 2010. As a reminder, for most employees, that is, those not grandfathered by age or length of service criteria, we froze our US pension plan effective January 1, 2008, and for our Canadian employees, effective January 1, 2010. Our UK plan will be frozen as of March 31st, 2010. As a result of the freezes of all three of our defined benefit-type plans, most employees are not accruing new benefits. However, they retain benefits accrued prior to the termination date.

In 2009, our pension expense was $66 million, up by $64 million from the prior year and was a significant headwind to the earnings in 2009. The increase in pension costs in 2009 resulted primarily from a significant decline in asset values in our plans during the latter part of 2008. In 2010, we anticipate pension expense to be $43 million, a reduction of $23 million. The lower pension expense results from higher than assumed return on plan assets in 2009 of $15 million, a $9 million benefit from our pension contributions and a $5 million benefit due to the plan freeze. These benefits were partially offset by a reduction in our expected return assumptions from 7.9% to 7.65% in our US plan, which increased expense by $4 million.

There was no impact from the change in the discount rate which is now 6.2 versus 6.25 last year. The reduction in pension expense of 23 million was partially offset by an increase in defined contribution plan expense of $5 million as employees were shifted to these enhanced plans. As a result, the total forecast reduction in our retirement plans expense in 2010 is $18 million. For those who are interested, we plan to publish a pension white paper in the next few days which will include much more detail related to our pension expense.

Turning to page 23, we're forecasting total gross capital spending in a range of approximately $1.1 billion to $1.2 billion, up by approximately $475 million to $550 million from a little over 600 million in 2009. Leased capital is projected to increase by around 175 to 250 million as we anticipate improved new sales and higher retention levels on lease renewals largely in the second half of the year. Most of this capital spending will benefit lease revenue and earnings primarily starting in 2011 but not this year.

We plan to spend $270 million on commercial rental vehicles globally after spending virtually no capital in rental in 2009. This capital will be used entirely to replace older vehicles. At this time, we do not plan to spend capital to grow the rental fleet in 2010, although we continue to monitor market demand conditions for potential expansion of the fleet if demand conditions improve significantly. Proceeds from the sales of primarily revenue earning equipment are forecast to improve somewhat from 2009 to $230 million, reflecting higher prices and a change in the mix of vehicle types sold. As a result, net capital expenditures are forecast at $855 million to $930 million, up approximately $460 million to $535 million from the prior year.

Free cash flow is forecast at $225 million to $275 million, the change from the prior year free cash flow $630 million is due to higher capital expenditures and cash taxes. These reductions in free cash flow are partially offset by an expected $110 million decrease in pension cash contributions compared to the mostly voluntary contributions we made in 2009. Based on these projections, total obligations to equity are forecast at 155 to 165%, down from 183% at the prior year-end. Although financial leverage is projected to decline in 2010, we continue to maintain a target leverage range of 250 to 300%.

As such, if market conditions improve more than expected, we have ample balance sheet capacity to support capital spending related to higher than forecast organic growth. We also continue to actively evaluate our pipeline of acquisition candidates and consider share repurchase opportunities, which as we mentioned previously ,are not included in our projections. During 2009, we made a thoughtful decision to temper our movement towards our leverage targets due to the crisis in the financial markets. As financial markets stabilize, we plan to continue our movement towards the low end of our target range. At this point, let me turn the call back over to Greg to review our EPS forecast.

Thank you, Robert. Turning to page 24, as I previously outlined in the waterfall chart, our full year 2010 EPS forecast is for a range of $1.80 to $1.95, up $0.10 to $0.25 from a comparable $1.70 in 2009. We're also providing a first quarter EPS forecast of $0.17 to $0.20 versus a comparable prior year EPS of $0.30. First quarter earnings are expected to be lower primarily due to significantly lower full service lease results because of customer fleet downsizing in 2009. We anticipate that the first quarter 2010 will represent the trough of lease earnings comparisons and that these comparisons should improve starting in the second quarter. We've also included a small negative impact from the recent Toyota production halt in our forecast. The reduction in first quarter lease earnings is forecasted to be partially offset by improved rental performance, better used vehicle sales operations and stronger supply chain results.

Turning to page 25 in closing, let me briefly summarize the key points in our 2010 plan. We're working to manage through the cumulative impact of the prolonged freight recession on our lease business, primarily related to customer fleet downsizing. We do expect improved new sales and renewal levels, especially in the second half this year, as the economy modestly improves, as new engine technology comes to market, as private fleets age and need to be replaced and as prospects look for alternative sources of capital to replace and grow their fleets. The expected improvement in lease sales this year will largely start to benefit the P&L in 2011. In the nearer term, we're leveraging the actions we've taken to right size the commercial rental and used vehicle fleets to improve returns in 2010.

We also expect higher returns in supply chain due to modestly recovering automotive volumes, the strategic decisions we made and undertook in 2009 to improve margins and through new initiatives. We continue to remain focused on implementing cost management and productivity initiatives to improve earnings and have specific action plans which are detailed in this area. Finally, we expect to generate strong operating cash flow again this year. We plan a balanced approach in using this cash to both make appropriate investments in our business in areas such as the refreshment of our rental fleet and in technology which will provide significant benefits in the future while also delivering significant free cash flow this year to shareholders. We're forecasting modest earnings growth for 2010 under our assumption of a stable but continued weak economic and freight environment with some moderate improvement in the second half of the year. Given the work we've already done to align the rental and used vehicle fleets and address underperforming accounts, we're well positioned to benefit further if the economic recovery is stronger than we've assumed in our forecast.

That concludes our prepared remarks this morning. We've covered a lot of material in today's call since we not only covered all of the fourth quarter for 2009, but also our 2010 plan. So in the interest of time and fairness to your colleagues I'll ask that you limit yourself to two questions each. If you should have additional questions, you're welcome to get back in the queue, and we'll take as many calls as we can, and at this time, I'll turn it over to the operator to open up the lines for questions.

(Operator Instructions). Our first question today is from Jon Langenfeld. You may ask your question and please state your company name.

Robert W. Baird. Good morning. On the asset value side, could you just compare two things, this cycle versus last cycle, one, the severity of the downturn in asset prices and then two, the different way it appears that you're handling the accounting of it. I think in the last cycle this was more of a one time charge that occurred, whereas this time it seems like you've been more proactive throughout the cycle adjusting the depreciation schedule. So could you compare those for me.

Sure. That's a fundamental and important area for us and also for making sure that, you know, we're not harming shareholders. I think the last time we actually took a restructuring charge in assets was probably in 2001. We've not taken one since and what we have tried to do since then is to always adjust depreciation rates so that we're not caught at the end with a residual value problem or a sale problem. So we're continuing something we've been at for the last seven, eight, nine years to try to make those adjustments along the way. I would say that in our experience, and maybe I'll turn to Tony as well for additional commentary, that because of the length and the depth of this downturn and recession, this is probably more severe because it's over an extended period of time. So we're taking the adjustments along the way. We think that's the right thing to do rather than let them accumulate at the end and, Tony, you'd like to add any flavor, I'll turn it to you.

Sure. Thank you, Greg. I think for the most part if you reflect upon Greg's comments about a 16, 17% reduction in provide seeds, those are clearly higher than we've experienced in the past and I think there are a number of reasons for that. First of all, the economy was really quite robust really going into this recent downturn and all lessors and renters had some pretty heavy fleet activity at that point in time. So when we saw everyone largely adjusting and right sizing their rental fleet, that did put a lot of used vehicle equipment into the marketplace, further depressing the prices. We also saw a number of truckload carriers and LTL carriers also put a lot of used vehicles on the market as well because of the downturn of the overall freight levels and many lessors, customers similar to ours were also downsizing their fleet and in some instances that equipment was put back into the market at used but not all.

So I think for the most part, we have a very robust economy with a lot of equipment in the marketplace when this freight recession hit. That put a lot of downward pressure on the used vehicle pricing and the 16, 17% is much more dramatic than we've seen in the past. However, at Ryder, we had expanded our retail network so that we can dispose of the units at much higher prices. We continue to expand that network from a footprint point of view at existing locations and also add locations to it and we've also increased our international operations as well. So that's helped us really mitigate some of the downward pressure on pricing as we try to move those units off the balance sheet.

Great, great color and then as a follow-up, you mentioned in your prepared remarks talking about the age of the fleet. If I just looked at the full service lease side can you give us any direction for where that average age stands today versus maybe a couple years ago and then where that's going to trend over the next 12 months because I'm assuming it's probably going to continue to get older at least through and into the second half, if not for the full year before it can turn in 2011.

Yes. I think again I'll let Tony provide some additional detail, but I think there are a couple of fleet ages that are different by the fleet. The fact that we're going to be refreshing the commercial rental fleet that will be younger and maintenance costs there we'll be in better shape and improving shape. Lease will continue to be older for longer until we start getting more renewals and new sales and if there's anything else you want to add, Tony.

I think overall we've been in the mid- to high 30s, 38, 39 months. We think over the next year or so that will rise to maybe the mid-40s, about six more months older overall. The acquisitions as you recall also added to the averaging of the aged fleet as well. So we do see, as Greg commented earlier, the running costs rising on an average for the units as that fleet ages and a smaller percentage proportion of our fleet going forward will be under warranty because of that, but overall mid-40s, 45, 46 months, about five, six months older than we've seen over the last 18 months.

That's the overall fleet or just the leasing fleet?

That's the lease fleet. The rental fleet is more than likely about the mid-50s, about 50 to 55 months is generally about 10 months older than the lease fleet. That's typically where it really should be from that perspective, but we like to bring it down a bit and be more competitive. So we are refreshing the rental fleet. We brought it down nicely in 2009. We think it's definitely the right time to refresh as we see the market taking off. We believe a little bit in 2010, but that will still stay -- the rental fleet will still stay in the 50s given the level of refreshment that we're doing in 2010.

Thank you.

Thank you. Our next question is from Art Hatfield. You may ask your question and please state your company name.

Yes. Morgan Keegan. Hey, thanks for taking my question. Greg, as I look at slide 43, the extension terminations, an early terminations slide that you guys provide, we see the spike obviously from business conditions and extensions and early terminations in 2009. How much of that, if any, has already flowed through the used vehicle network, and should we expect to see somewhat of a little bit of a bubble in 2010 of vehicles coming into the used vehicle sales network?

Yes. And I think for people who don't have that right in front of them, the spike that Art's referring to on the appendix at page 43 shows a total of 7,537 units extended in 2009 versus 5,168 in 2008. I think that your question is when are those going to come due and come up after being extended?

Yes. I mean obviously when those vehicles come off extension, you want to sell them through the used vehicle network. How much of those have already kind of hit that or are we looking at a bubble of vehicles that you'll need to sell over the next 12, 18 months?

All right. This is Tony. You will not see any bubble in 2010 as a result of the extensions at all. For the most part, the extensions were 18 months, in some cases 24 months extended. So we won't be seeing those really coming due until maybe 2011, 2012 in that regard.

So there will be no bubble whatsoever in 2010 from units extended to a second term, if you will, coming to the used vehicle operation as we go into 2010. Also the rental fleet was adjusted in 2009. So we do not see significant increase going in there as well as a result of downsizing the rental fleet. So no bubble from extension, no heavy pressure to sell vehicles at the end of their rental life. We took care of all that in 2009.

Great, great. That's helpful and then second question kind of broader thinking as again I'm going to reference the slide, slide 49. Your adjusted return on capital reconciliation, obviously again with what's gone on you've reduced the total capital base of the company in 2009. Is it possible on the current capital base to get back to a level of earnings that maybe you saw in 2008? If not, what kind of level of reinvestment would you have to do to get back that type of level?

I think our expectation is that whatever we were achieving at the height of our performance in 2007 and 2008, that since every downturn eventually turns that we expect to be at or higher than where we were at the height a year or two ago. The issue is timing. This is going to take several years. It's not going to happen this year certainly, and it's not going to be completed next year. By 2012, that's when we'd expect that unless there's some other shock to the system that's not forecastable, but if we stay on this long uphill somewhat erratic but upward trend, by a couple years from now we'll begin to seat returns to those previous levels.

But can you get to those levels on the existing capital base or would you have to make substantial investments to get to those earnings levels?

The simple answer to your first part of the question is no and, Robert, if you'd like to add anything in the second part.

Yes, sure. Art, clearly as we grow the business again, we have to invest in vehicles whether they're for lease or for rental. That would again drive up certainly debt from the levels that we're at now. Therefore, total capital would come up, but clearly in doing so you'd have the associated returns and that's where our goal is to get back up to, you know, our goal of being up over 8% on return on capital. So no, I don't think it's realistic to expect you'd be able to get back to the earnings levels we were at with the capital level we're at today.

Okay. But just as a final follow-up on that, then it's reasonable to think that as you reinvested the incremental returns on those investments could potentially get you back to a higher return level at those higher levels of earnings?

Absolutely.

Okay.

Also remember we've also discontinued operations in other parts of the world that were dragging returns down. , so you know, without having that once we get the core parts of the business back to where they were, you should have better

Great. That's what I was looking for. Thank you very much.

You're welcome.

Thank you. As a reminder what, asking a question, please limit yourself to one question and one follow-up question. Our next question is from Ed Wolfe. You may ask your question and please state your company name.

Wolfe Research.

Good morning.

Hello, Ed.

I just want to focus on the pre-tax at your core FMS margins. 4.9% in calendar 209 versus the 12 to 14% the prior five years it's been tough to model that things could move down that quickly that fast, and this year we talked about the big pension drags, about miles being fewer, about renewals being difficult and those kinds of things, but based on your slide on I think it's slide 21, your waterfall, it looks like the drag at commercial rental, the $0.60 offset partially by commercial expected benefit of $0.35 in commercial rental in the rental business, it implies that a further degradation down closer to about 4.1% pre-tax and, if I look at kind of the depreciation and the pension, they kind of cancel each other out. So and the economy, in your assumptions are getting better gradually. What is it that's really broken here and why can't you catch up to it feels like?

Well, it's not only hard to model, it's also hard to live through and when you've had so many things heading in one direction which were all south, it really becomes cumulative. So trying to calculate what the bottom line will be is going to be the summation of some simultaneously moving parts that we're trying to do the best we can to guess at but not having any clairvoyance to know exactly what the timing will be. So first of all, we have the miles per unit driven in lease. That's getting better. The decline is declining. If that stabling goes up faster, that's a big plus that goes to the bottom line. Commercial rental is expected to pick up. That's always the next big turn. When that occurs, then, you'll have probably utilization improvement, pricing improvement and that's always shown a big impact on the bottom line.

And those two factors also drag some other things along with them. You sell more fuel when units are moving. You sell more fuel when more units are rented. We may even sell more insurance. I mean there's all sorts of things that get dragged along at different times and then ultimately, we have to make our best guess as to when renewals will really occur and customers will feel confident enough to stop downsizing and then, of course, the last big pickup for FMS is the new additions in sales. So those are all simultaneously moving at different speeds and paces. So when we try to make guesses as we've done in the waterfall that ultimately translate to a bottom line return as a percent of revenue, this is our best guess on this date.

So are you saying that the most important factor for FMS margins are when renewals will occur and pick up?

That will be the third factor we see. That will be an important factor in leveling off the downsizing of the fleets because that big $0.60 you see is the cumulative negative impact of many months of downsizing. So when that levels off, that stops that bleeding, but the big pickup is then you replace, you stop the downsizing and then you start adding.

And just based on your intelligence with customers as you see them now, your sense is they're not close as we enter 2010 to start adding. Maybe they stop bleeding by second half but the pickup piece just isn't there at this point. Is that how to think about it?

That's the way we see it. We make our assessments by taking the pulse of our customers and I think they are still cautious. Therefore, we are still cautious. When they act otherwise, we will tell you.

That's helpful. I'll get back in line. Thank you.

Thank you. Our next question is from Kevin Sterling. You may ask your question and please state your company name.

Thank you. BB&T Capital Markets. Greg, you just mentioned leased miles per vehicle stabilizing. Could you -- I think you may have given some specific percentages around that. What were those numbers again? I'm looking for comparison year over year and sequentially.

I believe that we were down 2% in the fourth quarter versus last year-over-year because -- and then third quarter 2009 was down 6%. So the decline has diminished. So -- and if you did it by month in the quarter, October was down three, November was down two, December was down one. So those three average to 2% down for the quarter.

Okay. Thank you. And now since that trend looks like it's stabilizing, to have a meaningful impact on FMS do we need to see it turn positive before we really start seeing going back to, I guess, new lease contracts? Does the miles per vehicle driven need to turn positive to really see meaningful impact in FMS?

Yes. Fundamentally yes because what customers have done by driving fewer miles is pack the units as well as they could with less freight. They've probably still got capacity from the lower miles and the number of units they have. So they will probably start adding more freight and more volume to existing units, making more stops, and I think in this environment we see a trend I think both in supply chain and FMS that because of still credit sensitivity and financial issues, a lot of customers are making more shipments more frequently as opposed to bigger shipments less frequently and if that holds up for a while in this environment because of financials and credit, I think you'll start to see more miles on those units as well.

Okay. Thank you. One last question. How many FMS and commercial trucks did you have in the fleet in the fourth quarter? Is that somewhere in the presentation or if you could give it to me.

The year-end full service lease fleet had 115,100 vehicles, which was down 5% from 120,600 units at the end of 2008.

Okay. Thank you and how about commercial rental?

I recall that that was down I think 14%. I don't know the exact numbers offhand. Tony says about 22,000.

Okay. Thank you very much for your time today.

Sure.

Thank you. Our next question is from Todd Fowler. You may ask your question and please state your company name.

Hi, good morning. KeyBanc Capital Markets. Greg, back to the full service lease margins and the $0.60 year-over-year headwind here coming up in 2010, I guess if I've got my math right, you know, a 5% decline in contractual revenue is about $100 million of annual revenue that you lose but the $0.60 Works out to be about $0.45 to $0.50 of EBIT that goes away. I guess from a higher level can you talk a little bit more about is that really just a function of the negative leverage that you had -- or the positive leverage, the leverage is probably a better way to say it that you have in that business or does that also get into what's going on with the extensions and the maintenance costs and the age of the fleet as well?

Yes. Other than the quantity of units, which is a big driver, the higher maintenance costs on an older average fleet is also significant.

And when you say significant, I mean can you quantify out of the $0.60 how much of that is related to maintenance versus, you know, you could break that out into the different buckets that would encompass that $0.60.

I don't that know I would know that, nor do I know that I really stud get to that level of detail because it often changes and moves over time and I wouldn't want you to have the wrong vision or modeling over a longer period.

Okay. And then the productivity initiatives that you have in the waterfall is, most of that also geared, then, into FMS to offset the impact that we're going to see from the decline in revenue?

Yes. A big part of it is FMS. I think that we've got a team in operations that are doing some very leading industry edge activity. It's very encouraging. So a big part of it is there, but it also is included in SCS and dedicated what we're making investment for improvements and better service with customers.

Okay. And then just lastly for the follow-up here, can you talk a little bit more about the visibility that you have. It sounds like here in the first quarter you've got some pretty good visible as to what you're expecting as far as lease terminations and nonrenewals thinking about the full year guidance of contractual revenue being down 5%, can you talk a little bit about how comfortable you are with that number. Is that, kind of a base case? Is that a conservative estimate and the visibility that you have as far as large fleets coming up for renewal or the drivers behind that assumption?

Well, I'd say we're probably more comfortable in making guesses than assumptions this year than we were a year ago. I think it's probably the most realistic middle of the range number that we can come up with right now. So yes, you could do a little better or a little worse, but we think it's a realistic midrange.

Okay. I'll turn it over. Thank you.

Sure.

Thank you. Our next question is from John Barnes. You may ask your question and please state your company name.

RBC Capital Markets. Thanks, guys. Greg, can you just talk a little bit, do you have any confidence that given the excess capacity in the trucking space right now and elsewhere, that 2011 might be the year that you start to see lease growth again? Is there anything that you can point to that says all right, this is kind of our last bad year. We get into 2011 and we should begin to see some uptick?

Your question is our confidence that whether it is the excess capacity that you have in other parts of the market generally or any other items do we think this is the worst year or the last bad year of headwinds before 2011 in term of overall performance?

Yeah. Essentially.

If that's the question, then I would answer in the affirmative, unless something happens that is a shock to the economy for whatever reason, that is our expectation, that we're slowly going to keep coming out of this and there certainly is a lag on the fleet management full service lease and, you know, one of the things that protected us for so long on the down side is going to come up more slowly in the long term and that being the case, if our best guesses and estimates are right or reasonably close to our forecasts, that will really pick up by the latter part of this year and when you consider lead times for getting them from the OEM, getting the contract signs, getting them from the OEMs, putting them into service, most of that won't spill over until 2011 and if that's going on, then the other things are going well with the company as well. Rentals up, leased miles are up, used vehicle sales are better, supply chains volumes are up, DCC volumes up and then you've got a much healthier environment.

And then my other question is, you know, as you take a look, you know, back at the acquisitions you made on the leasing side of the business, can you tell, your terminations and downsizing, has it been more prevalent with the customers from the acquired businesses versus your core business, you know, or has it been more across the board?

No. It has not been concentrated more in any of the acquisitions. The due diligence in the effort that we make in working with a firm that we actually want to acquire, part of that due diligence is based on the fact of among other things the customer base, the health of the customers, the rates that they're paying and how long those contracts will run. So no, they are not weighted to the acquisitions at all. It is averaged over the entire existing and acquired fleet.

Very good. Thanks for your time.

Sure.

Thank you. Our next question is from Alex Brand. You may ask your question and please state your company name.

Hi. Stephens, Inc. Can you guys talk about the self-insurance hit to Q4 which I think was about seven million total, you did say it was primarily a Q4 event is. That more or less one time or does that mean we have higher accruals in your 2010 forecast as well?

I'll let Robert Sanchez answer that.

Yes. The delta from prior year was really completely due to favorable development in 2008 that did not reoccur in 2009. So in your 2010 -- in our 2010 forecast we expecting the same performance that we had in 2009.

In terms of the balance sheet I mean you have a good problem that you're potentially going to be underlevered now. Is there anything out there that's either meaningful to your lease business that you can look at or is it time to, you know, look beyond that maybe for supply chain freight boarding time acquisitions? What are your thoughts on what you might look at?

Our thought is we're interested in both. Meaningful -- when you define meaningful in FMS, by meaningful you mean a material big difference? No because nobody is of that size, but everyone we can do and we do them well and they're accretive, they make sense. We also look in supply chain and have talked before about looking at areas that focus -- enable us to focus better on the transPacific opportunities in consolidation and deconsolidation just as we announced a little over a year ago for Canada and Asia. Yeah, we will look elsewhere. We will hook through all segments of our -- look through all segments of our company where it makes sense for what you might call an adjunct complimentary service or a tuck-in activity.

All right, thanks. I appreciate the time, guys.

Thank you. Our next question is from Matt Brooklier. You may ask your question and please state your company name.

Yes. Piper Jaffray. I think you mentioned it earlier but walk through the commercialization levels on your commercial fleet in fourth quarter. If you have it on a monthly basis, that would be great as well.

I know the number quarterly because we talked about that. Tony, do you have it handy?

Not monthly, no.

No, quarterly.

Quarterly for the utilization? Quarterly we were for 2009 about 72.4% in the fourth quarter, third with 70.8 for 2009.

Okay.

And the second quarter was under 70, about 68% and the first quarter was very low, about 61%. So as we right sized the fleet we have really made a lot of progress to match it with demand and get those utilizations really back in line and our year-end fleet level for rental is really about 27,000 vehicles including the trailers. The 22,000 I mentioned earlier was only the power fleet, but that fleet is right sized now. We're seeing improvements in utilization and our plan includes improved utilization in every quarter of 2010.

Okay. And I guess how are things feeling in January, because if I look across the board for some of the other freight transport companies, we have seen kind of continued volume improvement it feels like and granted we have pretty easy comps here, but it feels like things directionally are getting better from a demand perspective. I guess what did utilization levels look like in January and also what were the miles on your lease equipment?

Actually we don't even know yet because they're still being closed and calculated, and then we tend not to do too much midquarter anyway, but we just don't even have that information yet.

But I guess my question generally in January how was January feeling versus what appears to be a less than spectacular fourth quarter for you guys?

Tony, do you want to comment?

I think utilization is generally around expectation from where we are and I think mileage will continue to improve.

Okay. Thank you for the time.

Sure.

Thank you. Our next question is from David Ross. You may ask your question and please state your company name.

Yes. Stifel Nicolaus. Good morning, gentlemen.

Good morning.

Question on the supply chain side. It looks like if you exclude the insurance costs and the termination costs that the margin would have been closer to 7.1%, which would have been I think a record. Is that a fair way to look at it? I know this was talk about the timing of the insurance costs.

I'll let John Williford comment a little bit, but I would say this, that I think SCS is a lot like what we said about DCC. The best way to look at that is not a quarter at a time but over a rolling four quarter period because you can get various blips in timing and they can spill from one quarter to another, but, John, if you'd like to comment further.

Yes. I think I had the same question. We had a record quarter I think in Q3 and everything came together pretty much perfectly in Q3. In Q4 we had some negatives including the year-over-year impact of the insurance rebates which we already mentioned and $2 million of shutdown costs in automotive, but we still had a margin that's kind of in line with what I said we should expect which is the 4 to 5% and I think we can get up to the 6% eventually, but we're not expecting to be at that 6% plus level, for example, in 2010.

Okay. That's very helpful. And then if you could talk a little bit about the new lease sales through the year. I know there's been a lot of headwinds from nonrenewals, customers renewing fewer trucks in their fleet than they had in their past contract, but I guess just if you look at the absolute trendline have you been increasing the number of lease sales through quarter through 2009 or have they been declining? Was there some other pattern?

I think generally they've been pretty much at the same level. A large portion of our new business does come from existing customers and those customers have also been adjusting their fleets as we have in rental, for example, to right size for their demand. So rather than having growth coming from those existing customers, we've actually accommodated them in the downsizing and used as an opportunity to solidify our relationship with them, but for the most part, we see our gross new sales next year increasing, our downsizing reducing next year and also the reduction in the fleet due to Ryder initiated credit pools and bankruptcy also being down as we go into 2010. So we do see a more positive net sales, if you will, perspective in 2010 predominantly happening in the second half of the year and benefiting 2011 as Greg had mentioned earlier.

Thank you very much.

Thank you. Our next question is from David Campbell. You may ask your question and please state your company name.

Thompson Davis & Co. Thank you. Good afternoon. I wanted to ask whether get a better feel for the capital expenditures this year will be primarily to add to the commercial rental fleet? Is that the way to look at it?

Well, that's one part of it. We're going to be around the range of about $270 million for capital for rental refurbishment, replenishment of the fleet when we did virtually none in 2009. Where we used the most additional judgment guess at this point is in the lease capital and in this environment the more, the better because that will indicate that customers are adding to the completes and we're going to get this whole malaise turned around and get the revenue and earning stream going in FMS. So the numbers that we shared are up over last year and we hope we're right. We hope it's at least that good, but it certainly could be a little less and maybe hopefully more.

So if this turns out to be the case, then by the end of 2010, you will have more commercial rental vehicles in the fleet than you have now?

Not in commercial rental at this time. The capital we're spending is to replace units that we'll be taking out of the rental fleet in. The thing we'll monitor for the future is whether demand warrants adding to the rental fleet but the plan we presented today does not show an increase and the capital we're spending is only replacing vehicles that will be coming out of rental. All of the other additions would be from lease.

Okay. Thank you very much.

You're welcome.

Thank you. Our next question is from Jeff Kauffman. Your line is open and please state your company name.

Hi. It's Sal Vitale for Jeff Kauffman at Sterne Agee.

Yes.

Good morning.

Good morning.

Just a quick question. In the release you mentioned that want cost reduction initiatives in the full service lease business, can you quantify what the fourth quarter impact of that was?

Good question. I know that there was some offset. I don't know that I have handy exactly what that was. Let us look while we're online. Let us just look at something real quick and see if we can answer that for you right now or we can have a follow-up call from you.

Okay. And then just one other question. Just looking at your full service lease customers that are downsizing their fleets, are they shifting to renting trucks from you on a short term basis as opposed to just using fewer trucks overall?

Yes, Tony, I'll turn that to you.

What we're seeing is that they're reducing the size of their fleet and when they need the extra capacity because they're still uncertain about the future, they don't make a longer term commitment, they do rent from our rental fleet and we are seeing that activity from them. Typically, though, when business starts to pick up, the first benefit that we receive is the increase in the miles revenue that we have and they improve the utilization of their private fleet. Then they'll begin to rent from us and then when they're a bit more comfortable and the rentals have been somewhat extended rentals, then they'll convert it from lease, but we do rely on the lease customers for a good solid portion of our rental activity as well as they're waiting for new units and also as they get some extra freight, but still they're a bit uncomfortable to make that longer term commitment and that is included in our rental performance for 2010 with the lag in lease prior to when they convert those rentals into lease.

So it sounds like you're saying that for now at least currently the first quarter, maybe into the second quarter, that, you know, those customers that are terminating their leases and not entering into new long term leases, the majority are not necessarily renting from you on a short term basis. They're just using fewer trucks right now or utilizing their private fleet more?

What they're doing, they are utilizing the units they continue to lease from us more and then they'll rent.

Understood. Okay. Thank you.

And we have the answer to the first question you asked.

Okay. Thank you.

Sal, this is Robert Sanchez. The cost reductions that we were speaking topper $10 million they're mainly due to headcount reduction and some of the cost reduction initiatives we announced earlier in the year.

Thank you very much.

Okay.

Thank you. This concludes our question-and-answer session. I would now like to turn the l call back over to Greg Swienton for any closing comments.

Well, I thank everybody for hanging on this long since we had a long presentation. I think we accommodated all the questions. Thanks for hanging with us because most of you are on East Coast time and it's close to your lunchtime. Have a good safe day and good luck to all of us for a better, healthier and successful 2010. Bye now.

Thank you. This concludes today's conference. Thank you for participating. You may disconnect at this time.