Ryder System today, Feb. 4, announced financial results for the fourth quarter and full year of 2008. The company also announced the completion of its previously announced acquisition of substantially all the assets of Edart Leasing, a privately owned full-service truck leasing, commercial truck rental and contract maintenance company headquartered in Hartford, Conn.
For the fourth quarter:
“We delivered full-year comparable earnings growth, operating revenue growth and positive free cash flow following more than two full years of a U.S. freight recession, which began in the third quarter of 2006,” said Greg Swienton, chairman and chief executive officer of Miami-based Ryder. “We also successfully completed four accretive acquisitions in 2008. We are pleased that we delivered fourth-quarter earnings within our previous forecast range.”
Swienton said that during the quarter, Ryder saw significant deterioration in general economic conditions that affected its transactional commercial rental business. “This more than offset continuing strength in our contractual FMS business, which grew by 4 percent in the quarter, adjusted for foreign exchange,” he said. “In addition to the steps we took throughout the year to adjust the size of the commercial rental fleet, we announced aggressive strategic actions in the quarter to better position us for the market conditions we anticipate in the coming year.”
For the full year, revenue was $6.20 billion, a decrease of 6 percent from $6.57 billion in the comparable period of 2007. Operating revenue (revenue excluding FMS fuel and all subcontracted transportation) of $4.70 billion was up 1 percent from $4.64 billion. Net earnings were $199.9 million compared with $253.9 million. Comparable net earnings were $254.8 million, up 1 percent from $251.9 million.
Comparable earnings exclude second-quarter 2008 charges in the company’s SCS operations in Brazil to adjust accruals and tax deferrals related to prior years; net restructuring and other items recognized in the fourth quarter of 2008 and the third quarter of 2007; and income tax benefits associated with tax law changes in both years and reversals of contingent tax accruals in 2008.
“We enter 2009 with a strong balance sheet; a lean, effective organizational structure; and a team that’s well prepared to manage through cyclical impacts of a prolonged recession and market downturn,” Swienton said. “Our improved business model, including centralized asset management processes, and the coordinated responsiveness of our organization continue to serve us well in tempering the full impact of these unprecedented economic times.”
Swienton said Ryder also took proactive strategic and tactical steps in the fourth quarter to further align its cost structure and resources with what it expects to be a soft economic environment throughout the year. “Clearly, we face challenging headwinds that are directly related to global economic and market conditions,” he said. “Chief among them is a significant increase in pension expense driven by poor performance in the overall stock market in 2008. In addition, we are experiencing the overall effect of a weak global economy on our transactional commercial rental and used vehicle sales operations, and challenges facing our Supply Chain customers in the automotive industry.”
Swienton said that despite those factors, Ryder is targeting new customer outsourcing opportunities in its contractual product lines, focusing on strong retention of its existing customers, and evaluating additional acquisition opportunities. “Our strong balance sheet, good availability of capital, and the free cash flow generated by our business model are of particular value in enabling Ryder to capitalize on opportunities in the current environment,” he said. “While we are certainly facing a difficult environment in the current period, we believe that our actions will position the company well for long-term profitable growth in the future.”
The Edart acquisition is expected to add about $35 million in annualized operating revenue to Ryder’s Fleet Management Solutions business unit and be accretive to earnings in 2009. Ryder anticipates additional earnings improvement in future years due to synergies and operational improvements within the combined companies.
In the transaction, Ryder acquired Edart’s fleet of about 1,460 full-service lease and 180 commercial rental units, serving 340 contract customers. Ryder acquired four of Edart’s nine multicustomer operating locations in Connecticut (Hartford, Bridgeport, E. Lyme and Franklin) and one additional single customer maintenance location in Bozrah. Customers previously served by Edart in the remaining five facilities will be consolidated into and served by Ryder’s nearest existing locations. The combined network will operate under the Ryder name. Also per the terms of the transaction, Ryder will acquire about 525 vehicles that will be remarketed pursuant to specific terms of the agreement.
“Edart has been a leader in transportation for 74 years and a strong provider of services in the Northeast,” Swienton said. “We are pleased to be in a position to acquire a reputable company and continue our expansion plans during challenging economic times. We look forward to the opportunity to provide our new customers with quality service and new products and technology to help with their future growth and profitability.”
