2. Safe Harbor
Certain statements and information included in this presentation are quot;forward-looking statementsquot; under
the Federal Private Securities Litigation Reform Act of 1995. Accordingly, these forward-looking
statements should be evaluated with consideration given to the many risks and uncertainties inherent in
our business that could cause actual results and events to differ materially from those in the forward-
looking statements. Important factors that could cause such differences include, among others, our ability
to obtain adequate profit margins for our services, our inability to maintain current pricing levels due to
customer acceptance or competition, customer retention levels, unexpected volume declines, loss of key
customers in the Supply Chain Solutions (SCS) business segment, our failure to successfully implement
sales growth initiatives in our FMS business segment, unexpected reserves or write-offs due to the
deterioration of the credit worthiness or bankruptcy of certain customers in our SCS business segment,
changes in financial, tax or regulatory requirements or changes in customers’ business environments that
will limit their ability to commit to long-term vehicle leases, changes in market conditions affecting the
commercial rental market or the sale of used vehicles, the effect of severe weather events, labor strikes
or work stoppages affecting our or our customers’ business operations, adequacy of accounting
estimates and accruals particularly with respect to pension, taxes and revenue, changes in general
economic conditions, sudden changes in fuel prices, availability of qualified drivers, our ability to manage
our cost structure, new accounting pronouncements, rules or interpretations, changes in government
regulations including regulations regarding vehicle emissions and the risks described in our filings with
the Securities and Exchange Commission. The risks included here are not exhaustive. New risks emerge
from time to time and it is not possible for management to predict all such risk factors or to assess the
impact of such risks on our business. Accordingly, we undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future events, or otherwise.
2
4. 4th Quarter Results Overview
► Earnings per diluted share were $1.08, up 17% from $0.92 in 4Q05
– 4Q06 includes $0.01 net restructuring and other charges
– 4Q05 includes $0.04 restructuring costs, $0.04 charge from cumulative effect of accounting change and
$0.03 benefit from discontinued operations
► Earnings per diluted share from continuing operations were $1.08, up 16% from
$0.93 in 4Q05
► Total revenue up 3% (and operating revenue up 6%)
► Fleet Management Solutions (FMS) total revenue down 1% (and operating revenue
up 2%) vs. prior year
– Fuel revenue down 10% (first decline in recent periods; impacts total revenue)
– Contractual revenue increased 5%
• Full service lease revenue up 5% and contract maintenance revenue up 16%
– Commercial rental revenue down 7%
► FMS net before tax earnings (NBT) up 3%
– FMS NBT percent of operating revenue up 10 basis points to 12.8%
► FMS earnings positively impacted by improved lease and contract maintenance
results as well as higher gains on used vehicle sales, partially offset by lower
commercial rental results in North America and higher sales & marketing and other
compensation-related costs
4
5. 4th Quarter Results Overview (cont’d)
► Supply Chain Solutions (SCS) total revenue up 13% (and operating revenue up 17%) vs.
prior year, reflecting higher volumes, new / expanded business and increased managed
subcontracted transportation
► SCS net before tax earnings (NBT) up 22%
– SCS NBT percent of operating revenue up 20 basis points to 5.3%
► SCS earnings positively impacted by higher volumes, and new and expanded business
► Dedicated Contract Carriage (DCC) total revenue down 2% (and operating revenue
down 2%) vs. prior year; decrease due to lower fuel revenues associated with declining
fuel prices and volumes
► DCC net before tax earnings (NBT) up 8%
– DCC NBT percent of operating revenue up 80 basis points to 8.3%
► DCC earnings positively impacted by lower safety and insurance costs including
hurricane-related recovery
5
6. Key Financial Statistics
($ Millions, Except Per Share Amounts)
Fourth Quarter
2006 2005 % B/(W)
(1)(2)
Operating Revenue $ 1,146.0 $ 1,085.9 6%
Fuel Services and Subcontracted Transportation Revenue 448.1 458.9 (2% )
Total Revenue $ 1,594.1 $ 1,544.8 3%
Earnings Per Share $ 1.08 $ 0.92 17%
Earnings Per Share from Continuing Operations $ 1.08 $ 0.93 16%
Memo:
EPS Impact of Restructuring and Net Retirement Plan Charges $ (0.01) $ (0.04)
Average Shares (Millions) - Diluted 61.2 63.9
Tax Rate 35.3% 36.6%
(1)
Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures.
(2)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the business and as a measure of sales activity. Fuel
services revenue net of related intersegment billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as
fuel is largely a pass through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. Subcontracted
transportation revenue is excluded from the operating revenue computation as it is largely a pass through to customers and the Company realizes minimal changes in
profitability as a result of fluctuations in subcontracted transportation.
6
7. Key Financial Statistics
($ Millions, Except Per Share Amounts)
Full Year
2006 2005 % B/(W)
(1)(2)
Operating Revenue $ 4,454.2 $ 4,210.9 6%
Fuel Services and Subcontracted Transportation Revenue 1,852.4 1,529.9 21%
Total Revenue $ 6,306.6 $ 5,740.8 10%
Earnings Per Share $ 4.04 $ 3.52 15%
Earnings Per Share from Continuing Operations $ 4.04 $ 3.53 14%
(1)
Comparable Earnings Per Share from Continuing Operations $ 3.99 $ 3.41 17%
Memo:
(3)
EPS Impact of Restructuring and Net Retirement Plan Charges $ (0.01) $ (0.03)
EPS Impact of Tax Law Changes $ 0.11 $ 0.12
EPS Impact of Pension Charge $ (0.06) $ -
Average Shares (Millions) - Diluted 61.6 64.6
Tax Rate 36.6% 36.3%
(1)
Adjusted Return on Capital 7.9% 7.8%
(1)
Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures. Comparable earnings per share exclude tax law changes and pension charge.
(2)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the business and as a measure of sales activity. Fuel services
revenue net of related intersegment billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a
pass through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. Subcontracted transportation revenue is
excluded from the operating revenue computation as it is largely a pass through to customers and the Company realizes minimal changes in profitability as a result of fluctuations in
subcontracted transportation.
(3)
7
Includes 2006 net restructuring and other (charges)/recoveries and the fourth quarter 2006 net retirement plan charges.
8. Business Segment
($ Millions)
Fourth Quarter
Mem o: Total Revenue
2006 2005 % B/(W) 2006 2005 % B/(W)
(1)
Operating Revenue :
Fleet Managem ent Solutions $ 741.3 $ 723.6 2% $ 1,005.4 $ 1,016.1 (1)%
Supply Chain Solutions 320.1 274.2 17% 543.1 482.7 13%
Dedicated Contract Carriage 135.6 137.8 (2)% 140.2 142.5 (2)%
Elim inations (51.0) (49.7) (3)% (94.6) (96.5) 2%
Total $ 1,146.0 $ 1,085.9 6% $ 1,594.1 $ 1,544.8 3%
Segm ent Net Before Tax Earnings:
Fleet Managem ent Solutions $ 94.5 $ 92.0 3%
Supply Chain Solutions 17.0 14.0 22%
Dedicated Contract Carriage 11.2 10.4 8%
Elim inations (9.0) (9.5) 3%
113.7 106.9 6%
Central Support Services (Unallocated Share) (11.1) (9.1) (22)%
(1)
Earnings Before Restructuring and Incom e Taxes 102.6 97.8 5%
Restructuring and Other (Charges)/Recoveries,
(2)
Net and Net Retirem ent Plan Charges (0.8) (4.0) NA
Earnings Before Incom e Taxes 101.8 93.8 9%
Provision for Incom e Taxes (36.0) (34.3) (5)%
Earnings from Continuing Operations 65.8 59.5 11%
Earnings from Discontinued Operations - 1.7 NA
Cum ulative Effect of Change in Accounting Principle - (2.4) NA
Net Earnings $ 65.8 $ 58.8 12%
Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures.
(1)
Our primary measure of segment financial performance excludes restructuring and other (charges)/recoveries, net and 2006 net retirement plan charges; however, the
(2)
applicable portion of the restructuring and other (charges)/recoveries, net and net retirement plan charges that related to each segment was as follows: FMS - $0.2,
SCS – ($0.9) and CSS – ($0.1) in 2006; and FMS – ($3.3) and SCS – ($0.7) in 2005. 8
9. Business Segment
($ Millions)
Full Year
Mem o: Total Revenue
2006 2005 % B/(W) 2006 2005 % B/(W)
(1)
Operating Revenue :
Fleet Managem ent Solutions $ 2,921.1 $ 2,864.9 2% $ 4,096.0 $ 3,921.2 4%
Supply Chain Solutions 1,182.9 1,015.8 16% 2,028.5 1,637.8 24%
Dedicated Contract Carriage 548.9 527.0 4% 568.8 543.3 5%
Elim inations (198.7) (196.8) (1)% (386.7) (361.5) (7)%
Total $ 4,454.2 $ 4,210.9 6% $ 6,306.6 $ 5,740.8 10%
Segm ent Net Before Tax Earnings:
Fleet Managem ent Solutions $ 368.1 $ 354.4 4%
Supply Chain Solutions 62.1 39.4 58%
Dedicated Contract Carriage 42.6 35.1 21%
Elim inations (33.7) (32.7) (3)%
439.1 396.2 11%
Central Support Services (Unallocated Share) (39.5) (35.7) (10)%
(1)
Earnings Before Restructuring and Incom e Taxes 399.6 360.5 11%
Restructuring and Other (Charges)/Recoveries,
Net and Net Retirem ent Plan Charges (2) (6.6) (3.4) NA
Earnings Before Incom e Taxes 393.0 357.1 10%
Provision for Incom e Taxes (144.0) (129.5) (11)%
Earnings from Continuing Operations 249.0 227.6 9%
Earnings from Discontinued Operations - 1.7 NA
Cum ulative Effect of Change in Accounting Principle - (2.4) NA
Net Earnings $ 249.0 $ 226.9 10%
(1)
Com parable Earnings from Continuing Operations $ 245.9 $ 220.0 12%
Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures.
(1)
Our primary measure of segment financial performance excludes restructuring and other (charges)/recoveries, net and 2006 net retirement plan charges; however, the
(2)
applicable portion of the restructuring and other (charges)/recoveries, net and net retirement plan charges that related to each segment was as follows: FMS - ($5.6), SCS
9
– ($0.9) and CSS – ($0.1) in 2006; and FMS – ($2.7) and SCS – ($0.7) in 2005.
10. Capital Expenditures
($ Millions)
Full Year
2006 $
2006 2005 O/(U) 2005
Full Service Lease $ 1,493 $ 1,082 $ 411
Commercial Rental 195 252 (57)
Operating Property and Equipment 72 77 (5)
Gross Capital Expenditures 1,760 1,411 349
Less: Proceeds from Sales (Primarily Revenue Earning Equipment) 333 334 (1)
Net Capital Expenditures $ 1,427 $ 1,077 $ 350
Memo: Acquisitions $ 4 $ 15 $ (11)
10
11. Cash Flow
($ Millions)
Full Year
2006 2005
Net Earnings $ 249.0 $ 226.9
Cumulative Effect of Change in Accounting Principle - 2.4
Depreciation 743.3 740.4
Gains on Vehicle Sales, Net (50.8) (47.1)
Amortization and Other Non-Cash Charges, Net 27.7 14.4
Changes in Working Capital and Deferred Taxes (115.6) (157.9)
Cash Provided by Operating Activities 853.6 779.1
Proceeds from Sales (Primarily Revenue Earning Equipment) 332.7 333.7
Collections of Direct Finance Leases 66.3 70.4
Other Investing, Net 2.1 -
(1)
Total Cash Generated 1,254.7 1,183.2
(2)
Capital Expenditures (1,695.1) (1,399.4)
Acquisitions (4.1) (15.1)
(1)
Free Cash Flow $ (444.5) $ (231.3)
(1) Non-GAAP financial measure; refer to Appendix – Non-GAAP Financial Measures
(2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment
11
12. Debt to Equity Ratio
($ Millions)
300%
Total Obligations to Equity (1)
250%
200% Balance Sheet Debt to Equity
150%
100%
50%
0%
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 Long
Term
Target
Midpoint (2)
12/31/06 12/31/05
Balance Sheet Debt $ 2,816.9 $ 2,185.4
164% 143%
Percent To Equity
(1)
$ 2,894.9 $ 2,302.4
Total Obligations
(1)
168% 151%
Percent To Equity
Total Equity $ 1,720.8 $ 1,527.5
Note: Includes impact of accumulated net pension related equity charge of $201 million and $221 million as of 12/31/06 and 12/31/05, respectively.
(1) Non-GAAP financial measure; refer to Appendix – Non-GAAP Financial Measures.
(2) Represents long term total obligations to equity target of 250 - 300% while maintaining a strong investment grade rating.
12
14. Asset Management Update
► The overall number of used vehicles sold in the fourth quarter was 4,722,
down 15% compared with prior year due to reduced levels of wholesale
activity
– Retail vehicles sold were up 3% vs. prior year period
► Retail sales proceeds per unit were up 1% on tractors and down 6% on trucks
in the fourth quarter compared with prior year
► Vehicles no longer earning revenue are 8,497; up 1,563 or 23% vs. prior year
driven primarily by a higher used truck center inventory
– 5,707 of these units are held for sale at the used truck centers
► Commercial rental fleet is down 2% year-over-year and down 4% from planned
fleet levels
Note: U.S. only
14
16. 2007 Overall Environment
Upside / Opportunities Issues / Risks
+ Overall economy stable − Softer housing market
− Automotive production levels
Modest Inflation Moderate GDP Growth
Full Solid Industrial
− Tight employment markets
Employment Production
+ Lower fuel prices
− U.S. dollar strengthening
+ Strength and currency
stability in emerging markets
+ Attractive real interest rates
16
17. FMS Assumptions / Drivers
Upside / Opportunities Issues / Risks
+ Positive 2006 lease / contract − Softer freight demand
maintenance sales carryover
• Declining rental revenue
+ New retention and sales
• Fewer miles driven
initiatives
− OEM tractor production decline
+ Stronger cash flow
& potential market acceptance
+ Stable used vehicle pricing and issues
improving vehicle residual
− Management of used vehicle
values
inventory through replacement
+ Pension performance benefit cycle
due to 2006 market returns and
− Fuel price volatility (impacts
discount rate
gross revenue growth rate only,
+ Continue process improvement not earnings)
initiatives
17
18. SCS / DCC Assumptions / Drivers
Upside / Opportunities Issues / Risks
+ Strong customer retention − Softer freight demand
and business development
− Potential automotive volume
focus
impacts and plant closures
+ Continue customer base
− Driver recruiting / retention
diversification
+ Expand related service − Potential U.S. dollar
offerings strengthening (impacts SCS
International)
+ Continue process
− Fuel price volatility (impacts
improvement initiatives
revenue growth rate)
18
19. Key Financial Statistics
($ Millions, Except Per Share Amounts)
2007
Forecast 2006 % B / (W)
Revenue:
Operating (1) (2) $ 4,630 - 4,670 $ 4,454 4 - 5%
Fuel Services and Subcontracted Transportation 2,020 - 2,060 1,853 9 - 11%
Total Revenue $ 6,650 - 6,730 $ 6,307 5 - 7%
Earnings:
Earnings Before Income Taxes $ 432 - 442 $ 393 10 - 12%
Provision for Income Taxes (170) - (174) (144) (18 - 21)%
Earnings $ 262 - 268 $ 249 5 - 8%
(1)
Comparable Earnings $ 262 - 268 $ 246 7 - 9%
Earnings Per Share (EPS):
EPS $ 4.30 - 4.40 $ 4.04 6 - 9%
(1)
Comparable EPS $ 4.30 - 4.40 $ 3.99 8 - 10%
Memo: Average Shares (millions) - Diluted 61.0 61.6
Tax Rate 39.4% 36.6%
Adjusted Return on Capital (1) 7.7 - 7.8% 7.9%
Non-GAAP financial measure; refer to Appendix – Non-GAAP Financial Measures. Comparable earnings and comparable EPS exclude tax law changes and pension
(1)
charge in 2006.
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the business and as a measure of sales activity. Fuel
(2)
services revenue net of related intersegment billings, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation
as fuel is largely a pass through to customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. Subcontracted
transportation revenue is excluded from the operating revenue computation as it is largely a pass through to customers and the Company realizes minimal changes in
profitability as a result of fluctuations in subcontracted transportation.
Note: Earnings per share amounts are calculated independently for each component and may not be additive due to rounding. 19
21. 2007 Causes of EPS Change
($ Earnings Per Share)
0.25 – 0.30 $4.30 - $4.40
0.12 - 0.15
(0.02)
$3.99 (1)
(0.07)
0.03 - 0.05
2006 Stock Tax Rate Asset Employee Revenue & 2007 Forecast
Demutualization Management Benefits Operational
Improvements
+ + +
Depreciation Pension Contractual Revenue
Performance
- -
Used Vehicle Rental Revenue
- Pension Funding
Sales
Interest
- Medical
- SFAS123R
21
(1) Non-GAAP financial measure; refer to Appendix – Non-GAAP Financial Measures. Excludes $0.05 net benefit from tax law changes and pension charge.
22. Business Segment Earnings
Full Year
Segment NBT as % of Operating Revenue (1)
Segment NBT as % of Total Revenue
13.1
12.6
15 12.4
11.2
8.2
Fleet 10 7.5
7.3
Management 9.0 9.0 9.3
8.7
5 6.7
Solutions 6.0
5.9
0
2001 2002 2003 2004 2005 2006 2007 Forecast
Midpoint
10
5.3 5.3
4.2 4.0 3.9
5
Supply Chain
(0.8)
Solutions (0.6) 3.1
2.9 3.0
2.7 2.4
0
2001 2002 2003 2004 2005 2006 2007 Forecast
(0.6)
-5 (0.4) Midpoint
15
7.8 7.8
Dedicated 10 6.9 6.7
6.3 5.9
6.1
Contract
5 7.7
Carriage 7.5
6.8 6.5
6.2 6.0 5.8
0
2001 2002 2003 2004 2005 2006 2007 Forecast
Midpoint
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the FMS business segment and as a measure of sales activity.
(a)
Fuel services revenue, which is directly impacted by fluctuations in market fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to
customers for which the Company realizes minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively
22
impacted by sudden increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on market fuel costs.
23. Capital Expenditures
► Full Service Lease:
– Capital for lease vehicles is committed after contracts are signed
with customers
– 2007 lease capital expenditures include:
• Replacement spending of $800 - $850 million
• Growth spending of $80 - $180 million
– Growth capital represents an investment which results in
$15 - $35 million of incremental 2007 revenue or $30 - $65
million of annualized revenue
► Commercial Rental:
– 2007 rental capital expenditures include:
• Replacement spending of $270 million
23
24. Capital Expenditures, Cash Flow & Leverage
($ Millions)
Full Year 2007
2006 Forecast
Full Service Lease - Replacement $800 - $850
Full Service Lease - Growth 80 - 180
Full Service Lease $ 1,493 880 - 1,030
Commercial Rental 195 270
Operating Property and Equipment 72 100
Gross Capital Expenditures 1,760 1,250 - 1,400
Less: Proceeds from Sales 333 320
Less: Proceeds from Sale and Leaseback of
Revenue Earning Equipment - 150
Net Capital Expenditures $ 1,427 $780 - $930
Assets Under Management $ 8,141 $8,225 - $8,325
Cash Provided by Operating Activities $ 854 $1,050 - $1,150
(1)
Total Cash Generated $ 1,255 $1,385 - $1,585
(1)
Free Cash Flow $ (444) $210 - $260
(1)
Total Obligations to Equity 168% 135% - 145%
(1) Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures.
24
25. EPS Forecast
($ Earnings Per Share)
First Quarter Full Year
2007 EPS Forecast $ 0.80 - 0.84 $ 4.30 - 4.40
(1) (2)
2006 Comparable EPS $ 0.77 $ 3.99
(1) First quarter 2006 includes $0.02 benefit from stock demutualization.
(2) Non-GAAP financial measure. Excludes tax changes and pension charge in 2006.
25
26. Summary
Drive growth from customer outsourcing in contractual product
lines while managing through cyclical impacts
► Focus on strong customer retention, new business development and
sales/marketing initiatives
► Continue growth in full service lease/contract maintenance, supply
chain solutions and dedicated contract carriage product lines
► Manage through cyclical impacts in commercial rental product line
► Balance sheet capacity to support growth and financial leverage
targets
► Sustain focus on cost management and process improvements,
while investing in sales and operational capabilities
26
28. Appendix
Business Segment Detail
Central Support Services
Balance Sheet
Asset Management
Financial Indicators Forecast
Non-GAAP Financial Measures & Reconciliations
28
29. Fleet Management Solutions (FMS)
($ Millions)
Fourth Quarter
2006 2005 % B/(W)
$ 472.4 $ 451.1 5%
Full Service Lease
37.9 32.6 16%
Contract Maintenance
510.3 483.7 5%
Contractual Revenue
48.7 47.6 2%
Contract-related Maintenance
163.4 175.3 (7)%
Commercial Rental
18.9 17.0 11%
Other
(a)
741.3 723.6 2%
Operating Revenue
264.1 292.5 (10)%
Fuel Services Revenue
$ 1,005.4 $ 1,016.1 (1)%
Total Revenue
$ 94.5 $ 92.0 3%
Segment Net Before Tax Earnings (NBT)
9.4% 9.1%
Segment NBT as % of Total Revenue
(a)
12.8% 12.7%
Segment NBT as % of Operating Revenue
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the FMS
business segment and as a measure of sales activity. Fuel services revenue, which is directly impacted by fluctuations in market
fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to customers for which the
Company realizes minimal changes in profitability during periods of steady market fuel prices. However, profitability may be
positively or negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer
pricing for fuel services is established based on market fuel costs.
29
30. Fleet Management Solutions (FMS)
($ Millions)
Full Year
2006 2005 % B/(W)
$ 1,848.3 $ 1,785.6 4%
Full Service Lease
141.9 134.5 6%
Contract Maintenance
1,990.2 1,920.1 4%
Contractual Revenue
193.1 191.1 1%
Contract-related Maintenance
665.7 686.3 (3)%
Commercial Rental
72.1 67.4 7%
Other
(a)
2,921.1 2,864.9 2%
Operating Revenue
1,174.9 1,056.3 11%
Fuel Services Revenue
$ 4,096.0 $ 3,921.2 4%
Total Revenue
$ 368.1 $ 354.4 4%
Segment Net Before Tax Earnings (NBT)
9.0% 9.0%
Segment NBT as % of Total Revenue
(a)
12.6% 12.4%
Segment NBT as % of Operating Revenue
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the FMS
business segment and as a measure of sales activity. Fuel services revenue, which is directly impacted by fluctuations in market
fuel prices, is excluded from the operating revenue computation as fuel is largely a pass-through to customers for which the
Company realizes minimal changes in profitability during periods of steady market fuel prices. However, profitability may be
positively or negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer
pricing for fuel services is established based on market fuel costs.
30
31. Supply Chain Solutions (SCS)
($ Millions)
Fourth Quarter
2006 2005 % B/(W)
U.S. Operating Revenue
$ 127.4 $ 116.5 9%
Automotive & Industrial
74.1 69.9 6%
High Tech & Consumer Industries
8.3 6.4 30%
Transportation Management
209.8 192.8 9%
U.S. Operating Revenue
110.3 81.4 36%
International Operating Revenue
(a)
320.1 274.2 17%
Operating Revenue
223.0 208.5 7%
Subcontracted Transportation
$ 543.1 $ 482.7 13%
Total Revenue
$ 17.0 $ 14.0 22%
Segment Net Before Tax Earnings (NBT)
3.1% 2.9%
Segment NBT as % of Total Revenue
(a)
5.3% 5.1%
Segment NBT as % of Operating Revenue
$ 24.9 $ 25.5 2%
Memo: Fuel Costs
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the SCS business segment
and as a measure of sales activity. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as
subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of
fluctuations in subcontracted transportation.
31
32. Supply Chain Solutions (SCS)
($ Millions)
Full Year
2006 2005 % B/(W)
U.S. Operating Revenue
$ 495.4 $ 449.4 10%
Automotive & Industrial
291.9 252.0 16%
High Tech & Consumer Industries
30.7 25.0 23%
Transportation Management
818.0 726.4 13%
U.S. Operating Revenue
364.9 289.4 26%
International Operating Revenue
(a)
1,182.9 1,015.8 16%
Operating Revenue
845.6 622.0 36%
Subcontracted Transportation
$ 2,028.5 $ 1,637.8 24%
Total Revenue
$ 62.1 $ 39.4 58%
Segment Net Before Tax Earnings (NBT)
3.1% 2.4%
Segment NBT as % of Total Revenue
(a)
5.3% 3.9%
Segment NBT as % of Operating Revenue
$ 104.2 $ 92.0 (13)%
Memo: Fuel Costs
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the SCS business segment
and as a measure of sales activity. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as
subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of
fluctuations in subcontracted transportation.
32
33. Dedicated Contract Carriage (DCC)
($ Millions)
Fourth Quarter
2006 2005 % B/(W)
(a)
$ 135.6 $ 137.8 (2)%
Operating Revenue
4.6 4.7 (2)%
Subcontracted Transportation
$ 140.2 $ 142.5 (2)%
Total Revenue
$ 11.2 $ 10.4 8%
Segment Net Before Tax Earnings (NBT)
8.0% 7.3%
Segment NBT as % of Total Revenue
(a)
8.3% 7.5%
Segment NBT as % of Operating Revenue
$ 24.3 $ 26.4 8%
Memo: Fuel Costs
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the SCS business segment
and as a measure of sales activity. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as
subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of
fluctuations in subcontracted transportation.
33
34. Dedicated Contract Carriage (DCC)
($ Millions)
Full Year
2006 2005 % B/(W)
(a)
$ 548.9 $ 527.0 4%
Operating Revenue
19.9 16.3 22%
Subcontracted Transportation
$ 568.8 $ 543.3 5%
Total Revenue
$ 42.6 $ 35.1 21%
Segment Net Before Tax Earnings (NBT)
7.5% 6.5%
Segment NBT as % of Total Revenue
(a)
7.8% 6.7%
Segment NBT as % of Operating Revenue
$ 104.6 $ 94.1 (11)%
Memo: Fuel Costs
(a)
The Company uses operating revenue, a non-GAAP financial measure, to evaluate the operating performance of the SCS business segment
and as a measure of sales activity. Subcontracted transportation is deducted from total revenue to arrive at operating revenue as
subcontracted transportation is largely a pass-through to customers. The Company realizes minimal changes in profitability as a result of
fluctuations in subcontracted transportation.
34
39. (1)
Financial Indicators Forecast
($ Millions)
Total Cash Generated (2) Gross Capital Expenditures
$1,760
Revenue Earning Equipment
$1,485
PP&E/Other $1,411
$1,263 $1,255 $1,325
$1,289
$1,183
$1,078 $1,165
$1,054
$949
$835
$725
$657 $600
2000 2001 2002 2003 2004 2005 2006 2007 2000 2001 2002 2003 2004 2005 2006 2007
Forecast Forecast
Midpoint Midpoint
Memo: Free Cash Flow (2)
(270) 131 367 260 140 (231)(3) (444) 235
Total Obligations to Equity Ratio (2)
275% Equity
234% Total Obligations (2)
201%
168%
140%
151%
146%
Significant and predictable cash generation
129%
Invest in growth
Increase assets under management
2000 2001 2002 2003 2004 2005 2006 2007
Forecast Increase financial leverage
Midpoint
Memo: Assets Under Management
7,030 6,928 6,626 6,751 7,301 7,534 8,141 8,275
Free Cash Flow and Debt to Equity include acquisitions. Gross Capital Expenditures exclude acquisitions.
(1)
Non-GAAP financial measure; refer to Appendix - Non-GAAP Financial Measures.
(2)
39
Includes $176 million payment to the IRS related to full resolution of 1998 - 2000 tax period matters.
(3)
40. (a)
Assets Under Management
($ Millions)
Forecast
Midpoint
2007 (b)
2000 2001 2002 2003 2004 2005 2006
Revenue Earning Equipment $ 4,587.7 $ 4,147.3 $ 4,493.6 $ 5,809.1 $ 6,352.4 $ 6,657.4 $ 7,335.2 $ 7,370.0
Direct Finance Leases 637.4 640.0 622.2 655.6 649.1 624.3 592.0 580.0
Operating Leases 1,804.9 2,140.3 1,510.6 286.2 299.5 251.8 213.6 325.0
Assets Under Management $ 7,030.0 $ 6,927.6 $ 6,626.4 $ 6,750.9 $ 7,301.0 $ 7,533.5 $ 8,140.8 $ 8,275.0
(a) Assets under management represent the original cost of all vehicles owned and held under lease by Ryder.
(b) Excludes impact of foreign exchange movements in 2007.
40
41. Non-GAAP Financial Measures
► This presentation includes “non-GAAP financial measures” as defined by SEC rules. As required by SEC rules, we
provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and an
explanation why management believes that presentation of the non-GAAP financial measure provides useful
information to investors. Non-GAAP financial measures should be considered in addition to, but not as a substitute
for or superior to, other measures of financial performance prepared in accordance with GAAP.
► Specifically, the following non-GAAP financial measures are included in this presentation. Unless otherwise noted,
these non-GAAP financial measures are presented for the fourth quarter 2006, full year 2006 and 2007 forecast.
Reconciliation & Additional Information
Non-GAAP Financial Measure Comparable GAAP Measure Presented on Slide Titled Page
Comparable EPS / Earnings Excluding Tax Changes EPS / Net Earnings Appendix - EPS and Earnings Reconciliation 42
and Pension Charge
Operating Revenue Total Revenue Key Financial Statistics 6 - 7 & 19
Earnings Before Restructuring and Income Taxes Net Earnings Business Segment 8-9
Adjusted Return on Capital Net Earnings Appendix - Adjusted Return on Capital 43
Reconciliation
Total Cash Generated / Free Cash Flow Cash Provided by Operating Activities Appendix - Cash Flow Reconciliation 44 - 45
Total Obligations / Total Obligations to Equity Balance Sheet Debt / Debt to Equity Appendix - Debt to Equity Reconciliation 46 - 47
FMS / SCS / DCC Operating Revenue and Segment FMS / SCS / DCC Total Revenue and Segment NBT Fleet Management Solutions / Supply Chain 29 - 34
NBT as % of Operating Revenue as % of Total Revenue Solutions / Dedicated Contract Carriage
41
42. EPS and Earnings Reconciliation
($ Millions or
$ Earnings Per Share)
FY06 - FY06 -
Net Earnings EPS*
Earnings from Continuing Operations $ 249.0 $ 4.04
Excluding Tax Law Changes and Pension Charge 3.1 0.05
Comparable Earnings from Continuing Operations $ 245.9 $ 3.99
FY05 - FY05 -
Net Earnings EPS
Earnings from Continuing Operations $ 227.6 $ 3.53
Excluding Tax Law Change 7.6 0.12
Comparable Earnings from Continuing Operations $ 220.0 $ 3.41
* Earnings per share amounts are calculated independently for each component and may not be additive due to rounding.
42
43. Adjusted Return on Capital Reconciliation
($ Millions)
Forecast
Midpoint
12/31/07 12/31/06 12/31/05
(1)
Net Earnings $ 265 $ 249 $ 227
Discontinued Operations - - (2)
Cumulative Effect of Changes in Accounting Principles - - 2
Income Taxes 172 144 130
Adjusted Earnings Before Income Taxes 437 393 357
(2)
Adjusted Interest Expense 171 147 127
(3)
Adjusted Income Taxes (239) (207) (186)
Adjusted Net Earnings $ 369 $ 333 $ 298
Average Total Debt $ 2,818 $ 2,480 $ 2,148
Average Off-Balance Sheet Debt 140 99 148
(4)
Average Adjusted Total Shareholders' Equity 1,822 1,605 1,550
Adjusted Average Total Capital $ 4,780 $ 4,184 $ 3,846
(5)
Adjusted Return on Capital 7.7% 7.9% 7.8%
Earnings calculated based on a 12-month rolling period.
(1)
Interest expense includes implied interest on off-balance sheet vehicle obligations.
(2)
Income taxes were calculated using the effective income tax rate for the period exclusive of benefits from tax law changes recognized in 2006 and 2005.
(3)
Represents shareholders’ equity adjusted for discontinued operations, accounting changes and the tax benefits in those periods.
(4)
The Company adopted adjusted return on capital, a non GAAP financial measure, as the Company believes that both debt (including off-balance sheet debt) and equity should be
(5)
included in evaluating how effectively capital is utilized across the business.
Note: Prior year has been restated to conform with current year presentation
43
44. Cash Flow Reconciliation
($ Millions)
12/31/00 (4) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06
Cash Provided by Operating Activities $ 1,023 $ 365 $ 617 $ 803 $ 867 $ 779 $ 854
Less: Changes in Balance of Trade Receivables Sold (270) 235 110 - - - -
Collections of Direct Finance Leases 67 66 66 61 64 70 66
230 173 152 210 331 334 333
Proceeds from Sales (Primarily Revenue Earning Equipment)
Other Investing, Net 4 (4) 4 4 1 - 2
(1)
Total Cash Generated 1,054 835 949 1,078 1,263 1,183 1,255
Capital Expenditures (2) (1,296) (704) (582) (734) (1,092) (1,399) (1,695)
Proceeds from Sale and Leaseback of Assets - - - 13 118 - -
Acquisitions (28) - - (97) (149) (15) (4)
(3)
Free Cash Flow $ (270) $ 131 $ 367 $ 260 $ 140 $ (231) $ (444)
Memo:
Depreciation Expense $ 580 $ 545 $ 552 $ 625 $ 706 $ 740 $ 743
Gains on Vehicle Sales, Net $ 19 $ 12 $ 14 $ 16 $ 35 $ 47 $ 51
The Company uses total cash generated, a non-GAAP financial measure, because management considers it to be an important measure of comparative operating performance.
(1)
Management believes total cash generated provides investors with an important measure of total cash inflows generated from our on-going business activities which include sales of
revenue earning equipment, sales of operating property and equipment, collections on direct finance leases and other cash inflows.
Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment.
(2)
The Company uses free cash flow, a non-GAAP financial measure, because management considers it to be an important measure of comparative operating performance. Management
(3)
believes free cash flow provides investors with an important perspective on the cash available for debt service and shareholders after making capital investments required to support
ongoing business operations. The calculation of free cash flow may be different from the calculation used by other companies and therefore comparability may be limited.
Amounts have not been recasted to give effect for the impact of foreign exchange movements on cash for which the impact is not expected to be significant.
(4)
44
45. Cash Flow Reconciliation
($ Millions)
Forecast
Midpoint
12/31/07
Cash Provided by Operating Activities $ 1,100
Collections of Direct Finance Leases 65
Proceeds from Sales (Primarily Revenue Earning Equipment) 320
Total Cash Generated (1) 1,485
Capital Expenditures (2) (1,400)
Proceeds from Sale and Leaseback of Revenue Earning Equipment 150
Free Cash Flow (3) $ 235
The Company uses total cash generated, a non-GAAP financial measure, because management considers it to be an important measure of
(1)
comparative operating performance. Management believes total cash generated provides investors with an important measure of total cash inflows
generated from our on-going business activities which include sales of revenue earning equipment, sales of operating property and equipment,
collections on direct finance leases and other cash inflows.
Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment.
(2)
The Company uses free cash flow, a non-GAAP financial measure, because management considers it to be an important measure of comparative
(3)
operating performance. Management believes free cash flow provides investors with an important perspective on the cash available for debt service and
shareholders after making capital investments required to support ongoing business operations. The calculation of free cash flow may be different from
the calculation used by other companies and therefore comparability may be limited.
45
46. Debt to Equity Reconciliation
($ Millions)
% to % to % to % to % to % to % to
12/31/00 Equity 12/31/01 Equity 12/31/02 Equity 12/31/03 Equity 12/31/04 Equity 12/31/05 Equity 12/31/06 Equity
Balance Sheet Debt $2,017 161% $1,709 139% $1,552 140% $1,816 135% $1,783 118% $2,185 143% $2,817 164%
Receivables Sold 345 110 - - - - -
PV of minimum
lease payments
and guaranteed
residual values
under operating
leases for vehicles 879 625 370 153 161 117 78
PV of contingent
rentals under
securitizations 209 441 311 - - - -
Total Obligations (1) $3,450 275% $2,885 234% $2,233 201% $1,969 146% $1,944 129% $2,302 151% $2,895 168%
(1) The Company uses total obligations and total obligations to equity, non-GAAP financial measures, which include certain off-balance sheet
financial obligations relating to revenue earning equipment. Management believes these non-GAAP financial measures are useful to investors
as they are more complete measures of the Company’s existing financial obligations and help investors better assess the Company’s overall
leverage position.
Note: In connection with adopting FIN 46 effective July 1, 2003, the Company consolidated the vehicle securitization trusts previously disclosed as
off-balance sheet debt.
46
47. Debt to Equity Reconciliation
($ Millions)
Forecast
Midpoint % to
12/31/07 Equity
Balance Sheet Debt $ 2,550 130%
PV of minimum lease payments and
guaranteed residual values under
operating leases for vehicles 190
(1)
Total Obligations $ 2,740 140%
(1) The Company uses total obligations and total obligations to equity, non-GAAP financial measures, which include certain
off-balance sheet financial obligations relating to revenue earning equipment. Management believes these non-GAAP
financial measures are useful to investors as they are more complete measures of the Company’s existing financial
obligations and help investors better assess the Company’s overall leverage position.
47
