Fitch Ratings Affirms Ryder At 'BBB+/F2'; Outlook To Positive.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 21, 2004

Fitch Ratings affirms Ryder System, Inc.'s (Ryder) senior unsecured debt and commercial paper ratings at 'BBB+' and 'F2', respectively. The Rating Outlook is revised to Positive from Stable. Approximately $1.1 billion of debt is covered by Fitch's actions.

The rating affirmations reflect Ryder's success in managing through one of the worst periods in the over-the-road (OTR) truck leasing business. While Ryder was not immune to the problems in the truck leasing sector since 2000, it has emerged from the current downturn relatively unscathed compared to other truck lessors. Ryder's conservative financial management has been an important factor in allowing the company to navigate through the industry downturn. Management's emphasis on extending leases and prudent equipment capital expenditures has resulted in financial leverage declining while access to the company's core funding sources was maintained. However, challenges remain and include reviving growth in the full service leasing business, maintaining the business turnaround in the supply chain solutions unit, and managing the potential impact on equipment residual values for trucks with engines that are compliant with the new emissions standards that were implemented in 2002.

The Positive Rating Outlook reflects the expectation that Ryder's operating metrics will sharply improve as management is able to capitalize on the operating leverage available in the company's business. In order to achieve better profitability, Ryder will need to grow its business as nearly all the cost-cutting opportunities have been realized. Fitch believes that management will grow the business with the same disciplined approach that was used in the restructuring process as a significant component of executive management's discretionary compensation is predicated on generating new business that is Economic Value Added (EVA) positive.

In addition to internal growth, selected acquisitions are expected to be important components of Ryder's growth over the intermediate term. On Dec. 19, 2003, the company announced the acquisition of General Car and Truck Leasing System, which closed on Jan. 6, 2004, and had also entered into a non-binding letter of intent with Ruan Leasing Co. Given Ryder's strong liquidity, Fitch views the acquisitions, which will be funded with debt, as manageable. They will increase the existing truck lease fleet by less than 10%, but allow the company to drive more volume through its existing infrastructure with some cost takeout opportunities.

Ryder reported net income of $92 million for the nine month period ending Sept. 30, 2003, a 50% increase over 2002's same period net income of $61 million. Ryder's supply chain solutions (SCS) unit drove the improvement in overall operating results as it reported pretax income of $27 million in 2003 versus a $5 million loss for the same period in 2002. The improvement in the SCS unit was partially offset by a $10 million decline in the pre-tax contribution by the fleet management solutions (FMS) unit as a result of higher pension expense. In spite of the overall improvement, segment margins remain under pressure relative to historic levels. Nevertheless, overall profitability improved as annualized return on equity increased to 10.48%, versus 6.45% for 2002's same period. Fitch notes that Ryder's low financial leverage adversely impacted ROE.

Throughout Ryder's restructuring, conservative balance sheet management has remained a priority. Since 2000, Ryder's balance sheet has strengthened as lower equipment capital expenditures resulted in significant free cash flow and allowed management to reduce debt and financial leverage, defined as total managed debt divided by tangible equity. Leverage at Sept. 30, 2003 stood at 1.86 times (x) versus 2.74x at Dec. 31, 2001. The decline in leverage is even more compelling considering that Ryder's book equity was reduced by $228 million in 2002 in connection with an after-tax charge to recognize the minimum pension liability. Ryder's commitment to maintaining a sound balance sheet is further underscored by the board of directors' decision not to raise the common dividend, in spite of increasing earnings.

Headquartered in Miami, Ryder System, Inc. is one of the world's largest providers of highway transportation services. Ryder operates in three reportable business segments: Fleet Management Solutions, Supply Chain Solutions, and Dedicated Contract Carriage. Ryder's assets and revenues at Sept. 30, 2003 and for the nine-month period ending Sept. 30, 2003 were $5.2 billion and $3.6 billion, respectively.