Fitch Ratings Affirms Ryder At 'BBB+/F2'; Rating Outlook Stable.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 10, 2002

Fitch Ratings affirms Ryder System, Inc.'s (Ryder) 'BBB+' senior debt and 'F2' commercial paper ratings. The Rating Outlook is Stable. Approximately $1.6 billion of debt securities are covered by Fitch's actions.

Ryder's ratings reflect the company's leading market position in the full-service truck leasing sector, improved operating efficiency as a result of management's cost reduction initiatives, diverse funding alternatives, good liquidity, and improving capitalization and leverage. Rating concerns center on Ryder's subpar profitability, success in logistics business, trends in truck residual values, and the continuation of weak global demand for capital goods and services.

Throughout the 1990s, Ryder has evolved from a diversified transportation equipment lessor with business activities ranging from aircraft leasing to automobile transportation to a company focused on commercial truck leasing and logistics. With the arrival of new management in 1999, the importance of business efficiency, cost-cutting, and free cash flow became heightened in Ryder's corporate metamorphosis. Significant restructuring charges aggregating $211 million, excluding year-2000 remediation expense, were taken between 1999 and 2001 to right-size Ryder. Improved working capital management and restraining equipment capital expenditures have helped to increase free cash flow, which totaled $290 million for the nine month period ending Sept. 30, 2002 up from $52 million for the same period in 2001.

Equally as important as reducing expenses was transitioning Ryder's culture from an emphasis on revenue growth to one of profitable growth. Economic Value Added (EVA) has been an important tool in Ryder's focus on profitable growth. Nevertheless, implementation of this has been more difficult than the cost reductions. Despite lower revenues, the supply chain solutions business has reduced its pre-tax operating loss by 50% over the last year and could be breakeven on an operating basis in 2003.

Management's cost-cutting initiatives and operating conservatism were timely as the over-the-road truck sector entered into a sharp downturn beginning in 2000. Ryder has done a good job navigating through the sector's problems. Ryder, like other lessors, was assisted by the implementation of new Environmental Protection Agency engine emission requirements, which resulted in strong short-term demand for used class 8 trucks. However, the operating environment remains difficult as new equipment demand is essentially flat with 2001's levels. This results in weak lease pricing and collateral values continuing to be under pressure.

Although still remaining profitable during the current economic downturn, Ryder's profitability remains subpar. The full impact of management's emphasis on profitable growth is not likely to become apparent until Ryder strengthens and demand for capital goods improves. In the meantime, return on equity since 2000 has been below 10% as management strengthens the capital base and de-leverages the balance sheet.

While strengthening the equity base has hurt Ryder's profitability, it has had a favorable impact on risk-adjusted capitalization and leverage. Management has positioned Ryder's balance sheet to withstand the current cyclical down period in the truck-leasing sector while maintaining financial flexibility to be opportunistic when the business strengthens, as well as funding the pension plan, if necessary. Ryder's total managed debt divided by tangible equity stood at 2.09 times (x) at Sept. 30, 2002 down from 3.37x at Dec. 31, 2000. Further declines in leverage are expected due to weak new business demand and continued balance sheet strengthening.

Headquartered in Miami, Ryder System, Inc. is one of the world's largest provided of highway transportation services. Ryder operates in three reportable business segments: Fleet Management Solutions, Supply Chain Solutions, and Dedicated Contract Carriage. Ryder's revenues for the nine-month period ending Sept. 30, 2002 were $3.6 billion.