Dear Ryder Investor,
Thanks for your continuing interest and investment in Ryder. I began 2013, my first year as CEO, by outlining five strategic priorities for our Ryder team:
- Attracting the Best People in the Industry;
- Delivering on the Promise to Our Customers;
- Innovating with New Solutions;
- Developing the Best Technology in the Industry; and
- Growing Our Business.
Thanks to great focus and teamwork on all fronts, we delivered record results for the year. We increased total revenue 3% to $6.4 billion and grew operating revenue 4% to a record $5.3 billion. Earnings per share improved 18% to $4.63 and we increased comparable earnings per share by 11% to a record $4.88. In total shareholder returns, we far outpaced S&P 500 growth of 32% by posting a 2013 increase of 51%. More importantly, we’re very well positioned to respond to market trends, adapt to customer needs, and deliver record results again in 2014.
Delivering on Our Promises
In our line of work, there’s nothing more important than delivering on what we promise to our customers. We feel the same way about our commitment to you, our investors. In last year’s letter to shareholders we outlined nine things that you could expect us to deliver for the full-year 2013. Here is a point-by-point review of those nine objectives with an assessment of how we performed:
- Increase sales in both of our business segments – Both of our business segments (Fleet Management Solutions and Supply Chain Solutions) delivered revenue growth and increased sales, while also posting double-digit increases in pre-tax earnings for the full year.
- Grow revenue at a better rate than GDP and continue to deliver solid earnings leverage – For the full year, Ryder’s strong performance in both business segments enabled us to grow operating revenue 4% (compared with GDP growth of under 2%) to a new record level, improve both net earnings and comparable earnings by 13%, and achieve record comparable earnings per share.
- Continue solid contractual sales in Fleet Management Solutions – In Fleet Management Solutions, we grew contractual revenue by 3%, driven by a 4% increase in full service lease revenue. Although the first half of 2013 was challenging in terms of fleet growth, our full service lease fleet grew by 2,600 vehicles during the second half of the year, driven by significantly improved sales activity.
- Further reduce the average age of our fleet – Strong vehicle replacement activity enabled us to reduce the average age of our lease fleet by an additional 8%.
- Achieve maintenance cost reductions – In addition to benefits realized from a younger fleet, our maintenance initiatives achieved cost reductions through improved technician training and efficiency, increased warranty recoveries and other targeted efforts.
- Improve utilization and pricing in commercial rental – Our commercial rental business also performed well in 2013, with improved utilization, and increased U.S. demand, with higher pricing throughout the year.
- Continue higher volumes of used vehicle sales activity, with expectations for pricing to decline slightly from historically high levels – Solid used vehicle sales activity in 2013 drove inventories to the lowest levels in two years, and pricing did not decline as anticipated, but rather held steady for the year.
- Grow Supply Chain Solutions revenue driven by strong new sales – Our Supply Chain Solutions business delivered strong overall performance. Total revenue increased 4% and operating revenue rose 6%, reflecting new sales and higher volumes, as well as growth in all industry verticals. Our dedicated services offering had particularly strong growth, driven by new sales and upselling of current lease customers to a dedicated solution.
- Continue improvement in Supply Chain Solutions earnings, driven both by revenue growth and leverage of overheads – We increased Supply Chain Solutions earnings before tax by a very strong 13% for the full year, with 6% operating revenue growth, and we reduced overheads 8% from 2012.
We’re pleased with our progress and the encouraging signs of growth we see in our business. But we’re even more excited about the opportunities ahead, as we find new and better ways to introduce “do-it-yourself” businesses to the benefits of outsourcing to Ryder.
Industry analysts and media have reported on a wide range of macro-trends that have been converging in recent years and which generally favor Ryder’s expertise and value proposition. The outsourced services and solutions that we provide are becoming more complex, increasingly regulated, more costly, and tougher for our customers and prospects to handle on their own.
We’ve been competing effectively and winning new business with customers that already understand the benefits of outsourcing. We’re also finding new, easier and more compelling ways to demonstrate Ryder’s value to the untapped 90% of our market that doesn’t yet outsource.
We’re innovating through new Fleet Management Solutions offerings such as natural gas trucks, as well as targeting new Supply Chain Solutions market segments including energy, medical and aftermarket parts. We’re also creating new reduced commitment “on ramps,” such as our fast growing on-demand maintenance product, to give customers easier points of entry to start experiencing the value of a Ryder relationship.
Last year, we saw signs of growing confidence from our customers and prospects. We’re also seeing increased new outsourcing activity, driven by the macro-trends that favor our value proposition, as well as our internal sales and marketing initiatives.
Our ability to respond to market trends and successfully adapt to customer demands puts us in a strong position to capitalize on future growth opportunities.
For 2014, we expect to build on our strong 2013 performance with accelerating revenue growth and double-digit earnings improvement. We anticipate revenue growth in all product lines. Based on recent sales results and trends, we anticipate continued growth in our lease fleet with a higher number of vehicles under long-term contracts with customers.
We’re forecasting another year of record earnings per share, driven by contractual full service lease and supply chain solutions, as well as commercial rental. We’re pleased that our strong earnings growth will also allow us to make strategic investments in the business to drive future growth.
On behalf of our nearly 29,000 employees and the more than 43,000 customers we serve, thank you for your interest and investment in Ryder. We look forward to reaching our goals in 2014 and sharing in the rewards of our success on the road ahead.
Chairman and CEO