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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 1-4364
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RYDER SYSTEM, INC.
(a Florida corporation)
3600 N.W. 82nd Avenue
Miami, Florida 33166
Telephone (305) 500-3726
I.R.S. Employer Identification No. 59-0739250
-------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: YES [X] NO [ ]
Ryder System, Inc. (the "Registrant" or the "Company") had 77,744,981 shares of
common stock ($0.50 par value per share) outstanding as of July 31, 1997.
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<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Ryder System, Inc. and Subsidiaries
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Second Quarter Six Months
Periods ended June 30, 1997 and 1996 ---------------------------- ------------------------------
(In thousands, except per share amounts) 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUE $ 1,393,109 1,426,048 2,729,004 2,753,999
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Operating expense 1,107,423 1,135,425 2,188,972 2,214,070
Depreciation expense, net of gains (quarter, 1997 - $12,736,
1996 - $18,390; six months, 1997 - $29,119, 1996 - $39,406) 156,222 183,716 310,216 362,203
Interest expense 48,888 53,803 95,771 106,619
Miscellaneous income, net (3,527) (545) (7,246) (269)
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1,309,006 1,372,399 2,587,713 2,682,623
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Earnings before income taxes 84,103 53,649 141,291 71,376
Provision for income taxes 34,068 22,066 57,590 29,614
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NET EARNINGS $ 50,035 31,583 83,701 41,762
==================================================================================================================================
EARNINGS PER COMMON SHARE $ 0.64 0.39 1.07 0.52
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Cash dividends per common share $ 0.15 0.15 0.30 0.30
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Average common and common equivalent shares 78,172 81,196 78,460 80,615
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
ITEM 1. Financial Statements (continued)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Ryder System, Inc. and Subsidiaries
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Six months ended June 30, 1997 and 1996
(In thousands) 1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 83,701 41,762
Depreciation expense, net of gains 310,216 362,203
Deferred income taxes 54,072 23,818
Increase in receivables (25,128) (24,707)
Decrease in accounts payable and accrued expenses (99,619) (26,566)
Increase in prepaid expenses and other current assets (45,047) (32,735)
Other, net (5,935) (1,887)
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272,260 341,888
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CASH FLOWS FROM FINANCING ACTIVITIES:
Debt proceeds 149,665 236,694
Debt repaid, including capital lease obligations (90,730) (153,010)
Common stock repurchased (54,631) -
Common stock issued 27,279 35,303
Dividends on common stock (23,082) (23,978)
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8,501 95,009
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and revenue earning equipment (507,349) (769,995)
Sales of property and revenue earning equipment 192,676 187,185
Sale and leaseback of revenue earning equipment - 150,000
Acquisitions (46,346) -
Other, net 6,672 29,158
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(354,347) (403,652)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (73,586) 33,245
Cash and cash equivalents at January 1 191,384 92,857
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CASH AND CASH EQUIVALENTS AT JUNE 30 $ 117,798 126,102
==================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
ITEM 1. Financial Statements (continued)
CONSOLIDATED CONDENSED BALANCE SHEETS
Ryder System, Inc. and Subsidiaries
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June 30, December 31,
(Dollars in thousands, except per share amounts) 1997 1996
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 117,798 191,384
Receivables 593,033 561,927
Inventories 62,356 61,345
Tires in service 166,461 168,367
Deferred income taxes 36,994 82,571
Prepaid expenses and other current assets 127,263 82,172
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Total current assets 1,103,905 1,147,766
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Revenue earning equipment 5,331,932 5,281,934
Less accumulated depreciation (2,069,377) (1,995,846)
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Net revenue earning equipment 3,262,555 3,286,088
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Operating property and equipment 1,110,131 1,128,626
Less accumulated depreciation (506,001) (513,515)
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Net operating property and equipment 604,130 615,111
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Direct financing leases and other assets 373,857 314,574
Intangible assets and deferred charges 298,735 281,850
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$ 5,643,182 5,645,389
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 368,010 199,958
Accounts payable 319,558 321,468
Accrued expenses 537,600 633,529
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Total current liabilities 1,225,168 1,154,955
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Long-term debt 2,130,614 2,237,010
Other non-current liabilities 453,378 461,275
Deferred income taxes 697,413 686,143
Shareholders' equity:
Common stock of $0.50 par value per share
(shares outstanding at June 30, 1997 - 77,312,272;
December 31, 1996 - 77,961,154) 471,498 496,292
Retained earnings 674,506 613,887
Translation adjustment (9,395) (4,173)
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Total shareholders' equity 1,136,609 1,106,006
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$ 5,643,182 5,645,389
=============================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
ITEM 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(A) INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements
have been prepared by the Company in accordance with the accounting
policies described in the 1996 Annual Report and should be read in
conjunction with the consolidated financial statements and notes which
appear in that report. These statements do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
(B) SALE OF AUTOMOTIVE CARRIER SERVICES
On May 27, 1997, the Company announced it had agreed in principle to
sell Ryder Automotive Carrier Services, Inc. to Allied Holdings, Inc.
for approximately $115 million in cash and the assumption of certain
liabilities. The Company has received regulatory approval from both
the U.S. and Canadian Governments with respect to the transaction and
expects to finalize a definitive agreement in the near term.
(C) SALE OF CONSUMER TRUCK RENTAL
On October 17, 1996, the Company completed the sale of substantially
all the assets and certain liabilities of its consumer truck rental
business. Revenue related to the consumer truck rental business was
$147 million and $253 million for the quarter and six months ended
June 30, 1996, respectively. The consumer truck rental business
recorded pretax earnings of $12.4 million and a pretax loss of $2.6
million for the quarter and six months ended June 30, 1996,
respectively (excluding a $1.2 million restructuring charge).
<PAGE>
KPMG PEAT MARWICK LLP
CERTIFIED PUBLIC ACCOUNTANTS
One Biscayne Tower Telephone 305-358-2300
Suite 2900 Telecopier 305-577-0544
2 South Biscayne Boulevard
Miami, FL 33131
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Shareholders
Ryder System, Inc.:
We have reviewed the accompanying consolidated condensed balance sheet of Ryder
System, Inc. and subsidiaries as of June 30, 1997, and the related consolidated
condensed statements of earnings for the three- and six-month periods ended June
30, 1997 and 1996 and the consolidated condensed statements of cash flows for
the six-month periods ended June 30, 1997 and 1996. These consolidated condensed
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Ryder System, Inc. and subsidiaries
as of December 31, 1996, and the related consolidated statements of operations
and cash flows for the year then ended (not presented herein); and in our report
dated February 4, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated condensed balance sheet as of December 31, 1996,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Miami, Florida
July 21, 1997
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS
The Company reported earnings before income taxes of $84 million in the second
quarter of 1997, compared with $54 million in last year's second quarter.
Results for the second quarter of 1996 included pretax earnings of $12 million
from the Company's former consumer truck rental operations and a pretax
restructuring charge of $20 million ($12 million after tax) associated with cost
reduction programs. Earnings before income taxes in the first half of 1997 were
$141 million, compared with $71 million in the first half of 1996. Results for
the first half of 1996 included a pretax loss of $3 million from the Company's
former consumer truck rental operations and a pretax restructuring charge of $20
million, which is described above. In the second quarter and first half of 1997,
pretax results (excluding restructuring charges and the impact of the Company's
former consumer truck rental operations) improved in all business units. The
improvement was led by Ryder Transportation Services (due to efficiency
improvements and cost reductions implemented in 1996 resulting in lower overhead
costs), Ryder Integrated Logistics (due to an increase in margin dollars and
improved operating efficiencies) and Ryder Public Transportation Services (due
to first quarter 1997 acquisitions, new business and expansion of existing
business).
Net earnings in the second quarter of 1997 were $50 million, or $0.64 per common
share, compared with $32 million, or $0.39 per common share, in the second
quarter of 1996. In the first half of 1997, net earnings were $84 million, or
$1.07 per common share, compared with $42 million, or $0.52 per common share, in
the first half of 1996. The Company's effective tax rates in the second quarter
and first half of 1997 were 40.5% and 40.8%, respectively, compared with 41.1%
and 41.5%, respectively, in the same 1996 periods. Lower 1997 effective rates
resulted from the impact of a similar amount of non-deductible items on higher
pretax earnings.
Total revenue was $1.39 billion in the second quarter of 1997, compared with
$1.28 billion in the second quarter of 1996 (excluding consumer truck rental
revenue of $147 million); an increase of 8.9%. For the first half of 1997,
revenue totaled $2.73 billion, compared with $2.50 billion in the first half of
1996 (excluding consumer truck rental revenue of $253 million). Vehicle Leasing
& Services revenue, excluding revenue from consumer truck rental, increased 10%
in both the second quarter and first half of 1997 compared with the same 1996
periods, led by integrated logistics and public transportation. Automotive
Carrier Services revenue was 2% higher in the second quarter and 6% higher in
the first half of 1997, compared with the same periods in 1996, due primarily
to an increase in the number of vehicles shipped. The 5% increase in vehicles
shipped in the first half of 1997 compared with the first half of 1996 was
impacted by the absence of a major strike in 1997, which was experienced during
the first quarter of 1996, at General Motors, the division's largest customer.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The Company's operating expense ratio was 79% and 80% in the second quarter and
first half of 1997, respectively, compared with 80% in the same periods of 1996.
Excluding the results of the Company's former consumer truck rental operations
and restructuring charges in the 1996 periods, the operating expense ratio was
approximately 80% in both the second quarter and first half periods of 1997 and
1996. The operating expense ratio was impacted by a significant increase in
subcontracted freight within integrated logistics, offset by lower maintenance,
insurance and other costs as a percentage of revenue for the Company as a whole.
Depreciation expense (before gains on vehicle sales) decreased 16% in both the
second quarter and first half of 1997 compared with the same periods in 1996.
Lower depreciation resulted from the absence of the consumer fleet in 1997 and a
decrease in the average size of the commercial rental fleet. Consistent with
management's expectations, gains on vehicle sales were $6 million and $10
million lower in the second quarter and first half of 1997, respectively,
compared with the same periods in 1996. The decrease in gains was primarily due
to the absence of consumer truck rental vehicle sales in the 1997 periods.
Management expects gains to be lower for fiscal year 1997, as compared with the
prior year, due to the absence of the consumer truck rental fleet.
Interest expense decreased $5 million and $11 million in the second quarter and
first half of 1997, respectively, compared with the same periods in 1996, due to
lower outstanding debt levels which more than offset the impact of a change in
composition towards higher interest-bearing fixed-rate debt in the 1997 periods.
The lower outstanding debt levels resulted primarily from lower levels of
capital spending and the reduction of debt with proceeds obtained from the sale
of the consumer truck rental operations. The Company continued to maintain
slightly less than one-fourth of its financing obligations at variable interest
rates at June 30, 1997.
During the second quarter and first half of 1997, the Company utilized
approximately $20 million and $37 million, respectively, of the December 31,
1996 restructuring liability which totaled $62 million. Management continues to
believe that the remaining restructuring liabilities at June 30, 1997 are
adequate to complete its plans and such liabilities are expected to be
substantially paid by the end of 1997. Of the 2,450 positions planned to be
eliminated as part of the restructuring initiatives, approximately 96% of the
separations had occurred as of June 30, 1997, with the remainder expected to be
completed by the end of 1997. As of June 30, 1997, approximately 74% of the 200
facilities scheduled for closure have ceased operations. The Company has sold or
disposed of approximately 40% of the closed facilities.
During the second quarter of 1997, the Company signed the Information Technology
Services portion of an agreement with Andersen Consulting and IBM Global
Services. The agreement formed the foundation of a strategic logistics and
technology relationship designed to enhance service offerings and more rapidly
develop and deploy advanced logistics solutions in the future.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The Company has a continuing strategy to increase shareholder value and
transform Ryder into a less asset-based company focused on long-term contractual
businesses. Consistent with this strategy, on May 27, 1997, the Company
announced it had agreed in principle to sell Ryder Automotive Carrier Services,
Inc. to Allied Holdings, Inc. for approximately $114.5 million and the
assumption of certain liabilities. The Company has received regulatory approval
from both the U.S. and Canadian Governments with respect to the transaction and
expects to finalize a definitive agreement in the near term. Upon finalizing
such agreement, the Automotive Carrier Services segment will be classified as a
discontinued operation for financial reporting purposes.
VEHICLE LEASING & SERVICES
Revenue from integrated logistics increased 29% and 26% in the second quarter
and first half of 1997, respectively, over the same 1996 periods, primarily due
to expansion of revenue with existing customers and start-up of business sold in
the previous year. Operating revenue (which excludes subcontracted freight
costs) increased 12% in both the second quarter and first half of 1997, compared
with the same 1996 periods. Revenue from full service truck leasing decreased 2%
in the second quarter of 1997, compared with the same period in 1996, and
remained relatively the same in the first half of 1997 compared with the first
half of 1996. The slight decrease in revenue is primarily the result of
decreases in fuel revenue as a result of lower fuel prices in 1997 (full service
lease contracts provide for the pass-through of fuel costs to customers) and
lower levels of new business sales, as the Company becomes more selective in
signing new business in accordance with specified Economic Value Added (EVA)
criteria adopted in 1997. Commercial truck rental revenue decreased 8% in both
the second quarter and first half of 1997, compared with the same periods in
1996, due to planned reductions in the size of the fleet. However, both revenue
per unit and utilization were higher in the 1997 periods compared with 1996.
Revenue from public transportation services increased 21% in the second quarter
and 19% in the first half of 1997, compared with the same periods in 1996. The
revenue growth was primarily achieved through expansion of existing contracts
and contributions from new contracts, as well as through first quarter 1997
acquisitions (Larson Transportation Services and School Bus Services).
International Division revenue was 37% higher in the second quarter and 29%
higher in the first half of 1997 compared with the same 1996 periods, due
primarily to new logistics contracts and the British Airways contract in the
United Kingdom combined with growth in the division's expanding operations in
Argentina and increased business in Germany.
Pretax earnings for Vehicle Leasing & Services were $78 million in the second
quarter of 1997 compared with $56 million in the second quarter of 1996. For the
six months ended June 30, 1997, pretax earnings were $138 million compared with
$82 million for the first half of 1996. Excluding the division's portion of the
restructuring charge recorded in the second quarter of 1996 ($13 million
pretax), earnings before income taxes were 14% higher in the second quarter and
46% higher in the first half of 1997 compared with the same periods in 1996.
Margin (revenue less direct operating expenses, depreciation and interest
expense) dollars from integrated logistics in the second quarter and
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
first half of 1997 was higher due primarily to the growth in revenue combined
with operating efficiencies and improved pricing on new and existing contracts.
Margin and margin as a percentage of revenue from full service truck leasing was
relatively the same in the second quarter and first half of 1997 compared with
the same periods in 1996 due primarily to greater selectivity in pricing
contracts and elimination of low margin business. Commercial rental margin and
margin as a percentage of revenue were higher in the second quarter and first
half of 1997, compared with the same 1996 periods, due primarily to higher
vehicle utilization and productivity as evidenced by higher revenue per unit. In
public transportation services, margin and margin as a percentage of revenue
were higher in the second quarter and first half of 1997 compared with the same
periods in 1996, due mainly to lower driver wages as a percentage of revenue
within student transportation and lower insurance and maintenance costs for the
business unit as a whole. International Division margin dollars were higher but
margin as a percentage of revenue was lower in the second quarter and first half
of 1997 compared with the same periods in 1996, primarily due to the impact of
start-up costs associated with the British Airways contract in the United
Kingdom.
For Vehicle Leasing & Services as a whole, overhead expenses (excluding consumer
truck rental) were lower in the second quarter and first half of 1997 compared
with the same periods in 1996. The increase in margin dollars and decrease in
overheads were partially offset by a reduction in gains on vehicle sales.
Miscellaneous income (net of miscellaneous expenses) was higher due primarily
to lower costs associated with the Company's sale of receivables program under
which the Company sells, with limited recourse, trade receivables on a revolving
basis. The outstanding balance of receivables sold pursuant to this program was
$75 million and $350 million at June 30, 1997 and 1996, respectively. In
addition, the increase in miscellaneous income was due to gains on sales of
certain facilities which were not associated with 1996 restructuring and other
charges.
AUTOMOTIVE CARRIER SERVICES
Automotive Carrier Services revenue was 2% higher in the second quarter and 6%
higher in the first half of 1997 compared with the same periods in 1996. The
increase in revenue was primarily due to increases in the number of vehicles
shipped in both the second quarter and first half of 1997, compared with the
same 1996 periods, and higher average revenue per vehicle shipped in both 1997
periods compared with 1996. Vehicle shipments in the first six months of 1996
were impacted by a first quarter strike at two General Motors component plants
which led to a temporary shutdown of the majority of General Motors' North
American assembly plants.
Automotive Carrier Services reported pretax earnings of $10 million in the
second quarter of 1997, compared with $6 million in the second quarter of 1996.
For the first half of 1997, pretax earnings were $11 million, compared with $3
million in the first half of 1996. The division's portion of the second quarter
1996 restructuring charge was $4 million pretax. Pretax earnings excluding the
restructuring charge were relatively unchanged in the second quarter of 1997,
compared with the second quarter of 1996, resulting from the offset of an
increase in revenue
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(described above) with an increase in driver labor costs. For the first half of
1997, pretax earnings (excluding a $4 million restructuring charge) increased
70% compared with the same period in 1996.
As discussed previously, the Company is selling Automotive Carrier Services to
Allied Holdings, Inc. and expects to sign a definitive agreement in the near
term. Upon finalizing such agreement, the Company will report the operations of
this division as a discontinued operation for purposes of financial reporting.
OTHER
Other, which is comprised primarily of corporate administrative costs, reported
net expenses in the second quarter and first half of 1997 of $4 million and $8
million, respectively, compared with net expenses of $8 million and $13 million,
respectively, in the same periods in 1996. Expenses in the 1996 periods
included a pretax restructuring charge of $3 million. Excluding the
restructuring charges in 1996, the reduction in net expenses is due primarily to
lower employee-related costs resulting from 1996 cost reduction initiatives.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
LIQUIDITY AND CAPITAL RESOURCES
Total capital expenditures in the first half of 1997 (excluding acquisitions of
$46 million in the first quarter of 1997) were $507 million, compared with $770
million in the first half of 1996. The decrease was consistent with management's
plan to ensure that capital spending is consistent with increasing return
thresholds in accepting new business and focusing on those products and services
with the greatest returns. Capital expenditures in the first half of 1997 were
lower than 1996 levels in all product lines except for commercial rental and
public transportation. Capital expenditures for consumer truck rental, which was
sold in October 1996, were $67 million in the first half of 1996. The increase
in commercial rental expenditures reflects planned fleet replacement to meet
current demand levels. Expenditures for public transportation increased due
primarily to the timing of school bus purchases (normally purchased in the third
quarter). Total capital expenditures for all of 1997 are expected to be below
$1.3 billion.
Cash flow from operating activities in the first six months of 1997 was $272
million, compared with $342 million in the same period in 1996. The decrease
resulted primarily from an increase in cash required for working capital, due
mainly to payments related to restructuring activities initiated in 1996, and
lower non-cash depreciation charges offset by improved earnings and higher
non-cash deferred income tax expense. Cash flow from operating activities
(excluding sales of receivables) plus asset sales as a percentage of capital
expenditures was 92% in the first half of 1997, compared with 69% in the same
period in 1996, primarily as a result of lower levels of capital spending.
Total debt at June 30, 1997 was $2.5 billion, compared with $2.4 billion at
December 31, 1996. During the first six months of 1997, issuances of U.S. and
Canadian commercial paper to finance first half capital expenditures were
partially offset by scheduled unsecured note payments. The Company also
completed the common stock repurchase program initiated in 1996. The Company's
debt to equity ratio at June 30, 1997, was 220% compared with 223% at March 31,
1997 and 220% at December 31, 1996. As part of its financing program, the
Company periodically enters into sale and leaseback agreements for revenue
earning equipment which are accounted for as operating leases. No such
agreements were entered into during the first six months of 1997. Proceeds from
sale-leaseback transactions were $150 million in the first six months of 1996.
On June 9, 1997, Standard & Poor's Ratings Group lowered its corporate credit
and senior unsecured debt ratings on the Company to triple-B-plus from
single-A-minus and removed the Company from CreditWatch where it was placed
on January 21, 1997. Also during the second quarter of 1997, the Company
restructured its revolving credit facilities by consolidating several agreements
into a single global revolving credit facility which will result in
administrative costs savings and increased financial flexibility.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
At June 30, 1997 and December 31, 1996, the Company had "floating to fixed"
interest rate swap agreements outstanding with aggregate notional amounts
totaling $61 million and $78 million, respectively. The Company also had
"floating to floating" interest rate swap agreements with notional amounts
totaling $90 million and $100 million at June 30, 1997 and December 31, 1996,
respectively.
The Company had contractual lines of credit totaling $720 million at June 30,
1997, of which $553 million was available. The Company also had $268 million of
debt securities available under a shelf registration statement filed in 1995.
Early in the second quarter of 1997, the Company completed its 1996 common stock
repurchase program (implemented in the fourth quarter) by repurchasing
approximately 0.8 million shares at an average price of $29.50 per share during
the second quarter of 1997. On July 28, 1997, the Company announced that it
plans to repurchase up to an additional 6 million shares of its common stock in
the open market and privately negotiated transactions during the next two years
using proceeds from the sale of Ryder Automotive Carrier Services and cash from
operating activities.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective in the fourth quarter of 1997, the Company must calculate and disclose
earnings per share (EPS) in accordance with SFAS No. 128, "Earnings Per Share."
The new Statement changes the calculation of primary and fully diluted EPS and
requires additional disclosures. For the second quarter and first half of 1997,
the impact on reported and fully diluted EPS of $0.64 and $1.07, respectively,
was approximately $0.01 per share improvement. The Company does not expect a
significant change in reported EPS as a result of the new requirements.
YEAR 2000
Management has initiated a program to prepare the Company's computer systems and
applications for the year 2000. The Company has assessed and continues to assess
the impact of the Year 2000 issue on its operations, including the development
of cost estimates for, and the extent of programming changes required to
address this issue. Although the final cost estimates have yet to be
determined, it is anticipated that these Year 2000 costs will result in an
increase in company expenses during 1998 and 1999. The Company expects to
complete its Year 2000 cost estimates by late 1997.
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis of results of operations and financial
condition contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based on the
current plans and expectations of Ryder System, Inc. and involve risks and
uncertainties that
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
could cause actual future events and results of operations to be materially
different from those in the forward-looking statements. Important factors that
could cause such differences include, among others, lost revenue from facility
closures, greater than expected expenses associated with the Company's personnel
needs or operating activities, the competitive pricing environment applicable to
the Company's operations or changes in government regulations.
<PAGE>
<TABLE>
<CAPTION>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (continued) --
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
SELECTED FINANCIAL AND OPERATIONAL DATA
(Dollars in thousands)
Second Quarter Six Months
---------------------------- --------------------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VEHICLE LEASING & SERVICES
Revenue:
Ryder Transportation Services:
Full service lease and programmed
maintenance $ 524,822 535,737 1,061,394 1,058,586
Commercial rental 122,174 133,382 235,308 254,532
Other 74,519 81,080 150,518 161,514
------------ ----------- ----------- ----------
721,515 750,199 1,447,220 1,474,632
Integrated Logistics 346,804 269,716 663,017 527,832
Consumer Truck Rental -- 146,680 -- 252,566
Public Transportation 137,600 113,558 274,975 230,246
International 115,619 84,134 213,981 165,903
Eliminations (84,617) (95,259) (171,077) (188,223)
------------ ----------- ----------- ----------
Total 1,236,921 1,269,028 2,428,116 2,462,956
------------ ----------- ----------- ----------
Operating expense 965,202 985,318 1,906,502 1,928,704
Depreciation expense 158,403 191,451 319,129 381,274
Gains on sale of revenue earning equipment (12,628) (18,373) (29,029) (39,313)
Interest expense 49,793 54,955 97,917 108,973
Miscellaneous (income) expense, net (1,952) (280) (4,737) 1,332
------------ ----------- ----------- ----------
Earnings before income taxes $ 78,103 55,957 138,334 81,986
============ =========== =========== ==========
Fleet size (owned and leased including international):
Full service lease 111,776 109,628
Commercial and consumer rental 37,216 74,343
Buses operated or managed 14,546 12,992
Ryder Transportation Services locations 1,077 1,141
- ---------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE CARRIER SERVICES
Revenue $ 163,091 160,514 315,156 297,945
============ =========== =========== ==========
Earnings before income taxes $ 10,472 5,845 11,473 2,588
============ =========== =========== ==========
Total units transported (000) 1,657 1,638 3,246 3,097
Total miles traveled (000) 59,718 61,195 116,152 113,506
Auto transports:
Owned and leased 2,758 2,791
Owner-operators 599 497
Locations 96 84
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
(a) The annual meeting of shareholders of Ryder System, Inc. was held on
May 2, 1997.
(b) All director nominees described in (c) below were elected. The
following directors continued in office after the meeting: Joseph L.
Dionne, Vernon E. Jordan, Jr., David T. Kearns, Lynn M. Martin, Paul J.
Rizzo, Alva O. Way and Mark W. Willes.
(c) Certain matters voted on at the meeting and the votes cast with respect
to such matters are as follows:
<TABLE>
<CAPTION>
VOTES CAST
------------------------------- BROKER
FOR AGAINST ABSTAIN NON-VOTES
----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
MANAGEMENT PROPOSAL
- -------------------
Ratification of the adoption
of the Ryder System, Inc.
Board of Directors Stock
Award Plan 59,991,493 7,259,210 277,293 0
Ratification of appointment
of independent auditors 67,111,289 243,163 173,544 0
SHAREHOLDER PROPOSAL
- --------------------
Relating to annual election
of all directors 34,639,548 27,881,766 423,095 4,583,587
ELECTION OF DIRECTORS
- ---------------------
Director VOTES RECEIVED VOTES WITHHELD
-------------- --------------
M. Anthony Burns 66,544,728 983,268
Edward T. Foote II 66,619,270 908,726
John A. Georges 65,235,787 2,292,209
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) EXHIBITS
(3.1) The Ryder System, Inc. Restated Articles of Incorporation,
dated November 8, 1985, as amended through May 18, 1990,
previously filed with the Commission as an exhibit to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990, are incorporated by reference into this
report.
(3.2) The Ryder System, Inc. By-Laws, as amended through November
23, 1993, previously filed with the Commission as an exhibit
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, are incorporated by reference into
this report.
(11) Statement regarding computation of per share earnings.
(15) Letter regarding unaudited interim financial statements.
(27) Financial data schedule (for SEC use only).
(b) REPORTS ON FORM 8-K
A report on Form 8-K, dated May 27, 1997, was filed by the Registrant
with respect to an announcement that the Registrant had agreed in
principle to sell Ryder Automotive Carrier Services, Inc. to Allied
Holdings, Inc. for approximately $114.5 million.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYDER SYSTEM, INC.
(Registrant)
Date: August 13, 1997 /s/ EDWIN A. HUSTON
----------------------------------------
Edwin A. Huston
Senior Executive Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: August 13, 1997 /s/ GEORGE P. SCANLON
----------------------------------------
George P. Scanlon
Vice President - Planning and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
11 Statement regarding computation of per share earnings.
15 Letter regarding unaudited interim financial statements.
27 Financial data schedule (for SEC use only).
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Primary earnings per share are computed by dividing earnings available to
common shares by the weighted average number of common and common equivalent
shares outstanding during the period.
For purposes of computing primary earnings per share, common equivalent shares
include the average number of common shares issuable upon the exercise of all
employee stock options and awards and outstanding employee stock subscriptions,
if dilutive, less the common shares which could have been purchased at the
average market price during the period with the assumed proceeds, including
"windfall" tax benefits, from the exercise of the options, awards and
subscriptions.
Fully-diluted earnings per share are computed by dividing the sum of earnings
applicable to common shares by the weighted average number of common shares,
common equivalent shares and common shares assumed converted from potentially
dilutive securities outstanding during the period.
For purposes of computing fully-diluted earnings per share, common equivalent
shares are computed on a basis comparable to that for primary earnings per
share, except that common shares are assumed to be purchased at the market price
at the end of the period, if dilutive.
EXHIBIT 15
KPMG PEAT MARWICK LLP
CERTIFIED PUBLIC ACCOUNTANTS
One Biscayne Tower Telephone 305-358-2300
Suite 2900 Telecopier 305-577-0544
2 South Biscayne Boulevard
Miami, FL 33131
The Board of Directors and Shareholders
Ryder Systems, Inc.:
We acknowledge our awareness of the incorporation by reference in the following
Registration Statements of our report dated July 21, 1997 related to our review
of interim financial information:
Form S-3:
/bullet/ Registration Statement No. 33-20359 covering $1,000,000,000
aggregate principal amount of debt securities.
/bullet/ Registration Statement No. 33-50232 covering $800,000,000
aggregate principal amount of debt securities.
/bullet/ Registration Statement No. 33-58667 covering $800,000,000
aggregate principal amount of debt securities.
Form S-8:
/bullet/ Registration Statement No. 33-20608 covering the Ryder
System Employee Stock Purchase Plan.
/bullet/ Registration Statement No. 33-4333 covering the Ryder
Employee Savings Plan.
/bullet/ Registration Statement No. 1-4364 covering the Ryder System
Profit Incentive Stock Plan.
/bullet/ Registration Statement No. 33-69660 covering the Ryder
System, Inc. 1980 Stock Incentive Plan.
/bullet/ Registration Statement No. 33-37677 covering the Ryder
System UK Stock Purchase Scheme.
/bullet/ Registration Statement No. 33-442507 covering the Ryder
Student Transportation Services, Inc. Retirement/Savings
Plan.
<PAGE>
The Board of Directors and Shareholders
Ryder System, Inc.
Page 2
/bullet/ Registration Statement No. 33-63990 covering the Ryder
System, Inc. Directors' Stock Plan.
/bullet/ Registration Statement No. 33-58001 covering the Ryder
System, Inc. Employee Savings Plan A.
/bullet/ Registration Statement No. 33-58003 covering the Ryder
System, Inc. Employee Savings Plan B.
/bullet/ Registration Statement No. 33-58045 covering the Ryder
System, Inc. Savings Restoration Plan.
/bullet/ Registration Statement No. 33-61509 covering the Ryder
System, Inc. Stock for Merit Increase Replacement Plan.
/bullet/ Registration Statement No. 33-62013 covering the Ryder
System, Inc. 1995 Stock Incentive Plan.
/bullet/ Registration Statement No. 333-19515 covering the Ryder
System, Inc. 1995 Stock Incentive Plan.
/bullet/ Registration Statement No. 333-26653 covering the Ryder
System, Inc. Board of Directors Stock Award Plan.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
/s/ KPMG PEAT MARWICK LLP
Miami, Florida
August 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RYDER
SYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AND
STATEMENTS OF EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 117,798
<SECURITIES> 0
<RECEIVABLES> 593,033
<ALLOWANCES> 0
<INVENTORY> 62,356
<CURRENT-ASSETS> 1,103,905
<PP&E> 6,442,063
<DEPRECIATION> 2,575,378
<TOTAL-ASSETS> 5,643,182
<CURRENT-LIABILITIES> 1,255,168
<BONDS> 2,130,614
0
0
<COMMON> 471,498
<OTHER-SE> 665,111
<TOTAL-LIABILITY-AND-EQUITY> 5,643,182
<SALES> 0
<TOTAL-REVENUES> 2,729,004
<CGS> 0
<TOTAL-COSTS> 2,491,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,771
<INCOME-PRETAX> 141,291
<INCOME-TAX> 57,590
<INCOME-CONTINUING> 83,701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,701
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 0
</TABLE>
