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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 March 31, 1998
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
-------------------------------------
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 74,317,711 shares of
common stock ($0.50 par value per share) outstanding as of April 30, 1998.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ryder System, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1998 and 1997
(In thousands, except per share amounts) 1998 1997
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<S> <C> <C>
REVENUE $ 1,245,617 1,187,119
- ---------------------------------------------------------------------------------------------------------------------------
Operating expense 909,943 896,369
Freight under management expense 77,913 46,790
Year 2000 expense 5,088 -
Depreciation expense, net of gains (1998 - $14,311; 1997 - $16,401) 146,758 144,810
Interest expense 48,408 47,318
Miscellaneous income (4,415) (3,562)
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1,183,695 1,131,725
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Earnings from continuing operations before income taxes 61,922 55,394
Provision for income taxes 24,648 22,943
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Earnings from continuing operations 37,274 32,451
Earnings from discontinued operations - 1,215
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NET EARNINGS $ 37,274 33,666
===========================================================================================================================
BASIC EARNINGS PER COMMON SHARE:
Continuing operations $ 0.50 0.41
Discontinued operations - 0.02
- ---------------------------------------------------------------------------------------------------------------------------
$ 0.50 0.43
===========================================================================================================================
DILUTED EARNINGS PER COMMON SHARE:
Continuing operations $ 0.50 0.41
Discontinued operations - 0.02
- ---------------------------------------------------------------------------------------------------------------------------
$ 0.50 0.43
===========================================================================================================================
Cash dividends per common share $ 0.15 0.15
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Item 1. Financial Statements (continued)
Ryder System, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
(Dollars in thousands, except per share amounts) 1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 56,422 78,370
Receivables 612,100 625,955
Inventories 63,088 66,006
Tires in service 164,666 163,771
Deferred income taxes - 22,309
Prepaid expenses and other current assets 203,997 135,574
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 1,100,273 1,091,985
Revenue earning equipment 3,165,263 3,145,461
Operating property and equipment 583,075 581,705
Direct financing leases and other assets 442,667 414,932
Intangible assets and deferred charges 272,671 274,977
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$ 5,563,949 5,509,060
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 209,720 301,361
Accounts payable 346,615 305,337
Accrued expenses 466,178 482,811
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Total current liabilities 1,022,513 1,089,509
Long-term debt 2,365,100 2,267,554
Other non-current liabilities 352,543 365,264
Deferred income taxes 718,634 726,025
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Total liabilities 4,458,790 4,448,352
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Shareholders' equity:
Common stock of $0.50 par value per share (shares outstanding at
March 31, 1998 - 74,298,394; December 31, 1997 - 73,692,226) 345,242 328,117
Retained earnings 769,857 743,713
Accumulated other comprehensive income (9,940) (11,122)
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Total shareholders' equity 1,105,159 1,060,708
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$ 5,563,949 5,509,060
=============================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Item 1. Financial Statements (continued)
Ryder System, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1998 and 1997
(In thousands) 1998 1997
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<S> <C> <C>
CONTINUING OPERATIONS
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from continuing operations $ 37,274 32,451
Depreciation expense, net of gains 146,758 144,810
Amortization expense and other non-cash charges, net (533) 1,358
Deferred income taxes 14,247 19,929
Changes in operating assets and liabilities:
Receivables 14,741 (22,231)
Inventories 2,255 (2,902)
Prepaid expenses and other current assets (68,123) (50,366)
Other assets (622) (1,159)
Accounts payable 38,657 18,757
Accrued expenses and other non-current liabilities (27,217) (50,366)
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157,437 90,281
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in commercial paper borrowings 135,410 51,220
Debt proceeds 9,107 7,618
Debt repaid, including capital lease obligations (140,151) (31,954)
Common stock repurchased - (31,310)
Common stock issued 14,564 4,884
Dividends on common stock (11,130) (11,575)
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7,800 (11,117)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and revenue earning equipment (270,566) (245,797)
Sales of property and revenue earning equipment 87,979 105,795
Acquisitions, net of cash acquired (4,933) (46,346)
Other, net 335 9,217
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(187,185) (177,131)
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NET CASH FLOWS FROM CONTINUING OPERATIONS (21,948) (97,967)
NET CASH FLOWS FROM DISCONTINUED OPERATIONS - 3,068
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DECREASE IN CASH AND CASH EQUIVALENTS (21,948) (94,899)
Cash and cash equivalents at January 1 78,370 191,384
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT MARCH 31 $ 56,422 96,485
=====================================================================================================================
</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
include the accounts of Ryder System, Inc. and subsidiaries (the
"Company") and have been prepared by the Company in accordance with the
accounting policies described in the 1997 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 and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim
periods are not necessarily indicative of the results that can be
expected for a full year. Certain 1997 amounts have been reclassified
to conform with the current year presentation.
(B) EARNINGS PER SHARE INFORMATION
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 128, "Earnings per Share." This
Statement requires the presentation of basic and diluted earnings per
share (EPS). Basic EPS is computed by dividing net earnings by the
weighted average number of common shares outstanding. Diluted EPS
reflects the dilutive effect of potential common shares from securities
such as stock options. All prior years EPS data has been restated to
conform with the provisions of the new Statement. A reconciliation of
the number of shares used in computing basic and diluted EPS follows
(in thousands):
For the three months ended March 31, 1998 1997
------------------------------------------------------------------
Weighted average
shares outstanding - Basic 73,971 77,607
Dilutive common stock equivalents
from option and purchase plans 1,035 1,141
------------------------------------------------------------------
Weighted average
shares outstanding - Diluted 75,006 78,748
==================================================================
At March 31, 1998 and 1997, options to purchase approximately 1,228,000
and 210,000 shares of common stock, respectively, were outstanding but
were not included in the computation of diluted EPS because the
options' exercise prices were greater than the average market price of
the common shares during the respective periods.
(C) COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted FAS No. 130, "Reporting
Comprehensive Income." Comprehensive income presents a measure of all
changes in shareholders' equity except for changes resulting from
transactions with shareholders in their capacity as shareholders. The
Company's total comprehensive income presently consists of net earnings
and currency translation adjustments associated with foreign operations
which use the local currency as their functional currency. Total
comprehensive income for the three months ended March 31, 1998 and 1997
was $38.5 million and $29.1 million, respectively. The Statement also
requires the separate presentation of the accumulated balance of
comprehensive income other than net earnings in the Consolidated
Condensed Balance Sheets.
(D) SALE OF AUTOMOTIVE CARRIER BUSINESS
On September 30, 1997, the Company completed the sale of its automotive
carrier business. Accordingly, the Company's automotive carrier
business has been reported as a discontinued operation for all periods
presented in the accompanying Consolidated Condensed Statements of
Earnings and Cash Flows. Revenue of the automotive carrier business for
the three months ended March 31, 1997 was $153.1 million and earnings
before income taxes were $1.8 million.
<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 March 31, 1998, and the related consolidated
condensed statements of earnings and cash flows for the three months ended March
31, 1998 and 1997. 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, 1997, 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, 1998, 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, 1997,
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
April 21, 1998
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition --
Three months ended March 31, 1998 and 1997
OVERVIEW
The following discussion should be read in conjunction with the unaudited
consolidated condensed financial statements and notes thereto included under
Item 1. In addition, reference should be made to the Company's audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's most recent Annual Report on Form 10-K.
The Company's primary business units consist of integrated logistics,
transportation services (which primarily provides full service truck leasing and
commercial truck rental in the United States and Canada), the International
Division (which provides full service truck leasing and integrated logistics in
Europe, South America and Mexico) and public transportation services. On
September 30, 1997, the Company completed the sale of its automotive carrier
business. In the accompanying consolidated condensed statements of earnings and
cash flows, the automotive carrier business has been reported as a discontinued
operation (see "Notes to Consolidated Condensed Financial Statements").
The Company reported earnings from continuing operations before income taxes of
$62 million in the first quarter of 1998, compared with $55 million in last
year's first quarter. 1998 results included incremental pretax expenses of $5
million associated with the Company's initiative to modify computer information
systems to be Year 2000 compliant. Excluding Year 2000 costs, earnings from
continuing operations before income taxes were 21% higher in the first quarter
of 1998 compared with the same period last year. All of the Company's business
units contributed to the improved results. In addition, first quarter results
included gains of $6.7 million from the sale of properties and the reinsurance
of certain vehicle-related liabilities. Results in the first quarter of 1997
also included gains of $2.2 million from the sale of properties.
Earnings from continuing operations in the first quarter of 1998 were $37
million, or $0.50 per diluted common share, compared with $32 million, or $0.41
per diluted common share, in the first quarter of 1997. Excluding Year 2000
costs, earnings from continuing operations were $40 million, or $0.54 per
diluted common share, a per-share increase of 32% compared with the same period
last year. This growth rate exceeds the earnings growth rate because the
Company's stock repurchase programs reduced the average number of diluted shares
outstanding in the first quarter of 1998 almost 5% from the same 1997 period.
Total revenue increased 5% in the first quarter of 1998, compared with the same
period in 1997, led by integrated logistics, International Division and public
transportation. These increases were somewhat offset by lower fuel revenue in
transportation services associated primarily with declining fuel prices.
Excluding fuel, transportation services revenue increased 2% in the first three
months of 1998 compared with the same period in 1997.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
Operating expense increased 2% in the first quarter of 1998 compared with the
first quarter of 1997. The increase is primarily attributable to higher
compensation, including driver rental costs, workers' compensation costs, and
maintenance costs as a result of higher business volumes. These increases were
substantially offset by lower fuel costs. Operating expense as a percentage of
revenue decreased to 73% in the first quarter of 1998 from 76% for the
comparable 1997 period. The decrease is attributable primarily to lower fuel
costs.
Freight under management expense which represents subcontracted freight costs on
logistics contracts where the Company purchases transportation, increased $31
million, or 67%, in the first quarter of 1998 compared with the same period in
1997. Freight under management expense as a percentage of revenue also increased
to 6% in the first quarter of 1998 from 4% for the comparable 1997 period. These
increases reflect the growth in integrated logistics contracts experienced
during the latter half of 1997.
Depreciation expense (before gains on vehicle sales) was about the same in the
first quarter of 1998 compared with the first quarter of 1997. Gains on vehicle
sales decreased $2 million, or 13%, in the first quarter of 1998 compared with
the same period last year due to lower average gains per vehicle sold. The
reduced average gains reflect a changing mix of vehicles sold. As a percentage
of revenue, depreciation expense, net of gains on vehicle sales, remained at 12%
in the first quarter of 1998 and 1997.
Interest expense increased $1 million, or 2%, in the first quarter of 1998
compared with the same period in 1997, due to higher average outstanding debt
levels partially offset by slightly lower average interest rates.
Miscellaneous income was $4.4 million in the first quarter of 1998 compared with
$3.6 million in the first quarter of 1997. The improvement in 1998 was due
primarily to increased gains on sales of facilities and properties.
The Company's effective tax rate for continuing operations in the first quarter
of 1998 was 39.8% compared with 41.4% in the same 1997 period. The lower 1998
effective tax rate resulted primarily from a reduction in the corporate income
tax rate in the United Kingdom and lower state income taxes.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
The Company is continuing to work to modify computer information systems to be
Year 2000 compliant (properly read dates, perform calculations and continue to
perform business critical functions when the calendar year changes to the year
2000) or to replace noncompliant systems. Pretax incremental Year 2000 expenses
totaled $5 million in the first quarter of 1998 ($3 million after tax). See the
Company's 1997 Annual Report for a further discussion.
BUSINESS UNIT PERFORMANCE
Revenue from integrated logistics increased 14% in the first quarter of 1998
compared with the same 1997 period, primarily due to expansion of revenue with
existing customers and start-up of business sold in the previous year. The
largest component of growth came from contracts for which integrated logistics
provides freight under management services. Operating revenue (which excludes
freight under management expense) increased 5% in the first quarter of 1998
compared with the same 1997 period. In 1997, sales of new logistics contracts
lagged previous years. As a result, revenue growth for this product line will be
lower than growth rates experienced in 1997. However, the Company believes that
improved sales force capabilities, industry segmentation, and the ability to
leverage rapidly emerging logistics technologies and alliances to enhance
service offerings will result in renewed growth in sales of new logistics
contracts in 1998, followed by higher revenue growth rates in the latter half of
1998.
Revenue from transportation services decreased 4% in the first quarter of 1998
compared with the same period in 1997 due to decreased fuel revenue. Full
service truck leasing revenue (excluding fuel) was slightly lower in the first
quarter of 1998, primarily the result of lower levels of new business sales in
1997 and selected non-renewal of lower margin business, as the Company has
become more selective in signing new business in accordance with specified
Economic Value Added (EVA) criteria adopted in 1997. New lease sales in the
first quarter of 1998 were at record levels and significantly ahead of new lease
sales in the same period of 1997; however, due to extended manufacturers'
delivery times for new vehicle purchases which delay the period for lease
revenue recognition, management does not expect such sales to result in renewed
revenue growth until the latter half of 1998. Commercial truck rental revenue
increased 11% in the first quarter of 1998, compared with the same period in
1997, due to higher utilization of a slightly larger fleet. Higher utilization
reflects, in part, increased demand from full service lease customers requiring
additional vehicles during peak periods and while awaiting delivery of new full
service lease vehicles. Fuel revenue decreased 21% in the first quarter of 1998
compared with the same period in 1997 as a result of lower fuel prices and to a
lesser extent, lower fuel volume. Other transportation services revenue,
consisting of third-party maintenance, trailer rentals and other ancillary
revenue to support product lines, increased 2% in the first quarter of 1998
compared with the first quarter of 1997.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
International Division revenue was 25% higher in the first quarter of 1998
compared with the same 1997 period, due primarily to new logistics contracts
including the British Airways ground equipment maintenance contract in the
United Kingdom, which commenced in the second quarter of 1997, and growth in the
Division's expanding operations in Argentina. Revenue from public transportation
services increased 11% in the first quarter of 1998, compared with the same
period last year. The revenue growth was primarily achieved from expansion of
existing contracts and contributions from new contracts, as well as 1997
acquisitions.
Operating margin (revenue less direct operating expenses, freight under
management expense, depreciation and interest expense) and operating margin as a
percentage of revenue from integrated logistics were about the same in the first
quarter of 1998 compared with the first quarter of 1997. However, overhead
spending was lower in the first quarter of 1998 resulting in increased pretax
margins on a quarter-over-quarter basis. Full service truck leasing operating
margin and operating margin as a percentage of revenue were also about the same
in the first quarter of 1998 as compared with the same 1997 period, as improved
pricing on new lease sales was offset by higher vehicle maintenance costs.
Commercial truck rental operating margin and operating margin as a percentage of
revenue were significantly higher in the first quarter of 1998, compared with
the same 1997 period, due primarily to higher vehicle utilization. In public
transportation services, operating margin was higher in the first quarter of
1998 compared with the same period in 1997, in conjunction with revenue growth.
Operating margin as a percentage of revenue in the first quarter of 1998 was
about the same as in the first quarter of 1997 as lower vehicle liability costs
were offset by increased maintenance associated with several transit contracts
at Ryder/ATE. International Division operating margin was higher in the first
quarter of 1998 compared with the same period in 1997 as a result of revenue
growth, while margin as a percentage of revenue was slightly lower due to a
change in product mix in the United Kingdom.
CORPORATE ADMINISTRATIVE EXPENSE AND OTHER
Corporate administrative expense and other totaled $1 million of income in the
first quarter of 1998, compared with $5 million of expense in the first quarter
of 1997. The 1998 results include gains of $6.7 million from the sale of
properties and the reinsurance of certain vehicle-related liabilities.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
LIQUIDITY AND CAPITAL RESOURCES
Total capital expenditures, excluding acquisitions, related to continuing
operations were $271 million in the first quarter of 1998, compared with $246
million in the first quarter of 1997. Expenditures for full service lease were
higher in the first quarter of 1998, as compared with the first quarter of 1997,
reflecting the growth in new lease sales. Commercial rental expenditures were
also higher due primarily to planned fleet replacement and positioning to meet
expected demand levels. Expenditures for the International Division in the first
quarter of 1998 remained at about the same level as in the first quarter of
1997, reflecting an increase in expenditures for operating property and
equipment offset by a decrease in expenditures for full service lease vehicles
in the United Kingdom. Expenditures for public transportation in the first
quarter of 1998 decreased compared to the same period in 1997 due primarily to
the timing of fleet replacement. Total capital expenditures, excluding
acquisitions, for all of 1998 are expected to be approximately $1.3 billion.
Cash paid for acquisitions totaled $5 million in the first quarter of 1998
compared with $46 million in the same 1997 period. During March 1998, the
Company acquired the assets of Medicine Lake Bus Company, a student and
municipal transportation services provider in Minnesota. The acquisition added
370 buses to the student transportation services fleet with annualized revenue
estimated at $15 million. The Company will continue to evaluate strategic
acquisition opportunities as a means of strengthening its core contractual
businesses.
Cash flow from continuing operating activities in the first quarter of 1998 was
$157 million, compared with $90 million in the same period last year. The
increase resulted from lower working capital needs, including reduced
receivables due to improved collections, increased accounts payable for vehicle
purchases due to the timing of new lease sales and vehicle deliveries, and lower
requirements for accrued expenses as 1997 activity reflected payments associated
with restructuring activities initiated in 1996, all of which more than offset
increased prepaid expenses and other current assets primarily for licensing and
employee benefit costs. Cash flow from continuing operating activities plus
asset sales as a percentage of capital expenditures was 91% in the first quarter
of 1998, compared with 80% in the same period last year, primarily as a result
of increased cash flow from operating activities.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
Total debt at March 31, 1998 was $2.6 billion, relatively unchanged from the
balance at December 31, 1997. During the first quarter of 1998, the Company made
scheduled unsecured note payments of $122 million. U.S. commercial paper
outstanding at March 31, 1998 increased to $472 million, compared with $340
million at December 31, 1997, primarily to fund scheduled debt maturities. The
Company's foreign debt at March 31, 1998 remained relatively unchanged from
December 31, 1997. The Company's debt to equity ratio at March 31, 1998 was
lowered to 233% compared with 242% at December 31, 1997. The ratio of debt to
tangible equity at March 31, 1998 was 302% compared with 318% at December 31,
1997. The Company's percentage of variable-rate financing obligations was
approximately 30% at March 31, 1998, which is within the Company's targeted
level of 25%-30% but higher than 27% at December 31, 1997. The Company expects
this percentage to trend downward over the next several quarters.
The Company had contractual lines of credit totaling $726 million at March 31,
1998, of which $207 million was available. The Company may also issue up to $268
million of debt securities available under a shelf registration statement filed
in 1995.
On April 29, 1998, Moody's Investors Service lowered its senior unsecured debt
rating of the Company to Baa1 from A3 and assigned a Baa1 rating to the
Company's $720 million Global Revolving Credit Agreement. Moody's Investors
Service affirmed the Company's P2 rating for commercial paper. As of March 31,
1998, Standard and Poor's Ratings Group and Duff and Phelps continued to
maintain ratings of BBB+ and A, respectively, for the Company's unsecured debt
and A2 and D1, respectively, for commercial paper.
During April 1998, the Company completed a six-million-share buyback program,
announced in July 1997, through the repurchase of 800,000 shares of common stock
at an average price of approximately $36.60 per common share. The Company
utilized cash flow from operating activities and commercial paper borrowings to
fund these purchases. On May 1, 1998, the Company's Board of Directors
authorized the Company to repurchase up to three million shares of common stock
in the open market and through private purchases in order to satisfy
requirements under the Company's incentive stock plans.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued FAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
Statement establishes standards for reporting information about a company's
operating segments and related disclosures about its products, services,
geographic areas of operations and major customers. This Statement will be
adopted by the Company in 1998 year-end financial statements and will not impact
the Company's results of operations or financial position.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which is effective for fiscal
years beginning after December 15, 1998. The Statement outlines the accounting
treatment for certain costs related to the development or purchase of software
to be used internally and requires that costs incurred during the preliminary
project and post-implementation/operation stages be expensed, and costs incurred
during the application development stage be capitalized and amortized over the
estimated useful life of the software. Costs incurred prior to initial
application of the Statement cannot be adjusted to the amounts that would have
been capitalized had the Statement been in effect when those costs were
incurred. Adoption of this Statement is not expected to have a material impact
on the Company's results of operations or financial position.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up
Activities." SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, requires that all costs of start-up activities, including
organization costs, be expensed as incurred. The impact of adoption of SOP 98-5
should be reported as the cumulative effect of a change in accounting principle.
Adoption of this Statement is not expected to have a material impact on the
Company's results of operations or financial position.
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 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, greater than
expected expenses associated with the Company's personnel needs or activities,
the competitive pricing environment applicable to the Company's operations or
changes in government regulations.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1998 and 1997
SELECTED FINANCIAL AND OPERATIONAL DATA
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1997*
- -------------------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS UNITS
Revenue:
Transportation services:
Full service lease and programmed
maintenance $ 393,594 396,002
Commercial rental 101,199 91,579
Fuel 138,288 174,396
Other 64,960 63,728
------------ ------------
698,041 725,705
Integrated logistics 361,012 316,213
International Division 122,994 98,362
Public transportation 153,099 137,375
Eliminations and other (89,529) (90,536)
------------ ------------
Total 1,245,617 1,187,119
------------ ------------
Operating expense 906,303 890,433
Freight under management expense 77,913 46,790
Year 2000 expense 5,071 -
Depreciation expense 160,482 160,727
Gains on sale of revenue earning equipment (14,311) (16,401)
Interest expense 48,772 48,124
Miscellaneous expense (income), net 598 (2,785)
------------ ------------
Earnings before income taxes from business units 60,789 60,231
CORPORATE ADMINISTRATIVE EXPENSE AND OTHER 1,133 (4,837)
------------ ------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $ 61,922 55,394
============ ============
Fleet size (owned and leased including international):
Full service lease 115,117 112,930
Commercial rental 36,202 35,992
Buses operated or managed 14,860 14,447
Transportation services locations 964 1,074
- -------------------------------------------------------------------------------------------
</TABLE>
* Certain prior year amounts have been reclassified to conform with current year
presentation.
<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.
(15) Letter regarding unaudited interim financial statements.
(27) Financial data schedule (for SEC use only).
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by the Registrant during the
period covered by this report.
<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: May 14, 1998 /S/ EDWIN A. HUSTON
---------------------------------------
Edwin A. Huston
Senior Executive Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: May 14, 1998 /S/ GEORGE P. SCANLON
----------------------------------------
George P. Scanlon
Vice President - Planning and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
(15) Letter regarding unaudited interim financial statements.
(27) Financial Data Schedule (for SEC use only).
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 System, Inc.:
We acknowledge our awareness of the incorporation by reference in the following
Registration Statements of our report dated April 21, 1998 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.
/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.
<PAGE>
The Board of Directors and Shareholders
Ryder System, Inc.
Page 2
/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. Deferred Compensation 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
May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RYDER
SYSTEM, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
AND STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH
31, 1997 (RESTATED FOR DISCONTINUED OPERATIONS) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 56,422 96,485
<SECURITIES> 0 0
<RECEIVABLES> 612,100 598,455
<ALLOWANCES> 0 0
<INVENTORY> 63,088 63,848
<CURRENT-ASSETS> 1,100,273 1,095,302
<PP&E> 6,158,923 6,399,722
<DEPRECIATION> 2,410,585 2,524,024
<TOTAL-ASSETS> 5,563,949 5,605,928
<CURRENT-LIABILITIES> 1,022,513 1,222,323
<BONDS> 2,365,100 2,167,903
0 0
0 0
<COMMON> 345,242 470,420
<OTHER-SE> 759,917 627,195
<TOTAL-LIABILITY-AND-EQUITY> 5,563,949 5,605,928
<SALES> 0 0
<TOTAL-REVENUES> 1,245,617 1,187,119
<CGS> 0 0
<TOTAL-COSTS> 1,135,287 1,084,407
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 48,408 47,318
<INCOME-PRETAX> 61,922 55,394
<INCOME-TAX> 24,648 22,943
<INCOME-CONTINUING> 37,274 32,451
<DISCONTINUED> 0 1,215
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 37,274 33,666
<EPS-PRIMARY> 0.50 0.43
<EPS-DILUTED> 0.50 0.43
</TABLE>
