- --------------------------------------------------------------------------------
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _____ TO ______
Commission file number 1-4364
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-0739250
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 N.W. 82 AVENUE, MIAMI, FLORIDA 33166 (305) 500-3726
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(Address of principal executive (Telephone number
offices including zip code) including area code)
Indicate by check mark whether the registrant (l) 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant computed by reference to the price at which the stock was sold as of
January 29, 1999, was $1,740,111,477. The number of shares of Ryder System, Inc.
Common Stock ($.50 par value) outstanding as of January 29, 1999, was
71,287,995.
DOCUMENTS INCORPORATED BY PART OF FORM 10-K INTO WHICH
REFERENCE INTO THIS REPORT DOCUMENT IS INCORPORATED
------------------------------ ----------------------------
Ryder System, Inc. 1998 Annual Parts I, II and IV
Report to Shareholders*
Ryder System, Inc. 1999 Proxy Part III
Statement
*The Ryder System, Inc. 1998 Annual Report to Shareholders is incorporated
herein only to the extent specifically stated.
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[Cover page 1 of 3 pages]
<PAGE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS OF SECURITIES EXCHANGE ON WHICH REGISTERED
- --------------------------------- ----------------------------
Ryder System, Inc. Common Stock New York Stock Exchange
($.50 par value) and Preferred Pacific Stock Exchange
Share Purchase Rights Chicago Stock Exchange
(the Rights are not currently Berlin Stock Exchange
exercisable, transferable or
exchangeable apart from the
Common Stock)
Ryder System, Inc. 9% Series G Bonds, New York Stock Exchange
due May 15, 2016
Ryder System, Inc. 8 3/8% Series H Bonds, New York Stock Exchange
due February 15, 2017
Ryder System, Inc. 8 3/4% Series J Bonds, New York Stock Exchange
due March 15, 2017
Ryder System, Inc. 9 7/8% Series K Bonds, New York Stock Exchange
due May 15, 2017
Ryder System, Inc. 9 1/4% Series N Notes, None
due May 15, 2001
Ryder System, Inc. 6 1/2% Series O Notes, None
due May 15, 2005
Ryder System, Inc. 6.60% Series P Notes, None
due November 15, 2005
Ryder System, Inc. Medium-Term Notes None
Series 1, due from 9 months to
10 years from date of issue at
rate based on market rates at time
of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 7, due from 9 months to
30 years from date of issue at
rate based on market rates at time
of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 8, due from 9 months to 30 years
from date of issue at rate based on
market rates at time of issuance
[Cover page 2 of 3 pages]
<PAGE>
Ryder System, Inc. Medium-Term Notes, None
Series 9, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 10, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 11, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 12, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 13, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 14, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
Ryder System, Inc. Medium-Term Notes, None
Series 15, due 9 months or more from date
of issue at rate based on market rates
at time of issuance
SECURITIES REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT: None
[Cover page 3 of 3 pages]
<PAGE>
RYDER SYSTEM, INC.
Annual Report on Form 10-K
TABLE OF CONTENTS
PAGE NO.
--------
PART I
Item 1 Business..................................................... 5
Item 2 Properties................................................... 10
Item 3 Legal Proceedings............................................ 10
Item 4 Submission of Matters to a Vote of Security Holders.......... 10
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters........................................ 11
Item 6 Selected Financial Data...................................... 11
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 11
Item 7A Quantitative and Qualitative Disclosures About Market Risk .. 11
Item 8 Financial Statements and Supplementary Data.................. 12
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 12
PART III
Item 10 Directors and Executive Officers of the Registrant........... 13
Item 11 Executive Compensation....................................... 13
Item 12 Security Ownership of Certain Beneficial Owners and
Management................................................. 13
Item 13 Certain Relationships and Related Transactions............... 13
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K................................................... 14
4
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Ryder System, Inc. (the "Company") was incorporated in Florida in 1955. Through
its subsidiaries, the Company engages primarily in the logistics and
transportation related services business with focus on: 1) integrated logistics,
including dedicated contract carriage, the management of carriers, and other
supply chain services; 2) transportation services, including full service
leasing, maintenance and short-term rental of trucks, tractors and trailers; and
3) public transit management and operations, fleet management and maintenance
services, and student transportation services. As of December 31, 1998, the
Company and its subsidiaries had a fleet of 173,116 vehicles and 45,373
employees.(1)
Financial information about industry segments is incorporated by reference from
the "Notes to Consolidated Financial Statements - Segment Reporting" on pages 44
and 45 of the Ryder System, Inc. 1998 Annual Report to Shareholders.
LOGISTICS AND TRANSPORTATION BUSINESS UNITS
INTEGRATED LOGISTICS
Ryder Integrated Logistics, Inc. ("Ryder Integrated Logistics") provides
integrated logistics support of clients' entire supply chains, from inbound raw
materials supply through finished goods distribution, including dedicated
contract carriage, the management of carriers, and other supply chain services
through 735 locations in the U.S. and Canada. Ryder Integrated Logistics
utilizes advanced information technology, and teams frequently with strategic
alliance and joint venture partners. Services include varying combinations of
logistics system design, the provision of vehicles and equipment, maintenance,
the provision of drivers, warehouse management (including cross docking and
flow-through distribution), transportation management, vehicle dispatch, and
inbound and outbound just-in-time and merge-in-transit delivery. Logistics
systems include procurement and management of all modes of transportation,
shuttles, interstate long-haul operations, just-in-time service to assembly
plants, and factory-to-warehouse-to-retail facility service. These services are
used in major industry sectors including automotive, telecommunications,
utilities, health care, paper and paper packaging, chemical, electronic and
office equipment, news, food and beverage, housing, and general retail
industries, along with other industries and the federal sector. In 1998, Ryder
Integrated Logistics continued to expand its presence in the logistics market
through expansion of existing accounts, increased emphasis on global account
management in key industry sectors, and initiation of strategic alliances/joint
ventures.
INTERNATIONAL OPERATIONS
The Company provides a wide variety of logistics and transportation services in
international markets outside the U.S. and Canada, including full service
leasing of trucks, tractors and trailers, commercial truck rental, contract
truck maintenance and a broad range of warehousing, logistics and supply chain
management services. The Company continues to implement a strategy for further
growth in international markets, providing global logistics solutions to
multinational customers.
- ---------------------------
(1) The employee count does not include: (a) operating personnel of local
transit authorities managed by certain subsidiaries of the Company (in such
situations, generally the entire cost of compensation and benefits for such
personnel is passed through to the transit authority, which reimburses the
Company's subsidiaries); or (b) drivers obtained by certain subsidiaries of the
Company under driver leasing agreements.
5
<PAGE>
This strategy enables the Company to take advantage of, and build upon, the
expertise, market knowledge and infrastructure of strategic alliance and joint
venture partners, as well as its own expertise in providing logistics solutions
to businesses involved in the over-the-road transportation of goods and to those
who move goods around the world using any mode of transportation. As of December
31, 1998, the Company had 13,209 full service lease and commercial rental
vehicles, 5,310 employees, and provided services through 140 locations in the
United Kingdom, Germany, Mexico, Poland, the Netherlands, Argentina and Brazil.
In 1998, the Company continued to enhance its presence in the United Kingdom,
Mexico, Poland, Argentina and Brazil through internal growth, and also commenced
both assessing and exploiting opportunities in markets in other countries. In
its worldwide operations, the Company is always mindful of its need to mitigate
risks, including the minimization of asset and currency exposures.
Within the context of international operations, the Company defines national
service as the provision of services within the confines of one particular
foreign country. International services require the management of the movement
of goods across borders; while global services include both of the foregoing for
customers with needs in a number of international markets who may also require
multinational coordination of logistic and supply chain management services.
FULL SERVICE LEASING, MAINTENANCE AND SHORT-TERM RENTAL OF TRUCKS, TRACTORS AND
TRAILERS
Ryder Truck Rental, Inc., which does business as Ryder Transportation Services
("Ryder Transportation Services"), provides full service leasing to nearly
13,000 customers (ranging from large national enterprises to small companies),
with a fleet of 109,124 vehicles (including 14,751 vehicles leased to
affiliates), through 894 locations in 48 states, Puerto Rico, and 8 Canadian
Provinces. Under a full service lease, Ryder Transportation Services provides
customers with vehicles, maintenance, supplies and related equipment necessary
for operation, while the customers furnish and supervise their own drivers, and
dispatch and exercise control over the vehicles. Additionally, Ryder
Transportation Services provides contract maintenance services to more than
1,500 customers, servicing 44,856 vehicles (including approximately 9,560
vehicles owned by affiliates) under maintenance contracts, and provides
short-term truck rental, which tends to be seasonal, to commercial customers to
supplement their fleets during peak business periods. A fleet of 37,517
vehicles, ranging from heavy-duty tractors and trailers to light-duty trucks, is
available for commercial short-term rental. In 1998, Ryder Transportation
Services focused on the expansion of its long-term contractual businesses such
as the full service leasing of trucks, tractors and trailers, and contract truck
maintenance, through internal growth. Additionally in 1998, Ryder Transportation
Services continued to develop its expanded range of services for customers. Such
services include fleet management, freight management and the Ryder Citicorp
Finance Lease program. By expanding its vehicle financing options, Ryder
Transportation Services gives customers the flexibility to choose a full service
lease or the combination of a finance lease and contract maintenance for their
vehicles.
PUBLIC TRANSIT MANAGEMENT, OPERATIONS AND FLEET MAINTENANCE SERVICES AND STUDENT
TRANSPORTATION SERVICES
The Company's public sector services are organized under a single management
structure for operating efficiencies and in order to focus its marketing efforts
on serving the unique needs of the public sector. The umbrella management
organization, Ryder Public Transportation Services, provides a wide array of
transportation and maintenance services to the public sector through two
subsidiaries: Ryder Student Transportation Services, Inc. which operates more
than 10,200 school buses under long-term contract for 477 school systems in 26
states; and Ryder/ATE, Inc., which operates or manages nearly 5,000 buses under
long-term contracts to 86 public transit agencies in 28 states. In addition,
Ryder/ATE, Inc.'s public fleet maintenance unit, Ryder/MLS, manages and
maintains over 30,000 pieces of equipment for public transit agencies, cities,
counties, colleges and utilities.
Ryder Public Transportation Services is either the largest or second largest
private contractor in the three primary markets it serves: student
transportation, public transit management and operations, and public fleet
management and maintenance for local governments and utilities. In each case,
public sector services that are operated by in-house governmental organizations
represent two-thirds or more of the market for such services and the biggest
opportunity for growth. Due to continuing cost pressures in the public sector
and the Company's ability to provide the same or enhanced levels of services,
typically at a 10 to 20 percent cost savings, a growing number of governmental
organizations are willing to outsource their transportation and fleet
maintenance services to Ryder Public Transportation Services.
6
<PAGE>
In 1998, Ryder Public Transportation Services expanded through various methods,
including acquisitions, increasing its fleet size by more than 600 buses in the
student transportation operation.
DISPOSITION OF REVENUE EARNING EQUIPMENT
The Company's business units have historically disposed of used revenue earning
equipment at prices in excess of book value. The gains on the sale of revenue
earning equipment (reported as reductions in depreciation expense) were
approximately 12%, 11% and 14% of earnings from reportable business segments
before interest and taxes in 1998, 1997 and 1996, respectively. The extent to
which gains will be realized on future disposal of revenue earning equipment is
dependent upon various factors including the general state of the used vehicle
market, the age and condition of vehicles at the time of their disposal and
depreciation methods with respect to vehicles.
COMPETITION
As an alternative to using the Company's services, customers may choose to
provide similar services for themselves, or may choose to purchase similar or
alternative services from other third-party vendors.
In the United States and Canada, Ryder Integrated Logistics competes with
companies providing similar services on a national, regional and local level.
Additionally, this business is subject to potential competition in most of the
regions it serves from air cargo, waterborne shipping, railroads and motor
carriers. On a country-by-country basis and on a global basis, the Company
competes with companies providing similar services in international markets
outside the United States and Canada. In the United Kingdom, the markets for
full service leasing of trucks, tractors and trailers, and dedicated contract
carriage services are well developed and competitive, similar to those in the
U.S. and Canada. Ryder Integrated Logistics expects that competition with its
services in emerging markets and in the global integrated logistics marketplace
will develop. Competitive factors include price, equipment, maintenance,
geographical coverage, market knowledge, expertise in logistics related
technology, and overall performance (e.g., timeliness, accuracy and
flexibility). Value-added differentiation of these service offerings across the
full global supply chain will continue to be Ryder Integrated Logistics'
overriding strategy.
Ryder Transportation Services competes with companies providing similar services
on a national, regional and local level. Regional and local competitors may
sometimes provide services on a national level through their participation in
various cooperative programs and through their membership in various industry
associations. Competitive factors include price, equipment, maintenance and
geographical coverage. Ryder Transportation Services also competes, to an
extent, with a number of truck and trailer manufacturers who provide truck and
trailer leasing, extended warranty maintenance, rental and other transportation
services. Value-added differentiation of the full service truck leasing, truck
rental, and contract and non-contract truck maintenance service offerings has
been, and will continue to be, Ryder Transportation Services' emphasis.
Ryder Public Transportation Services competes with companies that provide
similar services in each segment of its operations, although no competitors
duplicate the complete array of services that Ryder Public Transportation
Services provides. In the student transportation market, one national competitor
is larger than Ryder Student Transportation Services, and the next three largest
competitors are less than one-half of its size. In addition, over 1,500 small
and regional companies compete with Ryder Student Transportation Services on a
limited, local market basis. In the public transit market, one national
competitor is larger than Ryder/ATE, and less than 100 small and regional
companies compete with Ryder/ATE on a limited basis. In the public fleet
management and maintenance market, a small number of companies compete with
Ryder/MLS, of which MLS is the largest in the delivery of services to cities and
counties. In all segments of its operations, Ryder Public Transportation
Services has been able to retain over 90% of its contracts on an annual basis
through a combination of high quality, customer-focused services, and ongoing
improvements in cost efficiency and service innovation.
7
<PAGE>
OTHER DEVELOPMENTS AND FURTHER INFORMATION
Many federal, state and local laws designed to protect the environment, and
similar laws in some foreign jurisdictions, have varying degrees of impact on
the way the Company and its subsidiaries conduct their business operations,
primarily with regard to the use, storage and disposal of petroleum products and
various wastes associated with vehicle maintenance activities. Based on
information presently available, management believes that the ultimate
disposition of such matters, although potentially material to the Company's
results of operations in any one year, will not have a material adverse affect
on the Company's financial condition or liquidity.
For further discussion concerning the business of the Company and its
subsidiaries, see the information referenced under Items 7 and 8 of this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
All of the executive officers of the Company were elected or re-elected to their
present offices either at or subsequent to the meeting of the Board of Directors
held on May 1, 1998 in conjunction with the Company's 1998 Annual Meeting on the
same date. They all hold such offices, at the discretion of the Board of
Directors, until their removal, replacement or retirement.
NAME AGE POSITION
- ------------------ --- -----------------------------------------------
M. Anthony Burns 56 Chairman, President and
Chief Executive Officer
Dwight D. Denny 55 Executive Vice President - Development
John H. Dorr 52 President - Ryder Public Transportation
Services, Inc.
Raymond B. Greer 36 President - Ryder Integrated Logistics, Inc.
James B. Griffin 44 President - Ryder Transportation Services
Edwin A. Huston 60 Senior Executive Vice President -
Finance and Chief Financial Officer
Thomas E. McKinnon 54 Executive Vice President - Human
Resources and Corporate Services
Vicki A. O'Meara 41 Executive Vice President, General Counsel and
Secretary
Lisa A. Rickard 43 Senior Vice President - Government Relations
George P. Scanlon 41 Senior Vice President - Planning and Controller
M. Anthony Burns has been Chairman of the Board since May 1985, Chief Executive
Officer since January 1983, and President and a director since December 1979.
8
<PAGE>
Dwight D. Denny has been Executive Vice President - Development since January
1996, and was President - Ryder Commercial Leasing & Services from December 1992
to December 1995. Mr. Denny served Ryder Truck Rental, Inc. as Executive Vice
President and General Manager - Commercial Leasing & Services from June 1991 to
December 1992. Mr. Denny served Ryder Truck Rental, Inc. as Senior Vice
President and General Manager - Eastern Area from March 1991 to June 1991, and
Senior Vice President - Central Area from December 1990 to March 1991. Mr. Denny
previously served Ryder Truck Rental, Inc. as Region Vice President in Tennessee
from July 1985 to December 1990.
John H. Dorr has been President - Ryder Public Transportation Services, Inc.
since January 1997. Mr. Dorr served as Senior Vice President and General Manager
of Ryder Public Transportation Services since July 1993 and prior to that was
Vice President and General Manager of Ryder Student Transportation Services from
September 1990 to July 1993.
Raymond B. Greer has been President - Ryder Integrated Logistics, Inc. since
December 1998. Mr. Greer served as Senior Vice President and General Manager -
Global Operations from March 1998 to December 1998, as Senior Vice President -
Information and Logistics Services from March 1997 to March 1998, as a Regional
Vice President and General Manager from January 1995 to March 1997, and as a
Regional Distribution Manager from May 1994 to January 1995. Previously, Mr.
Greer spent 11 years with Federal Express in various operational, engineering
and technology capacities, most recently as Global Contract Director for FedEx
Logistics.
James B. Griffin has been President - Ryder Transportation Services (formerly
Commercial Leasing & Services) since January 1996, and was President - Ryder
Automotive Carrier Group, Inc. from February 1993 to December 1995. Mr. Griffin
served Ryder Truck Rental, Inc. as Vice President and General Manager -
Mid-South Region from December 1990 to February 1993. Mr. Griffin previously
served Ryder Truck Rental, Inc. as Region Vice President in Syracuse, New York
from April 1988 to December 1990.
Edwin A. Huston has been Senior Executive Vice President - Finance and Chief
Financial Officer since January 1987. Mr. Huston was Executive Vice President -
Finance from December 1979 to January 1987.
Thomas E. McKinnon has been Executive Vice President - Human Resources and
Corporate Services since February 1997. Mr. McKinnon served as Executive Vice
President - Human Resources from June 1995 until February 1997. Mr. McKinnon
previously served Unisys Corporation as Vice President - Human Resources from
August 1990 to June 1995.
Vicki A. O'Meara has been Executive Vice President and General Counsel since
June 1997 and Secretary since February 1998. Previously, Ms. O'Meara was with
the Chicago office of the law firm of Jones Day Reavis & Pogue where she was a
partner and chair of the firm's worldwide Environmental, Health and Safety
practice; and prior to that was Assistant Attorney General, heading the
Environmental and Natural Resources Division of the U.S. Department of Justice.
Lisa A. Rickard has been Senior Vice President - Government Relations since
January 1997. Ms. Rickard served as Vice President - Federal Affairs from
January 1994 until January 1997. From June 1982 until December 1993, Ms. Rickard
was with the Washington law firm of Akin, Gump, Strauss, Hauer & Feld, LLP,
where she was a partner.
George P. Scanlon has been Senior Vice President - Planning and Controller since
August 1998 and served as Vice President - Planning and Controller from January
1997. Mr. Scanlon is the Company's principal accounting officer. Prior to that,
Mr. Scanlon served as Vice President - Corporate Planning since August 1996. Mr.
Scanlon served as Group Director - Corporate Planning from October 1993 until
August 1996 and Group Director - Audit Services from March 1991 until October
1993.
9
<PAGE>
ITEM 2. PROPERTIES
The Company's property consists primarily of vehicles, vehicle maintenance and
repair facilities, and other real estate and improvements. Information regarding
vehicles is included in Item 1, which is incorporated herein by reference.
Ryder Integrated Logistics, Inc. has 735 locations in the United States and
Canada; 5 of these facilities are owned and the remainder are leased. Such
locations generally include a warehouse and administrative offices.
The Company's international operations has 140 locations in the United Kingdom,
Germany, The Netherlands, Mexico, Poland, Argentina, and Brazil; 21 of these
facilities are owned and the remainder are leased. Such locations generally
include a repair shop, warehouse and administrative offices.
Ryder Transportaton Services has 894 locations in the United States, Puerto Rico
and Canada; 385 of these facilities are owned and the remainder are leased. Such
locations generally include a repair shop and administrative offices.
Ryder Public Transportation Services has 340 locations in the United States; all
of which are leased.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various claims, lawsuits, and
administrative actions arising in the course of their businesses. Some involve
claims for substantial amounts of money and/or claims for punitive damages.
While any proceeding or litigation has an element of uncertainty, management
believes that the disposition of such matters, in the aggregate, will not have a
material impact on the consolidated financial condition, results of operations
or liquidity of the Company and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the quarter
ended December 31, 1998.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required by Item 5 is incorporated by reference from page 46
("Quarterly Financial and Common Stock Data") of the Ryder System, Inc. 1998
Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated by reference from page 46
("Five Year Summary") of the Ryder System, Inc. 1998 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by Item 7 is incorporated by reference from pages 16
through 27 of the Ryder System, Inc. 1998 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to fluctuations in
interest rates and foreign exchange rates. The Company manages such exposures in
several ways including the use of a variety of derivative financial instruments
when deemed prudent. The Company does not enter into leveraged financial
transactions or use derivative financial instruments for trading purposes.
The exposure to market risk for changes in interest rates relates primarily to
debt obligations. The Company's interest rate risk management program objective
is to limit the impact of interest rate changes on earnings and cash flows and
to lower overall borrowing costs. The Company manages its exposure to interest
rate risk through the proportion of fixed rate and variable rate debt in the
total debt portfolio. The Company targets variable rate debt levels at 25%-30%
of total financing obligations, including the present value of off-balance sheet
obligations such as operating leases. From time to time, the Company also uses
interest rate swap and cap agreements to manage its fixed rate and variable rate
exposure and to better match the repricing of its debt instruments to that of
its portfolio of assets. No interest rate swap or cap agreements were
outstanding at December 31, 1998.
The following table summarizes debt obligations outstanding as of December 31,
1998 expressed in U.S. dollar equivalents. The table shows the amount of debt,
including current portion, and related weighted average interest rates by
contractual maturity dates. Weighted average variable rates are based on implied
forward rates in the yield curve at December 31, 1998. This information should
be read in conjunction with the "Notes to Consolidated Financial
Statements-Debt" contained in the Ryder System, Inc. 1998 Annual Report to
Shareholders.
11
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------
EXPECTED MATURITY DATE
-----------------------------------------------------------------------------------
(Dollars in thousands) 1999 2000 2001 2002 2003 THEREAFTER TOTAL FAIR VALUE
- ----------------------------------- -------- ------- ------- ------- ------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Fixed Rate-Dollar Denominated $374,270 443,738 281,287 107,502 92,657 691,350 1,990,804 2,060,816
Average interest rate 7.54% 7.41% 7.33% 7.33% 7.47% 7.51%
Total Fixed Rate-Pound Sterling Denominated 24,893 24,893 24,893 58,083 - - 132,762 136,587
Average interest rate 8.06% 8.17% 8.17% 7.88% - -
Total Fixed Rate-Canadian Dollars 22,873 19,605 22,873 - 9,803 - 75,154 75,356
Average interest rate 7.22% 7.12% 6.49% 5.75% 5.75% -
Total Fixed Rate-Brazilian Real 7,917 2,115 1,070 840 227 - 12,169 12,328
Average interest rate 8.00% 8.00% 8.00% 8.00% 8.00% -
Total Fixed Rate-German Deutsche Mark 2,697 3,256 3,256 1,458 1,458 3,600 15,725 16,640
Average interest rate 5.47% 5.57% 5.67% 5.88% 5.91% 5.96%
Total Variable Rate Commercial Paper (a) - - - 197,500 - - 197,500 197,500
Average interest rate 5.08% 5.02% 5.05% 5.56% - -
Total Variable Rate-Dollar Denominated - - - 9,382 - - 9,382 9,382
Average interest rate 5.19% 5.13% 5.17% 5.69% - -
Total Variable Rate-Pound Sterling Denominated 34,850 - - 54,764 - - 89,614 89,614
Average interest rate 5.68% 5.67% 5.48% 5.40% - -
Total Variable Rate-Canadian Dollar - - - 18,102 - - 18,102 18,102
Average interest rate 5.11% 5.24% 5.41% 5.53% - -
Total Variable Rate-German Deutsche Mark - - - 4,615 - - 4,615 4,615
Average interest rate 3.57% 3.56% 3.84% 4.11% - -
Total Variable Rate-Argentine Peso 2,500 - - - - - 2,500 2,500
Average interest rate 11.50% - - - - -
---------- ---------
Total Debt (b) $2,548,327 2,623,440
========== =========
<FN>
(a) Assumed to be renewed through June 2002. As discussed in the "Debt" note to
the consolidated financial statements contained in the 1998 Annual Report to
Shareholders, the commercial paper program is supported by the Company's
$720 million global credit facility which is scheduled to expire in June
2002. The Company classified commercial paper borrowings as long-term debt
in the consolidated balance sheet at December 31, 1998.
(b) Excludes capital leases.
</FN>
</TABLE>
The exposure to market risk for changes in foreign exchange rates relates
primarily to foreign operations' buying, selling and financing in currencies
other than local currencies and to the carrying value of net investments in
foreign subsidiaries. The Company manages its exposure to foreign exchange rate
risk related to foreign operations' buying, selling and financing in currencies
other than local currencies by naturally offsetting assets and liabilities not
denominated in local currencies. The Company also uses foreign currency option
contracts and forward agreements to preserve the carrying value of foreign
currency assets, liabilities, commitments and anticipated foreign currency
transactions. No foreign currency option contracts or forward agreements were
outstanding at December 31, 1998. The Company does not generally hedge the
translation exposure related to its net investment in foreign subsidiaries.
Based on the overall level of transactions denominated in other than local
currencies and of the net investment in foreign subsidiaries, the exposure to
market risk for changes in foreign exchange rates is not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated by reference from pages 29
through 45 and page 46 ("Quarterly Financial and Common Stock Data") of the
Ryder System, Inc. 1998 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
12
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 regarding directors is incorporated by
reference from pages 4 through 8 of the Ryder System, Inc. 1999 Proxy Statement.
The information required by Item 10 regarding executive officers is set out in
Item 1 of Part I of this Form 10-K Annual Report.
Additional information required by Item 10 is incorporated by reference from
page 17 ("Section 16(a) Beneficial Ownership Reporting Compliance") of the Ryder
System, Inc. 1999 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from pages 9
and 10 ("Compensation of Directors") and 21 through 24 of the Ryder System, Inc.
1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from pages 16
and 17 of the Ryder System, Inc. 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from page 10 of
the Ryder System, Inc. 1999 Proxy Statement.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) 1. Financial Statements for Ryder System, Inc. and Consolidated
Subsidiaries:
Items A through F are incorporated by reference from pages 28 through 45
of the Ryder System, Inc. 1998 Annual Report to Shareholders.
A) Consolidated Statements of Operations for years ended December 31,
1998, 1997 and 1996.
B) Consolidated Balance Sheets as of December 31, 1998 and 1997.
C) Consolidated Statements of Cash Flows for years ended December 31,
1998, 1997 and 1996.
D) Consolidated Statements of Shareholders' Equity for years ended
December 31, 1998, 1997 and 1996.
E) Notes to Consolidated Financial Statements.
F) Independent Auditors' Report.
2. Not applicable.
All other schedules and statements are omitted because they are not
applicable or not required or because the required information is
included in the consolidated financial statements or notes thereto.
Supplementary Financial Information consisting of selected quarterly
financial data is incorporated by reference from page 46 of the Ryder
System, Inc. 1998 Annual Report to Shareholders.
14
<PAGE>
3. Exhibits:
The following exhibits are filed with this report or, where indicated,
incorporated by reference (Forms 10-K, 10-Q and 8-K referenced herein have
been filed under the Commission's file No. 1-4364). The Company will
provide a copy of the exhibits filed with this report at a nominal charge
to those parties requesting them.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------
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.
4.1 The Company hereby agrees, pursuant to paragraph (b)(4)(iii) of Item
601 of Regulation S-K, to furnish the Commission with a copy of any
instrument defining the rights of holders of long-term debt of the
Company, where such instrument has not been filed as an exhibit
hereto and the total amount of securities authorized thereunder does
not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis.
4.2(a) The Form of Indenture between Ryder System, Inc. and The Chase
Manhattan Bank (National Association) dated as of June 1, 1984,
filed with the Commission on November 19, 1985 as an exhibit to the
Company's Registration Statement on Form S-3 (No. 33-1632), is
incorporated by reference into this report.
4.2(b) The First Supplemental Indenture between Ryder System, Inc. and The
Chase Manhattan Bank (National Association) dated October 1, 1987,
previously filed with the Commission as an exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, is
incorporated by reference into this report.
4.3 The Form of Indenture between Ryder System, Inc. and The Chase
Manhattan Bank (National Association) dated as of May 1, 1987, and
supplemented as of November 15, 1990 and June 24, 1992, filed with
the Commission on July 30, 1992 as an exhibit to the Company's
Registration Statement on Form S-3 (No. 33-50232), is incorporated
by reference into this report.
4.4 The Rights Agreement between Ryder System, Inc. and Boston
Equiserve, L.P., dated as of March 8, 1996, filed with the
Commission on April 3, 1996 as an exhibit to the Company's
Registration Statement on Form 8-A is incorporated by reference into
this report.
15
<PAGE>
10.1 The form of change of control severance agreement for executive
officers effective as of May 1, 1996, previously filed with the
Commission as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, is incorporated by reference to
this report.
10.2 The form of severance agreement for executive officers effective as
of May 1, 1996, previously filed with the Commission as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December
31, 1996, is incorporated by reference to this report.
10.3(a) The Ryder System, Inc. 1998 Incentive Compensation Plan for
Headquarters Executive Management Levels MS 11 and Higher, previously
filed with the Commission as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, is
incorporated by reference to this report.
10.3(b) The Ryder System, Inc. 1999 Incentive Compensation Plan for
Headquarters Executive Management Levels MS 11 and Higher.
10.4(a) The form of Ryder System, Inc. 1980 Stock Incentive Plan, as amended
and restated as of August 15, 1996, previously filed with the
Commission as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, is incorporated by reference
into this report.
10.4(b) The form of Ryder System, Inc. 1980 Stock Incentive Plan, United
Kingdom Section, dated May 4, 1995, previously filed with the
Commission as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, is incorporated by reference
into this report.
10.4(c) The form of Ryder System, Inc. 1980 Stock Incentive Plan, United
Kingdom Section, dated October 3, 1995, previously filed with the
Commission as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, is incorporated by reference
into this report.
10.4(d) The form of Ryder System, Inc. 1995 Stock Incentive Plan, as amended
and restated as of August 15, 1996, previously filed with the
Commission as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, is incorporated by reference
into this report.
10.5(a) The Ryder System, Inc. Directors Stock Plan, as amended and restated
as of December 17, 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, is incorporated by reference into this
report.
10.5(b) The form of Ryder System, Inc. Directors Stock Award Plan dated as of
May 2, 1997, previously filed with the Commission as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December
31, 1997, is incorporated by reference into this report.
10.7 Distribution and Indemnity Agreement dated as of November 23, 1993
between Ryder System, Inc. and Aviall, Inc., 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, is incorporated by
16
<PAGE>
reference into this report.
10.8 Tax Sharing Agreement dated as of November 23, 1993 between Ryder
System, Inc. and Aviall, Inc., 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, is incorporated by reference into this
report.
10.9(a) The form of Ryder System, Inc. Stock for Merit Increase Replacement
Plan, as amended and restated as of August 15, 1996, previously filed
with the Commission as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, is incorporated by
reference into this report.
10.9(b) The form of Ryder System, Inc. Non-Qualified Stock Option Agreement,
dated as of February 17, 1998.
10.10 The form of Ryder System, Inc. Deferred Compensation Plan effective
January 1, 1997, as amended and restated as of November 3, 1997,
previously filed with the Commission as an exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, is
incorporated by reference into this report.
10.11 The Asset and Stock Purchase Agreement by and between Ryder Truck
Rental, Inc. and RCTR Holdings, Inc. dated as of September 19, 1996,
filed with the Commission on September 20, 1996 as an exhibit to the
Company's report on Form 8-K, is incorporated by reference into this
report.
10.12 The Acquisition Agreement among Ryder System, Inc. and Allied
Holdings, Inc., AH Acquisition Corp., Canadian Acquisition Corp. and
Axis National Inc., dated as of August 20, 1997, filed with the
Commission on October 16, 1997 as an exhibit to the Company's report
on Form 8-K, is incorporated by reference into this report.
13.1 Portions of the Ryder System, Inc. 1998 Annual Report to
Shareholders. Those portions of the Ryder System, Inc. 1998 Annual
Report to Shareholders which are not incorporated by reference into
this report are furnished to the Commission solely for information
purposes and are not to be deemed "filed" as part of this report.
21.1 List of subsidiaries of the registrant, with the state or other
jurisdiction of incorporation or organization of each, and the name
under which each subsidiary does business.
23.1 Auditors' consent to incorporation by reference in certain
Registration Statements on Forms S-3 and S-8 of their reports on
consolidated financial statements and schedules of Ryder System, Inc.
and its subsidiaries.
24.1 Manually executed powers of attorney for each of:
Joseph L. Dionne
Edward T. Foote II
David I. Fuente
17
<PAGE>
John A. Georges
Vernon E. Jordan, Jr.
David T. Kearns
Lynn M. Martin
Paul J. Rizzo
Christine A. Varney
Alva O. Way
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
No such reports were filed.
(c) Executive Compensation Plans and Arrangements:
Please refer to the description of Exhibits 10.1 through 10.12 set
forth under Item 14(a)3 of this report for a listing of all management
contracts and compensation plans and arrangements filed with this
report pursuant to Item 601(b)(10) of Regulation S-K.
(d) Not applicable
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 26, 1999 RYDER SYSTEM, INC.
By: /s/ M. ANTHONY BURNS
--------------------------
M. Anthony Burns
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 26, 1999 By: /s/ M. ANTHONY BURNS
--------------------------
M. Anthony Burns
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Date: March 26, 1999 By: /s/ EDWIN A. HUSTON
---------------------------
Edwin A. Huston
Senior Executive Vice President -
Finance and Chief Financial Officer
(Principal Financial Officer)
Date: March 26, 1999 By: /s/ GEORGE P. SCANLON
----------------------------
George P. Scanlon
Senior Vice President - Planning
and Controller
(Principal Accounting Officer)
19
<PAGE>
Date: March 26, 1999 By: /s/ JOSEPH L. DIONNE *
------------------------------
Joseph L. Dionne
Director
Date: March 26, 1999 By: /s/ EDWARD T. FOOTE II *
------------------------------
Edward T. Foote II
Director
Date: March 26, 1999 By: /s/ DAVID I. FUENTE *
------------------------------
David I. Fuente
Director
Date: March 26, 1999 By: /s/ JOHN A. GEORGES *
------------------------------
John A. Georges
Director
Date: March 26, 1999 By: /s/ VERNON E. JORDAN, JR. *
-------------------------------
Vernon E. Jordan, Jr.
Director
Date: March 26, 1999 By: /s/ DAVID T. KEARNS *
------------------------------
David T. Kearns
Director
Date: March 26, 1999 By: /s/ LYNN M. MARTIN *
------------------------------
Lynn M. Martin
Director
Date: March 26, 1999 By: /s/ PAUL J. RIZZO *
-----------------------------
Paul J. Rizzo
Director
Date: March 26, 1999 By: /s/ CHRISTINE A. VARNEY *
-----------------------------
Christine A. Varney
Director
Date: March 26, 1999 By: /s/ ALVA O. WAY *
-----------------------------
Alva O. Way
Director
*By: /s/ DIANA H. HULL
-----------------------------
Diana H. Hull
Attorney-in-Fact
20
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- -------- ------------
10.3(b) The Ryder System, Inc. 1999 Incentive Compensation Plan for
Headquarters Executive Management Levels MS 11 and Higher.
10.9(b) The form of Ryder System, Inc. Non-Qualified Stock Option
Agreement, dated as of February 17, 1998.
13.1 Portions of the Ryder System, Inc. 1998 Annual Report to
Shareholders. Those portions of the Ryder System, Inc. 1998
Annual Report to Shareholders which are not incorporated by
reference into this report are furnished to the Commission solely
for information purposes and are not to be deemed "filed" as part
of this report.
21.1 List of subsidiaries of the registrant, with the state or other
jurisdiction of incorporation or organization of each, and the
name under which each subsidiary does business.
23.1 Auditors' consent to incorporation by reference in certain
Registration Statements on Forms S-3 and S-8 of their reports on
consolidated financial statements and schedules of Ryder System,
Inc. and its subsidiaries.
24.1 Manually executed powers of attorney for each of:
Joseph L. Dionne
Edward T. Foote II
David I. Fuente
John A. Georges
Vernon E. Jordan, Jr.
David T. Kearns
Lynn M. Martin
Paul J. Rizzo
Christine A. Varney
Alva O. Way
27.1 Financial Data Schedule.
EXHIBIT 10.3(b)
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 1
- --------------------------------------------------------------------------------
Supersedes 1998 Executive Management Incentive Compensation Plans
INTRODUCTION
The following material explains the operation and administration of the 1999
Incentive Compensation Plan (the "Plan") for Ryder System, Inc. ("RSI" or the
"Company") headquarters Officers and Directors whose positions are evaluated at
Management Level 11 (MS11) or higher and other members of the Company's
Executive Committee ("participants"). The Plan is intended to serve as a single,
comprehensive source of information that will explain your bonus for achieving
various levels of performance.
The Plan is based on the Economic Value Added ("EVA") performance measurement
system. EVA is a measurement tool that determines whether a business is earning
more than its true cost of capital by incorporating the cost of equity capital
as well as debt capital. EVA will assess financial performance and will also
serve as a management tool for setting goals, evaluating strategies, and
analyzing results.
EVA can be expressed in the following formula: EVA = NAT - AN EQUITY CHARGE
PERFORMANCE TARGETS
The Plan is intended to provide participants with competitive compensation for
achieving targeted performance. Target awards are expressed as a percentage of a
participant's base salary and will be declared when Target EVA improvement is
achieved.
Target EVA improvement is the level of EVA performance improvement required over
a one-year time frame whereby participants will receive a target bonus payout.
RSI's Target EVA for 1999 is $20 million higher than year-end 1998 EVA, or $53.6
MM.
TARGET BONUS OPPORTUNITY
Target Bonus Opportunity is expressed as a percentage of base salary for each
participant. The following table summarizes the Target Bonus Opportunity for
each participating management level:
<TABLE>
<CAPTION>
TARGET BONUS OPPORTUNITY AS A PERCENTAGE OF BASE SALARY
- ----------------------------------------------------------- -------------------------
MANAGEMENT LEVEL TARGET BONUS OPPORTUNITY
- ----------------------------------------------------------- -------------------------
<S> <C>
Chief Executive Officer 85%
- ----------------------------------------------------------- -------------------------
Management Levels 17 - 20; including Division Presidents 75%
- ----------------------------------------------------------- -------------------------
Management Levels 14 - 16 70%
- ----------------------------------------------------------- -------------------------
Management Level 13 40%
- ----------------------------------------------------------- -------------------------
Management Levels 11 - 12 30%
- ----------------------------------------------------------- -------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 2
- --------------------------------------------------------------------------------
BONUS OPPORTUNITY
The Plan has uncapped bonus opportunity, both positive and negative. Bonus
opportunity will increase as EVA exceeds the expected level. Similarly, bonus
opportunity will decrease as EVA falls short of target. Participants in this
Plan will be subject to the Bonus Reserve which is discussed later in this
document.
BONUS PAYOUT MECHANISM
In 1999, 100% of the bonus calculation will be based on EVA performance. Actual
bonus award amounts will be distributed with 80% of the declared bonus based on
EVA improvement and the remaining 20% of the declared bonus based on performance
for pre-established Value Enhancement Measures ("VEMs") subject to the Bonus
Reserve discussed below. VEMs for 1999 will be 10% based on Ryder Transportation
Services ("RTS") Net Sales and 10% based on Ryder Integrated Logistics ("RIL")
Global Net Sales.
[GRAPHIC OMITTED]
The bonus calculation is based on EVA performance. Once the bonus calculation is
determined, bonuses will be distributed to participants based 80% on EVA and 20%
on the relative performance of VEMs.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 3
- --------------------------------------------------------------------------------
VALUE ENHANCEMENT MEASURES
There will be two 1999 Value Enhancement Measures, each based on Net Sales. 10%
of the overall 1999 bonus payout will be based on RTS Net Sales (Full Service
Lease plus RPM) and 10% will be based on RIL Global Net Sales.
The goals for 1999 Net Sales levels are shown below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
PERCENTAGE OF VEM AWARD
0% 2.5% 5% 7.5% 10%
- ---------------------------------------------------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
RTS NET SALES ($ millions) $75 $87 $100 $113 $126
- ---------------------------------------------------- ----------- ------------ ------------- ------------ -------------
-------------------------------------------------------------------
PERCENTAGE OF VEM AWARD
0% 2.5% 5% 7.5% 10%
- ---------------------------------------------------- ----------- ------------ ------------- ------------ -------------
RIL GLOBAL NET SALES ($ millions) $189 $226 $264 $302 $339
- ---------------------------------------------------- ----------- ------------ ------------- ------------ -------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 4
- --------------------------------------------------------------------------------
BONUS RESERVE
Participants in the Plan will be subject to a Bonus Reserve.
The Bonus Reserve promotes a long-term perspective for the Plan and aligns
participants with owners by simulating ownership. Sustained improvements are
rewarded and consistently exceeding EVA performance targets increases the Bonus
Reserve balance. The Bonus Reserve also makes managers accountable for
performance shortfalls since the Reserve can carry a negative balance if
performance is significantly lower than expected. The Bonus Reserve provides a
mechanism to smooth the impact of performance cycles.
The Bonus Declared in any year is added to the Bonus Reserve. The Bonus Reserve
will then pay participants up to their Target Bonus levels plus one-half of any
residual balance. The remaining one-half is carried forward and will be held in
the Bonus Reserve.
The Bonus Reserve is specifically identified with each individual and will
follow that individual through other positions within any business unit of the
Company. The Bonus Reserve balance will not exceed 3 times Target Bonus and any
residual balance above 3 times Target Bonus will be immediately paid out to the
participant.
The Bonus Reserve is illustrated below:
[GRAPHIC OMITTED]
The Bonus Reserve Balance, while linked to each Plan participant, is not
considered "earned" by that individual until performance is sustained over time.
The Bonus Reserve is designed to reward long-term performance, and participants
will receive one-half of any excess over target levels in any given year. The
remaining balance in the Bonus Reserve will be distributed in future years if
performance improvements are sustained, and will be used to pay up to Target
Bonus in years where performance falls short of target financial performance.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 5
- --------------------------------------------------------------------------------
1999 PLAN SCALE - EVA
The following scale illustrates how the Plan will work. Noted are the points
where Target Bonus, two times Target Bonus, and zero bonus are achieved. Bonus
amounts are dependent on the multiple declared.
[GRAPHIC OMITTED]
Follow the steps on the following example to understand how your bonus is
calculated.
STEPS TO CALCULATE YOUR BONUS:
Calculate Variance between Actual and Target EVA
Calculate Bonus Multiple Contribution
Calculate Bonus Contribution
Calculate Financial Bonus Contribution
Calculate VEM Bonus Contribution
Calculate Total Bonus Declared
Calculate Bonus Reserve and Bonus Payment
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 6
- --------------------------------------------------------------------------------
To fully appreciate these steps, the following definitions describe key terms of
the Plan.
KEY TERMS:
TARGET EVA The level of EVA performance required to
earn a Target Bonus. For RSI, Target EVA
for 1999 will be year-end 1998 EVA plus
$20 million or $53.6 MM.
BONUS INTERVAL The performance above Target EVA or the
performance below Target EVA that will
cause a 2x bonus contribution or a zero
bonus contribution. For RSI, the Bonus
Interval will be $34 million. With RSI
1999 Target EVA of $53.6 MM, a 2x bonus
multiple contribution will result if EVA
of $87.6 MM is achieved. If actual EVA is
$19.6 MM or less, then a zero bonus will
occur.
VEMS VEMs are important measures which impact
how bonuses will be paid out. For 1999,
80% of bonus payments will be based on EVA
and 20% will be based on two VEMs, which
are RTS Net Sales (10%) and RIL Global Net
Sales (10%).
VEM POTENTIAL 20% of your Bonus Contribution
BONUS
VEM AWARD The percent of your VEM Potential Bonus
that you have earned. This award % will be
based on how well RTS and RIL achieved Net
Sales goals.
VEM BONUS CONTRIBUTION Your VEM Potential Bonus x VEM Award
BONUS DECLARED The bonus dollars available for payment or
reserve after all declarations have been
made.
AVAILABLE BALANCE The Bonus Declared plus the Beginning
Bonus Reserve Balance.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 7
- --------------------------------------------------------------------------------
KEY TERMS (CONTINUED):
NAT The consolidated Net Earnings After Tax
for the bonus year, including appropriate
accruals for all incentive awards
estimated to be payable for that bonus
year.
EQUITY CHARGE The average equity x the cost of equity
determined by Chief Financial Officer.
EXAMPLE:
The following is an example of how bonus calculations are determined using 1999
RSI Target EVA of $53.6 MM.
Assume your base salary is $100,000 and your Target Bonus is 30% of your salary,
or $30,000. 80% of your bonus is determined by EVA, and 20% determined by VEMs.
As you will recall, Target EVA for 1999 is $20 MM higher than 1998 Year-End EVA,
or $53.6 MM.
The EVA Bonus Interval ("Interval") is the EVA Improvement needed, over and
above Target, to declare a double bonus. It is also the shortfall from Target
that will cause a zero bonus being declared. The EVA Bonus Interval for 1999 is
$34 MM. Therefore:
Zero Bonus Contribution at: 1999 Target EVA - Interval = $53.6 MM - $34 MM=
$19.6 MM
or,
Twice Target Bonus Contribution at: = 1999 Target EVA + Interval = $53.6 MM +
$34 MM = $87.6 MM
For any level of EVA, determine the difference between Actual EVA and Target
EVA, and divide that difference by the Interval. Add that number to 1.0 to
calculate the Bonus Contribution.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 8
- --------------------------------------------------------------------------------
STEP ONE: CALCULATE VARIANCE FROM TARGET EVA:
Year-end EVA in 1998 was $33.6 MM. As stated previously, 1999 Target EVA is
$53.6MM. First, determine the difference between 1999 Actual EVA and 1999
Target EVA. This is your Variance from Target EVA. If year-end 1999 EVA is
$58.6 MM, the calculation is shown below.
1999 Actual EVA $58.6 MM
- 1999 Target EVA - $53.6 MM
--------------- --------
= Variance from Target EVA $ 5 MM
STEP TWO: CALCULATE BONUS MULTIPLE CONTRIBUTION:
In this example, RSI's 1999 EVA is $5 MM above Target EVA. From above, this
should be divided by the EVA Bonus Interval to determine the amount of Bonus to
be added to Target.
Variance from Target EVA $ 5 MM
/ EVA Bonus Interval / 34 MM
------------------ ------
= Bonus Above Target 0.15 x
Next, add the Bonus Above Target to the Target Bonus of 1.0 to determine your
Bonus Contribution.
Bonus Above Target 0.15x
+ Target Bonus Multiple + 1.00
--------------------- ----
= Bonus Multiple Contribution 1.15 x
STEP THREE: CALCULATE BONUS CONTRIBUTION:
The Bonus Multiple Contribution is then multiplied by your Target Bonus to
determine your Bonus Contribution in dollars.
Bonus Multiple Contribution 1.15x
x Target Bonus x $30,000
------------ ------
= Bonus Contribution $34,500
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 9
- --------------------------------------------------------------------------------
STEP FOUR: CALCULATE FINANCIAL BONUS CONTRIBUTION:
For all RSI participants, 20% of your Bonus Contribution will be determined by
VEMs. The other 80% is determined by EVA.
Bonus Contribution $34,500
x EVA Component x 80%
------------- ------
= Financial Bonus Contribution $27,600
STEP FIVE: CALCULATE VALUE ENHANCEMENT MEASURES BONUS CONTRIBUTION:
To determine the amount subject to VEMs (your VEM Potential Bonus) multiply your
Bonus Contribution by 20%.
Bonus Contribution $34,500
x Value Enhancement Measures x 20%
-------------------------- ------
= VEM Potential Bonus $ 6,900
Your VEM Potential Bonus is then modified by VEM performance. If you achieved
90% performance on your VEM, this calculation is illustrated below.
VEM Potential Bonus $ 6,900
x VEM Award x 90%
--------------------- -----
= VEM Bonus Contribution $ 6,210
STEP SIX: CALCULATE TOTAL BONUS DECLARED:
Add the VEM Bonus Contribution to the Financial Bonus Contribution to get the
Total Bonus Declared, which is then subject to the Bonus Reserve.
Vem Bonus Contribution $ 6,210
+ Financial Bonus Contribution + $27,600
---------------------------- -------
= Total Bonus Declared $33,810
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 10
- --------------------------------------------------------------------------------
STEP SEVEN: CALCULATE THE BONUS RESERVE AND BONUS PAYMENT:
The Bonus Reserve will only apply to those in MS 11 and above. Before any Bonus
can be paid, the Bonus Declared must flow through the Bonus Reserve. First, the
Bonus Declared is added to the Beginning Reserve Balance to determine how much
is available to be paid. If in 1999, your Beginning Reserve Balance is $2,000.
Bonus Declared (1999) $33,810
+ Beginning Reserve Balance + $ 2,000
------------------------- -------
= Available Balance $35,810
Second, the reserve then pays out up to Target Bonus; if less than Target Bonus
is in the Bonus Reserve, the entire Bonus Reserve is paid out.
Available Balance $35,810
- (Up To) Target Bonus - $30,000
------------------- -------
= Residual Balance $ 5,810
Next, ONE-HALF OF ANY RESIDUAL BALANCE is paid out...
Residual Balance $ 5,810
x 1/2 x 1/2
------------------ -------
= Additional Payment $ 2,905
Target Bonus $30,000
+ Additional Payment + $ 2,905
------------------ -------
= Total Bonus Payment $32,905
...with the remaining one-half staying in the reserve.
Residual Balance $ 5,810
- Additional Payment - $ 2,905
------------------ -------
= Ending Reserve Balance $ 2,905
The Ending Reserve Balance from 1999 then becomes the Beginning Reserve Balance
for 2000.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 11
- --------------------------------------------------------------------------------
BASE SALARY CALCULATION
For the purpose of bonus calculations, base salary is defined as the average
annual rate of pay for the calendar year, excluding all other compensation paid
to the employee during the year, e.g. bonus, commissions, car allowance,
employee benefits, moving expenses, any imputed income and amounts attributable
to any of the Company's stock plans.
The average annual rate of pay for a participant whose base salary changes
within the bonus year is calculated below. Salaried employees are paid
semi-monthly, each check representing 1/24 of the annual base salary. Daily pay
for a salaried employee is calculated by dividing the annual salary by 360
working days per year.
BASE SALARY CALCULATION EXAMPLE
Average annual rate of pay would be calculated as follows for a
participant who begins a bonus year with a base salary of
$100,000, then effective April 1 receives an increase to a base
salary of $104,000:
JANUARY 1 THROUGH MARCH 31 OF BONUS YEAR:
3 months X 30 days per month = 90 = .25 x $100,000/yr. = $ 25,000
---------------------------- ----
360 days 360
APRIL 1 THROUGH DECEMBER 31 OF BONUS YEAR:
360 - 90 = 270 = .75 x $104,000/yr. = $ 78,000
-------- ------ ------
360 days 360
AVERAGE ANNUAL RATE OF PAY FOR BONUS YEAR = $ 103,000
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 12
- --------------------------------------------------------------------------------
PLAN RULES
The following rules apply to Plan participants. The Company reserves the right
to alter, modify, change or terminate any of the provisions described below at
any time.
ELIGIBILITY: Employees whose positions are designated on page 1 and
who are employed in good standing at the time bonus payments are made
are eligible to participate in this Plan. Individuals who have
agreements which specifically provide for incentive compensation other
than that which is provided in this Plan or who are participants in
any other incentive compensation plan of RSI, its subsidiaries or
affiliates are not eligible to participate in this Plan.
Employees who are newly hired, promoted or transferred into or out of
eligible positions and those who move from one eligibility level to
another will receive pro-rata bonus awards based on the average annual
rate of pay and Bonus Opportunity in eligible positions, provided they
are employed in good standing at the time bonus awards are
distributed.
PROMOTION: A participant who is promoted during the bonus year will
receive a pro-rata bonus declaration based on the average annual rate
of pay and bonus opportunity in the eligible positions. The
participant will receive a pro-rata bonus based on the appropriate
Plan for his/her management level, position and the portion of time
spent in each position during the year.
WORKERS' COMPENSATION OR LEAVE OF ABSENCE ("LOA"): A participant who
leaves the payroll due to a workers' compensation leave or LOA will
receive no additional bonus declarations while off the payroll, but
will be eligible to receive a pro-rata bonus for the year in which
they leave the payroll. Such payment may be made in a lump sum or over
time at the discretion of the Company, the Board of Directors or the
Compensation Committee of the Board of Directors.
TRANSFERS: A participant who transfers from one business unit to another
will have their Bonus Reserve transferred with them. At the time of
transfer the award will be prorated with respect to the year in which
the transfer occurs.
DEMOTION: If an individual is demoted from level 11 or above to level 10
or below, the person will no longer be subject to the Bonus Reserve
mechanism. The reserve balance will be paid out one half over each of
the next 2 years in accordance with the other provisions of this Plan.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 13
- --------------------------------------------------------------------------------
PLAN RULES (CONTINUED)
TERMINATION (DISMISSAL): Participants leaving the Company under any
conditions other than those outlined in the Eligibility or Change of
Control sections of this Plan are not eligible for bonus awards for
the bonus year in which they leave, nor are they eligible for awards
for the preceding bonus year, if such awards have not yet been
distributed. A participant who is terminated and who has a positive
Reserve Balance will forfeit any Reserve Balance. Unless terminated
for cause, the individual may be eligible for severance which may
include a provision for bonus.
RESIGNATIONS: Except as provided otherwise in this Plan, voluntary
termination of employment with the Company will result in forfeiture
of any unpaid declared bonuses and of the balance in a participant's
Bonus Reserve.
RETIREMENT OR PERMANENT DISABILITY RETIREMENT: A participant who retires
or takes disability retirement from the Company will receive full
payment of their Reserve Balance and a pro-rata bonus for the year in
which they retire. Such payment will be made in a lump sum or over
time at the Company's discretion.
DEATH: The estate of a participant who dies while in the employ of the
Company will receive full payment of their Reserve Balance and a
pro-rata bonus for the year in which they die. Such payment will be
made at the regular time for making bonus payments in respect to the
year of such death, and will be paid to the designated beneficiary or
estate.
SALE OF BUSINESS: If a business is sold, the reserve will be paid out
to participants of the sold business.
NO GUARANTEE: Participation provides no guarantee that a bonus will be
paid. The success of the Company, its business units and individual
participants as measured by the achievement of EVA will determine the
extent to which participants will be entitled to receive bonuses
hereunder; provided, however, all bonuses are subject to the sole
discretion of the Board of Directors or the Compensation Committee of
the Board of Directors of the Company.
EXCLUSION CRITERIA: Participation in the Plan is not a right, but a
privilege subject to annual review by the Company. RSI retains the
right to withhold payment from any participant who violates Company
principles or policies, or the rules contained in this Plan.
NEGATIVE BALANCES: The entire Bonus Declared is credited to each
participant's personal Bonus Reserve account, with the Target Bonus
and one half of any net positive balance paid out. Residual amounts,
including negative balances, are reserved forward to be credited or
debited against future declared bonus amounts. Negative balances will
not be held as claims against participants who leave the payroll for
any reason.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 14
- --------------------------------------------------------------------------------
ADMINISTRATION
The Chairman, President, and Chief Executive Officer of RSI will administer this
Plan, except for bonus awards to the Chief Executive Officer, which will be
administered by the Compensation Committee of the Board of Directors of RSI.
BONUS YEAR
The bonus year is defined as the calendar year in which bonus awards are earned.
BONUS ELIGIBILITY ON CHANGE OF CONTROL
Notwithstanding anything in this Plan to the contrary, in the event of a Change
of Control of the Company (as defined and adopted by the Board of Directors on
August 18, 1995), the funds necessary to pay incentive awards, including the
Reserve Balances, will be placed in a trust administered by an outside financial
institution.
The amount of each participant's incentive award will be determined in
accordance with the provisions of the Plan by a "Big 5" accounting firm chosen
by the Company. The Company will be responsible for all legal fees and expenses
which participants may reasonably incur in enforcing their rights under the Plan
in the event of a Change of Control of the Company.
Should a Change of Control occur during 1999, participants will receive
instructions regarding the collection of incentive awards.
BONUS PAYMENT
Shortly after the end of the calendar year and after considering the
recommendations of the Administrator of the Plan, the Compensation Committee of
the Board of Directors or the Board of Directors of RSI will, in its sole
discretion, determine the participants, if any, who will receive bonus awards
and the amounts of such awards. Bonus award payments will be distributed to
eligible participants following such Board or Committee approval and subsequent
to certification of consolidated financial statements by an independent auditor.
BONUS FUNDING
A maximum of 13% of consolidated RSI NBT may be allotted by RSI throughout the
bonus year as an accrual to fund all awards under all incentive compensation
plans of the Company, including this Plan, as well as any incentive or bonus
payments resulting from employment commitments or agreements.
<PAGE>
- --------------------------------------------------------------------------------
RYDER RSI HEADQUARTERS
EXECUTIVE MANAGEMENT
LEVELS MS 11 AND HIGHER
1999 INCENTIVE COMPENSATION PLAN PAGE 15
- --------------------------------------------------------------------------------
BONUS FUNDING (CONTINUED)
Bonus payout maximums are limited by the lower of the total declared bonus
provided under this Plan, the amount of the accrual at the time of any bonus
payment, or the maximum funding limitation. Should the funding limitation or
accrual not provide for bonus allotments under this Plan, proration will be
performed at the discretion of the Chairman, President and Chief Executive
Officer of RSI. Unused funds may not be carried forward for subsequent bonus
years.
DISCRETIONARY AWARDS
With the approval of the Board of Directors or the Compensation Committee of the
Board of Directors of RSI, the Chairman, President, and Chief Executive Officer
of RSI has the authority to grant discretionary bonus awards for exemplary
performance to non-participants or to enhance the awards of participants.
Discretionary awards are not subject to the funding limitations of this Plan.
While it is common to grant discretionary awards at the same time as regular
awards, it may be appropriate, on occasion, to recognize an employee off-cycle
due to extremely unusual performance. Off-cycle discretionary awards must be
approved by the Chairman, President and Chief Executive Officer of RSI.
The total of all discretionary awards for participants under all RSI incentive
compensation plans, including this Plan as well as awards granted off-cycle, may
not exceed $500,000 per year.
AMENDMENTS
The Board of Directors of RSI, or the Compensation Committee, reviews RSI's, its
subsidiaries' and affiliates' incentive compensation plans annually to ensure
equitability both within the Company, and in relation to current economic
conditions.
THE BOARD OF DIRECTORS, OR THE COMPENSATION COMMITTEE, RESERVES THE RIGHT TO
AMEND, SUSPEND, TERMINATE OR MAKE EXCEPTIONS TO THIS PLAN AT ANY TIME.
EXHIBIT 10.9(b)
RYDER SYSTEM, INC
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of this 19th day of February, 1998, between Ryder
System, Inc., a Florida corporation ("RSI"), and [FName] [LName] (the
"Grantee");
W I T N E S S E T H:
WHEREAS, the Board of Directors of RSI has adopted and the shareholders of RSI
have approved the Ryder System, Inc. Stock for Merit Increase Replacement Plan,
as amended (the "Plan"), which provides for the grant of non-qualified stock
options ("Non-qualified Stock Options") in lieu of merit salary increases to key
executive employees; and
WHEREAS, the Grantee is a key executive employee and has been selected by the
Compensation Committee of the Board of Directors of RSI (the "Committee") to
receive Non-qualified Stock Options under the Plan;
NOW, THEREFORE, in consideration of the premises, RSI and the Grantee agree as
follows:
I. NON-QUALIFIED STOCK OPTION
GRANT OF OPTION Subject to the limitations and other terms and conditions set
forth in this Agreement and the Plan, the Committee grants to the Grantee as of
February 19, 1998 a Non-qualified Stock Option to purchase an aggregate of
[Award] shares of RSI's common stock, par value $.50 per share (the "Common
Stock"), at a price of $37.2188 per share of Common Stock, the Fair Market Value
on the date of grant.
LIMITATIONS ON EXERCISE OF OPTION Subject to the limitations and other terms and
conditions set forth in this Agreement and the Plan, the Non-qualified Stock
Option shall be exercisable in installments on or before February 18, 2008, the
expiration of the term of the Non-Qualified Stock Option, as follows:
(i) 20% of the shares of Common Stock subject to the Non-qualified
Stock Option effective immediately;
(ii) 20% of the shares of Common Stock subject to the Non-qualified
Stock Option on or after February 19, 1999;
(iii) 20% of the shares of Common Stock subject to the Non-qualified
Stock Option on or after February 19, 2000;
<PAGE>
(iv) 20% of the shares of Common Stock subject to the Non-qualified
Stock Option on or after February 19, 2001;
(v) and the final 20% of the shares of Common Stock subject to the
Non-qualified Stock Option on or after February 19, 2002.
EXERCISE AND PAYMENT OF OPTION Subject to the limitations and other terms and
conditions set forth in this Agreement and the Plan, the Non-qualified Stock
Option may be exercised in whole or, from time-to-time, in part with respect to
the number of then exercisable shares by delivering written notice to RSI
addressed to the Controller of RSI specifying the number of shares of Common
Stock the Grantee then elects to purchase under the Non-qualified Stock Option,
together with the full purchase price of the shares being purchased in cash or a
certified or bank cashier's check payable to the order of RSI, or in shares of
Common Stock having a Fair Market Value on the date of exercise equal to the
purchase price, or a combination of the foregoing having an aggregate Fair
Market Value equal to the purchase price. As promptly as practicable after any
such exercise, RSI will deliver to the Grantee certificates for the number of
shares of Common Stock with respect to which the Non-qualified Stock Option has
been exercised, issued in the name of the Grantee.
EXERCISE AND PAYMENT UPON A CHANGE OF CONTROL Subject to the limitations and
other terms and conditions set forth in this Agreement and the Plan:
(i) Notwithstanding any other provision of this Agreement, pursuant to
Section 12 of the Plan, in the event of a Change of Control, the Non-qualified
Stock Option granted under Section I of this Agreement, to the extent not
previously exercised or expired under the terms of this Agreement and the Plan,
shall become immediately exercisable in full and shall remain exercisable to the
full extent of the shares of Common Stock available thereunder, regardless of
any installment provisions applicable thereto, for the remainder of its term,
unless the Grantee has been terminated for Cause, in which case the
Non-qualified Stock Option shall automatically terminate.
(ii) The Grantee may, in lieu of exercising, require RSI to purchase
for cash all or any portion of the Non-qualified Stock Option granted under
Section I of this Agreement, which is not otherwise exercised or expired under
the terms of this Agreement and the Plan, for a period of sixty days following
the occurrence of a Change of Control at the Price upon a Change of Control
specified below.
PRICE UPON A CHANGE OF CONTROL Subject to the limitations and other terms and
conditions set forth in this Agreement and the Plan, upon the occurrence of a
Change of Control, the Price of the Non-qualified Stock Option or portions
thereof shall be the excess of the highest of:
<PAGE>
(i) the highest closing price of the Common Stock reported by the
composite transaction reporting system for securities listed on the New York
Stock Exchange within the sixty days preceding the date of exercise;
(ii) the highest price per share of Common Stock included in a filing
made by any Person, but excluding any employee benefit plan or plans (or related
trust) of RSI and its subsidiaries and affiliates, who becomes the beneficial
owner, directly or indirectly, of twenty percent or more of the combined voting
power of RSI's outstanding voting securities ordinarily having the right to vote
for the election of directors of RSI, on any Schedule 13D pursuant to Section
13(d) of the 1934 Act as paid within the sixty days prior to the date of such
report; and
(iii) the value of the consideration to be received by the holders of
Common Stock, expressed on a per share basis, in any Business Combination
affecting RSI, any liquidation or dissolution of RSI approved by the
shareholders or any sale of all or substantially all of the assets of RSI, with
all noncash consideration being valued in good faith by the Incumbent Board;
over the purchase price per share of Common Stock at which the related
Non-qualified Stock Option is exercisable, as applicable.
II. GENERAL
TRANSFERABILITY OF OPTIONS No Options shall be assignable or transferable by the
Grantee except by will or the laws of descent and distribution. During the
lifetime of the Grantee, an Option shall be exercisable only by the Grantee or
the Grantee's guardian or legal representative.
NOTICES All notices provided for in this Agreement or the Plan shall be in
writing and shall be deemed to have been duly given if delivered in person or
mailed by registered mail, return receipt requested:
(a) If to RSI, at Ryder System, Inc., P. O. Box 020816, Miami,
Florida 33102-0816, Attention: Controller; and
(b) If to the Grantee, at the Grantee's business address or
address appearing in the payroll records of RSI; or
(c) At such other addresses as may be furnished to RSI or the
Grantee in accordance with this paragraph.
DEFINITIONS AND INTERPRETATION Capitalized terms not otherwise defined in this
Agreement are defined as in the Plan. This Agreement and the grant, exercise,
adjustment, modification, cancellation and termination of the Non-qualified
Stock Option and the issuance of shares of Common Stock subject thereto are
subject in all respects to the
<PAGE>
terms of the Plan and in the event that any provision of this Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. The Committee shall have plenary authority, subject to the express
provisions of the Plan, to interpret this Agreement and the Plan and to make all
determinations deemed necessary or advisable for the administration of the Plan.
The Committee's interpretations and determinations shall be conclusive.
ACKNOWLEDGEMENT The Grantee acknowledges that he/she has read the entire Plan
including the provisions thereof relating to termination of employment and
Change of Control. Additionally, Grantee acknowledges that this Agreement is not
an employment agreement between the Grantee and RSI, and RSI and the Grantee
each has the right to terminate the Grantee's employment at any time for any
reason whatsoever, unless there is a written employment agreement to the
contrary.
GOVERNING LAW This Agreement shall be construed and enforced in accordance with,
and governed by, the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Attest: Ryder System, Inc. ("RSI")
By:_____________________________ By:_____________________________
Edward R. Henderson Stephen N. Karp
Assistant Secretary Vice President
Compensation & Benefits
__________________________
GRANTEE
_______________________________
Social Security Number
EXHIBIT 13.1
FINANCIAL REVIEW
Ryder System, Inc. and Subsidiaries
1998 REVENUE
Full Service Leasing 33%
Integrated Logistics 29%
International 12%
Public Transportation 11%
Rental 10%
Other 5%
[Chart]
This Financial Review discusses the Company's results of operations and
financial position and should be read in conjunction with the consolidated
financial statements and related notes.
The Company's business segments consist of Integrated Logistics,
Transportation Services (which primarily provides full service leasing,
programmed maintenance and commercial rental services in the United States and
Canada), Public Transportation Services and International (which provides
integrated logistics and full service leasing in Europe, South America and
Mexico). During 1997, the Company completed the sale of its automotive carrier
business. The sale, which followed the 1996 sale of the consumer truck rental
business, reinforced the Company's strategy to emphasize contractual businesses
which are less cyclical and less capital intensive. In the accompanying
consolidated statements of operations and cash flows, the automotive carrier
business has been reported as a discontinued operation (see the "Divestitures"
note to the consolidated financial statements for a further discussion).
Consolidated Results
Years ended December 31
In thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Earnings from continuing
operations before special
items* $182,702 162,359 103,136
Per diluted common share 2.48 2.08 1.27
Earnings (loss) from
continuing operations 159,071 160,238 (19,423)
Per diluted common share 2.16 2.05 (0.24)
- --------------------------------------------------------------------------------
* Year 2000 expense, 1996 restructuring and other charges and the results of the
consumer truck rental business.
Earnings from continuing operations increased 13% in 1998 and 57% in 1997 after
adjusting for the effects of special items. The earnings growth in 1998 was
primarily due to improved performance in Transportation Services and Integrated
Logistics which offset slight decreases in Public Transportation Services and
International performance. All of the Company's business segments contributed to
the improved results in 1997. The earnings per share growth rate the last two
years exceeded the earnings growth rate because the average number of shares
outstanding during 1998 and 1997 decreased by 5% compared with prior periods.
The decrease in shares reflects the impact of the Company's various stock
repurchase programs announced since 1996.
16
<PAGE>
Revenue in 1998 totaled $5.2 billion, an increase of $295 million, or 6%,
from 1997. International, Public Transportation Services and Integrated
Logistics led the 1998 growth with annual increases of 10% or greater.
Transportation Services revenue in 1998 was lower due to decreased fuel revenue
associated with declining fuel prices and volumes, which offset an improvement
in full service leasing and commercial rental revenue. In 1997, revenue
decreased $42 million, or 1%, compared with 1996. Excluding the consumer truck
rental business, revenue increased 9% in 1997 compared with 1996, led by
Integrated Logistics, Public Transportation Services and International.
Operating expense increased 4% in 1998 compared with 1997. The increase was
attributable to higher compensation and employee benefit expenses, outside
driver costs, maintenance, technology and workers' compensation costs primarily
as a result of higher business volumes. These increases were partially offset
by lower fuel costs. Operating expense as a percentage of revenue was 73% in
1998 compared with 74% in 1997. The decrease was primarily attributable to lower
fuel costs. Operating expense as a percentage of revenue (excluding
restructuring and other charges and the consumer truck rental business)
decreased to 74% in 1997 from 77% in 1996, due to an overall decrease in
employee benefit and vehicle liability expenses.
Freight under management expense, which represents subcontracted freight
costs on logistics contracts where the Company purchases transportation,
increased $85 million, or 35%, in 1998 and $167 million, or 214%, in 1997
compared with prior periods. Freight under management expense as a percentage of
revenue also increased to 6% in 1998 from 5% in 1997 and 2% in 1996. The
increases since 1996 reflect the growth these integrated logistics contracts
experienced, especially during the latter half of 1997.
Incremental Year 2000 expense totaled $38 million in 1998 ($24 million
after tax, or $0.32 per diluted common share) compared with $3 million ($2
million after tax, or $0.03 per diluted common share) in 1997. See "Year 2000
Preparation" for a further discussion of this matter.
Depreciation expense (before gains on vehicle sales) increased 3% in 1998
compared with 1997 reflecting growth in the average size of the full service
lease and commercial rental fleets. Gains on vehicle sales increased by $7
million, or 12%, in 1998 compared with 1997. The increase was due to a higher
number of vehicles sold in 1998 as well as greater average gain per vehicle
sold. As a percentage of revenue, depreciation expense, net of gains on vehicle
sales, remained at 12% in 1998 and 1997. Excluding the consumer truck rental
business, depreciation expense (before gains on vehicle sales) decreased 1% in
1997 compared with 1996 as the average size of the full service lease vehicle
fleet remained constant while the average size of the commercial truck rental
fleet decreased 8%. Excluding the consumer truck rental business, gains on
vehicle sales decreased in 1997 by $2 million, or 4%, compared with 1996 due to
a reduced number of vehicles sold in 1997. As a percentage of revenue,
depreciation expense, net of gains on vehicle sales, decreased to 12% in 1997
from 13% in 1996.
Interest expense increased 5% in 1998 compared with 1997 as higher average
outstanding debt levels were only partially offset by lower average interest
rates. The higher outstanding debt levels resulted primarily from increased
levels of capital spending. Interest expense decreased 8% in 1997 compared with
1996 due to lower average debt levels during 1997, reflecting the impact of
reduced capital spending which began in 1996 and the Company's use of proceeds
from the sale of its consumer truck rental business to pay down debt.
Miscellaneous income, net was $7 million in 1998 compared with $10 million
in 1997 and $22 million in 1996. The decrease in 1998 was primarily because of
lower earnings from equity investments due in part to the International
acquisition of an entity previously reported on the equity method of accounting,
increased costs associated with selling, with limited recourse, more trade
receivables during the year, and costs incurred in an attempt to sell a portion
of the International segment's operations in the U.K. These items were partially
offset by increased gains from the sale of surplus non-operating properties and
the reversal of a valuation allowance established for the sale of a small,
non-strategic business which the Company has elected to retain. The U.K.
transactions are discussed in more detail in the "1996 Restructuring" and
"International" sections of this Financial Review. The decrease in miscellaneous
income, net in 1997, compared with 1996, was primarily due to a gain of
17
<PAGE>
$25 million recognized in 1996 on the sale of the consumer truck rental
business. This item was partially offset by decreased costs associated with
selling, with limited recourse, less trade receivables during 1997.
The Company's effective tax rate for continuing operations was 38.1% in
1998, 39.3% in 1997 and 222.1% in 1996. The lower 1998 effective tax rate
resulted primarily from lower state income taxes and lower net non-deductible
items. The lower 1997 effective tax rate relative to the prior year resulted
primarily from the impact of a reduced amount of non-deductible expenses on
higher pretax earnings as well as a reduction in the corporate income tax rate
in the U.K. The 1996 effective tax rate includes the tax effects of
non-deductible restructuring and other charges. Additionally, lower income
before taxes in 1996 increased the rate impact of normal, recurring
non-deductible expenses.
1996 RESTRUCTURING
During 1996, the Company recorded to operating expense, restructuring and other
charges of $228 million, attributable to continuing operations, related to plans
to improve organizational effectiveness, improve margins and contain costs. The
restructuring plan included reducing the workforce by approximately 2,300
positions, including employees who took advantage of early retirement programs,
and closing approximately 200 operating and administrative locations in order to
achieve economies of scale and eliminate redundant processes. The planned
headcount reductions and facility closures were substantially completed as of
December 31, 1998.
The Company's restructuring initiatives also included asset write-downs and
valuation allowances of $81 million relating to facility closures, the
anticipated sale of small non-strategic businesses, discontinuance of the
company car program, certain information systems and other assets, and $29
million for other costs associated with the restructuring initiatives including
relocation of employees and professional fees incurred as part of the
implementation of the restructuring. The Company substantially completed its
facility closure program during the third quarter of 1998 and credited to
operating expense, excess accruals of $3.4 million. During the fourth quarter of
1998, the Company also decided to retain a small business previously held for
sale in the U.K. and credited to miscellaneous income, a valuation allowance of
$7.5 million which had been established in 1996.
See the "Restructuring and Other Charges" note to the consolidated
financial statements for a further discussion.
OPERATING RESULTS BY BUSINESS SEGMENT
Years ended December 31
In thousands 1998 1997 1996
- --------------------------------------------------------------------------------
REVENUE
Transportation Services:
Full service lease and
programmed maintenance $1,604,739 1,584,159 1,579,251
Commercial rental 467,222 419,720 429,278
Fuel 533,406 635,849 702,323
Other 261,477 246,907 268,557
- --------------------------------------------------------------------------------
2,866,844 2,886,635 2,979,409
Integrated Logistics 1,501,126 1,370,320 1,104,797
Public Transportation Services 581,748 525,757 439,750
International 603,834 457,869 358,869
Intersegment eliminations (364,828) (346,676) (386,815)
- --------------------------------------------------------------------------------
Total revenue from
reportable segments 5,188,724 4,893,905 4,496,010
Consumer truck rental -- -- 440,113
- --------------------------------------------------------------------------------
Total revenue $5,188,724 4,893,905 4,936,123
================================================================================
<PAGE>
EARNINGS (LOSS) BEFORE INCOME TAXES
Transportation Services $236,466 217,059 171,441
Integrated Logistics 76,514 67,300 36,351
Public Transportation Services 48,367 50,178 39,434
International (93) 1,516 (9,989)
Intersegment eliminations (54,619) (50,061) (37,933)
- --------------------------------------------------------------------------------
Total product line earnings before
income taxes from reportable
segments 306,635 285,992 199,304
Corporate administrative
expenses and other (11,506) (18,546) (21,566)
Year 2000 expense (38,173) (3,494) --
Consumer truck rental -- -- 44,687
Restructuring and other charges -- -- (228,455)
- --------------------------------------------------------------------------------
Total earnings (loss)
before income taxes $256,956 263,952 (6,030)
================================================================================
- --------------------------------------------------------------------------------
Fleet size (owned and leased),
including International:
Full service lease 120,018 113,565 112,518
Commercial rental 39,832 36,631 37,609
Buses operated or managed 15,226 14,552 13,098
Transportation Services locations 1,034 957 1,083
- --------------------------------------------------------------------------------
The Company evaluates financial performance based upon several factors, of which
the primary measure is business segment earnings before income taxes and
one-time items such as Year 2000 expense and 1996 restructuring and other
charges. Business segment earnings before income taxes represent the
18
<PAGE>
total profit earned from each segment's customers across all of the Company's
segments and include allocations of certain overhead costs.
INTEGRATED LOGISTICS
Ryder Integrated Logistics helps clients speed products to market, reduce
inventory, free working capital, improve customer satisfaction and expand into
new markets-domestically and globally. We achieve these goals by providing
supply chain solutions, from raw material supply management to finished goods
distribution. Solutions range from just-in-time pickup and delivery (smoothing
material flow into assembly and manufacturing plants) to flow-through
distribution (products from multiple locations are brought into a central
facility, consolidated by delivery destination and shipped, minimizing facility
investment and material handling). Ryder also offers dedicated contract carriage
for time-sensitive door-to-door shipping. Additionally, Ryder offers shipment
and carrier management to optimize all methods of domestic and international
transportation, from mode selection support to complete planning and execution
of the transportation process.
INTEGRATED LOGISTICS REVENUE [GRAPH]
Integrated Logistics serves more than 400 customers on three continents and
has special expert teams dedicated to automotive, aerospace, communications,
consumer goods, electronics, health care, high tech, industrial products, retail
and utilities industries.
Revenue from Integrated Logistics increased 10% in 1998 compared with 1997,
primarily due to expansion of revenue with existing customers and start-up of
business sold in the previous year. The largest component of growth in 1998 has
come from logistics contracts where the Company manages the transportation of
freight and subcontracts the delivery of products to third parties. Operating
revenue (which excludes subcontracted freight costs) increased 4% in 1998
compared with 1997. Revenue growth from Integrated Logistics was impacted by the
termination of two large accounts in the last year. Adjusting for these
accounts, total revenue and operating revenue would have increased 15% and 9%,
respectively, in 1998 compared with 1997. Revenue growth for Integrated
Logistics was also impacted by lower levels of new business sales during 1997
and the first half of 1998; however, new business sales in the second half of
1998 increased more than 50% compared to the second half of 1997. Management
believes that improved sales force capabilities, industry segmentation, and the
ability to leverage rapidly emerging logistics technologies and alliances to
enhance service offerings should result in continued new sales growth and higher
revenue growth rates in 1999.
Integrated Logistics pretax earnings increased 14% in 1998 compared with
1997. Pretax earnings as a percentage of operating revenue also increased to
6.5% in 1998 from 6.0% in 1997. These improvements were primarily due to
increased operating efficiencies, lower overhead spending, improved pricing in
new and existing contracts and, to a lesser extent, the growth in revenue.
Total revenue increased 24% in 1997 compared with 1996, primarily due to
expansion of business with existing customers and start-up of business from
sales in 1996. Operating revenue was 10% higher in 1997 compared with 1996.
Pretax earnings increased 85% in 1997 and pretax earnings as a percentage of
operating revenue also increased to 6.0% in 1997 from 3.5% in 1996. The
significant earnings improvement resulted from the growth in revenue combined
with operating efficiencies, improved pricing in new and existing contracts and
lower vehicle liability and overhead expenses.
TRANSPORTATION SERVICES
The primary product lines of Transportation Services consist of full service
leasing, programmed maintenance and commercial rental of trucks, tractors and
trailers. Revenue in the Transportation Services segment decreased 1% in 1998
compared with 1997 and 3% in 1997 compared with 1996. The results for both years
were impacted by decreased fuel revenue. Dry revenue (revenue excluding fuel)
increased 4% in 1998 compared with 1997 primarily due to growth in commercial
rental revenue. Dry revenue declined 1% in 1997 compared with 1996 due to
reduced commercial rental revenue.
Fuel revenue decreased 16% and 9% in 1998 and 1997, respectively, compared
with the prior periods as a result of both lower fuel prices and volume. Other
transportation services revenue, consisting of third-party maintenance, trailer
rentals and other ancillary revenue to support product lines, increased 6% in
1998 and decreased 8% in 1997, compared with prior periods.
Transportation Services pretax earnings increased 9% in 1998 compared with
1997. Earnings before income taxes as a percentage of dry revenue also improved
to 10.1% in 1998, compared with 9.6% in 1997. The improvement resulted from
higher revenue and operating margins in both product lines, especially
commercial rental, which more than offset increased overhead spending for
technology and 1998 marketing initiatives. Transportation Services earnings
before income taxes increased 27% in 1997 compared with 1996. Earnings before
income taxes as a percentage
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of dry revenue also improved to 9.6% in 1997, compared with 7.5% in 1996. The
improvement resulted from higher operating margins in commercial rental and
reduced overhead spending primarily due to 1996 restructuring actions and a
focus on cost containment throughout the Company.
FULL SERVICE LEASING. Full service leasing continues to be Ryder's largest
product line, supplying more than 13,500 full service leasing customers with
109,000 vehicles in the U.S. and Canada. Full service leasing is designed for
customers who wish to manage their own transportation systems without investing
the capital and human resources necessary to own and maintain a fleet. The full
service leasing product line provides nearly all of the vehicles operated by
Ryder to serve Integrated Logistics customers, as well as nearly all the
maintenance services for Public Transportation Services vehicles.
Under a customized full service lease, Ryder offers customers vehicle
specification and acquisition support; preventive maintenance; licensing and
permitting; emergency road service; fuel and fuel tax reporting; substitute
vehicles; safety programs; customized vehicle painting and washing; flexible
return conditions; and vehicle reliability and protection programs.
To serve customers and prospects with more tailored solutions to meet their
financial, maintenance and vehicle management needs, Ryder offers the Ryder
Citicorp Lease. The Ryder Citicorp Lease combines Ryder's equipment management
expertise with Citicorp's financing flexibility to provide customized solutions
in four service areas: vehicle specification and acquisition, financing,
programmed maintenance, and vehicle management services.
FULL SERVICE LEASING REVENUE [GRAPH]
Ryder's maintenance expertise is also available to companies who choose to
own their vehicles. Ryder Programmed Maintenance offers companies all of the
components of a full service lease except the actual vehicles. Many programmed
maintenance customers eventually ask Ryder to take on an expanded role in their
transportation operations.
Full service lease and programmed maintenance revenue increased 1% in 1998
compared with 1997. New lease sales for 1998 were significantly ahead of new
lease sales in 1997 and the best since 1994. The strong lease sales in 1998 were
partially offset by extended manufacturer's delivery times for new vehicle
purchases which delayed the period for lease revenue recognition. However, the
impact of delays in delivery did begin to lessen during the second half of 1998
and revenue grew 3% during this period. Management expects continued revenue
growth in 1999 in light of the increased level of new lease sales. Operating
margin (revenue less direct operating expenses, depreciation and interest
expense) and operating margin as a percentage of revenue from full service
leasing were up slightly in 1998, compared with 1997, as revenue growth on a
larger fleet was offset by higher vehicle maintenance costs, principally on
older units.
Revenue from full service lease and programmed maintenance was about the
same in 1997, compared with 1996, as new lease sales were offset by lost
business including selected non-renewal of lower margin business. Operating
margin and operating margin as a percentage of revenue were slightly lower in
1997 compared with 1996 as the benefit of improved pricing on new lease sales in
1997 and 1996 was offset by higher vehicle maintenance costs.
COMMERCIAL RENTAL. Helping companies meet their short-term transportation needs
safely, efficiently and cost-effectively is one of Ryder's strengths. With more
than 37,000 trucks, tractors and trailers available for rent in the U.S. and
Canada, Ryder offers vehicles for short-term rental. Often times, these vehicles
supplement the needs of full service lease customers when they require
additional vehicles to meet peak demand, to replace vehicles being serviced or
to serve as temporary vehicles while awaiting delivery of new full service lease
vehicles.
COMMERCIAL RENTAL REVENUE [GRAPH]
Commercial rental revenue in 1998 increased 11%, compared with 1997, due to
strong utilization of a larger fleet. Utilization levels reflect, in part,
increased demand from full service lease customers, especially while awaiting
delivery of new full service lease vehicles. Such "awaiting new lease" rental
revenue increased $23 million, or 95%, in 1998 compared with 1997. The average
commercial truck rental fleet size was 7% larger in 1998 compared with 1997
which was consistent with management's plan to grow the rental fleet in response
to strengthening demand beginning in the second half of 1997 and to shift the
fleet mix to more light-duty trucks. Management believes that with the current
fleet level and demand, this product line is well positioned for continued good
performance in 1999. However, the commercial rental product line continues to be
sensitive to the overall condition of the U.S. economy and 1999 rental results
will depend to a great extent on the strength of the economy.
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Revenue from commercial rental decreased 2% in 1997 compared with 1996,
primarily due to planned fleet reductions; however, revenue per unit and
utilization were higher in 1997. Stronger demand for rental resulted in revenue
growth in the second half of 1997 compared with the second half of 1996.
Commercial rental operating margin and operating margin as a percentage of
revenue were significantly higher in 1998 and 1997, compared with prior periods,
as a result of higher vehicle utilization.
PUBLIC TRANSPORTATION SERVICES
Ryder extends its logistics expertise to the public sector through its Public
Transportation Services segment, which includes student transportation, public
transit and public fleet management and maintenance services.
Ryder Student Transportation Services, one of the largest providers of
student transportation services in the U.S., transports more than 650,000
students daily in 477 school systems in 26 states.
Ryder/ATE provides public transit contracting and management services to
nearly 90 public transit organizations in such cities as Los Angeles, Dallas,
Charlotte and New York City. Those systems range from shuttles with fixed routes
and express bus service to paratransit systems.
PUBLIC TRANSPORTATION SERVICES REVENUE [GRAPH]
Ryder/MLS is the nation's largest private supplier of fleet management and
maintenance services for public fleets and for utility companies. More than
30,000 vehicles and pieces of equipment owned by cities, counties,
municipalities, colleges and utilities are managed or maintained by Ryder/MLS.
Public Transportation Services revenue increased 11% in 1998 compared with
1997. This revenue growth was primarily achieved through contributions from new
contracts, as well as the impact of four acquisitions completed in student
transportation services since December 1997. Revenue in Public Transportation
Services increased 20% in 1997, compared with 1996, reflecting the expansion of
existing contracts and contributions from new contracts, primarily at Ryder/ATE,
as well as the impact of a first quarter 1997 acquisition in student
transportation and public transportation. Pretax earnings in Public
Transportation Services decreased 4% in 1998 compared with 1997, and pretax
earnings as a percentage of revenue declined to 8.3% in 1998 compared with 9.5%
in 1997. These results were due to increased maintenance, safety and termination
costs associated with several transit and fleet maintenance contracts at
Ryder/ATE which more than offset improvements in student transportation services
achieved as a result of revenue growth and fleet efficiencies. Pretax earnings
in Public Transportation Services increased 27% in 1997 compared with 1996, and
pretax earnings as a percentage of revenue increased to 9.5% in 1997 from 9.0%
in 1996. These improvements were primarily as a result of the growth in revenue,
lower vehicle liability expense and lower driver compensation costs as a
percentage of revenue.
INTERNATIONAL
During 1998, Ryder continued to strengthen its presence within Latin America and
Europe, with the objective of becoming the leading provider of supply chain
management solutions. Ryder's supply chain management is globally coordinated,
targets key industries with an array of logistics services, and implements and
operates specialized logistics solutions tailored to both customer and local
market requirements and norms.
In Latin America, Ryder completed the acquisition of Companhia
Transportadora e Comercial Translor ("Translor"), a major logistics provider in
Brazil. In Europe, Ryder continues to focus on further refining a comprehensive
Pan-European strategy that will enable the Company to better serve customers in
this highly complex market.
INTERNATIONAL REVENUE [GRAPH]
The International segment experienced revenue growth of 32% in 1998 and 28%
in 1997, compared with the prior years. The revenue growth in 1998 resulted
primarily from the May 1998 acquisition of the remaining interest in Translor;
however, revenue improvements were made in every country. The 1998 revenue
growth also reflected the impact of a ground equipment maintenance contract with
British Airways that commenced in the U.K. during the second quarter of 1997.
The 1997 increase in revenue was primarily due to new logistics and maintenance
contracts in the U.K. and expanding operations in Argentina and Mexico.
Pretax results in the International segment were break-even in 1998
compared with earnings of $1.5 million in 1997. The results in the International
segment were adversely affected by operations in the U.K. and Brazil which
reported decreased pretax earnings in 1998 of $10 million. During 1998, the
Company explored various alternatives relative to disposing of its full service
leasing and commercial rental business in the U.K. in order to focus on global
integrated logistics. In December
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1998, the Company announced its intention to retain this business. U.K.
results include $5.5 million in transaction and other costs incurred during the
sale process. The U.K. results also include losses and write-offs of $7.5
million associated with two logistics contracts which have been terminated or
renegotiated. These U.K. charges were somewhat mitigated by the reversal of a
valuation allowance originally established in 1996 for the sale of a small,
non-strategic business in the U.K. which the Company elected to retain. The
results in Brazil reflect the country's general economic problems experienced
during the year.
Pretax earnings in the International segment were $1.5 million in 1997
compared with a loss of $10 million in 1996. The significant improvement in
earnings in 1997 compared with 1996 results principally from revenue growth. At
this time, there are no significant legal restrictions regarding the
repatriation of cash flows to the U.S. from the foreign countries where the
Company is currently operating.
CORPORATE ADMINISTRATIVE EXPENSES AND OTHER
Net corporate administrative expenses and other totaled $12 million in 1998
compared with $19 million in 1997 and $22 million in 1996. Lower 1998 costs were
primarily due to gains from the sale of surplus non-operating properties and the
re-insurance of certain vehicle-related liabilities. Lower 1997 costs were
primarily due to headcount reductions resulting from the 1996 restructuring plan
and reduced spending levels.
DISCONTINUED OPERATIONS
On September 30, 1997, the Company completed the sale of its automotive carrier
business for $111 million in cash and realized a $3 million after tax gain
($0.04 per diluted common share). The transaction was made at a premium over the
net book value of the business sold and also generated gains from the settlement
and curtailment of certain employee benefit and postretirement plans, offset by
provisions for severance and direct transaction and other costs. The disposal of
the automotive carrier business has been accounted for as a discontinued
operation and accordingly, its operating results and cash flows are segregated
and reported as discontinued operations in the accompanying consolidated
financial statements.
Earnings (loss) from discontinued operations before disposition gain
totaled $12 million in 1997 and $(12) million in 1996. The loss from
discontinued operations in 1996 includes the after tax impact of restructuring
and other charges of $14 million. The increase in earnings in 1997 (excluding
restructuring and other charges) was primarily due to an increase in vehicles
shipped through the sale date over the comparable 1996 period and reduced
overhead expenses as a result of the 1996 restructuring actions.
FINANCIAL RESOURCES AND LIQUIDITY
CASH FLOW
The following is a summary of the Company's cash flows from continuing
operating, financing and investing activities for the past three years:
Years ended December 31
In thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Net cash provided by (used in):
Operating activities $ 960,539 615,791 532,683
Financing activities (124,862) (105,184) (317,728)
Investing activities (775,694) (628,855) (128,215)
- --------------------------------------------------------------------------------
Net cash flows from
continuing operations $ 59,983 (118,248) 86,740
================================================================================
<PAGE>
The increase in cash flow from continuing operating activities in 1998,
compared with 1997, was attributable to lower working capital needs. The lower
working capital needs related primarily to an increase in the aggregate balance
of trade receivables sold, increased accounts payable for vehicle purchases due
to the timing of new lease sales and vehicle deliveries, and lower cash payments
for accrued expenses as 1997 activity reflected payments associated with
restructuring activities initiated in 1996. The increase in cash flow from
continuing operating activities in 1997, compared with 1996, resulted primarily
from higher earnings before non-cash charges, such as depreciation and deferred
income taxes, which were partially offset by higher working capital needs. A
summary of the individual items contributing to the cash flow changes is
included in the Consolidated Statements of Cash Flows.
During 1998, cash of $125 million was used for financing activities,
primarily to repurchase $110 million of common stock and pay dividends of $44
million. Debt levels were relatively unchanged for 1998 compared with 1997.
During 1997, cash of $105 million was used for financing activities. Net cash
expended for the purchase of common stock of $241 million and to pay dividends
of $46 million was partially offset by additional borrowings of $120 million and
stock issuances from employee option plans of $62 million. In December 1998, the
Company announced its fourth stock repurchase program since 1996, to acquire up
to three million shares of common stock in open market transactions. The three
prior programs were completed in their entirety, resulting in the repurchase of
fifteen million shares of common stock. The Company has utilized proceeds from
the sale of the automotive carrier business and
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<PAGE>
the consumer truck rental business, cash from operating activities and
commercial paper borrowings to fund these programs.
The increase in cash used for investing activities in 1998 compared with
1997 is primarily attributable to higher capital expenditures which was
partially offset by the sale and operating leaseback of revenue earning
equipment in 1998. Additionally, 1997 investing activities included the sale of
the automotive carrier business which generated proceeds of $111 million. The
significant increase in cash used for continuing investing activities in 1997
compared with 1996 is primarily attributable to the 1996 sale of the consumer
truck rental business which generated proceeds of $574 million.
The following is a summary of capital expenditures for the past three
years:
Years ended December 31
In thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Revenue earning equipment:
Transportation Services $1,136,582 818,932 841,764
Public Transportation Services 32,044 45,027 44,808
International 84,432 75,991 129,412
- --------------------------------------------------------------------------------
1,253,058 939,950 1,015,984
Operating property and
equipment 116,059 99,168 173,224
Consumer truck rental -- -- 68,099
- --------------------------------------------------------------------------------
$1,369,117 1,039,118 1,257,307
================================================================================
The increase in capital spending for 1998 was consistent with management's
expectations of anticipated growth and fleet replacement in full service leasing
and commercial rental. For the year, capital expenditures in full service truck
leasing increased $238 million in 1998 to $932 million. Capital expenditures for
commercial rental were $165 million in 1998, an increase of $62 million compared
with 1997, due to a planned shift in fleet mix and fleet replacement to reduce
the average age of the commercial rental fleet. The decrease in spending for
Public Transportation Services in 1998 was primarily due to the timing of fleet
replacement. International capital expenditures increased in 1998 due primarily
to additional spending on the lease fleet in the U.K. In 1999, management
projects that capital expenditures will exceed 1998 levels by 20%-25%, primarily
as a result of anticipated growth and fleet replacement in full service truck
leasing. The Company expects to fund its 1999 capital expenditures with both
internally generated funds and additional financing.
During 1998 and 1997, the Company completed a number of acquisitions, in
all business segments, each of which has been accounted for using the purchase
method of accounting. Total consideration for these acquisitions was $70 million
in 1998 and $84 million in 1997. The Company will continue to evaluate selective
acquisitions in full service leasing, integrated logistics and public
transportation in 1999.
The Company's cash requirements are funded principally through operations
and the sale of revenue earning equipment. Cash flow from continuing operating
activities (excluding sales of receivables) plus asset sales (excluding sale of
business) as a percentage of capital expenditures (net of proceeds from the sale
and leaseback of revenue earning equipment) was 110% in 1998, compared with 92%
in 1997 and 82% in 1996. The increase in 1998 as compared with 1997 was
primarily due to improved cash flow from operations and the sale and leaseback
of equipment which offset higher capital spending. The 1997 increase reflected
decreased capital spending and improved cash flow from operations.
FINANCING
Ryder utilizes external capital to support growth in its asset-based product
lines. The Company has a variety of financing alternatives available to fund its
capital needs. These alternatives include long- and medium-term public and
private debt, as well as variable-rate financing available through bank credit
facilities and commercial paper. The Company also periodically enters into sale
and leaseback agreements of revenue earning equipment, the majority of which are
accounted for as operating leases. The Company's debt ratings as of December 31,
1998 were as follows:
<PAGE>
Commercial Unsecured
Paper Notes
- --------------------------------------------------------------------------------
Moody's Investors Service P2 Baa1
Standard & Poor's Ratings Group A2 BBB+
Duff and Phelps D1 A
On April 29, 1998, Moody's Investors Service lowered its senior unsecured
debt rating on the Company to Baa1 from A3 and assigned a Baa1 rating to the
Company's $720 million global revolving credit facility. All other debt ratings
are consistent with the prior year.
Debt totaled $2.6 billion at the end of 1998 and 1997; however, the
composition of the Company's debt portfolio changed during the year. The Company
made $251 million of scheduled unsecured note payments in 1998 and issued $405
million of unsecured debentures and medium-term notes with the proceeds used to
reduce commercial paper balances. U.S. commercial paper outstanding at December
31, 1998, was $198 million, compared with $340 million at the end of 1997. The
Company's foreign debt also remained unchanged at approximately $390 million.
The Company's percentage of variable-rate financing obligations was 27% at
December 31, 1998,
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which is within the Company's targeted level of 25%-30% and comparable to
December 31, 1997. The Company's debt to equity ratio at December 31, 1998,
decreased to 236% from 242% at December 31, 1997.
During 1997, the Company entered into a $720 million global revolving
credit facility, which expires in 2002, and replaced existing credit facilities
in the U.S., U.K. and Canada. The primary purpose of the credit facility is to
finance working capital and provide support for the issuance of commercial
paper. At the Company's option, the interest rate on borrowings under the credit
facility is based on LIBOR, prime, federal funds or local equivalent rates. The
credit facility has an annual facility fee of 0.08% based on the Company's
current credit rating. At December 31, 1998, foreign borrowings of $55 million
were outstanding under the credit facility.
At the end of 1998, $468 million was available under the Company's global
credit facility. In September 1998, the Company filed an $800 million shelf
registration statement with the Securities and Exchange Commission. Proceeds
from debt issues under the shelf registration are expected to be used for
capital expenditures, debt refinancing and general corporate purposes. As of
December 31, 1998, the Company had $661 million of debt securities available for
issuance under this shelf registration statement. The Company also participates
in an agreement to sell, with limited recourse, up to $350 million ($50 million
of which is uncommitted) of trade receivables on a revolving basis through July
2002. At December 31, 1998, the outstanding balance of receivables sold pursuant
to this agreement was $200 million.
Proceeds from sale-leaseback transactions were $312 million in 1998. The
1998 sale-leaseback transactions include a vehicle securitization transaction
whereby the Company sold a beneficial interest in certain long-term vehicle
leases and related lease vehicle residuals to a separately-rated and
unconsolidated vehicle lease trust (the "Trust") for $78 million, which
approximated the carrying value of the vehicles. The Company received $73
million in cash and a $5 million subordinated note from the Trust. The Trust
funded the cash payment to the Company with the issuance of triple-A rated
senior notes and single-A rated asset-backed certificates collateralized by a
beneficial interest in the long-term vehicle leases and the residual value of
the vehicles. The senior notes and asset-backed certificates are not insured or
guaranteed by the Company; however, the Company has provided credit enhancement
in the form of a cash reserve fund of approximately $3 million and a pledge of
its subordinated note as additional security for the Trust to the extent that
delinquencies and losses on the truck leases and related vehicle sales are
incurred. The completion of the vehicle securitization provides the Company with
further liquidity and access to new capital markets.
ENVIRONMENTAL MATTERS
The operations of the Company involve storing and dispensing petroleum products,
primarily diesel fuel, regulated under environmental protection laws. These laws
require the Company to eliminate or mitigate the effect of such substances on
the environment. In response to these requirements, the Company has upgraded
operating facilities and implemented various programs to detect and minimize
contamination.
Capital expenditures related to these programs totaled approximately $9
million in 1998 and $7 million in 1997. Environmental capital expenditures have
primarily related to a government mandated tank replacement program which was
completed by the end of 1998; accordingly, these capital expenditures are
expected to decrease from 1998 levels. The Company also incurred $4 million of
environmental expenses in 1998, compared with $5 million in 1997 and $7 million
in 1996, which included normal recurring expenses, such as licensing, testing
and waste disposal fees. Based on current circumstances and the present
standards imposed by governmental regulations, environmental expenses should not
increase materially from 1998 levels in the near term.
The ultimate cost of the Company's environmental liabilities cannot
presently be projected with certainty due to the presence of several unknown
factors, primarily the level of contamination, the effectiveness of selected
remediation methods, the stage of management's investigation at individual sites
and the
24
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recoverability of such costs from third parties. Based upon information
presently available, management believes that the ultimate disposition of these
matters, although potentially material to the results of operations in any one
year, will not have a material adverse effect on the Company's financial
condition or liquidity. See the "Environmental Matters" note to the consolidated
financial statements for a further discussion.
YEAR 2000 PREPARATION
The Year 2000 issue is the result of computer systems, software products and
embedded technology using two digits rather than four to indicate the applicable
year. If not addressed, such computer systems, software products and embedded
technology may be unable to properly interpret dates beyond the year 1999, which
could cause system failures or miscalculations and lead to disruptions in the
Company's activities and operations.
During 1997, after consideration of the potential impact to operations,
including customer and supplier relationships, an enterprise-wide program was
initiated to modify computer information systems to be Year 2000 compliant or to
replace non-compliant systems. The Company has established a Year 2000 Steering
Committee comprised of senior executives to address compliance issues and
alternatives. The Company also established a program office dedicated to
implementing the Year 2000 compliance plan, and has engaged external consultants
to provide day-to-day management oversight and contractors to remediate and test
non-compliant source code. Accordingly, the majority of the Company's Year 2000
costs are incremental to operations. Management believes that adequate resources
have been allocated to the Year 2000 effort and expects the Year 2000 compliance
program to be completed on a timely basis.
The Company has identified three major areas determined to be critical for
successful Year 2000 compliance: (1) information systems, such as mainframes,
PCs, networks and similar type systems maintained at customer sites, and legacy
applications relating to operations such as financial reporting, human
resources, purchasing, treasury, marketing and sales; (2) third-party
relationships, including customers, suppliers, vendors and government agencies;
and (3) facilities and equipment which may contain microprocessors with embedded
technology.
The Company's Year 2000 compliance program for each major area can be
segregated into three broad phases. Phase I of the program is the assessment of
information systems, facilities and equipment, and services and products
provided by third parties in order to identify exposures to Year 2000 issues and
to develop a master plan of action including remediation, retirement or
replacement of non-compliant systems. Phase II of the program is the
implementation of action plans. Phase III of the program is the final testing of
each major area of exposure to ensure compliance, the placement of remediated
items into production and contingency planning to assess reasonably likely worst
case scenarios.
The Company has completed the assessment of the legacy application and
system software. The Company's remediation plan for this area is segregated into
15 major partitions worldwide. Currently, the Company's remediation projects are
at different phases of completion; overall, approximately 55% of the remediation
effort has been performed. Remediation and testing activities are underway on
most of the Company's core business applications. Final testing of remediated
code is scheduled to be substantially completed by mid-1999. In addition, due to
the uncertainties inherent in this undertaking, the Company has initiated
contingency planning to evaluate a course of action to minimize the impact of
any unforeseen disruption resulting from non-compliance.
The Company relies on suppliers, vendors and government agencies to timely
provide a wide range of goods and services, including equipment, supplies,
telecommunications, utilities, transportation services and banking services.
Management believes that third-party relationships represent the greatest risk
with respect to the Year 2000 issue because of the Company's limited ability to
influence actions of third parties and to estimate the impact of non-compliance
of third parties throughout the Company's operations. The Company is making
concerted efforts to understand the Year 2000 status of third parties whose Year
2000 non-compliance could either have a material adverse effect on the Company's
business, financial condition or results of operations or involve a safety risk
to employees or customers. The Company continues to survey and communicate with
customers, suppliers and vendors with whom it has important financial and
operational relationships to assess the status of their Year 2000 compliance
program and to develop a joint contingency plan.
The Company's vendor compliance program includes the following: assessing
vendor compliance status; tracking vendor compliance progress; developing
contingency plans, including identifying alternate vendors, as needed;
addressing contract language; replacing, remediating or upgrading equipment;
25
<PAGE>
requesting certification from vendors or making on-site assessments, as
required; and sending questionnaires and conducting phone interviews. Some of
the Company's significant suppliers and vendors have not responded to inquiries,
have declined to respond because of liability concerns or have not responded
with sufficient detail for the Company to ensure (a) timely Year 2000
compliance, or (b) the impact to the Company in the event of non-compliance. The
Company is continuing to pursue adequate responses from mission critical
business partners under the new "Year 2000 Readiness Disclosure" legislation.
However, the Company can provide no assurance that Year 2000 compliance plans
will be successfully completed by third parties in a timely manner.
In the facilities and equipment area, the Company's exposure relates to
embedded technology in, among other things, vehicles, vehicle-related devices,
and fuel storage and other facilities operated by the Company. Based upon
preliminary testing and discussions with major truck manufacturers, it appears
that the microprocessors installed by the truck manufacturers are Year 2000
compliant. Remediation of leak detection devices on the Company's underground
fuel storage tanks will be completed by mid-1999. The Company is continuing to
assess its exposure and to develop action and contingency plans for other
critical facilities and equipment, including on-board vehicle computers acquired
from manufacturers other than major truck manufacturers.
The Company has developed a Year 2000 contingency plan development process
to mitigate potential disruptions in the Company's activities and operations
that may be created by failures of critical business partners, facilities and
equipment, and internal systems. Management currently believes that the most
likely worst case scenario will consist of some localized disruptions of systems
that may affect individual business processes, facilities or suppliers for a
short time rather than systemic or long-term problems affecting business
operations as a whole. Through visits to key operating sites, departments,
customers, and vendors, potential disruption scenarios are being identified and
contingency plans are being developed. These plans address preparation,
assessment of failure, and resumption of critical business functions. Detailed
contingency plans for each business unit and for critical business processes are
expected to be developed by the third quarter of 1999.
However, the Company can provide no assurance that it will correctly
anticipate the level, impact or duration of non-compliance by critical business
partners, facilities and equipment or internal systems, or that contingency
plans will be sufficient to mitigate the impact of non-compliance.
Based upon current information, the Company estimates that the impact on
after tax earnings for incremental Year 2000 costs range from $34 to $38
million, an increase of approximately $12 million from the estimate provided in
the 1997 annual report. The increase in estimated costs reflects primarily the
discovery of additional lines of software code subject to remediation. Through
December 31, 1998, the Company has incurred $26 million after tax on the Year
2000 project. The majority of costs incurred to date relate to remediation
activities. These costs have been and will continue to be funded through
operating cash flows and expensed as incurred. Future costs are difficult to
estimate and actual results could differ significantly from the Company's
expectations due to changes in software remediation or replacement plans,
unanticipated technological difficulties, project vendor delays or overruns,
impact of third-party non-compliance and the cost and availability of resources.
EURO CONVERSION
On January 1, 1999, the participating countries of the European Union adopted
the euro as their common legal currency. The participating countries' existing
national currencies will continue as legal tender until at least January 1,
2002. During this transition period, parties may pay for goods and services
using either the euro or the participating country's legacy currency. The
Company is presently assessing the business implications of conversion to the
euro, principally the need to adapt internal systems to accommodate
euro-denominated transactions. Due to the nature of current international
operations, conversion to the euro is not expected to have a material impact on
the Company's results of operations or financial position.
26
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
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. 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 also 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. Adoption of this
statement is not expected to have a material impact on the Company's results of
operations or financial position.
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
all derivatives to be recognized at fair value as either assets or liabilities
on the balance sheet. Any gain or loss resulting from changes in such fair value
is required to be recognized in earnings to the extent the derivatives are not
effective as hedges. This statement is effective for fiscal years beginning
after June 15, 1999, and is effective for interim periods in the initial year of
adoption. Adoption of this statement is not expected to have a material impact
on the Company's results of operations or financial position.
OUTLOOK
In 1999, the Company will focus on several key areas to sustain growth, maximize
shareholder value and improve EVA. The Company will emphasize growing revenue in
all business segments through increased new sales and improved customer loyalty
and retention, building on strategic alliances and enhanced services to increase
the base of logistics business, and rationed capital spending and overall cost
containment to enhance productivity and EVA.
FORWARD-LOOKING STATEMENTS
This annual report 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 may cause actual results to differ materially from the
forward-looking statements.
Important factors that could cause such differences include, among others,
general economic conditions in the United States and worldwide, the highly
competitive environment applicable to the Company's operations (including
competition in integrated logistics from other logistics companies as well as
from air cargo, shipping, railroads and motor carriers and competition in full
service leasing and commercial rental from companies providing similar services
as well as truck and trailer manufacturers who provide leasing, extended
warranty maintenance, rental and other transportation services), greater than
expected expenses associated with the Company's personnel needs or activities
(including increased cost of freight and transportation), availability of
equipment, changes in customers' business environments (or the loss of a
significant customer), changes in government regulations and disruptions due to
Year 2000 non-compliance by the Company, its suppliers or customers.
The risks included here are not exhaustive. New risk factors emerge from
time to time and it is not possible for management to predict all such risk
factors or to assess the impact of such risk factors on the Company's business.
27
<PAGE>
REPORT OF MANAGEMENT
TO THE SHAREHOLDERS OF RYDER SYSTEM, INC.:
The financial information in this annual report has been prepared by the
management of Ryder System. Management is responsible for the fair presentation
of the financial statements of the Company in accordance with generally accepted
accounting principles and for the objectivity of key underlying assumptions and
estimates.
Ryder System maintains a dynamic system of internal controls to provide
reasonable assurance that assets are safeguarded and transactions are properly
authorized, recorded and reflected in the financial statements. This system is
continually reviewed, evaluated and revised to reflect changes in the Company
and in the businesses in which we operate. One of the key elements of Ryder
System's internal financial controls has been the Company's success in
recruiting, selecting, training and developing professional financial managers
who implement and oversee the financial control system.
The board of directors, acting through its audit committee, is responsible
for determining that management fulfills its responsibilities in the preparation
of financial statements and the financial control of operations. The audit
committee is composed solely of outside directors. The committee recommends to
the board of directors the appointment of the independent public accountants and
meets regularly with management, internal auditors and independent accountants.
Our commitment to social responsibility is a key management principle.
Management is responsible for conducting our businesses in an ethical, moral
manner assuring that our business practices encompass the highest, most
uncompromising standards of personal and business conduct. These standards,
which address conflicts of interest, compliance with laws and acceptable
business practices and proper employee conduct are included in our Corporate
Conduct Guidelines. The importance of these standards is stressed throughout the
Company and all of our employees are expected to comply with them.
/s/ M. ANTHONY BURNS
- --------------------
M. Anthony Burns
Chairman, President and
Chief Executive Officer
/s/ EDWIN A. HUSTON
- -------------------
Edwin A. Huston
Senior Executive Vice President-Finance and
Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RYDER SYSTEM, INC.:
We have audited the accompanying consolidated balance sheets of Ryder System,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ryder
System, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Miami, Florida
February 4, 1999
28
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Ryder System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Years ended December 31
In thousands, except per share amounts 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 5,188,724 4,893,905 4,936,123
- -------------------------------------------------------------------------------------------------------------
Operating expense 3,767,063 3,609,612 4,003,269
Freight under management expense 330,124 244,874 77,946
Year 2000 expense 38,173 3,494 --
Depreciation expense, net of gains 604,281 592,279 676,273
Interest expense 198,857 189,361 206,636
Miscellaneous income, net (6,730) (9,667) (21,971)
- -------------------------------------------------------------------------------------------------------------
4,931,768 4,629,953 4,942,153
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before income taxes 256,956 263,952 (6,030)
Provision for income taxes 97,885 103,714 13,393
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 159,071 160,238 (19,423)
Earnings (loss) from discontinued operations -- 15,447 (11,864)
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) before extraordinary loss 159,071 175,685 (31,287)
Extraordinary loss on early extinguishment of debt -- -- (10,031)
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 159,071 175,685 (41,318)
=============================================================================================================
Earnings (loss) per common share-Basic:
Continuing operations $ 2.18 2.08 (0.24)
Discontinued operations -- 0.20 (0.15)
Extraordinary loss on early extinguishment of debt -- -- (0.12)
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 2.18 2.28 (0.51)
=============================================================================================================
Earnings (loss) per common share-Diluted:
Continuing operations $ 2.16 2.05 (0.24)
Discontinued operations -- 0.20 (0.15)
Extraordinary loss on early extinguishment of debt -- -- (0.12)
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 2.16 2.25 (0.51)
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
CONSOLIDATED BALANCE SHEETS
Ryder System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31
Dollars in thousands, except per share amounts 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 138,353 78,370
Receivables 559,141 625,955
Inventories 67,605 66,006
Tires in service 166,578 163,771
Prepaid expenses and other current assets 178,022 157,883
- ---------------------------------------------------------------------------------------------------------
Total current assets 1,109,699 1,091,985
Revenue earning equipment 3,211,969 3,145,461
Operating property and equipment 597,951 581,705
Direct financing leases and other assets 476,390 414,932
Intangible assets and deferred charges 312,592 274,977
- ---------------------------------------------------------------------------------------------------------
$ 5,708,601 5,509,060
=========================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 483,334 301,361
Accounts payable 399,495 305,337
Accrued expenses 479,835 482,811
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 1,362,664 1,089,509
Long-term debt 2,099,697 2,267,554
Other non-current liabilities 343,003 365,264
Deferred income taxes 807,623 726,025
- ---------------------------------------------------------------------------------------------------------
Total liabilities 4,612,987 4,448,352
- ---------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock of $0.50 par value per share
Authorized, 400,000,000; outstanding, 1998-71,280,247; 1997-73,692,226 610,543 605,573
Retained earnings 504,105 466,257
Accumulated other comprehensive income (19,034) (11,122)
- ---------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,095,614 1,060,708
- ---------------------------------------------------------------------------------------------------------
$ 5,708,601 5,509,060
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ryder System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Years ended December 31
In thousands 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations
Cash flows from operating activities:
Earnings (loss) from continuing operations $ 159,071 160,238 (19,423)
Depreciation expense, net of gains 604,281 592,279 676,273
Amortization expense and other non-cash charges, net 2,207 9,191 31,563
Gain on sale of consumer truck rental business -- -- (25,000)
Deferred income tax expense (benefit) 108,806 124,516 (8,810)
Changes in operating assets and liabilities, net of acquisitions:
Increase in aggregate balance of trade receivables sold 125,000 -- --
Receivables (31,991) (76,895) (192,275)
Inventories (1,599) (7,947) (8,064)
Prepaid expenses and other assets (40,672) (61,298) 30,167
Accounts payable 88,220 22,305 (50,078)
Accrued expenses and other non-current liabilities (52,784) (146,598) 98,330
- ----------------------------------------------------------------------------------------------------------------
960,539 615,791 532,683
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in commercial paper borrowings (150,162) 305,132 (36,568)
Debt proceeds 475,161 47,502 138,992
Debt repaid, including capital lease obligations (328,873) (232,597) (312,677)
Dividends on common stock (43,841) (45,859) (48,315)
Common stock issued 32,393 61,973 63,710
Common stock repurchased (109,540) (241,335) (122,870)
- ----------------------------------------------------------------------------------------------------------------
(124,862) (105,184) (317,728)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and revenue earning equipment (1,369,117) (1,039,118) (1,257,307)
Sales of property and revenue earning equipment 326,195 344,513 373,300
Sale and leaseback of revenue earning equipment 312,230 -- 150,000
Acquisitions, net of cash acquired (70,081) (84,195) --
Proceeds from business sold -- 111,306 574,167
Other, net 25,079 38,639 31,625
- ----------------------------------------------------------------------------------------------------------------
(775,694) (628,855) (128,215)
- ----------------------------------------------------------------------------------------------------------------
Net cash flows from continuing operations 59,983 (118,248) 86,740
Net cash flows from discontinued operations -- 5,234 11,787
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 59,983 (113,014) 98,527
Cash and cash equivalents at January 1 78,370 191,384 92,857
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at December 31 $ 138,353 78,370 191,384
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Ryder System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Common Retained Comprehensive
Dollars in thousands, except per share amounts Income (Loss) Stock Earnings Income Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ 550,197 703,520 (13,692) 1,240,025
Net loss $(41,318) -- (41,318) -- (41,318)
Foreign currency translation adjustments 9,519 -- -- 9,519 9,519
--------
Comprehensive loss $(31,799)
========
Common stock dividends declared-$0.60 per share -- (48,315) -- (48,315)
Common stock issued under employee
plans (2,833,241 shares)* 63,710 -- -- 63,710
Common stock repurchased (4,152,700 shares) (30,872) (91,998) -- (122,870)
Other 5,255 -- -- 5,255
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 588,290 521,889 (4,173) 1,106,006
Net earnings $175,685 -- 175,685 -- 175,685
Foreign currency translation adjustments (6,949) -- -- (6,949) (6,949)
--------
Comprehensive income $168,736
========
Common stock dividends declared-$0.60 per share -- (45,859) -- (45,859)
Common stock issued under employee
plans (2,778,372 shares)* 61,973 -- -- 61,973
Common stock repurchased (7,047,300 shares) (55,877) (185,458) -- (241,335)
Other 11,187 -- -- 11,187
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 605,573 466,257 (11,122) 1,060,708
Net earnings $159,071 -- 159,071 -- 159,071
Foreign currency translation adjustments (7,912) -- -- (7,912) (7,912)
--------
Comprehensive income $151,159
========
Common stock dividends declared-$0.60 per share -- (43,841) -- (43,841)
Common stock issued under employee
plans (1,388,021 shares)* 32,393 -- -- 32,393
Common stock repurchased (3,800,000 shares) (32,158) (77,382) -- (109,540)
Other 4,735 -- -- 4,735
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ 610,543 504,105 (19,034) 1,095,614
===================================================================================================================================
</TABLE>
*Net of common stock purchased from employees exercising stock options.
See accompanying notes to consolidated financial statements.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
Ryder System, Inc. and subsidiaries (the "Company") is a multinational logistics
and transportation company operating in nine countries. The Company's segments
consist of integrated logistics, transportation services, public transportation
services and international.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of Ryder System, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
REVENUE RECOGNITION. Operating lease revenue is recognized as vehicles are used
over the terms of the related agreements. Revenue from service contracts is
recognized as services are provided, generally at billing rates specified in
underlying contracts. Direct financing lease revenue is recognized by the
interest method over the terms of the lease agreements.
CASH EQUIVALENTS. All investments in highly liquid debt instruments with
maturities of three months or less at the date of purchase are classified as
cash equivalents.
INVENTORIES. Inventories, which consist primarily of fuel and vehicle parts, are
valued using the lower of cost (specific identification or average cost) or
market.
REVENUE EARNING EQUIPMENT, OPERATING PROPERTY AND EQUIPMENT AND DEPRECIATION.
Revenue earning equipment, principally vehicles, and operating property and
equipment are stated at cost. Vehicle repairs and maintenance that extend the
life or increase the value of the vehicle are capitalized whereas ordinary
maintenance and repairs are expensed as incurred. Provision for depreciation is
computed using the straight-line method on substantially all depreciable assets.
Annual straight-line depreciation rates range from 8% to 33% for revenue earning
equipment, 2.5% to 10% for buildings and improvements and 10% to 25% for
machinery and equipment.
Gains on operating property and equipment sales are reflected in miscellaneous
income. Gains on sales of revenue earning equipment, net of selling and
equipment preparation costs, are reported as reductions of depreciation expense
and totaled $59 million, $52 million and $66 million in 1998, 1997 and 1996,
respectively.
TIRES IN SERVICE. The Company allocates a portion of the acquisition costs of
revenue earning equipment to tires in service and amortizes such tire costs to
expense over the lives of the vehicles and equipment. The cost of replacement
tires and tire repairs are expensed as incurred.
INTANGIBLE ASSETS. Intangible assets consist principally of goodwill totaling
$275 million in 1998 and $238 million in 1997. Goodwill is amortized on a
straight-line basis over appropriate periods generally ranging from 10 to 40
years. Accumulated amortization was approximately $96 million and $84 million at
December 31, 1998 and 1997, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets, including intangible assets,
used in the Company's operations are reviewed for impairment when circumstances
indicate that the carrying amount of assets may not be recoverable. The primary
indicators of recoverability are the associated current and forecasted
undiscounted operating cash flows.
SELF-INSURANCE RESERVES. The Company retains a portion of the risk under vehicle
liability, workers' compensation and other insurance programs. Reserves have
been recorded which reflect the undiscounted estimated liabilities, including
claims incurred but not reported. Such liabilities are necessarily based on
estimates and, while management believes that the amounts are adequate, there
can be no assurance that changes to management's estimates may not occur due to
limitations inherent in the estimation process. Changes in the estimates of
these reserves are charged or credited to income in the period determined.
Amounts estimated to be paid within one year have been classified as accrued
expenses with the remainder included in other non-current liabilities.
INCOME TAXES. Deferred taxes are provided using the asset and liability method
for temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
DERIVATIVE FINANCIAL INSTRUMENTS. From time to time, the Company enters into
interest rate swap and cap agreements to manage its fixed and variable interest
rate exposure and to better match the repricing of its debt instruments to that
of its portfolio of assets. The Company assigns each interest rate swap and cap
agreement to a debt or operating lease obligation. Amounts to be paid or
received under swap and cap agreements are recognized over the terms of the
agreements as adjustments to interest expense or rent expense. Derivative
financial instruments are not leveraged or held for trading purposes.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
FOREIGN CURRENCY TRANSLATION. The Company's foreign operations generally use the
local currency as their functional currency. Assets and liabilities of these
operations are translated at the exchange rates in effect on the balance sheet
date. Income statement items are translated at the average exchange rates for
the year. The impact of currency fluctuation is included in other comprehensive
income as a translation adjustment. For subsidiaries whose economic environment
is highly inflationary, the U.S. dollar is the functional currency and gains and
losses that result from translation are included in earnings.
STOCK-BASED COMPENSATION. Stock-based compensation is recognized using the
intrinsic value method. Under this method, compensation cost is recognized based
on the excess, if any, of the quoted market price of the stock at the date of
grant (or other measurement date) and the amount an employee must pay to acquire
the stock.
EARNINGS PER SHARE. Basic earnings per share is computed by dividing net
earnings (loss) by the weighted average number of common shares outstanding.
Diluted earnings per share reflects the dilutive effect of potential common
shares from securities such as stock options.
ACCOUNTING CHANGES. Effective December 31, 1998, the Company adopted Statement
of Financial Accounting Standards (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. Adoption of this statement did not impact the Company's results
of operations or financial position. The "Segment Reporting" note provides
further information.
Effective 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 (loss) and currency
translation adjustments associated with foreign operations which use the local
currency as their functional currency. The statement also requires the separate
presentation of the accumulated balance of comprehensive income other than net
earnings in the Consolidated Balance Sheets.
Effective December 31, 1997, the Company adopted FAS No. 128, "Earnings per
Share." This statement requires the presentation of basic and diluted earnings
per share. All prior years' earnings per share data were restated to conform
with the provisions of the new statement.
Effective January 1, 1997, the Company adopted FAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which establishes accounting standards for, among other things, the sales of
receivables with recourse. The Company also adopted the American Institute of
Certified Public Accountants' (AICPA) Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities," effective January 1, 1997. The guidance
provided by these statements was consistent with the Company's prior method of
accounting and, therefore, adoption of these statements did not impact the
Company's results of operations, cash flows or financial position.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to conform
with current year presentation.
RECENT ACCOUNTING PRONOUNCEMENTS. In March 1998, the AICPA issued 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. SOP 98-1 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.
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 also 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. Adoption of this
statement is not expected to have a material impact on the Company's results of
operations or financial position.
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
all derivatives to be recognized at fair value as either assets or liabilities
on the balance sheet. Any gain or loss resulting from changes in such fair value
is required to be recognized in earnings to the extent the derivatives are not
effective as hedges. This statement is effective for fiscal years beginning
after June 15, 1999, and is effective for interim periods in the initial year of
adoption. Adoption of this statement is not expected to have a material impact
on the Company's results of operations or financial position.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
ACQUISITIONS
During 1998 and 1997, the Company completed a number of acquisitions in each of
its business segments, all of which have been accounted for using the purchase
method of accounting. The consolidated financial statements reflect the results
of operations of the acquired businesses from the acquisition dates. Pro forma
results of operations have not been presented because the effects of these
acquisitions were not significant. The fair value of assets acquired and
liabilities assumed in connection with these acquisitions were as follows:
In thousands 1998 1997
- --------------------------------------------------
Working capital $ 14,708 (2,170)
Goodwill 43,269 42,755
Other net assets 47,971 57,809
Non-current liabilities (35,867) (14,199)
- --------------------------------------------------
Net assets acquired $ 70,081 84,195
==================================================
DIVESTITURES
On September 30, 1997, the Company completed the sale of its automotive carrier
business for $111 million in cash and realized a $3 million after tax gain
($0.04 per diluted common share). The transaction was made at a premium over the
net book value of the business sold and also generated gains from the settlement
and curtailment of certain employee benefit and postretirement plans, offset by
provisions for severance and direct transaction and other costs. The disposal of
the automotive carrier business has been accounted for as a discontinued
operation and accordingly, its operating results and cash flows are segregated
and reported as discontinued operations in the accompanying consolidated
financial statements.
Summarized results of the automotive carrier business were as follows:
Period ended Year ended
September 30 December 31
In thousands 1997 1996
- ------------------------------------------------------------------
Revenue $ 462,853 583,292
==================================================================
Earnings (loss) before
income taxes $ 18,228 (11,592)
Provision for income taxes 5,981 272
- ------------------------------------------------------------------
Earnings (loss) from
discontinued operations
before net gain on disposition 12,247 (11,864)
- ------------------------------------------------------------------
Loss on disposition (5,300) --
Income tax benefit 8,500 --
- ------------------------------------------------------------------
Net gain on disposition 3,200 --
- ------------------------------------------------------------------
Earnings (loss) from
discontinued operations $ 15,447 (11,864)
==================================================================
The loss from discontinued operations in 1996 includes a pretax charge of $18
million as part of a company-wide restructuring. The pretax charge included $8
million in employee-related costs, $8 million in estimated facility closure
costs and $2 million in other costs. The after tax impact of these charges was
$14 million or $0.18 per diluted common share.
On October 17, 1996, the Company sold substantially all the assets and
certain liabilities of its consumer truck rental business for $574 million in
cash, resulting in a pretax gain of $25 million ($15 million after tax), which
is included in miscellaneous income, net. Revenue related to the consumer truck
rental business was $440 million for the period January 1 through October 16,
1996. Pretax earnings (before restructuring and other charges) of the consumer
truck rental business, on a stand alone basis, were $20 million for the period
January 1 through October 16, 1996.
<PAGE>
Pursuant to the terms of the sales agreement, the Company gave the buyer a
royalty-free license to use the Ryder trademark and color scheme, subject to
certain restrictions, for a total of 10 years (with required modifications to
the trademark after five years).
RESTRUCTURING AND OTHER CHARGES
During 1996, the Company implemented several restructuring initiatives designed
to reduce costs, improve profitability and align the organizational structure
with the strategic direction of the Company. As a result of the initiatives, the
Company recorded to operating expense, restructuring and other charges of $228
million for continuing operations ($150 million after tax or $1.84 per diluted
common share). These charges were as follows:
In thousands
- -------------------------------------------------------
Restructuring charges:
Employee separations $ 58,568
Facility closures 13,817
- -------------------------------------------------------
72,385
Early retirement costs 46,251
Asset write-downs and valuation allowances 80,544
Other charges 29,275
- -------------------------------------------------------
$228,455
=======================================================
The restructuring plan included charges of $72 million for reducing the
workforce by approximately 1,500 positions and closing approximately 200
operating and administrative locations in order to achieve economies of scale
and eliminate redundant processes. The planned headcount reductions and facility
closures were substantially completed as of December 31, 1998. The Company made
cash payments of $8 million in 1998, $44 million in 1997 and $15 million in 1996
related to restructuring charges. As of December 31, 1998, the remaining
restructuring liabilities totaled $5 million and management
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
believes these amounts are adequate to complete its plans and that the
liabilities will be substantially paid by the end of 1999.
The pretax charges also included $46 million of pension and postretirement
benefit expense for approximately 740 employees who retired pursuant to
voluntary early retirement programs.
The Company's restructuring initiatives also included asset write-downs and
valuation allowances of $81 million relating to facility closures, the
anticipated sale of small non-strategic businesses, discontinuance of the
company car program, certain information systems and other assets, and $29
million for other costs associated with the restructuring initiatives including
relocation of employees and professional fees incurred as part of the
implementation of the restructuring. The Company substantially completed its
facility closure program during the third quarter of 1998 and credited to
operating expense, excess accruals of $3.4 million. During the fourth quarter of
1998, the Company also decided to retain a small business previously held for
sale in the U.K. and credited to miscellaneous income, a valuation allowance of
$7.5 million which had been established in 1996.
SALES OF RECEIVABLES
The Company participates in an agreement to sell, with limited recourse, up to
$350 million ($50 million of which is uncommitted) of trade receivables on a
revolving basis through July 2002. The costs associated with this program were
$8 million in 1998, $6 million in 1997 and $13 million in 1996 and were charged
to miscellaneous income, net. At December 31, 1998 and 1997, the outstanding
balance of receivables sold pursuant to this agreement was $200 million and $75
million, respectively.
REVENUE EARNING EQUIPMENT
In thousands 1998 1997
- ----------------------------------------------------------------
Full service lease $ 3,552,891 3,538,297
Commercial rental 1,278,036 1,171,038
- ----------------------------------------------------------------
4,830,927 4,709,335
Accumulated depreciation (1,803,425) (1,742,949)
- ----------------------------------------------------------------
3,027,502 2,966,386
- ----------------------------------------------------------------
Other revenue earning equipment 352,739 333,588
Accumulated depreciation (168,272) (154,513)
- ----------------------------------------------------------------
184,467 179,075
- ----------------------------------------------------------------
$ 3,211,969 3,145,461
================================================================
OPERATING PROPERTY AND EQUIPMENT
In thousands 1998 1997
- ----------------------------------------------------------------
Land $ 107,057 104,813
Buildings and improvements 503,188 467,652
Machinery and equipment 407,304 385,099
Other 114,548 99,445
- ----------------------------------------------------------------
1,132,097 1,057,009
Accumulated depreciation (534,146) (475,304)
- ----------------------------------------------------------------
$ 597,951 581,705
================================================================
<PAGE>
ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES
In thousands 1998 1997
- ----------------------------------------------------------------------------
Salaries and wages $ 104,498 113,042
Employee benefits 16,360 17,188
Interest 38,628 41,274
Operating taxes 80,078 66,544
Self-insurance reserves 227,982 249,137
Postretirement benefits
other than pensions 46,761 47,694
Vehicle rent and related accruals 153,018 162,611
Environmental liabilities 22,962 29,971
Other 132,551 120,614
- ----------------------------------------------------------------------------
822,838 848,075
Non-current portion (343,003) (365,264)
- ----------------------------------------------------------------------------
Accrued expenses $ 479,835 482,811
============================================================================
LEASES
OPERATING LEASES AS LESSOR. One of the Company's major product lines is full
service leasing of commercial trucks, tractors and trailers. These lease
agreements provide for a fixed time charge plus a fixed per-mile charge. A
portion of these charges is often adjusted in accordance with changes in the
Consumer Price Index. Contingent rentals included in income during 1998, 1997
and 1996 were $251 million, $233 million and $248 million, respectively.
DIRECT FINANCING LEASES. The Company also leases revenue earning equipment to
customers as direct financing leases. The net investment in direct financing
leases consisted of:
In thousands 1998 1997
- ----------------------------------------------------------------------------
Minimum lease payments receivable $ 772,550 714,065
Executory costs and unearned income (405,777) (375,724)
Unguaranteed residuals 64,514 59,123
- ----------------------------------------------------------------------------
Net investment in direct financing leases 431,287 397,464
Current portion included in receivables (55,927) (52,976)
- ----------------------------------------------------------------------------
Non-current portion included in other assets $ 375,360 344,488
============================================================================
Contingent rentals included in income were $26 million in 1998 and 1997, and
$24 million in 1996.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
OPERATING LEASES AS LESSEE. The Company leases vehicles, facilities and office
equipment under operating lease agreements. The majority of these agreements are
vehicle leases which specify that rental payments be adjusted periodically based
on changes in interest rates and provide for early termination at stipulated
values. During 1998 and 1996, the Company entered into several agreements for
the sale and operating leaseback of revenue earning equipment. Proceeds from
these transactions totaled $312 million in 1998 and $150 million in 1996. The
Company has purchase and lease renewal options under these agreements as well as
limited guarantees of the lessor's residual value. During 1998, 1997 and 1996,
rent expense was $261 million, $228 million and $240 million, respectively.
Through September 1997, rental rates were modified by certain interest rate swap
agreements as discussed in the "Summary of Significant Accounting Policies"
note.
LEASE PAYMENTS. Future minimum payments for leases in effect at December 31,
1998 were as follows:
As Lessor As Lessee
- -----------------------------------------------------
Direct
Operating Financing Operating
In thousands Leases Leases Leases
- -----------------------------------------------------
1999 $ 977,689 131,510 285,479
2000 822,878 126,616 257,711
2001 637,612 121,223 219,025
2002 432,470 112,322 172,397
2003 246,466 101,218 136,735
Thereafter 190,659 179,661 100,506
- -----------------------------------------------------
$3,307,774 772,550 1,171,853
=====================================================
The amounts in the previous table are based upon the assumption that revenue
earning equipment will remain on lease for the length of time specified by the
respective lease agreements. This is not a projection of future lease revenue;
no effect has been given to renewals, new business, cancellations, contingent
rentals or future rate changes.
INCOME TAXES
The components of the provision for income taxes attributable to continuing
operations were as follows:
In thousands 1998 1997 1996
- ---------------------------------------------------------------------------
Current tax (benefit) expense:
Federal $ (13,304) (21,243) 19,756
State (4,467) (998) 2,767
Foreign 6,850 1,439 (320)
- ---------------------------------------------------------------------------
(10,921) (20,802) 22,203
- ---------------------------------------------------------------------------
Deferred tax expense (benefit):
Federal 94,686 100,756 (13,847)
State 13,590 15,546 (767)
Foreign 530 8,214 5,804
- ---------------------------------------------------------------------------
108,806 124,516 (8,810)
- ---------------------------------------------------------------------------
Provision for income taxes $ 97,885 103,714 13,393
===========================================================================
<PAGE>
A reconciliation of the Federal statutory tax rate with the effective tax
rate for continuing operations follows:
% of Pretax Income
- ---------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------
Federal statutory tax rate 35.0 35.0 (35.0)
Impact on deferred taxes
for changes in tax rates (0.6) (0.6) --
State income taxes, net of
Federal income tax benefit 2.3 3.6 21.6
Amortization of goodwill 1.1 0.9 41.2
Restructuring and other charges -- -- 148.6
Miscellaneous items, net 0.3 0.4 45.7
- ---------------------------------------------------------------
Effective tax rate 38.1 39.3 222.1
===============================================================
The higher 1996 effective tax rate is primarily due to the tax effects of
non-deductible foreign charges associated with the restructuring and other
charges. Additionally, lower income before taxes increased the rate impact of
normal, recurring non-deductible expenses.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
The components of the net deferred income tax liability as of December 31,
1998 and 1997 were as follows:
In thousands 1998 1997
- -----------------------------------------------------------------------------
Deferred income tax assets:
Self-insurance reserves $ 74,190 88,374
Alternative minimum taxes 30,905 12,771
Accrued compensation and benefits 31,345 36,167
Lease accruals and reserves 45,707 46,652
Miscellaneous other accruals 32,375 44,978
- -----------------------------------------------------------------------------
214,522 228,942
Valuation allowance (13,030) (12,445)
- -----------------------------------------------------------------------------
201,492 216,497
- -----------------------------------------------------------------------------
Deferred income tax liabilities:
Property and equipment bases differences (894,475) (837,120)
Other items (113,361) (83,093)
- -----------------------------------------------------------------------------
(1,007,836) (920,213)
- -----------------------------------------------------------------------------
Net deferred income tax liability* $ (806,344) (703,716)
=============================================================================
* Deferred tax assets of $1 million and $22 million have been included in the
consolidated balance sheet caption "Prepaid expenses and other current
assets" at December 31, 1998 and 1997, respectively.
Deferred taxes have not been provided on temporary differences related to
investments in foreign subsidiaries that are considered permanent in duration.
These temporary differences consist primarily of undistributed foreign earnings
of $92 million at December 31, 1998. A full foreign tax provision has been made
on these undistributed foreign earnings. Determination of the amount of deferred
taxes on these temporary differences is not practicable due to foreign tax
credits and exclusions.
The Company had unused alternative minimum tax credits, for tax purposes, of
$31 million at December 31, 1998, available to reduce future income tax
liabilities. The alternative minimum tax credits may be carried forward
indefinitely.
A valuation allowance has been established to reduce deferred income tax
assets, principally foreign tax loss carryforwards, to amounts expected to be
realized.
Income taxes paid (refunded) totaled $(23) million in 1998, $18 million in
1997 and $1 million in 1996 and include amounts related to both continuing and
discontinued operations.
DEBT
In thousands 1998 1997
- -------------------------------------------------------------------------------
U.S. commercial paper $ 197,500 340,000
Canadian commercial paper 18,102 27,339
Unsecured U.S. notes:
Debentures, 6.50% to 9.88%,
due 2001 to 2017 627,340 444,215
Medium-term notes, 5.00% to 8.45%,
due 1999 to 2025 1,381,500 1,410,020
Discount on unsecured U.S. notes (20,807) (21,196)
Unsecured foreign obligations
(principally pound sterling),
4.84% to 9.48%, due 1999 to 2006 338,496 320,362
Other debt, including capital leases 40,900 48,175
- -------------------------------------------------------------------------------
Total debt 2,583,031 2,568,915
Current portion (483,334) (301,361)
- -------------------------------------------------------------------------------
Long-term debt $ 2,099,697 2,267,554
===============================================================================
<PAGE>
Debt maturities (including sinking fund requirements) during the five years
subsequent to December 31, 1998 were as follows:
Debt
In thousands Maturities
- -------------------------------
1999 $483,334
2000 503,087
2001 341,935
2002 454,884
2003 104,311
- -------------------------------
The weighted average interest rates for outstanding U.S. commercial paper at
December 31, 1998 and 1997, were 5.96% and 6.25%, respectively. The weighted
average interest rates for outstanding Canadian commercial paper at December 31,
1998 and 1997, were 5.30% and 4.63%, respectively. U.S. commercial paper is
classified as long-term debt since it is backed by the long-term revolving
credit facility discussed below.
During 1997, the Company entered into a $720 million global revolving credit
facility, which expires in 2002, and replaced existing credit facilities in the
U.S., U.K. and Canada. The global credit facility is primarily to be used to
finance working capital and provide support for the issuance of commercial
paper. At the Company's option, the interest rate on borrowings under the global
credit facility is based on LIBOR, prime, federal funds or local equivalent
rates. No compensating balances are required under the global credit facility;
however, it does have an annual facility fee of 0.08% based on the Company's
current credit rating. At December 31, 1998, foreign borrowings of $55 million
were outstanding under the credit facility and the Company had $468 million
available under this agreement.
At December 31, 1998 and 1997, the Company also had letters of credit
outstanding totaling $163 million and
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
$220 million, respectively, which primarily guarantee various insurance
activities.
During the fourth quarter of 1996, the Company recorded an extraordinary loss
of $10 million (net of income tax benefit of $6 million) in connection with the
early retirement of $80 million of outstanding high coupon debt.
Interest paid totaled $201 million in 1998, $196 million in 1997 and $204
million in 1996. Interest rates have been modified by interest rate swap
agreements as discussed in the "Summary of Significant Accounting Policies"
note.
The carrying amount of debt (excluding capital leases) was $2,548 million and
$2,525 million as of December 31, 1998 and 1997, respectively. Based on dealer
quotations which represent the discounted future cash flows through maturity or
expiration using current rates, the fair value of this debt at December 31, 1998
and 1997 was estimated at $2,623 million and $2,631 million, respectively.
At December 31, 1997, the Company had outstanding an interest rate swap
agreement effectively changing the interest rate exposure on $61 million of
medium-term notes from variable to 5.84% fixed rate. The swap matured in March
1998. The carrying amount and estimated fair value of this agreement as of
December 31, 1997 was not material.
SHAREHOLDERS' EQUITY
In December 1998, the Company announced its fourth stock repurchase program
since 1996, which allows the Company to acquire up to three million shares of
common stock in open market transactions. The three prior programs were
completed in their entirety, resulting in the repurchase of fifteen million
shares of common stock. The Company used a portion of the proceeds from the sale
of the automotive carrier business and consumer truck rental business to
repurchase shares of common stock. The cost of stock repurchases has been
allocated between common stock and retained earnings based on the amount of
capital surplus at the time of the stock repurchase. Prior year amounts were
reclassified to conform with current year presentation.
At December 31, 1998, the Company had 71,280,247 Preferred Stock Purchase
Rights (Rights) outstanding which expire in March 2006. The Rights contain
provisions to protect shareholders in the event of an unsolicited attempt to
acquire the Company which is not believed by the board of directors to be in the
best interest of shareholders. The Rights are evidenced by common stock
certificates, are subject to antidilution provisions, and are not exercisable,
transferable or exchangeable apart from the common stock until ten days after a
person, or a group of affiliated or associated persons, acquires beneficial
ownership of 10% or more, or, in the case of exercise or transfer, makes a
tender offer for 10% or more of the Company's common stock. The Rights entitle
the holder, except such an acquiring person, to purchase at the current exercise
price of $100, that number of the Company's common shares which at the time
would have a market value of $200. In the event the Company is acquired in a
merger or other business combination (including one in which the Company is the
surviving corporation), each Right entitles its holder to purchase at the
current exercise price of $100 that number of common shares of the surviving
corporation which would then have a market value of $200. In lieu of common
shares, Rights holders can purchase 1/100 of a share of Series C Preferred Stock
for each Right. The Series C Preferred Stock would be entitled to quarterly
dividends equal to the greater of $10 per share or 100 times the common stock
dividend per share and have 100 votes per share, voting together with the common
stock. By action of the board of directors, the Rights may also be exchanged in
whole or in part, at an exchange ratio of one share of common stock per Right.
The Rights have no voting rights and are redeemable, at the option of the
Company, at a price of $0.01 per Right prior to the acquisition by a person or a
group of persons affiliated or associated persons of beneficial ownership of 10%
or more of the common stock.
EMPLOYEE STOCK OPTION AND STOCK PURCHASE PLANS
OPTION PLANS. The Company sponsors various stock option and incentive plans
which provide for the granting of options to employees and directors for
purchase of common stock at prices equal to fair market value at the time of
grant. Key employee plans also provide for the issuance of stock appreciation
rights, limited stock appreciation rights, performance units or restricted stock
at no cost to the employee; none were granted in 1998, 1997 or 1996. Options
granted under all plans are for terms not exceeding 10 years and are exercisable
cumulatively 20% to 50% each year based on the terms of the grant. Awards under
a non-employee director plan may be granted in tandem with restricted stock
units at no cost to the grantee; 2,850 units and 47,673 units were granted in
1998 and 1997, respectively. Compensation expense is recognized as the
restricted stock units vest over the periods established for each grant.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
The following table summarizes the status of the Company's stock option
plans:
<TABLE>
<CAPTION>
Shares in thousands 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 6,000 $27.18 6,878 $24.33 7,424 $23.31
Granted 246 33.21 1,339 35.08 1,312 29.35
Exercised (911) 23.60 (2,037) 22.85 (1,742) 23.29
Forfeited (82) 27.01 (180) 26.40 (116) 27.57
- ----------------------------------------------------------------------------------------------------------------------
End of year 5,253 $28.06 6,000 $27.18 6,878 $24.33
======================================================================================================================
Exercisable at end of year 3,610 $26.12 3,373 $23.87 4,636 $22.83
======================================================================================================================
Available for future grant 3,907 N/A 1,566 N/A 2,535 N/A
======================================================================================================================
</TABLE>
Information about options in various price ranges at December 31, 1998
follows:
Shares in thousands Options Outstanding Options Exercisable
- ---------------------------------------------------------------------
Remaining Weighted Weighted
Price Life Average Average
Range Shares (in years) Price Shares Price
- ---------------------------------------------------------------------
$ 10-20 261 2.5 $16.13 261 $16.13
20-25 1,070 4.2 22.42 802 21.88
25-30 2,436 5.9 27.30 2,067 26.90
30-38 1,486 8.5 35.46 480 35.25
- ---------------------------------------------------------------------
5,253 6.2 $28.06 3,610 $26.12
=====================================================================
PURCHASE PLANS. The Employee Stock Purchase Plan provides for periodic offerings
to substantially all U.S. and Canadian employees, with the exception of
employees in executive stock option plans, to subscribe shares of the Company's
common stock at 85% of the fair market value on either the date of offering or
the last day of the purchase period, whichever is less. The most recent stock
purchase plan provides for quarterly purchase periods. The U.K. Stock Purchase
Scheme provides for periodic offerings to substantially all U.K. employees to
subscribe shares of the Company's common stock at 85% of the fair market value
on the date of the offering.
The following table summarizes the status of the Company's stock purchase
plans:
<TABLE>
<CAPTION>
Shares in thousands 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 571 $24.46 1,653 $23.88 1,374 $22.79
Granted 146 20.31 63 30.28 1,608 23.96
Exercised (586) 23.05 (994) 23.96 (1,191) 22.85
Forfeited (49) 24.54 (151) 23.91 (138) 22.86
- ----------------------------------------------------------------------------------------------------------------------
End of year 82 $27.05 571 $24.46 1,653 $23.88
======================================================================================================================
Exercisable at end of year -- N/A 472 $23.96 -- N/A
======================================================================================================================
Available for future grant 226 N/A 323 N/A 235 N/A
======================================================================================================================
</TABLE>
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
PRO FORMA INFORMATION. The Company accounts for stock-based compensation using
the intrinsic value method; accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had the fair value method of
accounting been applied to the Company's plans, which requires recognition of
compensation expense over the vesting periods of the awards, pro forma net
earnings (loss) and earnings (loss) per share for 1998, 1997 and 1996 would have
been:
In thousands,
except per share amounts 1998 1997 1996
- ------------------------------------------------------------------------------
Net earnings (loss):
As reported $ 159,071 175,685 (41,318)
Pro forma 150,958 164,235 (49,310)
Earnings (loss) per share:
Basic:
As reported 2.18 2.28 (0.51)
Pro forma 2.07 2.14 (0.61)
Diluted:
As reported 2.16 2.25 (0.51)
Pro forma 2.06 2.11 (0.61)
This pro forma impact only takes into account options granted since January
1, 1995 and is likely to increase in future years as additional options are
granted and amortized over the vesting period. The fair values of options
granted since January 1, 1995 were estimated as of the dates of grant using the
Black-Scholes option-pricing model. The option pricing assumptions for 1998,
1997 and 1996 were as follows:
1998 1997 1996
- -----------------------------------------------------------------------------
Dividend yield 2.3% 1.8% 2.1%
Expected volatility 25.1% 24.5% 25.4%
Option plans:
Risk-free interest rate 5.4% 6.2% 6.7%
Weighted average expected life 9 years 8 years 9 years
Weighted average grant-date
fair value per option $11.05 $12.59 $10.82
Purchase plans:
Risk-free interest rate 5.3% 6.1% 6.3%
Weighted average expected life .25 year 5 years 1.5 years
Weighted average grant-date
fair value per option $ 5.50 $12.30 $ 6.51
EARNINGS PER SHARE INFORMATION
A reconciliation of the number of shares used in computing basic and diluted EPS
follows:
In thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Weighted average shares
outstanding-Basic 73,068 76,888 81,263
Common equivalents:
Shares issuable under
outstanding dilutive options 3,850 5,442 --
Shares assumed repurchased
based on the average
market value for the period (3,416) (4,494) --
Dilutive effect of exercised
options prior to
being exercised, net 143 356 --
- --------------------------------------------------------------------------------
Weighted average shares
outstanding-Diluted 73,645 78,192 81,263
================================================================================
Anti-dilutive options
not included above 1,485 1,129 8,531
================================================================================
<PAGE>
EMPLOYEE BENEFIT PLANS
PENSION PLANS. The Company sponsors several defined benefit pension plans,
covering substantially all employees not covered by union-administered plans,
including certain employees in foreign countries. These plans generally provide
participants with benefits based on years of service and career-average
compensation levels. Funding policy for these plans is to make contributions
based on normal costs plus amortization of unfunded past service liability but
not greater than the maximum allowable contribution deductible for Federal
income tax purposes. The majority of the plans' assets are invested in a master
trust which, in turn, is primarily invested in listed stocks and bonds. The
Company also contributed to various defined benefit, union-administered,
multi-employer plans for employees under collective bargaining agreements.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
Pension (income) expense attributable to continuing operations for 1998, 1997
and 1996 was as follows:
In thousands 1998 1997 1996
- ------------------------------------------------------------------------------
Company-administered plans:
Service cost $ 26,067 24,037 26,746
Interest cost 48,356 46,160 36,662
Expected return on plan
assets (75,680) (60,078) (44,979)
Additional expense from
early retirement program -- -- 43,928
Curtailment gain -- (7,614) --
Amortization of transition
asset (3,848) (3,376) (2,905)
Recognized net actuarial
(gain) loss (2,334) 523 651
Amortization of prior service cost 2,368 1,816 1,082
- ------------------------------------------------------------------------------
(5,071) 1,468 61,185
Union-administered plans 2,488 1,840 2,013
- ------------------------------------------------------------------------------
Net pension (income) expense $ (2,583) 3,308 63,198
===============================================================================
The following table sets forth the balance sheet impact, as well as the
benefit obligations, assets and funded status associated with the Company's
pension plans at December 31, 1998 and 1997:
In thousands 1998 1997
- -----------------------------------------------------------------------------
Change in benefit obligations:
Benefit obligations at January 1, $ 708,714 644,073
Service cost 26,067 24,037
Interest cost 48,356 46,160
Amendments 618 6,669
Actuarial (gain) loss (4,053) 11,194
Benefits paid (38,530) (33,718)
Curtailment -- (10,308)
Change in discount rate assumption 46,986 22,448
Foreign currency exchange rate changes (429) (1,841)
- -----------------------------------------------------------------------------
Benefit obligations at December 31, 787,729 708,714
- -----------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at January 1, 820,696 679,756
Actual return on plan assets 136,108 142,195
Employer contributions 8,466 33,532
Plan participants' contributions 2,746 1,881
Benefits paid (38,530) (33,718)
Foreign currency exchange rate changes (325) (2,950)
- -----------------------------------------------------------------------------
Fair value of plan assets at December 31, 929,161 820,696
- -----------------------------------------------------------------------------
Funded status 141,432 111,982
Unrecognized transition asset (7,990) (11,838)
Unrecognized prior service cost 15,355 16,802
Unrecognized net actuarial gain (88,713) (72,230)
- -----------------------------------------------------------------------------
Prepaid benefit cost $ 60,084 44,716
=============================================================================
The following table sets forth the actuarial assumptions used for the
Company's dominant plan:
1998 1997
- -----------------------------------------------------------------
Discount rate 6.75% 7.25%
Rate of increase in compensation levels 5.00% 5.00%
Expected long-term rate of return
on plan assets 9.50% 9.50%
Transition amortization in years 8 8
Gain and loss amortization in years 8 8
<PAGE>
SAVINGS PLANS. The Company also has defined contribution savings plans that
cover substantially all eligible employees. Company contributions to the plans,
which are based on employee contributions and the level of company match,
totaled approximately $12 million in 1998, 1997 and 1996.
SUPPLEMENTAL PENSION AND DEFERRED COMPENSATION PLANS. The Company has a
non-qualified supplemental pension plan covering certain employees which
provides for incremental pension payments from the Company's funds so that total
pension payments equal amounts that would have been payable from the Company's
principal pension plans if it were not for limitations imposed by income tax
regulations. The benefit obligation under this plan totaled $17 million and $15
million at December 31, 1998 and 1997, respectively. The prepaid benefit cost in
the table above is net of an accrued pension expense liability of $11 million
and $9 million related to this plan at December 31, 1998 and 1997, respectively.
Pension expense for this plan totaled $2 million in 1998 and 1997 and $3 million
in 1996.
The Company also has deferred compensation plans which permit eligible
employees, officers and directors to defer a portion of their compensation. The
deferred compensation liability, including Company matching amounts and
accumulated earnings on notional investments, totaled $20 million and $17
million at December 31, 1998 and 1997, respectively.
The Company has established a grantor trust to provide funding for benefits
payable under the supplemental pension plan and a deferred compensation plan.
The assets held in trust at December 31, 1998 and 1997, amounted to $23 million
and $5 million, respectively, consisting of a managed portfolio of equity
securities and corporate-owned life insurance policies. These assets are
included in Direct Financing Leases and Other Assets in the accompanying balance
sheets because they are available to the general creditors of the Company in the
event of the Company's insolvency.
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company sponsors plans which
provide retired employees with certain health care and life insurance benefits.
Substantially all employees not covered by union-administered health and welfare
plans are eligible for these benefits. Health care benefits for the Company's
principal plans are generally provided to qualified retirees under age 65 and
eligible dependents. Generally, these plans require employee contributions which
vary based on years of service and include provisions which cap Company
contributions. On January 1, 1998, the postretirement plans were amended to
change the health care provider elections. The amendment generated an
unrecognized prior service credit of $9 million.
Total periodic postretirement benefit expense attributable to continuing
operations for 1998, 1997 and 1996 was as follows:
In thousands 1998 1997 1996
- ----------------------------------------------------------------------------
Service cost $1,117 1,569 1,626
Interest cost 2,535 3,122 2,790
Additional expense from
early retirement program -- -- 2,323
Curtailment gain -- (1,881) --
Amortization of prior service cost (1,091) -- --
- ----------------------------------------------------------------------------
Postretirement benefit expense $2,561 2,810 6,739
============================================================================
The Company's postretirement benefit plans are not funded. The following
table sets forth the balance sheet impact, as well as the benefit obligations
and rate assumptions associated with the Company's postretirement benefit plans
at December 31, 1998 and 1997:
In thousands 1998 1997
- ---------------------------------------------------------------------------
Benefit obligations at January 1, $44,286 59,298
Service cost 1,117 1,569
Interest cost 2,535 3,122
Service and interest cost -
discontinued operations -- 573
Amendment (8,731) --
Actuarial loss (gain) 2,801 (2,974)
Benefits paid (3,497) (2,783)
Disposition of automotive
carrier business -- (9,921)
Curtailment and settlement -- (5,232)
Change in discount rate assumption 1,797 1,004
Change in participation assumption (1,332) --
Change in medical trend rate assumption -- (370)
- ---------------------------------------------------------------------------
Benefit obligations at December 31, 38,976 44,286
Unrecognized prior service credit 7,640 --
Unrecognized net actuarial gain 145 3,408
- ---------------------------------------------------------------------------
Accrued postretirement benefit obligation $46,761 47,694
===========================================================================
Discount rate 6.75% 7.25%
The actuarial assumptions include health care cost trend rates projected
ratably from 8% in 1999 to 6% in 2003 and thereafter. Changing the assumed
health care cost trend rates by 1% in each year would not have had a material
effect on the accumulated postretirement benefit obligation as of December 31,
1998 or periodic postretirement benefit expense for 1998.
ENVIRONMENTAL MATTERS
The Company's operations involve storing and dispensing petroleum products,
primarily diesel fuel. In 1988, the Environmental Protection Agency issued
regulations that established requirements for testing and replacing underground
storage tanks. During 1998, the Company completed its tank replacement program
to comply with the regulations. In addition, the Company received notices from
the Environmental Protection Agency and others that it has been identified as a
potentially responsible party (PRP) under the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act and similar state statutes and may be required to share in
the cost of cleanup of 33 identified disposal sites.
<PAGE>
The Company records a liability for environmental assessments and/or cleanup
when it is probable a loss has been incurred. Generally, the timing of these
accruals coincides with the identification of an environmental problem through
the Company's internal procedures or upon notification from regulatory agencies.
The estimate of loss is based on information obtained from independent
environmental engineers and/or from Company experts regarding the nature and
extent of environmental contamination, remedial alternatives available and the
cleanup criteria required by relevant governmental agencies. The estimated costs
include amounts for anticipated site testing, consulting, remediation, disposal,
post-remediation monitoring and legal fees, as appropriate. These amounts
represent the estimated undiscounted costs to fully resolve the environmental
matters in accordance with prevailing Federal, state and local requirements
based on information presently available. The liability does not reflect
possible recoveries from insurance companies or reimbursement of remediation
costs by state agencies, but does include estimates of cost sharing with other
PRPs at Superfund sites.
The Company's environmental expenses, which included remediation costs as
well as normal recurring expenses such as licensing, testing and waste disposal
fees, were $4 million in 1998, $5 million in 1997 and $7 million in 1996.
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
The ultimate costs of the Company's environmental liabilities cannot be
projected with certainty due to the presence of several unknown factors,
primarily the level of contamination, the effectiveness of selected remediation
methods, the stage of investigation at individual sites, the determination of
the Company's liability in proportion to other responsible parties and the
recoverability of such costs from third parties. Based on information presently
available, management believes that the ultimate disposition of these matters,
although potentially material to the results of operations in any one year, will
not have a material adverse effect on the Company's financial condition or
liquidity.
OTHER MATTERS
The Company is currently involved in litigation with a former customer relating
to a logistics services agreement which was terminated in 1997. The former
customer has filed a claim against the Company and the Company has filed a
counterclaim. Management believes that the resolution of this matter will not
have a material impact on the Company's consolidated financial position,
liquidity or results of operations.
The Company is also a party to various other claims, legal actions and
complaints arising in the ordinary course of business. While any proceeding or
litigation has an element of uncertainty, management believes that the
disposition of these matters will not have a material impact on the consolidated
financial position, liquidity or results of operations of the Company.
SEGMENT REPORTING
The Company operates in four business segments: (1) Transportation Services,
which provides full service leasing, commercial rental and programmed
maintenance of trucks, tractors and trailers to customers throughout the U.S.
and Canada; (2) Integrated Logistics, which provides support services for
customers' entire supply chains, from inbound raw materials supply through
finished goods distribution, including dedicated contact carriage, the
management of carriers, and inventory deployment throughout the U.S. and Canada;
(3) Public Transportation Services, which provides student transportation,
transit management, and fleet management and maintenance services to the U.S.
public sector; and (4) International, which provides full service leasing,
commercial rental, programmed maintenance and logistics services in Europe,
South America and Mexico.
The segment information set forth below is based on the nature of the
services offered, as well as the geographic markets served. The accounting
policies of the business segments are the same as those previously described in
the "Summary of Significant Accounting Policies" note. The Company evaluates
financial performance based upon several factors, of which the primary measure
is business segment earnings before income taxes and one-time items such as Year
2000 expense and 1996 restructuring and other charges. Business segment earnings
before income taxes represent the total profit earned from each segment's
customers across all of the Company's segments and include allocations of
certain overhead costs. The Transportation Services segment leases revenue
earning equipment, sells fuel and provides maintenance and other ancillary
services to the Integrated Logistics segment. Likewise, the Transportation
Services segment sells fuel and provides maintenance services to the Public
Transportation Services segment. Intersegment sales are accounted for at fair
value as if the sales were made to third parties. Interest expense, net is
allocated to the various business segments based upon targeted debt to equity
ratios using an interest factor which reflects the Company's average total cost
of debt.
<PAGE>
<TABLE>
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
REVENUE 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $2,866,844 2,886,635 2,979,409
Integrated Logistics 1,501,126 1,370,320 1,104,797
Public Transportation 581,748 525,757 439,750
International 603,834 457,869 358,869
Intersegment eliminations (364,828) (346,676) (386,815)
- ------------------------------------------------------------------------------------
Total from reportable segments 5,188,724 4,893,905 4,496,010
Consumer truck rental -- -- 440,113
- ------------------------------------------------------------------------------------
Total revenue $5,188,724 4,893,905 4,936,123
====================================================================================
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $ 236,466 217,059 171,441
Integrated Logistics 76,514 67,300 36,351
Public Transportation 48,367 50,178 39,434
International (93) 1,516 (9,989)
Intersegment eliminations (54,619) (50,061) (37,933)
- ------------------------------------------------------------------------------------
Total from reportable segments 306,635 285,992 199,304
Other, primarily corporate
administrative expenses (11,506) (18,546) (21,566)
Year 2000 expense (38,173) (3,494) --
Consumer truck rental -- -- 44,687
Restructuring and other charges -- -- (228,455)
- ------------------------------------------------------------------------------------
Total earnings (loss)
before income taxes $ 256,956 263,952 (6,030)
====================================================================================
</TABLE>
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ryder System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
DEPRECIATION EXPENSE, NET OF GAINS 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $464,098 466,251 495,566
Integrated Logistics 18,824 16,485 9,794
Public Transportation 34,088 32,563 27,242
International 84,824 74,730 65,842
- ------------------------------------------------------------------------------------
Total from reportable segments 601,834 590,029 598,444
Other, primarily corporate 2,447 2,250 1,072
Consumer truck rental -- -- 76,757
- ------------------------------------------------------------------------------------
Total depreciation, net of gains $604,281 592,279 676,273
====================================================================================
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
AMORTIZATION EXPENSE
AND OTHER NON-CASH CHARGES, NET 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $ 2,649 (1,352) 8,113
Integrated Logistics 4,969 5,996 5,238
Public Transportation 2,999 3,411 3,136
International (4,490) (1,225) 12,407
- ------------------------------------------------------------------------------------
Total from reportable segments 6,127 6,830 28,894
Other, primarily corporate (3,920) 2,361 2,652
Consumer truck rental -- -- 17
- ------------------------------------------------------------------------------------
Total amortization expense
and other non-cash charges, net $ 2,207 9,191 31,563
====================================================================================
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
INTEREST EXPENSE, NET 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $162,609 159,768 161,440
Integrated Logistics 1,588 214 828
Public Transportation 10,532 9,159 6,019
International 25,564 22,975 23,050
- ------------------------------------------------------------------------------------
Total from reportable segments 200,293 192,116 191,337
Other, primarily corporate (1,436) (2,755) (5,104)
Consumer truck rental -- -- 20,403
- ------------------------------------------------------------------------------------
Total interest expense, net $198,857 189,361 206,636
====================================================================================
<PAGE>
<CAPTION>
In thousands December 31
- ------------------------------------------------------------------------------------
ASSETS 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $4,236,787 4,229,236 4,165,033
Integrated Logistics 294,667 286,677 268,480
Public Transportation 378,483 353,482 271,481
International 611,755 552,522 536,925
- ------------------------------------------------------------------------------------
Total from reportable segments 5,521,692 5,421,917 5,241,919
Other, primarily corporate 186,909 87,143 112,733
Discontinued operations -- -- 290,737
- ------------------------------------------------------------------------------------
Total assets $5,708,601 5,509,060 5,645,389
====================================================================================
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
CAPITAL EXPENDITURES 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $1,203,885 873,002 956,371
Integrated Logistics 20,413 24,921 36,357
Public Transportation 35,976 49,107 49,463
International 107,366 89,603 143,451
- ------------------------------------------------------------------------------------
Total from reportable segments 1,367,640 1,036,633 1,185,642
Other, primarily corporate 1,477 2,485 3,566
Consumer truck rental -- -- 68,099
- ------------------------------------------------------------------------------------
Total capital expenditures $1,369,117 1,039,118 1,257,307
====================================================================================
GEOGRAPHIC INFORMATION
<CAPTION>
In thousands Years ended December 31
- ------------------------------------------------------------------------------------
REVENUE 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Services $2,377,851 2,408,954 2,463,946
Integrated Logistics 1,386,458 1,298,408 1,073,416
Public Transportation 581,748 525,757 439,750
Consumer truck rental -- -- 440,113
- ------------------------------------------------------------------------------------
Total United States 4,346,057 4,233,119 4,417,225
- ------------------------------------------------------------------------------------
Transportation Services 400,354 386,045 352,025
Integrated Logistics 442,313 274,741 166,873
- ------------------------------------------------------------------------------------
Total Foreign 842,667 660,786 518,898
- ------------------------------------------------------------------------------------
Total $5,188,724 4,893,905 4,936,123
====================================================================================
<CAPTION>
In thousands December 31
- ------------------------------------------------------------------------------------
LONG-LIVED ASSETS 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $3,209,027 3,139,084 3,296,319
Foreign 600,893 588,082 604,880
- ------------------------------------------------------------------------------------
Total $3,809,920 3,727,166 3,901,199
====================================================================================
</TABLE>
45
<PAGE>
SUPPLEMENTAL FINANCIAL DATA
Ryder System, Inc. and Subsidiaries
QUARTERLY FINANCIAL AND COMMON STOCK DATA
<TABLE>
<CAPTION>
Per Common Share
-----------------------------------------------------------
Earnings From
Continuing Dividends
In thousands, Earnings From Operations Net Earnings Stock Prices Per
except per Continuing Net ------------------------------------------------------- Common
share amounts Revenue Operations Earnings Basic Diluted Basic Diluted High Low Share
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998
First quarter $1,245,617 37,274 37,274 0.50 0.50 0.50 0.50 38.94 31.44 0.15
Second quarter 1,281,577 45,267 45,267 0.61 0.61 0.61 0.61 40.56 31.06 0.15
Third quarter 1,290,817 37,048 37,048 0.51 0.51 0.51 0.51 32.25 19.44 0.15
Fourth quarter 1,370,713 39,482 39,482 0.55 0.55 0.55 0.55 28.81 21.75 0.15
- ----------------------------------------------------------------------------------------------------------------------------
Total $5,188,724 159,071 159,071 2.18 2.16 2.18 2.16 40.56 19.44 0.60
============================================================================================================================
1997
First quarter $1,187,119 32,451 33,666 0.42 0.41 0.43 0.43 32.75 27.13 0.15
Second quarter 1,233,999 43,328 50,035 0.56 0.55 0.65 0.64 34.63 28.88 0.15
Third quarter 1,204,339 35,278 42,803 0.45 0.45 0.55 0.54 36.50 33.25 0.15
Fourth quarter 1,268,448 49,181 49,181 0.65 0.64 0.65 0.64 37.13 31.81 0.15
- ----------------------------------------------------------------------------------------------------------------------------
Total $4,893,905 160,238 175,685 2.08 2.05 2.28 2.25 37.13 27.13 0.60
============================================================================================================================
</TABLE>
Quarterly and year-to-date computations of per share amounts are made
independently; therefore, the sum of per share amounts for the quarters may not
equal per share amounts for the year.
The Company's common shares are traded on the New York Stock Exchange, the
Chicago Stock Exchange, the Pacific Stock Exchange and the Berlin Stock
Exchange. As of January 29, 1999, there were 16,614 common stockholders of
record.
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
Dollars in thousands, except per share amounts 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 5,188,724 4,893,905 4,936,123 4,572,975 4,040,201
Earnings from continuing operations before
special items(a):
Before income taxes $ 295,129 267,446 177,738 210,412 186,571
After income taxes $ 182,702 162,359 103,136 123,633 109,877
Per diluted common share $ 2.48 2.08 1.27 1.56 1.39
Earnings (loss) from continuing operations:
Before income taxes $ 256,956 263,952 (6,030) 217,985 207,071
After income taxes $ 159,071 160,238 (19,423) 128,023 121,800
Per diluted common share(a) $ 2.16 2.05 (0.24) 1.61 1.55
Net earnings (loss)(b) $ 159,071 175,685 (41,318) 147,666 153,529
Per diluted common share(b) $ 2.16 2.25 (0.51) 1.86 1.95
Cash dividends per common share $ 0.60 0.60 0.60 0.60 0.60
Average common shares-diluted (in thousands) 73,645 78,192 81,263 79,370 78,768
Average common equity, excluding Year 2000 $ 1,106,889 1,126,519 1,261,101 1,176,373 1,057,931
Return on average common equity (%)(c) 16.5 15.5 (3.3) 13.2 14.5
Book value per common share $ 15.37 14.39 14.19 15.64 14.33
Market price (high-low) $40.56-19.44 37.13-27.13 31.13-22.63 26.13-21 28-19.88
Total debt $ 2,583,031 2,568,915 2,436,968 2,623,101 1,912,898
Long-term debt $ 2,099,697 2,267,554 2,237,010 2,411,024 1,794,795
Debt to equity (%) 236 242 220 212 169
Year-end assets $ 5,708,601 5,509,060 5,645,389 5,893,815 5,014,473
Return on average assets (%)(d) 3.2 3.0 (0.5) 2.4 2.8
Average asset turnover (%)(e) 91.2 91.2 87.3 86.4 91.3
Cash flow from continuing operating activities
and asset sales $ 1,286,734 960,304 905,983 1,115,015 1,017,921
Capital expenditures, including capital leases(e) $ 1,369,983 1,041,515 1,259,835 2,088,763 1,726,373
Number of vehicles(e) 173,116 162,665 161,749 197,029 179,725
Number of employees(e) 45,373 42,342 40,287 39,740 37,326
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Special items represent Year 2000 expense, 1996 restructuring and other
charges and results of the consumer truck rental business. Year 2000
expense totaled $38 million ($24 million after tax, or $0.32 per diluted
common share) in 1998 and $3 million ($2 million after tax, or $0.03 per
diluted common share) in 1997. Restructuring and other charges totaled $228
million ($150 million after tax, or $1.84 per diluted common share) in
1996. The consumer truck rental business reported earnings of $45 million
($27 million after tax, or $0.33 per diluted common share) in 1996 before
restructuring and other charges, $8 million ($4 million after tax, or $0.05
per diluted common share) in 1995 and $21 million ($12 million after tax,
or $0.16 per diluted common share) in 1994.
(b) Net loss for 1996 includes, in addition to the items discussed in (a)
above, an after tax extraordinary loss of $10 million ($0.12 per diluted
common share) relating to the early extinguishment of debt at a premium.
Net earnings for 1995 include, in addition to the items discussed in (a)
above, the cumulative effect of a change in accounting for charitable
contributions resulting in an after tax charge of $8 million ($0.10 per
diluted common share). Net earnings (loss) for all years include the
results of discontinued operations.
(c) Excludes Year 2000 expense, the cumulative effect of changes in accounting
and special charges and gains related to discontinued operations.
(d) Excludes Year 2000 expense and the cumulative effect of changes in
accounting and discontinued operations.
(e) Excludes discontinued operations.
46
EXHIBIT 21.1
RYDER SYSTEM, INC.
SUBSIDIARIES AS OF FEBRUARY 1, 1999
STATE/COUNTRY OF
NAME OF COMPANY INCORPORATION
- --------------- ----------------
Associated Ryder Capital Services, Inc. Florida
Associated Ryder Capital Services LLC Delaware
ATE Management of Duluth, Inc. Minnesota
Cape Area Transportation Systems, Inc. Massachusetts
Central Virginia Transit Management Company, Inc. Virginia
Commuter Services, Inc. Virginia
Companhia Transportadora e Comercial Translor Brazil
Disposition Holding Corp. Florida
Far East Freight, Inc. Florida
Forrest Rental Services Limited England
H.N.S. Management Company, Inc. Connecticut
Manufacturing Holding Corp. Florida
Merrimack Valley Area Transportation Co., Corp. Massachusetts
Mid-South Transportation Management, Inc. Tennessee
Mitchell Self Drive Limited England
Network Sales, Inc. (1) Tennessee
Network Vehicle Central, Inc. Florida
Northern Carriers, Inc. Illinois
Old Dominion Transit Management Company Virginia
Paratransit Brokerage Services, Inc. Massachusetts
Parking Management of Southwest Virginia, Inc. Virginia
Phaseking Limited England
Road Master, Limited Bermuda
RSI Acquisition Corp. Delaware
RSI Holding B.V. Netherlands
RSI Purchase Corp. Delaware
RTA Transit Services, Inc. Massachusetts
RTR Leasing I, Inc. Delaware
RTR Leasing II, Inc. Delaware
Rycom 1, LLC Delaware
Rycom 2, LLC Delaware
Ryder Airport Operations Corp. Florida
Ryder Argentina S.A. Argentina
Ryder/ATE, Inc. (2) Delaware
Ryder Capital S.A. de C.V. Mexico
RYDERCORP Florida
RYDERCORP, Inc. Delaware
Ryder de Mexico S.A. de C.V. Mexico
Ryder Dedicated Capacity, Inc. Tennessee
Ryder Dedicated Logistics, Inc. Delaware
Ryder Dedicated Logistics Limited England
Page 1 of 4 Pages
<PAGE>
Ryder Deutschland GmbH West Germany
Ryder Distribution Services Limited England
Ryder do Brasil Ltda. Brazil
Ryder Driver Leasing, Inc. Florida
Ryder Energy Distribution Corporation Florida
Ryder (Europe) Limited England
Ryder Funding LP Delaware
Ryder Holding, LLC Delaware
Ryder Integrated Logistics Limited England
Ryder Integrated Logistics, Inc. (3) (4) Delaware
Ryder International Acquisition Corp. Florida
Ryder International, Inc. Florida
Ryder Lease Co. 1, Inc. Florida
Ryder Lease Co. 2, Inc. Florida
Ryder Mexicana, S.A. de C.V. Mexico
Ryder Netherlands B.V. Netherlands
Ryder Pension Fund Limited England
Ryder Plc England
Ryder Polska Sp. z o.o. Poland
Ryder Public Transportation Services, Inc. Florida
Ryder Puerto Rico, Inc. Delaware
Ryder Realty, Inc. Delaware
Ryder Services Corporation (5) Florida
Ryder Servicios do Brasil Ltda. Brazil
Ryder Servicios S.A. de C.V. Mexico
Ryder St. Louis Redevelopment Corporation Missouri
Ryder Student Transportation Services, Inc. (6) Florida
Ryder System B.V. Netherlands
Ryder System Holdings (UK) Limited England
Ryder System Limited England
Ryder Transport Services Limited England
Ryder Transportation Limited England
Ryder Truck Rental, Inc. (7) Florida
Ryder Truck Rental I LLC Delaware
Ryder Truck Rental II LLC Delaware
Ryder Truck Rental III LLC Delaware
Ryder Truck Rental I LP Delaware
Ryder Truck Rental II LP Delaware
Ryder Truck Rental Canada Ltd. (8) Canada
Ryder Truck Rental Limited England
Ryder Truck Rental LT Delaware
Ryder Truckstops, Inc. Florida
Ryder Vehicle Lease Trust 1998-A Delaware
Ryder Vehicle Leasing & Sales Corp. Barbados
Ryhert Holding, Inc. Delaware
Rymar Holding, Inc. Delaware
Rynew 1, Inc. Delaware
Rynew 2, Inc. Delaware
Ryvof Holding, Inc. Delaware
Saunders Leasing System of Canada Limited - BEING DISSOLVED Canada
Seacoast Management Company, Inc. New Hampshire
Page 2 of 4 Pages
<PAGE>
Southwestern Virginia Transit Management Company, Inc. Virginia
Spring Hill Integrated Logistics Management, Inc. Delaware
Surplus Property Holding Corp. Florida
Tandem Transport, L.P. Georgia
Transit Management Company of Laredo Texas
Transit Management of Alexandria, Inc. Virginia
Transit Management of Charlotte, Inc. North Carolina
Transit Management of Connecticut, Inc. Connecticut
Transit Management of Decatur, Inc. Illinois
Transit Management of Durham, Inc. North Carolina
Transit Management of Great Falls, Inc. Montana
Transit Management of Nashua, Inc. New Hampshire
Transit Management of Racine, Inc. Wisconsin
Transit Management of Richland, Inc. Ohio
Transit Management of St. Joseph, Inc. Missouri
Transit Management of Spartanburg, Inc. South Carolina
Transit Management of Tucson, Inc. Arizona
Transit Management of Tyler, Inc. Texas
Transit Management of Washoe, Inc. Nevada
Transit Management of Waukesha, Inc. Wisconsin
Truck Transerv, Inc. Delaware
Unilink Contract Hire Limited England
UniRyder Limited England
United Contract Hire Limited England
Westside Corporate Center, Inc. Florida
- --------------------------------------------------------------------------------
(1) Ontario, Canada: D/B/A VEHICLE NETWORK SALES
(2) Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia,
Indiana, Iowa, Maryland, Massachusetts, New Jersey, New York,
Pennsylvania, Tennessee, Texas, Virginia, Washington: D/B/A RYDER/MLS
(3) California, Delaware, Iowa, North Dakota, North Carolina, Virginia,
Texas, Utah: D/B/A TRIANGLE SERVICES CORPORATION
(4) Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida,
Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland,
Michigan, Missouri, Nebraska, Nevada, New Jersey, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South
Dakota, Tennessee, Texas, Utah, Virginia and Washington: D/B/A LOGICORP.
Florida: d/b/a UniRyder
(5) Ohio and Texas: D/B/A RYDER CLAIMS SERVICES CORPORATION
Page 3 of 4 Pages
<PAGE>
(6) California, Colorado, Connecticut, Illinois, Minnesota, Missouri, Montana
and New Jersey: D/B/A RYDER TRANSPORTATION
California: D/B/A RYDER
Colorado: D/B/A GRAND CONNECTION
Massachusetts: D/B/A DEPALMA TRANSPORTATION SALES
Minnesota: D/B/A KARE KABS
New York: D/B/A RYDER STUDENT TRANSPORTATION
Rhode Island: D/B/A RYDER STUDENT TRANSPORTATION SALES
(7) Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut,
Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode
Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont,
Virginia, Washington, West Virginia, Wisconsin and Wyoming: D/B/A RYDER
TRANSPORTATION SERVICES
Maryland and Virginia: D/B/A RYDER/JACOBS
Michigan: D/B/A ATLAS TRUCKING, INC.
Michigan: D/B/A RYDER ATLAS OF WESTERN MICHIGAN
(8) French Name: Location de Camions Ryder du Canada Ltee.
Canadian Provinces: Ryder Integrated Logistics
Page 4 of 4 Pages
EXHIBIT 23.1
The Board of Directors and Shareholders of
Ryder System, Inc.:
We consent to incorporation by reference in the following Registration
Statements on Forms S-3 and S-8 of Ryder System, Inc. of our report dated
February 4, 1999, relating to the consolidated balance sheets of Ryder System,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1998, which report
is incorporated by reference in the December 31, 1998 annual report on Form 10-K
of Ryder System, Inc.:
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.
/bullet/ Registration Statement No. 333-63049 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.
<PAGE>
The Board of Directors and Shareholders of
Ryder System, Inc.
Page 2
/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. 33-61509 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. 1997 Deferred Compensation Plan.
/bullet/ Registration Statement No. 333-26653 covering the Ryder
System, Inc. Board of Directors Stock Award Plan.
/bullet/ Registration Statement No. 333-57599 covering the Ryder
Student Transportation Services, Inc. Retirement/Savings
Plan.
/bullet/ Registration Statement No. 333-57593 covering the Ryder
System, Inc. Stock Purchase Plan for Employees.
/bullet/ Registration Statement No. 333-57595 covering the Ryder
System, Inc. 1995 Stock Incentive Plan.
Miami, Florida
March 26, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ CHRISTINE A. VARNEY
-----------------------------
Christine A. Varney
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Christine A. Varney, personally known to me and known to me
to be the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ ALVA O. WAY
-----------------------------
Alva O. Way
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Alva O. Way, personally known to me and known to me to be the
person described in and who executed the foregoing instrument, and acknowledged
to and before me this 18th day of February, 1999 that he or she executed said
instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ PAUL J. RIZZO
-----------------------------
Paul J. Rizzo
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Paul J. Rizzo, personally known to me and known to me to be
the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ LYNN M. MARTIN
-----------------------------
Lynn M. Martin
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Lynn M. Martin, personally known to me and known to me to be
the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ DAVID T. KEARNS
-----------------------------
David T. Kearns
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared David T. Kearns, personally known to me and known to me to be
the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ VERNON E. JORDAN, JR.
-----------------------------
Vernon E. Jordan, Jr.
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Vernon E. Jordan, Jr., personally known to me and known to me
to be the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ JOHN A. GEORGES
-----------------------------
John A. Georges
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared John A. Georges, personally known to me and known to me to be
the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ EDWARD T. FOOTE II
-----------------------------
Edward T. Foote II
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Edward T. Foote II, personally known to me and known to me to
be the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ JOSEPH L. DIONNE
-----------------------------
Joseph L. Dionne
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared Joseph L. Dionne, personally known to me and known to me to
be the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Vicki A. O'Meara, Frederick V. Perry and Diana H.
Hull, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for the undersigned and in
his or her name, place and stead, in any and all capacities, to sign the Ryder
System, Inc. Form 10-K (Annual Report pursuant to the Securities Exchange Act of
1934) for the fiscal year ended December 31, 1998 (the "Form 10-K"), and any and
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and with the New York Stock Exchange, Chicago Stock Exchange and
Pacific Stock Exchange, granting unto each said attorney-in-fact and agent full
power and authority to perform every act requisite and necessary to be done in
connection with the execution and filing of the Form 10-K and any and all
amendments thereto, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying all that each said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ DAVID I. FUENTE
-----------------------------
David I. Fuente
STATE OF FLORIDA )
) ss:
COUNTY OF DADE )
Before me appeared David I. Fuente, personally known to me and known to me to be
the person described in and who executed the foregoing instrument, and
acknowledged to and before me this 18th day of February, 1999 that he or she
executed said instrument for the purposes therein expressed.
Witness my hand and official seal:
/s/ Lourdes Palomares
-----------------------------
Notary Public
[Stamped]
Official Notary Seal
Lourdes Palomares
Notary Public State of Florida
Commission No. CC771726
My commission expires Sept. 22, 2002
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RYDER
SYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AND STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 138,353
<SECURITIES> 0
<RECEIVABLES> 559,141
<ALLOWANCES> 0
<INVENTORY> 67,605
<CURRENT-ASSETS> 1,109,699
<PP&E> 6,315,763
<DEPRECIATION> 2,505,843
<TOTAL-ASSETS> 5,708,601
<CURRENT-LIABILITIES> 1,362,664
<BONDS> 2,099,697
0
0
<COMMON> 610,543<F1>
<OTHER-SE> 485,071<F1>
<TOTAL-LIABILITY-AND-EQUITY> 5,708,601
<SALES> 0
<TOTAL-REVENUES> 5,188,724
<CGS> 0
<TOTAL-COSTS> 4,732,911
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198,857
<INCOME-PRETAX> 256,956
<INCOME-TAX> 97,885
<INCOME-CONTINUING> 159,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 159,071
<EPS-PRIMARY> 2.18<F2>
<EPS-DILUTED> 2.16
<FN>
<F1>The cost of stock repurchases has been allocated between common stock and
retained earnings based on the amount of capital surplus at the time of the
stock repurchase. Prior year amounts were reclassified in the consolidated
financial statements to conform with current year presentation.
<F2>(EPS-PRIMARY DENOTES BASIC EPS)
</FN>
</TABLE>
