--------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 1-4364
-------------------------------------
RYDER SYSTEM, INC.
(a Florida corporation)
3600 N. W. 82nd Avenue
Miami, Florida 33166
Telephone (305) 500-3726
I.R.S. Employer Identification No. 59-0739250
-------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: YES X NO _____
Ryder System, Inc. had 59,804,985 shares of common stock ($0.50 par value per
share) outstanding as of October 31, 2000.
--------------------------------------------------------------------------------
<PAGE>
RYDER SYSTEM, INC.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Condensed Statements of Earnings -
Three and nine months ended September 30, 2000 and 1999
(unaudited) 3
Consolidated Condensed Balance Sheets -
September 30, 2000 (unaudited) and December 31, 1999 4
Consolidated Condensed Statements of Cash Flows -
Nine months ended September 30, 2000 and 1999 (unaudited) 5
Notes to Consolidated Condensed Financial Statements (unaudited) 6
Independent Accountants' Review Report 11
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 12
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk 22
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 23
Signatures 24
Exhibit Index 25
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Ryder System, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Periods ended September 30, 2000 and 1999 Three Months Nine Months
---------------------------- -----------------------------
(In thousands, except per share amounts) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $1,338,817 1,261,566 3,979,615 3,630,420
------------- ------------- ------------- -------------
Operating expense 1,001,019 902,330 2,990,534 2,611,719
Freight under management expense 101,405 98,389 310,774 305,141
Depreciation expense, net of gains 139,100 146,401 417,288 428,366
Interest expense 36,613 50,067 117,263 144,140
Miscellaneous expense, net 4,126 2,666 8,688 5,835
Unusual items:
Restructuring and other charges, net 37,278 3,000 37,278 4,658
Year 2000 expense -- 2,313 -- 23,284
------------- ------------- ------------- -------------
1,319,541 1,205,166 3,881,825 3,523,143
------------- ------------- ------------- -------------
Earnings from continuing operations before income taxes 19,276 56,400 97,790 107,277
Provision for income taxes 7,132 21,291 36,182 40,701
------------- ------------- ------------- -------------
Earnings from continuing operations 12,144 35,109 61,608 66,576
Earnings (loss) from discontinued operations, less income taxes -- (8,992) -- 11,831
Gain on sale of discontinued operations, less income taxes -- 335,350 -- 335,350
------------- ------------- ------------- -------------
Net earnings $ 12,144 361,467 61,608 413,757
============= ============= ============= =============
Earnings per common share - Basic:
Continuing operations $ 0.20 0.51 1.04 0.95
Discontinued operations -- (0.13) -- 0.17
Gain on sale of discontinued operations -- 4.84 -- 4.77
------------- ------------- ------------- -------------
Net earnings $ 0.20 5.22 1.04 5.89
============= ============= ============= =============
Earnings per common share - Diluted:
Continuing operations $ 0.20 0.51 1.03 0.94
Discontinued operations -- (0.13) -- 0.17
Gain on sale of discontinued operations -- 4.83 -- 4.76
------------- ------------- ------------- -------------
Net earnings $ 0.20 5.21 1.03 5.87
============= ============= ============= =============
Cash dividends per common share $ 0.15 0.15 0.45 0.45
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
ITEM 1. Financial Statements (continued)
Ryder System, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
--------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
(In thousands, except share amounts) 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 111,678 112,993
Receivables, net of allowance for doubtful accounts of $10,629
and $10,254, respectively 550,982 725,815
Inventories 74,588 69,845
Tires in service 157,442 162,877
Prepaid expenses and other current assets 236,050 137,861
------------------- ----------------
Total current assets 1,130,740 1,209,391
Revenue earning equipment, net of accumulated depreciation of
$1,354,008 and $1,483,084, respectively 2,986,807 3,095,451
Operating property and equipment, net of accumulated depreciation
of $617,476 and $574,784, respectively 579,384 581,105
Direct financing leases and other assets 709,342 652,270
Intangible assets and deferred charges 213,249 232,233
------------------- ----------------
$ 5,619,522 5,770,450
=================== ================
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 553,675 574,253
Accounts payable 341,652 334,103
Accrued expenses 554,984 541,156
------------------- ----------------
Total current liabilities 1,450,311 1,449,512
Long-term debt 1,680,263 1,819,136
Other non-current liabilities 326,125 285,802
Deferred income taxes 932,790 1,011,095
------------------- ----------------
Total liabilities 4,389,489 4,565,545
------------------- ----------------
Shareholders' equity:
Common stock of $0.50 par value per share (shares outstanding at
September 30, 2000 - 59,708,523; December 31, 1999 - 59,395,050) 520,154 513,083
Retained earnings 749,369 714,544
Accumulated other comprehensive income (39,490) (22,722)
------------------- ----------------
Total shareholders' equity 1,230,033 1,204,905
------------------- ----------------
$ 5,619,522 5,770,450
=================== ================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
ITEM 1. Financial Statements (continued)
Ryder System, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2000 and 1999
(In thousands) 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Earnings from continuing operations $ 61,608 66,576
Depreciation expense, net of gains 417,288 428,366
Amortization expense and other non-cash charges, net 22,530 12,676
Deferred income tax expense 41,003 79,460
Changes in operating assets and liabilities:
Increase (decrease) in aggregate balance of trade receivables sold 154,000 (125,000)
Receivables 24,585 (74,436)
Inventories (4,711) (5,401)
Prepaid expenses and other assets (75,421) (31,804)
Accounts payable 14,896 75,154
Accrued expenses and other liabilities (1,005) (58,331)
----------------- ----------------
654,773 367,260
----------------- ----------------
Cash flows from financing activities:
Net change in commercial paper borrowings 173,740 (50,743)
Debt proceeds 54,324 275,738
Debt repaid, including capital lease obligations (457,929) (335,911)
Common stock repurchased -- (81,148)
Common stock issued 5,261 6,599
Dividends on common stock (26,783) (31,552)
----------------- ----------------
(251,387) (217,017)
----------------- ----------------
Cash flows from investing activities:
Purchases of operating property and revenue earning equipment (1,039,469) (1,522,448)
Sales of operating property and revenue earning equipment 179,718 286,380
Sale and leaseback of revenue earning equipment 372,953 300,030
Acquisitions, net of cash acquired (3,705) (12,699)
Proceeds from sale of public transportation services business -- 940,000
Other, net 85,802 30,575
----------------- ----------------
(404,701) 21,838
----------------- ----------------
Net cash flows from continuing operations (1,315) 172,081
Net cash flows from discontinued operations -- 4,602
----------------- ----------------
Increase (decrease) in cash and cash equivalents (1,315) 176,683
Cash and cash equivalents at January 1 112,993 138,353
----------------- ----------------
Cash and cash equivalents at September 30 $ 111,678 315,036
================= ================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
ITEM 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(A) INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements
include the accounts of Ryder System, Inc. and subsidiaries (the
"Company") and have been prepared by the Company in accordance with the
accounting policies described in the 1999 Annual Report and should be
read in conjunction with the consolidated financial statements and
notes which appear in that report. These statements do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim
periods are not necessarily indicative of the results that can be
expected for a full year. Certain amounts have been reclassified to
conform with current presentation.
(B) EARNINGS PER SHARE INFORMATION
Basic earnings per share is computed by dividing net earnings 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. The dilutive effect of stock options
is computed using the treasury stock method, which assumes the
repurchase of common shares by the Company at the average market price
for the period. A reconciliation of the number of shares used in
computing basic and diluted earnings per share follows (in thousands):
<TABLE>
<CAPTION>
Periods ended September 30, 2000 and 1999 Three Months Nine Months
2000 1999 2000 1999
----------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares outstanding-Basic 59,576 69,247 59,504 70,307
Common equivalents:
Shares issuable under outstanding dilutive options 1,108 846 1,131 1,300
Shares assumed repurchased based
on the average market value for the period (1,059) (761) (1,063) (1,165)
Dilutive effect of restricted stock and exercised
options prior to being exercised, net 171 76 100 83
------- --------- -------- -------
220 161 168 218
------- -------- -------- -------
Weighted average shares outstanding-Diluted 59,796 69,408 59,672 70,525
======= ======== ======== =======
Anti-dilutive options not included above 6,596 6,364 6,574 5,910
======= ======== ======== =======
</TABLE>
6
<PAGE>
ITEM 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(C) SEGMENT INFORMATION
During the fourth quarter of 1999, the Company implemented several
restructuring initiatives designed to improve profitability and align
the organizational structure with the strategic direction of the
Company (see note "E"). As part of the restructuring, the Company
changed how it manages and measures the business during the first
quarter of 2000. The principal changes from prior management and
measurement are (1) management of the business along product lines,
without regard to geography and (2) discrete management and
presentation of the Dedicated Contract Carriage business. The business
segment information presented below reflects such changes. Prior year
information has been restated to conform to the current year
presentation.
The Company operates in three business segments: (1) Leasing and
Rental, which provides full service leasing, commercial rental and
programmed maintenance of trucks, tractors and trailers to customers,
principally in the U.S., Canada and the United Kingdom; (2) Logistics
Solutions, which provides comprehensive supply chain consulting and
lead logistics management solutions that support customers' entire
supply chains, from inbound raw materials through distribution of
finished goods throughout North America, in Latin America, Europe and
Asia; and (3) Dedicated Contract Carriage (DCC), which provides
vehicles and drivers as part of a dedicated transportation solution,
principally in North America.
Management evaluates segment financial performance based upon several
factors, of which the primary measure is contribution margin.
Contribution margin represents each business segment's revenue, less
direct costs and direct overheads related to the segment's operations.
Business segment contribution margin for all segments (net of
eliminations), less Central Support Services expenses and unusual
items, is equal to earnings from continuing operations before income
taxes. Central Support Services consist primarily of corporate overhead
and other expenses not directly attributable to a single business
segment, such as shared management information systems, customer
solutions, finance, and sales and marketing. Central Support Services
also include expenses of certain new business initiatives, Ryder
Capital Services and e-Commerce, which may be reported as business
segments in the future once such operations become material.
The Leasing and Rental segment leases revenue earning equipment, sells
fuel and provides maintenance and other ancillary services to the
Logistics Solutions and DCC segments. Intersegment revenues are
accounted for at approximate fair value as if the transactions were
made to third parties. Interest expense is allocated only to the
Leasing and Rental business segment. The following table sets forth the
revenue and contribution margin for each of the Company's business
segments for the three and nine months ended September 30, 2000 and
1999:
<TABLE>
<CAPTION>
Three Months Nine Months
----------------------- -----------------------
In millions 2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Leasing and rental:
Full service lease and program maintenance $ 484.3 461.6 1,433.8 1,352.9
Commercial rental 137.7 144.4 394.3 400.2
Fuel 189.2 152.8 563.1 418.8
Other 97.2 90.4 295.4 269.4
----------- ----------- ----------- -----------
Total leasing and rental 908.4 849.2 2,686.6 2,441.3
----------- ----------- ----------- -----------
Logistics solutions 394.3 361.1 1,184.6 1,047.5
Dedicated contract carriage 136.7 132.2 404.3 383.1
Eliminations (100.6) (80.9) (295.9) (241.5)
----------- ----------- ----------- -----------
Total revenue $ 1,338.8 1,261.6 3,979.6 3,630.4
=========== =========== =========== ===========
</TABLE>
7
<PAGE>
ITEM 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(C) SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
Three Months Nine Months
---------------------- ----------------------
In millions 2000 1999 2000 1999
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Contribution margin:
Leasing and rental $ 107.2 101.0 285.7 277.1
Logistics solutions 16.8 19.1 52.1 39.9
Dedicated contract carriage 14.8 15.1 43.0 42.2
Eliminations (10.4) (10.2) (34.1) (30.0)
---------- ---------- ---------- ---------
128.4 125.0 346.7 329.2
Central support services (71.8) (63.3) (211.6) (193.9)
---------- ---------- ---------- ---------
Earnings from continuing operations before
unusual items and income taxes 56.6 61.7 135.1 135.3
Restructuring and other charges (37.3) (3.0) (37.3) (4.7)
Year 2000 expense -- (2.3) -- (23.3)
---------- ---------- ---------- ---------
Earnings from continuing operations before
income taxes $ 19.3 56.4 97.8 107.3
========== ========== ========== =========
</TABLE>
Management does not evaluate and the Company does not report total
assets by business segment. Such records are maintained on a legal
entity basis, which differs from the Company's business segments. As
such, these amounts are not presented on an business segment basis.
(D) COMPREHENSIVE INCOME
Comprehensive income presents a measure of all changes in shareholders'
equity except for changes resulting from transactions with shareholders
in their capacity as shareholders. The Company's total comprehensive
income presently consists of net earnings and currency translation
adjustments associated with foreign operations which use the local
currency as their functional currency. Such currency translation
adjustments for the three months ended September 30, 2000 and 1999 were
$5.8 million and $(5.3) million, respectively. For the nine months
ended September 30, 2000 and 1999, such currency translation
adjustments were $16.8 million and $2.2 million, respectively. Total
comprehensive income for the three months ended September 30, 2000 and
1999 was $6.3 million and $366.8 million, respectively. Total
comprehensive income for the nine months ended September 30, 2000 and
1999 was $44.8 million and $411.6 million, respectively.
(E) RESTRUCTURING AND OTHER CHARGES
During the third quarter of 2000, the Company recorded a pretax charge
of $37.3 million. The components of the charge were as follows (in
thousands):
Revenue earning equipment held for sale:
Units identified for accelerated disposal $15,100
Other tractors:
Owned 2,552
Leased 16,100
---------
33,752
Other impairment charges 4,096
Recovery of prior impairment charges (570)
---------
$37,278
=========
8
<PAGE>
ITEM 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(E) RESTRUCTURING AND OTHER CHARGES (continued)
The most significant portion of the charge was a result of the recent
industry-wide downturn in the market for new and used "Class 8"
tractors and trucks (the largest heavy-duty tractors and straight
trucks) which has resulted in a decrease in the market value of used
tractors. Ryder's unsold Class 8 inventory consists of units previously
used by customers of the Company's full service commercial lease and
short-term commercial rental programs. Units identified for accelerated
disposal consist of approximately 1,800 units that the Company
identified in the third quarter as increasingly undesirable and
unmarketable due to lower-powered engines or a potential lack of future
support for parts and service. Charges for other tractors reflect
approximately 700 owned and approximately 2,500 leased units for which
estimated fair value less costs to sell declined below carrying value
(or termination value, which represents the final payment due to
lessors, in the case of leased units) in the third quarter.
The Company was previously involved in litigation with a former
customer, OfficeMax, relating to a logistics services agreement that
was terminated in 1997. In October 2000, Ryder agreed to an
out-of-court settlement with OfficeMax, ending this litigation. In the
final settlement, OfficeMax will pay Ryder a total of $5.1 million over
the next five years. Ryder will not pay anything to OfficeMax. Further,
the settlement is backed by a $5.1 million letter of credit, obtained
by OfficeMax, naming Ryder as the beneficiary. Other impairment charges
relate to write-off of certain assets related to the OfficeMax
contract.
Recovery of prior impairment charges represents gains on vehicles sold
in the U.K. during the third quarter of 2000, for which an impairment
charge had been recorded in the 1999 restructuring.
During the fourth quarter of 1999, the Company implemented several
restructuring initiatives designed to improve profitability and align
the organizational structure with the strategic direction of the
Company. The Company also identified certain assets that would be sold
or for which development would be abandoned as a result of the
restructuring. During 1999, the Company also restructured its leasing
and rental operations in the United Kingdom in conjunction with the
December 1998 decision to retain the business. As a result of these
initiatives, the Company recorded pretax restructuring and other
charges in 1999 of $52 million.
Activity related to restructuring reserves for the nine months ended
September 30, 2000 was as follows:
<TABLE>
<CAPTION>
Dec. 31, September 30,
1999 2000
In thousands Balance Additions Deductions Balance
---------------------------------------- ------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Employee severance and benefits $ 13,017 -- 7,825 5,192
Facilities and related costs 7,182 -- 3,888 3,294
------------- ------------- -------------- -----------------
$ 20,199 -- 11,713 8,486
============= ============= ============== =================
</TABLE>
Deductions consist of payments and reversals of restructuring reserves
related to the 1996 restructuring that were in excess of amounts
required. Such reversals consisted of employee severance and benefits
and facilities and related costs of $522,000 and $436,000,
respectively. In the Consolidated Condensed Statement of Earnings for
the nine months ended September 30, 2000, such reversals of prior
accruals were offset by expenses for other charges of $942,000 for
consulting fees incurred during the period related to completion of the
Company's profitability improvement study.
9
<PAGE>
ITEM 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(F) DEBT
The Company's outstanding debt balances were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
In millions 2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
U.S. commercial paper $ 470.9 320.0
Canadian commercial paper 65.6 45.0
Unsecured U.S. notes:
Debentures 425.6 453.2
Medium-term notes 868.8 1,181.4
Unsecured foreign obligations 280.6 335.4
Other debt, including capital leases 122.4 58.4
------------------------------------------------------------------------------------
Total debt 2,233.9 2,393.4
Current portion (553.7) (574.3)
------------------------------------------------------------------------------------
Long-term debt $ 1,680.2 1,819.1
====================================================================================
</TABLE>
10
<PAGE>
KPMG LLP
CERTIFIED PUBLIC ACCOUNTANTS
One Biscayne Tower Telephone 305-358-2300
2 South Biscayne Boulevard Fax 305-913-2692
Suite 2900
Miami, Florida 33131
Independent Accountants' Review Report
--------------------------------------
The Board of Directors and Shareholders
Ryder System, Inc.:
We have reviewed the accompanying consolidated condensed balance sheet of Ryder
System, Inc. and subsidiaries as of September 30, 2000, and the related
consolidated condensed statements of earnings for the three and nine months
ended September 30, 2000 and 1999 and the consolidated condensed statements of
cash flows for the nine months ended September 30, 2000 and 1999. These
consolidated condensed financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above in
order for them to be in conformity with accounting principles generally accepted
in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Ryder System, Inc. and subsidiaries as of December 31, 1999, and the related
consolidated statements of earnings, shareholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated February 2,
2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated condensed balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/S/ KPMG LLP
Miami, Florida
October 19, 2000
11
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition --
Nine months ended September 30, 2000 and 1999
OVERVIEW
The following discussion should be read in conjunction with the unaudited
consolidated condensed financial statements and notes thereto included under
ITEM 1. In addition, reference should be made to the Company's audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's most recent Annual Report on Form 10-K. Unless
otherwise noted, discussion and analysis for the nine months ended September 30,
2000 is consistent with that for the three month period ended September 30,
2000.
On September 13, 1999, the Company completed the sale of its Public
Transportation Services ("RPTS") business to FirstGroup plc for $940 million in
cash and realized a $339 million after-tax gain. The Company used the proceeds
from the sale for working capital needs, repurchase of common stock and debt
reduction. The following discussion excludes the results of RPTS, which has been
classified as discontinued operations.
The Company operates in three business segments: (1) Leasing and Rental, which
provides full service leasing, commercial rental and programmed maintenance of
trucks, tractors and trailers to customers, principally in the U.S., Canada and
the United Kingdom; (2) Logistics Solutions, which provides comprehensive supply
chain consulting and lead logistics management solutions that support customers'
entire supply chains, from inbound raw materials through distribution of
finished goods throughout North America, in Latin America, Europe and Asia and
(3) Dedicated Contract Carriage (DCC), which provides vehicles and drivers as
part of a dedicated transportation solution, principally in North America.
Revenue from continuing operations increased 6.1% to $1.34 billion for the three
months ended September 30, 2000, as compared to $1.26 billion in the comparable
period last year. All business segments experienced revenue growth over the same
period in 1999. The increase in revenue was primarily due to revenue growth in
the Leasing and Rental and Logistics Solutions business segments and higher fuel
revenue. The increase in fuel revenue was driven by higher fuel costs, which
increased by a dollar amount comparable to fuel revenue. Revenue from continuing
operations increased 9.6% to $3.98 billion for the nine months ended September
30, 2000, as compared to $3.63 billion in the comparable period last year.
Operating expense increased $98.7 million, or 10.9%, to $1.0 billion in the
third quarter of 2000 compared to the same period in 1999. Operating expense
increased $378.8 million, or 14.5%, to $3.0 billion in the first nine months of
2000 compared to the same period in 1999. The increase in operating expense was
primarily attributable to an increase in equipment rental expense as result of
sale-leaseback transactions completed in the fourth quarter of 1999 and the
first quarter of 2000; an increase in the cost of fuel due to higher market
prices; and an increase in salaries and payroll due primarily to headcount
growth related to growth in the Company's Logistics Solutions business. Such
increases in salaries and payroll were partially offset by reduced employee
benefit costs associated with income recognized from the Company's pension plan.
Such trends -- growth in salaries and payroll, partially offset by pension plan
income -- are expected to continue for the remainder of 2000. Pension income is
generally recognized ratably throughout the year. The Company anticipates that
pension income recognized for full year 2000 will be approximately $35 million
to $40 million greater than that recognized for full year 1999. Based upon
preliminary estimates as of October 2000, the Company expects pension income in
2001 to be comparable to that recorded in 1999 and thus significantly less than
pension income recorded in 2000. Such estimates are subject to change based upon
market performance of pension plan investments through December 31, 2000,
interest rates, employee census and demographic characteristics and other
factors. Pension income in 2000 and 1999 principally benefited the Leasing and
Rental segment, as the obligation for pension benefits relates principally to
vested employees in Leasing and Rental. Pension income is allocated to each
business segment as well as Central Support Services.
12
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
OVERVIEW (continued)
Freight under management expense increased 3.0% to $101.4 million in the third
quarter of 2000 compared to the same period in 1999. For the first nine months
of 2000, freight under management expense increased 1.9% to $310.8 million
compared to the same period in 1999. The increase in freight under management
expense was less than the increase in revenue because revenue growth was
associated with operations which do not outsource freight to third-party
providers and operations which are directly outsourcing freight rather than
providing freight management services.
Depreciation expense, net of gains, in the third quarter of 2000 decreased by
$7.3 million, or 5.0%, compared to the third quarter of 1999. In the first nine
months of 2000, net depreciation expense decreased by $11.1 million, or 2.6%,
compared to the same period in 1999. Depreciation expense, excluding gains on
vehicle sales, decreased by $18.3 million and $36.9 million in the third quarter
and first nine months of 2000, respectively, as compared with 1999. The
decreases resulted principally from sale-leaseback and other leasing
transactions which increased the number of leased (as opposed to owned) vehicles
in the Company's fleet as of September 30, 2000 as compared with September 30,
1999. Equipment rent expense increased by $36.3 million and $105.6 million in
the third quarter and first nine months of 2000, respectively, as compared with
1999. Consistent with the charge recorded in the third quarter of 2000
(described below) to reflect decreases in the market value of used tractors, the
Company reduced residual values for vehicles currently in use and expected to be
disposed of during the next two years. In light of this change, the Company
expects to record additional depreciation and rent expense in the fourth quarter
(and over the next two years on a declining basis). Such increases to
depreciation and rent expense are a result of reduced residual values on owned
vehicles and an increase in the Company's reserves for guaranteed termination
values for equipment that Ryder leases. The increases apply to equipment
currently in use but expected to be disposed of in the next two years to values
that reflect the recent and expected continued downturn in the market for used
tractors.
Gains on vehicle sales decreased from $14.7 million in the third quarter of 1999
to $3.7 million in the third quarter of 2000 and from $42.8 million in the first
nine months of 1999 to $17.0 million in the first nine months of 2000. During
the first nine months of 2000, average sales proceeds per unit have decreased
for certain classes of tractors and have generally been stable for other
tractors and types of trucks compared with average proceeds per unit during the
first nine months of 1999. However, the average book value per unit of units
sold in 2000 was generally greater than that of units sold in 1999.
Interest expense decreased $13.5 million or 26.8% to $36.6 million during the
third quarter of 2000 and decreased $26.9 million or 18.6% to $117.3 million
during the first nine months of 2000 compared with the same periods in 1999. The
decrease in interest expense principally reflects the paydown of debt from the
proceeds from the aforementioned sale-leaseback transactions, the sale of
receivables and the sale of RPTS.
Miscellaneous expense increased $1.5 million to $4.1 million during the third
quarter of 2000 and increased $2.9 million to $8.7 million for the first nine
months of 2000. The increase in miscellaneous expense was due to increases in
fees related to increases in the use of the Company's revolving facility for
sale of trade receivables. Such facility is generally utilized more frequently
when the cost of use is less than the cost of other short-term credit
facilities, such as commercial paper. Miscellaneous expense in 1999 was also
reduced by gains on sales of non-operating properties.
During the third quarter of 2000, the Company recorded a pretax charge of $37.3
million. The components of the charge were as follows (in thousands):
Revenue earning equipment held for sale:
Units identified for accelerated disposal $15,100
Other tractors:
Owned 2,552
Leased 16,100
--------
33,752
Other impairment charges 4,096
Recovery of prior impairment charges (570)
---------
$37,278
=========
13
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
OVERVIEW (continued)
The most significant portion of the charge was a result of the recent
industry-wide downturn in the market for new and used "Class 8" tractors and
trucks (the largest heavy-duty tractors and straight trucks) which has resulted
in a decrease in the market value of used tractors. Ryder's unsold Class 8
inventory consists of units previously used by customers of the Company's full
service commercial lease and short-term commercial rental programs. Units
identified for accelerated disposal consist of approximately 1,800 units that
the Company identified in the third quarter as increasingly undesirable and
unmarketable due to lower-powered engines or a potential lack of future support
for parts and service. Charges for other tractors reflect approximately 700
owned and approximately 2,500 leased units for which estimated fair value less
costs to sell declined below carrying value (or termination value, which
represents the final payment due to lessors, in the case of leased units) in the
third quarter.
The Company was previously involved in litigation with a former customer,
OfficeMax, relating to a logistics services agreement that was terminated in
1997. In October 2000, Ryder agreed to an out-of-court settlement with
OfficeMax, ending this litigation. In the final settlement, OfficeMax will pay
Ryder a total of $5.1 million over the next five years. Ryder will not pay
anything to OfficeMax. Further, the settlement is backed by a $5.1 million
letter of credit, obtained by OfficeMax, naming Ryder as the beneficiary. Other
impairment charges relate to write-off of certain assets related to the
OfficeMax contract.
Recovery of prior impairment charges represents gains on vehicles sold in the
U.K. during the third quarter of 2000, for which an impairment charge had been
recorded in the 1999 restructuring.
During the fourth quarter of 1999, the Company implemented several restructuring
initiatives designed to improve profitability and align the organizational
structure with the strategic direction of the Company. The Company also
identified certain assets that would be sold or for which development would be
abandoned as a result of the restructuring. During 1999, the Company also
restructured its leasing and rental operations in the United Kingdom in
conjunction with the December 1998 decision to retain the business. As a result
of these initiatives, the Company recorded pretax restructuring and other
charges in 1999 of $52 million.
Activity related to restructuring reserves for the nine months ended September
30, 2000 was as follows:
<TABLE>
<CAPTION>
Dec. 31, September 30,
1999 2000
In thousands Balance Additions Deductions Balance
---------------------------------------- ------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Employee severance and benefits $ 13,017 -- 7,825 5,192
Facilities and related costs 7,182 -- 3,888 3,294
------------- ------------- -------------- -----------------
$ 20,199 -- 11,713 8,486
============= ============= ============== =================
</TABLE>
Deductions consist of payments and reversals of restructuring reserves related
to the 1996 restructuring that were in excess of amounts required. Such
reversals consisted of employee severance and benefits and facilities and
related costs of $522,000 and $436,000, respectively. In the Consolidated
Condensed Statement of Earnings for the nine months ended September 30, 2000,
such reversals of prior accruals were offset by expenses for other charges of
$942,000 for consulting fees incurred during the period related to completion of
the Company's profitability improvement study.
The Company's effective income tax rate on earnings from continuing operations
for the third quarter and first nine months of 2000 was 37.0% compared to 37.8%
and 37.9% for the same periods in 1999, respectively.
14
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
OVERVIEW (continued)
Earnings from continuing operations were $12.1 million for the three months
ended September 30, 2000, as compared to $35.1 million for the same period in
1999. Earnings from continuing operations were $61.6 million for the first nine
months of 2000, as compared to $66.6 million for the same period in 1999.
Earnings (loss) from discontinued operations of $(9.0) million and $11.8 million
in the third quarter and first nine months of 1999, respectively, represent the
results of operations of RPTS. Gain on sale of discontinued operations of $335.4
million represents the gain recorded in the third quarter of 1999 on the sale of
RPTS.
Net income in the third quarter of 2000 totaled $12.1 million, or $0.20 per
diluted share, compared with $361.5 million, including discontinued operations,
or $5.21 per diluted share during the third quarter of 1999. In the first nine
months of 2000, net income totaled $61.6 million, or $1.03 per diluted share,
compared with $413.8 million, including discontinued operations, or $5.87 per
diluted share.
OPERATING RESULTS BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
In millions 2000 1999 2000 1999
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Leasing and Rental
Total revenue $ 908.4 849.2 2,686.6 2,441.3
Fuel revenue (189.2) (152.8) (563.1) (418.8)
------------ ------------ ------------- ------------
Dry revenue $ 719.2 696.4 2,123.5 2,022.5
============ ============ ============= ============
Contribution margin $ 107.2 101.0 285.7 277.1
============ ============ ============= ============
Contribution margin as % of total revenue 11.8% 11.9% 10.6% 11.4%
============ ============ ============= ============
Contribution margin as % of dry revenue 14.9% 14.5% 13.5% 13.7%
============ ============ ============= ============
Logistics Solutions
Total revenue $ 394.3 361.1 1,184.6 1,047.5
Freight Under Management (FUM) expense (99.2) (97.3) (306.4) (301.8)
------------ ------------ ------------- ------------
Operating revenue $ 295.1 263.8 878.2 745.7
============ ============ ============= ============
Contribution margin $ 16.8 19.1 52.1 39.9
============ ============ ============= ============
Contribution margin as % of total revenue 4.3% 5.3% 4.4% 3.8%
============ ============ ============= ============
Contribution margin as % of operating revenue 5.7% 7.2% 5.9% 5.4%
============ ============ ============= ============
Dedicated Contract Carriage
Total revenue $ 136.7 132.2 404.3 383.1
Freight Under Management (FUM) expense (2.2) (1.0) (4.4) (3.2)
------------ ------------ ------------- ------------
Operating revenue $ 134.5 131.2 399.9 379.9
============ ============ ============= ============
Contribution margin $ 14.8 15.1 43.0 42.2
============ ============ ============= ============
Contribution margin as % of total revenue 10.8% 11.4% 10.6% 11.0%
============ ============ ============= ============
Contribution margin as % of operating revenue 11.0% 11.5% 10.8% 11.1%
============ ============ ============= ============
</TABLE>
15
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
OPERATING RESULTS BY BUSINESS SEGMENT (continued)
Management evaluates segment financial performance based upon several factors,
of which the primary measure is contribution margin. Contribution margin
represents each business segment's revenue, less direct costs and direct
overheads related to the segment's operations. Business segment contribution
margin for all segments (net of eliminations), less Central Support Services
expenses and unusual items, is equal to earnings from continuing operations
before income taxes. Central Support Services consist primarily of corporate
overhead and other expenses not directly attributable to a single business
segment, such as shared management information systems, customer solutions,
finance, and sales and marketing. Central Support Services also include expenses
of certain new business initiatives, Ryder Capital Services and e-Commerce,
which may be reported as business segments in the future once such operations
become material.
The Leasing and Rental segment leases revenue earning equipment, sells fuel and
provides maintenance and other ancillary services to the Logistics Solutions and
DCC segments. Intersegment revenues are accounted for at approximate fair value
as if the transactions were made to third parties. Interest expense is allocated
only to the Leasing and Rental business segment.
Leasing and Rental
In the Leasing and Rental business segment, dry revenue (revenue excluding fuel)
in the third quarter of 2000 totaled $719.2 million, an increase of 3.3%, and in
the first nine months of 2000 totaled $2.1 billion, an increase of 5.0%, from
the same periods in 1999, respectively. Full service lease revenue increased
4.9% in the third quarter of 2000 and 6.0% in the first nine months of 2000 as a
result of a significant number of vehicles being placed in service. Rental
revenue decreased 4.6% in the third quarter of 2000 and 1.5% in the first nine
months of 2000 primarily due to the arrival of new full service lease vehicles,
which replaced rental vehicles that had been used by customers awaiting new full
service lease deliveries. However, pure rental revenue (defined as total rental
revenue less rental revenue related to units provided to full service lease
customers) increased 6.1% and 7.6% for the quarter and nine months ended
September 30, 2000, respectively, as compared to 1999. Rental fleet utilization
for the nine months ended September 30, 2000 was 70.3%, compared to 70.6% for
the same period in 1999. Fuel revenue increased 23.8% in the third quarter of
2000 and 34.5% in the first nine months of 2000 over the same periods in 1999
due to increased prices charged to customers. However, the impact of such
selling price increase was offset by the increase in cost paid by the Company
for fuel.
The contribution margin as a percentage of dry revenue was 14.9% in the third
quarter of 2000 compared with 14.5% in 1999. Improved contribution margin in the
third quarter of 2000 compared to the same period in 1999 are due to
improvements in full service lease margins in the United States, decreased fixed
costs on non-revenue earning equipment and pension income attributable to
Leasing and Rental employees, net of reduced gains on vehicle sales and lower
rental margin dollars due to lower rental revenue. The contribution margin as a
percentage of dry revenue was 13.5% in the first nine months of 2000 compared
with 13.7% in 1999. The contribution margin percentage for the nine months ended
September 30, 2000 has decreased compared to the same period in 1999 due to
higher fixed costs on non-revenue earning equipment and lower gains on the sale
of equipment, net of pension income recognized.
16
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
OPERATING RESULTS BY BUSINESS SEGMENT (continued)
Leasing and Rental (continued)
The Company's fleet of owned and leased revenue earning equipment is summarized
as follows (number of units):
<TABLE>
<CAPTION>
September 30, December 31,
By type: 2000 1999
------------------ ------------------
<S> <C> <C>
Trucks 67,300 65,600
Tractors 56,700 54,700
Trailers 48,500 46,700
Other 4,500 4,500
------------------ ------------------
177,000 171,500
================== ==================
<CAPTION>
September 30, December 31,
By business: 2000 1999
------------------ ------------------
<S> <C> <C>
Full service lease 130,200 124,700
Commercial rental 43,900 43,500
Service vehicles and other 2,900 3,300
------------------ ------------------
177,000 171,500
================== ==================
</TABLE>
The totals in each of the tables above include the following non-revenue earning
equipment:
<TABLE>
<S> <C> <C>
Not yet earning revenue (NYE) 2,300 3,200
No longer earning revenue (NLE) 8,600 6,300
------------------ ------------------
10,900 9,500
================== ==================
</TABLE>
Logistics Solutions
In the Logistics Solutions business segment, third quarter 2000 gross revenue
totaled $394.3 million, an increase of 9.2% from the comparable period in 1999.
Third quarter 2000 operating revenue was $295.1 million, an increase of 11.9%
from the comparable period a year ago. In the first nine months of 2000, gross
revenue totaled $1.2 billion, an increase of 13.1% from the first nine months of
1999, and operating revenue was $878.2 million, an increase of 17.8% over 1999.
Revenue growth was principally due to increased business with existing accounts,
in particular, automotive industry customers, and revenue from customers in the
electronics and high technology industries that have been added in the last 12
months.
The Logistics Solutions business segment contribution margin decreased 12.0% to
$16.8 million in the third quarter of 2000 compared with the third quarter of
1999. The contribution margin as a percentage of operating revenue was 5.7% in
the third quarter of 2000, compared with 7.2% in the same quarter of 1999.
Contribution margin decreased primarily due to increased overhead spending
related to the opening of a new transportation management facility in early
October 2000. This will consolidate all of the Company's transportation
management operations into a single facility in Dallas, Texas. Contribution
margin in the third quarter of 2000 was also reduced by $1.3 million for legal
expenses related to the OfficeMax settlement. In the first nine months of 2000,
contribution margin increased 30.6% to $52.1 million compared with the same
period in 1999. The contribution margin as a percentage of operating revenue was
5.9% in the first nine months of 2000, compared with 5.4% in the first nine
months of 1999. Improvements in contribution margin were due to improved
performance on start-up accounts, as well as increased efficiency and expansion
with existing customers.
17
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
OPERATING RESULTS BY BUSINESS SEGMENT (continued)
Dedicated Contract Carriage
In the Dedicated Contract Carriage business segment, third quarter gross revenue
totaled $136.7 million, an increase of 3.4% from the third quarter of 1999.
Third quarter operating revenue was $134.5 million, an increase of 2.5% from the
comparable period a year ago. Contribution margin decreased 2.0% to $14.8
million in the third quarter of 2000 compared with the third quarter of 1999.
The contribution margin as a percentage of operating revenue was 11.0%, compared
with 11.5% in the third quarter of 1999. The lower contribution margin in the
third quarter was due to increased fuel and driver costs compared to the third
quarter of 1999. The Company expects this trend to continue into 2001. In the
first nine months of 2000, gross revenue totaled $404.3 million, an increase of
5.5% from the first nine months of 1999. Operating revenue for the first nine
months of 2000 was $399.9 million, an increase of 5.3% from the comparable
period a year ago. Contribution margin increased 1.9% to $43.0 million in the
first nine months of 2000 compared with the first nine months of 1999. The
contribution margin as a percentage of operating revenue was 10.8%, compared
with 11.1% in the first nine months of 1999. The improvements in revenue were
largely influenced by the successful efforts during the end of 1999 to minimize
lost business in the segment. The increase in contribution margin for the nine
months ended September 30, 2000 compared to the same period in 1999 is primarily
due to favorable comparisons year-over-year, particularly in the first quarter,
for the termination of certain unprofitable contracts, net of the increase in
fuel and driver costs noted above.
Central Support Services
Central Support Services are those costs incurred to support all business
segments, including sales and marketing, human resources, finance, shared
management information systems, customer solutions, health and safety, legal and
communications. Central Support Services expenses were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
In millions 2000 1999 2000 1999
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Sales and marketing $ 9.9 11.3 31.4 36.6
Human resources 5.8 3.4 16.3 12.4
Finance 14.4 13.4 40.9 39.5
Corporate services/public affairs 2.6 3.1 8.3 9.4
MIS 24.8 21.4 75.0 62.3
Customer solutions 4.4 3.9 13.3 10.5
Health and safety 2.4 2.3 7.0 6.8
Other 7.5 4.5 19.4 16.4
------------ ------------ ------------- ------------
Total Central Support Services $ 71.8 63.3 211.6 193.9
============ ============ ============= ============
</TABLE>
The increase was due primarily to additional spending on management information
systems, training costs and incremental spending for customer solutions, Ryder
Capital Services, and e-Commerce. Such increases were partially offset by a
reduction in sales and marketing expenses and interest expense attributed to
Central Support Services. Ryder Capital Services, e-Commerce and interest
expense are included in "other".
18
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following is a summary of the Company's cash flows from continuing
operating, financing and investing activities for the nine months ended
September 30, (in thousands):
2000 1999
---- ----
Net cash provided by (used in):
Operating activities $ 654,773 367,260
Financing activities (251,387) (217,017)
Investing activities (404,701) 21,838
---------- -----------
Net cash flows from continuing operations $ (1,315) 172,081
========== ===========
A summary of the individual items contributing to the cash flow changes is
included in the Consolidated Condensed Statements of Cash Flows.
The improvement in cash flow from operating activities in the first nine months
of 2000, compared with the same period last year, was primarily attributable to
increases in the aggregate balance of trade receivables sold. The increase in
cash used in financing activities in the first nine months of 2000, compared to
the same period last year, was due primarily to repayment of debt using a
portion of the cash received from the sale of trade receivables and
sale-leaseback transactions. The increase in cash used for investing activities
in the first nine months of 2000 compared with the same period last year was
attributable to RPTS in 1999, net of reduced capital expenditures in 2000 as
compared to 1999.
A summary of capital expenditures for continuing operations for the nine months
ended September 30 follows (in thousands):
2000 1999
---- ----
Revenue earning equipment $ 970,018 1,441,992
Operating property and equipment 69,451 80,456
----------- ---------
$ 1,039,469 1,522,448
=========== =========
The decrease in capital expenditures for revenue earning equipment was due
principally to improved controls over capital expenditures and a reduction in
the volume of early terminations of full service leases compared to the third
quarter and first nine months of 1999. Such decrease was partially offset by
purchases of revenue earning equipment during the nine months ended September
30, 2000 that had been postponed from the fourth quarter of 1999. Management
expects capital expenditures for the full year 2000 will be less than full year
1999 levels. The Company expects to fund its remaining 2000 capital expenditures
principally with internally generated funds.
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 for revenue earning equipment, the majority of which
are accounted for as operating leases.
19
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
LIQUIDITY AND CAPITAL RESOURCES (continued)
Financing (continued)
The Company's debt ratings as of September 30, 2000 were as follows:
Commercial Unsecured
Paper Notes
---------- ---------
Moody's Investors Service P2 Baa1
Standard & Poor's Ratings Group A2 BBB
Fitch D2 A-
Total debt was $2.23 billion at September 30, 2000, or a decrease of 6.7% from
December 31, 1999. During the first nine months of 2000, the Company made $17.1
million of scheduled unsecured note payments, $11.0 million of payments in
accordance with sinking fund requirements, and retired $313.0 million of
medium-term notes. U.S. commercial paper outstanding at September 30, 2000
increased to $470.9 million, compared with $320.0 million at December 31, 1999,
primarily to fund capital expenditures. The Company participates in an agreement
to sell, with limited recourse, up to $375.0 million of trade receivables on a
revolving basis through July 2002. At September 30, 2000 and December 31, 1999,
the outstanding balance of receivables sold pursuant to this agreement was
$229.0 and $75.0 million, respectively. The Company's foreign debt decreased
approximately $44.0 million from December 31, 1999 to $356.0 million at
September 30, 2000. The Company's percentage of variable-rate financing
obligations was 28.2% at September 30, 2000 compared to 19.2% at December 31,
1999. The Company's debt-to-equity ratio at September 30, 2000 decreased to 182%
from 199% at December 31, 1999.
As of September 30, 2000, $188.6 million was available under the Company's
$720.0 million global revolving credit facility, which expires in 2002. Foreign
borrowings of $60.5 million were outstanding under the facility as of September
30, 2000. In September 1998, the Company filed an $800.0 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. The
Company has $487.0 million of debt securities available for issuance under this
shelf registration statement.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
replaces SFAS No. 125. This statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. Because SFAS No. 140 focuses on control, after a
transfer of financial assets, an entity is required to recognize the financial
and servicing assets it controls and the liabilities it has incurred,
derecognize financial assets when control has been surrendered, and derecognize
liabilities when extinguished. All measurements and allocations should be based
on fair value. SFAS No. 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March 31,
2001. This Statement is effective for recognition and reclassification of
collateral and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. The Company is
currently assessing the impact of SFAS No. 140.
20
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)--
Nine months ended September 30, 2000 and 1999
RECENT ACCOUNTING PRONOUNCEMENTS (continued)
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") 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 net 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, as amended by SFAS 138, is effective for fiscal years
beginning after June 15, 2000, and is effective for interim periods in the
initial year of adoption. Based on the Company's work to date, adoption of this
Statement is not expected to have a material impact on the Company's results of
operations or financial position. The Company will adopt SFAS 133 in the first
quarter of 2001.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation--an interpretation of APB Opinion No. 25" (FIN 44). This
Interpretation provides guidance for issues that have arisen in applying APB
Opinion No. 25, "Accounting for Stock Issued to Employees." FIN 44 applies
prospectively to new stock awards, exchanges of stock awards in a business
combination, modifications to outstanding stock awards, and changes in grantee
status that occur on or after July 1, 2000, except for the provisions related to
repricings of stock awards and the definition of an employee which apply to
stock awards issued after December 15, 1998. The provisions related to
modifications to fixed stock option awards to add a reload feature are effective
for awards modified after January 12, 2000. Based upon the terms of the
Company's existing stock-based compensation plans, the impact of FIN 44 was not
material.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition" (SAB 101). SAB 101 provides guidance on
applying generally accepted accounting principles to revenue recognition issues
in financial statements. SAB 101, as amended by Staff Accounting Bulletin No.
101B issued in June 2000, will be adopted by the Company in the fourth quarter
of 2000 as required and is not anticipated to have a material impact on the
results of the Company operations.
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis of results of operations and financial
condition contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are based on
the current plans and expectations of Ryder System, Inc. and involve risks and
uncertainties that 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 the
state of the used truck market, competition in logistics solutions from other
logistics companies as well as from air cargo, shipping, railroads and motor
carriers and competition in full service truck leasing and commercial rental
from companies providing similar services as well as from 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), or changes in government
regulations.
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.
21
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
In the normal course of business, the Company is exposed to fluctuations in
interest rates, fuel prices 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 Company's quantitative and qualitative disclosures about market risk for
changes in interest rates and foreign exchange rates have not materially changed
since December 31, 1999. The Company's disclosures about market risk are
contained in the Annual Report on Form 10-K for the year ended December 31,
1999.
22
<PAGE>
PART II. OTHER INFORMATION
--------------------------
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
--------
(3.1) The Ryder System, Inc. Restated Articles of Incorporation,
dated November 8, 1985, as amended through May 18, 1990,
previously filed with the Commission as an exhibit to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990, are incorporated by reference into this
report.
(3.2) The Ryder System, Inc. By-Laws, as amended through November
23, 1993, previously filed with the Commission as an exhibit
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, are incorporated by reference into this
report.
(15) Letter regarding unaudited interim financial statements.
(27.1) Financial data schedule (for SEC use only).
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed by the Registrant during the
period covered by this report.
23
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYDER SYSTEM, INC.
(Registrant)
Date: November 7, 2000 /S/ CORLISS J. NELSON
---------------------
Corliss J. Nelson
Senior Executive Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: November 7, 2000 /S/ RICHARD G. RODICK
---------------------
Richard G. Rodick
Vice President and Controller
(Principal Accounting Officer)
24
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. 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.
(15) Letter regarding unaudited interim financial statements.
(27.1) Financial data schedule (for SEC use only).
25
