-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TCHJlIbodCAq4piBOokMeJdxbOpmeBxZm7f80btoKMHYEg75GmbNczQBV22ozi4s Ac0BMzEIlGOAtBsQCYruSg== 0000950170-97-001399.txt : 19971115 0000950170-97-001399.hdr.sgml : 19971115 ACCESSION NUMBER: 0000950170-97-001399 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYDER SYSTEM INC CENTRAL INDEX KEY: 0000085961 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 590739250 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04364 FILM NUMBER: 97717370 BUSINESS ADDRESS: STREET 1: 3600 NW 82ND AVE CITY: MIAMI STATE: FL ZIP: 33166 BUSINESS PHONE: 3055003283 MAIL ADDRESS: STREET 1: 3600 NW 82 AVENUE CITY: MIAMI STATE: FL ZIP: 33166 10-Q 1 - -------------------------------------------------------------------------------- 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File No. 1-4364 ------------------------------------- RYDER SYSTEM, INC. (a Florida corporation) 3600 N.W. 82nd Avenue Miami, Florida 33166 Telephone (305) 500-3726 I.R.S. Employer Identification No. 59-0739250 ------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES X NO___ Ryder System, Inc. (the "Registrant" or the "Company") had 76,509,198 shares of common stock ($0.50 par value per share) outstanding as of October 31, 1997. - --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS Ryder System, Inc. and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------------------ Third Quarter Nine Months Periods ended September 30, 1997 and 1996 ------------------------- -------------------------- (In thousands, except per share amounts) 1997 1996* 1997 1996* - ------------------------------------------------------------------------------------------------------------------------------ REVENUE $1,204,339 1,272,146 3,625,457 3,728,199 - ------------------------------------------------------------------------------------------------------------------------------ Operating expense 952,945 986,659 2,864,538 2,924,693 Depreciation expense, net of gains (quarter, 1997 - $13,417, 1996 - $13,675; nine months, 1997 - $42,446, 1996 - $52,988) 147,697 177,382 438,843 519,844 Interest expense 46,530 52,656 143,194 159,973 Miscellaneous expense (income), net (270) 2,966 (6,777) 3,965 - ------------------------------------------------------------------------------------------------------------------------------ 1,146,902 1,219,663 3,439,798 3,608,475 - ------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations before income taxes 57,437 52,483 185,659 119,724 Provision for income taxes 22,159 23,073 74,602 50,978 - ------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations 35,278 29,410 111,057 68,746 Earnings (loss) from discontinued operations, net of income taxes (quarter, 1997 - $834, 1996 - $(1,351); nine months, 1997 - $5,981, 1996 - $358) 4,325 (3,122) 12,247 (696) Gain on sale of discontinued operations, including income tax benefit of $8,500 3,200 - 3,200 - - ------------------------------------------------------------------------------------------------------------------------------ NET EARNINGS $ 42,803 26,288 126,504 68,050 ============================================================================================================================== Earnings per common share: Continuing operations $ 0.45 0.36 1.41 0.85 Discontinued operations 0.05 (0.04) 0.16 (0.01) Gain on sale of discontinued operations 0.04 - 0.04 - - ------------------------------------------------------------------------------------------------------------------------------ EARNINGS PER COMMON SHARE $ 0.54 0.32 1.61 0.84 - ------------------------------------------------------------------------------------------------------------------------------ Cash dividends per common share $ 0.15 0.15 0.45 0.45 - ------------------------------------------------------------------------------------------------------------------------------ Average common and common equivalent shares 79,246 81,946 78,722 81,059 ==============================================================================================================================
* Certain amounts have been restated for discontinued opearations. See accompanying notes to consolidated condensed financial statements.
Item 1. Financial Statements (continued) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Ryder System, Inc. and Subsidiaries - ------------------------------------------------------------------------------------------------------- Nine months ended September 30, 1997 and 1996 (In thousands) 1997 1996* - ------------------------------------------------------------------------------------------------------- CONTINUING OPERATIONS CASH FLOWS FROM OPERATING ACTIVITIES: Earnings from continuing operations $ 111,057 68,746 Depreciation expense, net of gains 438,843 519,844 Deferred income taxes 77,795 61,131 Increase in receivables (68,579) (55,796) Decrease in accounts payable and accrued expenses (46,161) (35,402) Other, net (33,212) (4,004) - ------------------------------------------------------------------------------------------------------- 479,743 554,519 - ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt proceeds 39,526 220,530 Debt repaid, including capital lease obligations (164,632) (184,070) Common stock issued 62,222 52,041 Common stock repurchased (62,149) - Dividends on common stock (34,778) (36,178) - ------------------------------------------------------------------------------------------------------- (159,811) 52,323 - ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and revenue earning equipment (762,230) (1,023,417) Sales of property and revenue earning equipment 279,167 276,226 Proceeds from sale of discontinued operations 111,306 - Sale and leaseback of revenue earning equipment - 150,000 Acquisitions (46,346) - Other, net (935) 18,671 - ------------------------------------------------------------------------------------------------------- (419,038) (578,520) - ------------------------------------------------------------------------------------------------------- NET CASH FLOWS FROM CONTINUING OPERATIONS (99,106) 28,322 NET CASH FLOWS FROM DISCONTINUED OPERATIONS 7,621 (1,127) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (91,485) 27,195 Cash and cash equivalents at January 1 191,384 92,857 - ------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 99,899 120,052 =======================================================================================================
* Certain amounts have been restated for discontinued operations. See accompanying notes to consolidated condensed financial statements.
Item 1. Financial Statements (continued) CONSOLIDATED CONDENSED BALANCE SHEETS Ryder System, Inc. and Subsidiaries - ------------------------------------------------------------------------------------------------------ September 30, December 31, (Dollars in thousands, except per share amounts) 1997 1996 - ------------------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 99,899 191,384 Receivables 597,121 561,927 Inventories 64,399 61,345 Tires in service 162,899 168,367 Deferred income taxes 7,370 82,571 Prepaid expenses and other current assets 95,477 82,172 - ------------------------------------------------------------------------------------------------------ Total current assets 1,027,165 1,147,766 - ------------------------------------------------------------------------------------------------------ Revenue earning equipment 4,983,712 5,281,934 Less accumulated depreciation (1,852,230) (1,995,846) - ------------------------------------------------------------------------------------------------------ Net revenue earning equipment 3,131,482 3,286,088 - ------------------------------------------------------------------------------------------------------ Operating property and equipment 1,037,393 1,128,626 Less accumulated depreciation (464,273) (513,515) - ------------------------------------------------------------------------------------------------------ Net operating property and equipment 573,120 615,111 - ------------------------------------------------------------------------------------------------------ Direct financing leases and other assets 387,317 314,574 Intangible assets and deferred charges 254,151 281,850 - ------------------------------------------------------------------------------------------------------ $ 5,373,235 5,645,389 ====================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 348,507 199,958 Accounts payable 334,614 321,468 Accrued expenses 468,559 633,529 - ------------------------------------------------------------------------------------------------------ Total current liabilities 1,151,680 1,154,955 - ------------------------------------------------------------------------------------------------------ Long-term debt 1,975,954 2,237,010 Other non-current liabilities 390,821 461,275 Deferred income taxes 668,245 686,143 Shareholders' equity: Common stock of $0.50 par value per share (shares outstanding at September 30, 1997 - 78,094,300; December 31, 1996 - 77,961,154) 491,508 496,292 Retained earnings 705,613 613,887 Translation adjustment (10,586) (4,173) - ------------------------------------------------------------------------------------------------------ Total shareholders' equity 1,186,535 1,106,006 - ------------------------------------------------------------------------------------------------------ $ 5,373,235 5,645,389 ======================================================================================================
See accompanying notes to consolidated condensed financial statements. Item 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (A) INTERIM FINANCIAL STATEMENTS The accompanying unaudited consolidated condensed financial statements have been prepared by the Company in accordance with the accounting policies described in the 1996 Annual Report and should be read in conjunction with the consolidated financial statements and notes which appear in that report. These statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. (B) RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." This Statement requires the dual presentation of basic earnings per share (EPS) and diluted EPS. Basic EPS excludes the dilutive effect of stock options and other potentially dilutive instruments and diluted EPS includes such items. The Company will adopt this Statement in the fourth quarter of 1997 and does not expect the adoption to have a material impact on previously reported EPS amounts. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components. In June 1997, the FASB also issued SFAS 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 and major customers in annual and interim financial statements. Both Statements will be adopted by the Company in 1998. The adoption of these Statements in 1998 will not impact the Company's results of operations, cash flow or financial position. (C) SALE OF AUTOMOTIVE CARRIER SERVICES On September 30, 1997, the Company completed the sale of its Automotive Carriers segment to Allied Holdings, Inc. Accordingly, the Company's Automotive Carriers segment has been reported as a discontinued operation for all periods presented in the accompanying Consolidated Condensed Statements of Earnings and Cash Flows. The purchase price of $111.3 million in cash was based on a premium over the August 31, 1997 net book value of the businesses sold. The final purchase price will be determined in the fourth quarter based on the audited net book value of the businesses sold as of September 30, 1997, plus the premium. The Company recorded a gain on the sale of $3.2 million (including an income tax benefit of $8.5 million), or $0.04 per common share. The transaction was made at a premium over the net book value of the businesses sold and also generated gains from the settlement and curtailment of certain employee benefit and postretirement plans, offset by provisions for severance and direct and other transaction costs. (Continued) Item 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (C) SALE OF AUTOMOTIVE CARRIER SERVICES (Continued) The following table summarizes the results of the discontinued Automotive Carriers segment (in thousands, except per share amounts):
Third Quarter Nine Months -------------------- ------------------- 1997 1996 1997 1996 -------------------- ------------------- Revenue $144,765 136,557 462,853 434,502 Earnings (loss) before income taxes 5,159 (4,473) 18,228 (338) Income tax expense (benefit) 834 (1,351) 5,981 358 -------------------- ------------------- Earnings (loss) from discontinued operations $ 4,325 (3,122) 12,247 (696) ==================== =================== Earnings (loss) per common share $ 0.05 (0.04) 0.16 (0.01) ==================== ===================
(D) SALE OF CONSUMER TRUCK RENTAL On October 17, 1996, the Company completed the sale of substantially all the assets and certain liabilities of its consumer truck rental business. Revenue related to the consumer truck rental business was $164 million and $417 million for the quarter and nine months ended September 30, 1996, respectively. Pretax earnings from the consumer truck rental business were $24 million and $20 million for the quarter and nine months ended September 30, 1996, respectively. KPMG PEAT MARWICK LLP Telephone: 305-358-2300 CERTIFIED PUBLIC ACCOUNTANTS Telecopier: 305-577-0544 One Biscayne Tower Suite 2900 2 South Biscayne Boulevard Miami, FL 33131 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors and Shareholders Ryder System, Inc.: We have reviewed the accompanying consolidated condensed balance sheet of Ryder System, Inc. and subsidiaries as of September 30, 1997, and the related consolidated condensed statements of earnings for the third quarter and nine months ended September 30, 1997 and 1996 and the consolidated condensed statements of cash flows for the nine months ended September 30, 1997 and 1996. These consolidated condensed financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Ryder System, Inc. and subsidiaries as of December 31, 1996, and the related consolidated statements of operations and cash flows for the year then ended (not presented herein); and in our report dated February 4, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP Miami, Florida October 20, 1997 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Three and nine months ended September 30, 1997 and 1996 RESULTS OF OPERATIONS On September 30, 1997, the Company completed the sale of its Automotive Carriers segment to Allied Holdings, Inc. Therefore, the following discussion excludes the results of the Automotive Carriers segment which has been classified as discontinued operations for all periods presented (see "Notes to Consolidated Condensed Financial Statements" and "Discontinued Operations" below). On October 17, 1996, the Company completed the sale of substantially all the assets and certain liabilities of its consumer truck rental business. As a result, year-over-year comparisons are impacted by the absence of this former business unit in the 1997 periods. The Company reported earnings from continuing operations before income taxes of $57 million in the third quarter of 1997, compared with $52 million in last year's third quarter. Results from continuing operations in the third quarter of 1996 included pretax earnings of $24 million from the Company's former consumer truck rental operations and pretax restructuring and other charges of $10 million associated with cost reduction programs. Earnings from continuing operations before income taxes in the first nine months of 1997 were $186 million, compared with $120 million in the first nine months of 1996. Results in the first nine months of 1996 included pretax earnings of $21 million (excluding restructuring charges of $1 million) from consumer truck rental and pretax restructuring and other charges of $26 million. Excluding consumer truck rental pretax earnings and the restructuring and other charges in 1996, earnings from continuing operations before income taxes were 48% higher in the third quarter and 50% higher in the first nine months of 1997 compared with the same periods last year. All of the Company's business units contributed to the improved results. Earnings from continuing operations in the third quarter of 1997 were $35 million, or $0.45 per common share, compared with $29 million, or $0.36 per common share, in the third quarter of 1996. In the first nine months of 1997, earnings from continuing operations were $111 million, or $1.41 per common share, compared with $69 million, or $0.85 per common share, in the first nine months of 1996. The Company's effective tax rates for continuing operations in the third quarter and first nine months of 1997 were 38.6% and 40.2%, respectively, compared with 44.0% and 42.6%, respectively, in the same 1996 periods. Lower 1997 effective rates resulted primarily from the utilization of foreign net operating loss carryforwards and a reduction in the corporate income tax rate in the United Kingdom. Total revenue increased 9% in both the third quarter and first nine months of 1997 compared with the same periods in 1996 (exclusive of 1996 revenue from consumer truck rental of $164 million in the third quarter and $417 million in the nine months), led by integrated logistics, International Division and public transportation. Operating expense increased 10% in both the third quarter and first nine months of 1997 compared with the same 1996 periods (excluding consumer truck rental and restructuring and other charges in 1996). In ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996 addition to the increase attributable to higher business volumes, operating expense comparisons were impacted by higher subcontracted freight costs in integrated logistics, somewhat offset by lower compensation and employee benefit expenses in transportation services, as a result of headcount reductions, and lower overall vehicle liability expense. Depreciation expense (before gains on vehicle sales) decreased 16% in both the third quarter and first nine months of 1997 compared with the same periods last year. Excluding consumer truck rental, depreciation expense was slightly lower in both 1997 periods as a result of fewer commercial truck rental units and facilities in transportation services, offset by growth-related increases in the other business units. Gains on vehicle sales (excluding consumer truck rental) were 9% higher in the third quarter and about the same in the first nine months of 1997 compared with the same periods last year. Interest expense decreased $6 million and $17 million in the third quarter and first nine months of 1997, respectively, compared with the same periods in 1996, due to lower outstanding debt levels, which resulted primarily from lower levels of capital spending and a reduction of outstanding debt utilizing proceeds obtained from the sale of consumer truck rental. Miscellaneous income was $0.3 million and $7 million in the third quarter and first nine months of 1997, respectively, compared with miscellaneous expense of $3 million and $4 million in the third quarter and first nine months of 1996, respectively. The improvements in 1997 were due primarily to lower costs associated with the Company's sale of receivables program under which the Company sells, with limited recourse, trade receivables on a revolving basis, and an increase in miscellaneous income from gains on sales of certain facilities which were not associated with the 1996 restructuring and other charges. In 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 these initiatives, the Company recorded pretax restructuring and other charges in 1996 totaling $228 million (for continuing operations), of which $10 million ($7 million after tax) were recorded in the third quarter and $26 million ($17 million after tax) were recorded in the first nine months. The charges for the year included employee separation costs related to the elimination of approximately 2,450 positions, costs and asset write-downs related to the closure of approximately 200 operating and administrative facilities and other write-downs related to certain information systems and other assets. At December 31, 1996, the remaining restructuring liabilities were $62 million related to employee separation costs and facility closure costs. In the third quarter and first nine months of 1997, the Company utilized approximately $8 million and $45 million, respectively, of the restructuring liabilities and the balance at September 30, 1997 was $17 million. Management continues to believe that the remaining ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996 restructuring liabilities at September 30, 1997 are adequate to complete its plans and such liabilities are expected to be substantially paid by the end of 1997. The headcount reductions contemplated in the Company's restructuring plan have been substantially completed. As of September 30, 1997, approximately 80% of the 200 facilities scheduled for closure had ceased operations. The Company has sold or disposed of approximately 42% of the closed facilities. Management has initiated a program to prepare the Company's information systems for the year 2000. The Company is assessing the impact of the Year 2000 issue on its operations, including the extent and cost of programming changes required to address this issue. Although the final cost estimates will not be completed until late 1997, it is anticipated that Year 2000 costs will result in an increase in expenses in 1998 and 1999. BUSINESS UNIT PERFORMANCE As a result of the disposition of the consumer truck rental business in October, 1996 and the Automotive Carriers segment in September, 1997, the Company's primary business units now consist of integrated logistics, transportation services (which primarily provides full service truck leasing and commercial truck rental in the U.S. and Canada), public transportation services and the International Division (which provides full service truck leasing and integrated logistics in Europe, South America and Mexico). Revenue from integrated logistics increased 25% in both the third quarter and first nine months of 1997 compared with the same 1996 periods, primarily due to expansion of revenue with existing customers and start-up of business sold in the previous year. Operating revenue (which excludes subcontracted freight costs) increased 9% in the third quarter and 11% in the first nine months of 1997 compared with the same 1996 periods. Revenue from full service truck leasing decreased 4% in the third quarter and 1% in the first nine months of 1997, compared with the same periods in 1996. The decrease in revenue was primarily the result of lower levels of new business sales in the first half of 1997 and selected non-renewal of lower margin business, as the Company has become more selective in signing new business in accordance with specified Economic Value Added (EVA) criteria adopted in 1997, and decreases in fuel revenue primarily as a result of lower fuel volume in both periods and lower fuel prices in the third quarter. Commercial truck rental revenue decreased slightly in the third quarter and 5% in the first nine months of 1997, compared with the same periods in 1996, due to planned reductions in the size of the fleet, however, revenue per unit and utilization were higher in both 1997 periods compared with 1996. Revenue from public transportation services increased 19% in both the third quarter and first nine months of 1997, compared with the same periods last year. The revenue growth was primarily achieved through expansion of existing contracts and contributions from new contracts, as well as through first quarter 1997 acquisitions. International Division revenue was 29% higher in both the third quarter and first nine months of 1997 compared with the same 1996 periods, due primarily to new logistics contracts including the British Airways ground equipment maintenance contract in the United ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996 Kingdom, combined with growth in the Division's expanding operations in Argentina and increased business in Germany. Operating margin (revenue less direct operating expenses, depreciation and interest) and margin as a percentage of revenue from integrated logistics in the third quarter and first nine months of 1997 were higher compared with last year, due primarily to the growth in revenue combined with operating efficiencies and improved pricing on new and existing contracts. Operating margin and margin as a percentage of revenue from full service truck leasing were lower in the third quarter and about the same in the first nine months of 1997 compared with last year. The third quarter decrease was due primarily to higher vehicle maintenance costs and the decline in revenue. Commercial truck rental operating margin and margin as a percentage of revenue were higher in the third quarter and first nine months of 1997, compared with the same 1996 periods, due primarily to higher vehicle utilization. In public transportation services, operating margin and margin as a percentage of revenue were higher in the third quarter and first nine months of 1997, compared with the same periods in 1996, due mainly to the growth in revenue and lower vehicle liability expense. International Division operating margin dollars were higher but margin as a percentage of revenue was lower in the third quarter and first nine months of 1997 compared with the same periods in 1996. The growth in margin dollars was due to new contracts in all areas while the decrease in operating margin percentage was due to a change in product mix. For the business units as a whole, pretax earnings (exclusive of consumer truck rental and restructuring and other charges in 1996) increased $17 million in the third quarter and $58 million in the first nine months of 1997, compared with the same periods in 1996, as a result of an increase in operating margin and reduced overhead expenses due mainly to restructuring actions implemented in late 1996. CORPORATE ADMINISTRATIVE EXPENSES Corporate administrative expenses were $6 million in the third quarter and $16 million in the first nine months of 1997, compared with $7 million and $19 million in the third quarter and first nine months of 1996, respectively (exclusive of restructuring costs). Lower 1997 costs were 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 Carriers segment to Allied Holdings, Inc. The purchase price of $111 million in cash was based on a premium over the August 31, 1997 net book value of the businesses sold. The final purchase price will be determined in the fourth quarter based on the audited net book value of the businesses sold as of September 30, 1997, plus the premium. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996 Earnings from discontinued operations were $6 million higher in the third quarter and $9 million higher in the first nine months of 1997 compared with the same periods in 1996 (exclusive of 1996 after tax restructuring charges of $1 million in the third quarter and $4 million in the first nine months). The increased earnings were primarily due to an increase in vehicles shipped and reduced overhead expenses as a result of the 1996 restructuring actions. The sale of the Company's discontinued operations resulted in an after tax gain of $3 million (including a benefit for income taxes of $8 million), or $0.04 per common share. The transaction was made at a premium over the net book value of the businesses 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. LIQUIDITY AND CAPITAL RESOURCES Total capital expenditures related to continuing operations in the first nine months of 1997 (including acquisitions of $46 million in the first quarter of 1997) were $809 million, compared with $1.02 billion in the first nine months of 1996. The decrease was consistent with management's plan to restrict capital spending by increasing return thresholds in accepting new business and focusing on those products and services with the greatest returns. Capital expenditures in the first nine months of 1997 were lower than 1996 levels in all product lines except for commercial rental and public transportation. The increase in commercial rental expenditures reflected planned fleet replacement to reduce the average age of the fleet. Expenditures for public transportation increased due primarily to timing of fleet replacement and new business. Capital expenditures related to continuing operations in the first nine months of 1996 included approximately $68 million in consumer truck rental. Expenditures for the discontinued Automotive Carriers segment were $13 million and $30 million in the first nine months of 1997 and 1996, respectively. Total capital expenditures for all of 1997 are expected to be below $1.3 billion. Cash flow from continuing operating activities in the first nine months of 1997 was $480 million, compared with $555 million in the same period last year. The decrease resulted primarily from an increase in cash required for working capital, due mainly to increased receivables, payments related to restructuring activities initiated in 1996 and timing of pension funding, and lower non-cash depreciation charges. These decreases were offset by improved earnings and a higher non-cash charge for deferred income taxes. Cash flow from continuing operating activities plus asset sales as a percentage of capital expenditures was 100% in the first nine months of 1997, compared with 81% in the same period last year, as a result of lower levels of capital spending. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996 Total debt at September 30, 1997 was $2.3 billion, compared with $2.4 billion at December 31, 1996. During the first nine months of 1997, the Company made scheduled unsecured note payments of $39 million, repaid the $16 million of U.S. commercial paper outstanding at December 31, 1996 and reduced foreign debt by $57 million. The Company's debt to equity ratio at September 30, 1997, was 196% compared with 220% at both June 30, 1997, and December 31, 1996. As part of its financing program, the Company periodically enters into sale and leaseback agreements for revenue earning equipment which are accounted for as operating leases. No such agreements were entered into during the first nine months of 1997. Proceeds from sale-leaseback transactions were $150 million in the first nine months of 1996. The Company's percentage of variable-rate financing obligations was below 20% at September 30, 1997, which was lower than recent historical levels of slightly less than 25%. The decrease at September 30, 1997 was due to the use of a portion of the proceeds from the sale of the Automotive Carriers segment to pay down short-term variable-rate debt. Management expects the variable-rate percentage to return to recent historical levels over the next several months. On June 9, 1997, Standard & Poor's Ratings Group lowered its corporate credit and senior unsecured debt ratings on the Company to triple-B-plus from single-A-minus and removed the Company from CreditWatch where it was placed on January 21, 1997. As of September 30, 1997, Moody's Investors Service and Duff and Phelps continued to maintain ratings of A3 and A, respectively, for the Company's unsecured debt. During the second quarter of 1997, the Company restructured its revolving credit facilities by consolidating several agreements into a single global revolving credit facility which will result in administrative costs savings and increased financial flexibility. At September 30, 1997 and December 31, 1996, the Company had "floating to fixed" interest rate swap agreements outstanding with aggregate notional amounts totaling $61 million and $78 million, respectively. The Company had contractual lines of credit totaling $726 million at September 30, 1997, of which $676 million was available. The Company also had $268 million of debt securities available under a shelf registration statement filed in 1995. On July 28, 1997, the Company announced that it plans to repurchase up to six million shares of its common stock in the open market and privately negotiated transactions using proceeds from the sale of the Automotive Carriers segment and cash from operating activities. Through November 7, 1997, the Company had repurchased approximately 4,080,000 shares under this plan at an average price of $35.83 per common share. In April 1997, the Company completed a six-million-share buyback program at an average price of $29.75 per common share. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996 FORWARD-LOOKING STATEMENTS This management's discussion and analysis of results of operations and financial condition contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current plans and expectations of Ryder System, Inc. and involve risks and uncertainties that could cause actual future events and results of operations to be materially different from those in the forward-looking statements. Important factors that could cause such differences include, among others, lost revenue from facility closures, greater than expected expenses associated with the Company's personnel needs or operating activities, the competitive pricing environment applicable to the Company's operations or changes in government regulations. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and nine months ended September 30, 1997 and 1996
SELECTED FINANCIAL AND OPERATIONAL DATA (Dollars in thousands) Third Quarter Nine Months --------------------------- ---------------------------- 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------------------ BUSINESS UNITS Revenue: Transportation services: Full service lease and programmed maintenance $ 512,062 532,861 1,573,456 1,591,447 Commercial rental 132,603 134,103 367,911 388,635 Other 78,034 82,768 228,552 244,282 ---------- --------- ------------ ----------- 722,699 749,732 2,169,919 2,224,364 Integrated logistics 345,283 276,759 1,008,300 804,591 Consumer truck rental - 164,166 - 416,732 Public transportation 103,573 87,082 378,548 317,328 International Division 116,989 90,433 330,970 256,336 Eliminations (81,745) (92,380) (252,822) (280,603) ---------- --------- ------------ ----------- Total 1,206,799 1,275,792 3,634,915 3,738,748 ---------- --------- ------------ ----------- Operating expense 950,696 982,906 2,857,198 2,911,610 Depreciation expense 160,574 190,832 479,703 572,106 Gains on sale of revenue earning equipment (13,417) (13,675) (42,446) (52,988) Interest expense 47,289 53,200 145,206 162,173 Miscellaneous (income) expense, net (1,412) 3,075 (6,149) 4,407 ---------- --------- ------------ ----------- Earnings before income taxes from business units 63,069 59,454 201,403 141,440 CORPORATE ADMINISTRATIVE EXPENSES (5,632) (6,971) (15,744) (21,716) ---------- --------- ------------ ----------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ 57,437 52,483 185,659 119,724 ========== ========= ============ =========== Fleet size (owned and leased including international): Full service lease 112,050 111,300 Commercial and consumer rental 37,100 72,165 Buses operated or managed 14,226 13,021 Transportation services locations 966 1,127 - ------------------------------------------------------------------------------------------------------------------------
ITEM 6. Exhibits and Reports on Form 8-K: (a) EXHIBITS (3.1) The Ryder System, Inc. Restated Articles of Incorporation, dated November 8, 1985, as amended through May 18, 1990, previously filed with the Commission as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, are incorporated by reference into this report. (3.2) The Ryder System, Inc. By-Laws, as amended through November 23, 1993, previously filed with the Commission as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, are incorporated by reference into this report. (11) Statement regarding computation of per share earnings. (15) Letter regarding unaudited interim financial statements. (27) Financial data schedule (for SEC use only). (b) REPORTS ON FORM 8-K There were no reports on Form 8-K filed by the Registrant during the period covered by this report. 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 13, 1997 /S/ EDWIN A. HUSTON ------------------- Edwin A. Huston Senior Executive Vice President-Finance and Chief Financial Officer (Principal Financial Officer) Date: November 13, 1997 /S/ GEORGE P. SCANLON --------------------- George P. Scanlon Vice President - Planning and Controller (Principal Accounting Officer) EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 11 Statement regarding computation of per share earnings. 15 Letter regarding unaudited interim financial statements. 27 Financial data schedule (for SEC use only). EX-11 2 Exhibit 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS Primary earnings per share are computed by dividing earnings applicable to common shares by the weighted average number of common and common equivalent shares outstanding during the period. For purposes of computing primary earnings per share, common equivalent shares include the average number of common shares issuable upon the exercise of all employee stock options and awards and outstanding employee stock subscriptions, if dilutive, less the common shares which could have been purchased at the average market price during the period with the assumed proceeds, including "windfall" tax benefits, from the exercise of the options, awards and subscriptions. Fully-diluted earnings per share are computed by dividing the sum of earnings applicable to common shares by the weighted average number of common shares, common equivalent shares and common shares assumed converted from potentially dilutive securities outstanding during the period. For purposes of computing fully-diluted earnings per share, common equivalent shares are computed on a basis comparable to that for primary earnings per share, except that common shares are assumed to be purchased at the market price at the end of the period, if dilutive. EX-15 3 KPMG PEAT MARWICK LLP Telephone: 305-358-2300 CERTIFIED PUBLIC ACCOUNTANTS Telecopier: 305-577-0544 One Biscayne Tower Suite 2900 2 South Biscayne Boulevard Miami, FL 33131 The Board of Directors and Shareholders Ryder System, Inc.: We acknowledge our awareness of the incorporation by reference in the following Registration Statements of our report dated October 20, 1997 related to our review of interim financial information: Form S-3: /bullet/ Registration Statement No. 33-20359 covering $1,000,000,000 aggregate principal amount of debt securities. /bullet/ Registration Statement No. 33-50232 covering $800,000,000 aggregate principal amount of debt securities. /bullet/ Registration Statement No. 33-58667 covering $800,000,000 aggregate principal amount of debt securities. Form S-8: /bullet/ Registration Statement No. 33-20608 covering the Ryder System Employee Stock Purchase Plan. /bullet/ Registration Statement No. 33-4333 covering the Ryder Employee Savings Plan. /bullet/ Registration Statement No. 1-4364 covering the Ryder System Profit Incentive Stock Plan. /bullet/ Registration Statement No. 33-69660 covering the Ryder System, Inc. 1980 Stock Incentive Plan. /bullet/ Registration Statement No. 33-37677 covering the Ryder System UK Stock Purchase Scheme. /bullet/ Registration Statement No. 33-442507 covering the Ryder Student Transportation Services, Inc. Retirement /Savings Plan. /bullet/ Registration Statement No. 33-63990 covering the Ryder System, Inc. Directors' Stock Plan. /bullet/ Registration Statement No. 33-58001 covering the Ryder System, Inc. Employee Savings Plan A. /bullet/ Registration Statement No. 33-58003 covering the Ryder System, Inc. Employee Savings Plan B. The Board of Directors and Shareholders Ryder System, Inc. Page 2 /bullet/ Registration Statement No. 33-58045 covering the Ryder System, Inc. Savings Restoration Plan. /bullet/ Registration Statement No. 33-61509 covering the Ryder System, Inc. Stock for Merit Increase Replacement Plan. /bullet/ Registration Statement No. 33-62013 covering the Ryder System, Inc. 1995 Stock Incentive Plan. /bullet/ Registration Statement No. 333-19515 covering the Ryder System, Inc. 1995 Stock Incentive Plan. /bullet/ Registration Statement No. 333-26653 covering the Ryder System, Inc. Board of Directors Stock Award Plan. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. /s/ KPMG PEAT MARWICK LLP Miami, Florida November 13, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RYDER SYSTEM, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS AND STATEMENTS OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996 (RESTATED FOR DISCONTINUED OPERATIONS) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS 9-MOS DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 SEP-30-1997 SEP-30-1996 99,899 120,052 0 0 597,121 436,872 0 0 64,399 59,937 1,027,165 1,476,233 6,021,105 6,398,495 2,316,503 2,459,583 5,373,235 6,017,663 1,151,680 997,260 1,975,954 2,520,357 0 0 0 0 491,508 606,681 695,027 722,226 5,373,235 6,017,663 0 0 3,625,457 3,728,199 0 0 3,296,604 3,448,502 0 0 0 0 143,194 159,973 185,659 119,724 74,602 50,978 111,057 68,746 15,447 (696) 0 0 0 0 126,504 68,050 1.61 0.84 0 0
-----END PRIVACY-ENHANCED MESSAGE-----