-----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, SdfWu5AO1jPl5qVvmQ+/z9HjgXhADD0CDzRnKjEShCRfyPRHx9kY3revAPy53iCK VFEU4ebZfbJ38VQ1QNxKIg== 0000950170-96-000608.txt : 19960814 0000950170-96-000608.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950170-96-000608 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 1934 Act SEC FILE NUMBER: 001-04364 FILM NUMBER: 96611330 BUSINESS ADDRESS: STREET 1: 3600 NW 82ND AVE CITY: MIAMI STATE: FL ZIP: 33166 BUSINESS PHONE: 3055933726 MAIL ADDRESS: STREET 1: 3600 NW 82 AVENUE CITY: MIAMI STATE: FL ZIP: 33166 10-Q 1 QUARTERLY REPORT - --------------------------------------------------------------------------- FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 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 81,203,295 shares of common stock ($0.50 par value per share) outstanding as of July 31, 1996. - ------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS Ryder System, Inc. and Consolidated Subsidiaries - ------------------------------------------------------------------------------------------------------------------- Periods ended June 30, 1996 and 1995 Second Quarter Six Months ------------------------ ---------------------- (In thousands, except per share amounts) 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------- REVENUE $ 1,426,048 1,324,444 2,753,999 2,557,925 - ------------------------------------------------------------------------------------------------------------------- Operating expense 1,135,425 1,024,338 2,214,070 2,019,101 Depreciation expense, net of gains (quarter, 1996 - $18,390, 1995 - $21,259; six months, 1996 - $39,406, 1995 - $49,957) 183,716 165,671 362,203 314,165 Interest expense 53,803 46,337 106,619 91,446 Miscellaneous (income) expense (545) 1,178 (269) 1,168 - ------------------------------------------------------------------------------------------------------------------- 1,372,399 1,237,524 2,682,623 2,425,880 - ------------------------------------------------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of change in accounting 53,649 86,920 71,376 132,045 Provision for income taxes 22,066 35,434 29,614 53,980 - ------------------------------------------------------------------------------------------------------------------- Earnings before cumulative effect of change in accounting 31,583 51,486 41,762 78,065 Cumulative effect of change in accounting - - - (7,759) - ------------------------------------------------------------------------------------------------------------------- NET EARNINGS $ 31,583 51,486 41,762 70,306 =================================================================================================================== Earnings per common share: Earnings before cumulative effect of change in accounting $ 0.39 0.65 0.52 0.99 Cumulative effect of change in accounting - - - (0.10) - ------------------------------------------------------------------------------------------------------------------- EARNINGS PER COMMON SHARE $ 0.39 0.65 0.52 0.89 - ------------------------------------------------------------------------------------------------------------------- Cash dividends per common share $ 0.15 0.15 0.30 0.30 - ------------------------------------------------------------------------------------------------------------------- Average common and common equivalent shares 81,196 79,291 80,615 79,141 ===================================================================================================================
See accompanying notes to consolidated condensed financial statements.
ITEM 1. Financial Statements (continued) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Ryder System, Inc. and Consolidated Subsidiaries - ----------------------------------------------------------------------------------- Six months ended June 30, 1996 and 1995 (In thousands) 1996 1995 - ----------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 41,762 70,306 Cumulative effect of change in accounting - 7,759 Depreciation expense, net of gains 362,203 314,165 Deferred income taxes 23,818 38,636 Proceeds from sales of receivables - 30,000 Increase in working capital items and other, net (85,895) (21,812) - ----------------------------------------------------------------------------------- 341,888 439,054 - ----------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt proceeds 236,694 912,363 Debt repaid, including capital lease obligations (153,010) (432,579) Common stock issued 35,303 2,441 Dividends on common stock (23,978) (23,637) - ----------------------------------------------------------------------------------- 95,009 458,588 - ----------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and revenue earning equipment (769,995) (1,253,630) Sales of property and revenue earning equipment 187,185 189,453 Sale and leaseback of revenue earning equipment 150,000 150,000 Other, net 29,158 18,681 - ----------------------------------------------------------------------------------- (403,652) (895,496) - ----------------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 33,245 2,146 Cash and cash equivalents at January 1 92,857 75,878 - ----------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT JUNE 30 $ 126,102 78,024 ===================================================================================
See accompanying notes to consolidated condensed financial statements.
ITEM 1. Financial Statements (continued) CONSOLIDATED CONDENSED BALANCE SHEETS Ryder System, Inc. and Consolidated Subsidiaries - ------------------------------------------------------------------------------------------ June 30, December 31, (Dollars in thousands, except per share amounts) 1996 1995 - ------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 126,102 92,857 Receivables 401,911 374,689 Inventories 59,600 59,699 Tires in service 195,314 195,742 Deferred income taxes 24,746 39,527 Prepaid expenses and other current assets 154,568 121,547 - ------------------------------------------------------------------------------------------ Total current assets 962,241 884,061 - ------------------------------------------------------------------------------------------ Revenue earning equipment 5,979,821 5,892,408 Less accumulated depreciation (2,218,621) (2,116,523) - ------------------------------------------------------------------------------------------ Net revenue earning equipment 3,761,200 3,775,885 - ------------------------------------------------------------------------------------------ Operating property and equipment 1,222,261 1,174,217 Less accumulated depreciation (527,886) (512,852) - ------------------------------------------------------------------------------------------ Net operating property and equipment 694,375 661,365 - ------------------------------------------------------------------------------------------ Direct financing leases and other assets 291,983 269,819 Intangible assets and deferred charges 295,824 302,685 - ------------------------------------------------------------------------------------------ $ 6,005,623 5,893,815 ========================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 162,580 212,077 Accounts payable 385,785 380,264 Accrued expenses 485,614 527,834 - ------------------------------------------------------------------------------------------ Total current liabilities 1,033,979 1,120,175 - ------------------------------------------------------------------------------------------ Long-term debt 2,552,424 2,411,024 Other non-current liabilities 465,922 474,218 Deferred income taxes 657,379 648,373 Shareholders' equity: Common stock of $0.50 par value per share (shares outstanding at June 30, 1996 - 80,889,469; December 31, 1995 - 79,280,613) 588,861 550,197 Retained earnings 721,304 703,520 Translation adjustment (14,246) (13,692) - ------------------------------------------------------------------------------------------ Total shareholders' equity 1,295,919 1,240,025 - ------------------------------------------------------------------------------------------ $ 6,005,623 5,893,815 ==========================================================================================
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 1995 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) ACCOUNTING CHANGES Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 116, "Accounting for Contributions Received and Contributions Made," which requires that promises to make contributions be recognized in the financial statements as an expense and a liability when a promise is made. As a result, a pretax charge of $12.2 million ($7.8 million after tax, or $0.10 per common share) was recorded as the cumulative effect of a change in accounting principle to establish a liability for the present value of the Company's total outstanding charitable commitments as of January 1, 1995. Prior to the adoption of the new Statement, charitable contributions were recorded in the financial statements in the period in which they were paid. On January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Adoption of the Statement had no impact on the Company's results of operations or financial position in 1996. In addition, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," became effective in 1996. As provided for in Statement No. 123, the Company has elected to continue to apply the provisions of APB No. 25, "Accounting for Stock Issued to Employees" in accounting for stock-based compensation. As a result, the Statement had no impact on the Company's results of operations or financial position in 1996. The Company will provide disclosures required by Statement No. 123 in its December 31, 1996 annual financial statements. (C) RESTRUCTURING CHARGE In the second quarter of 1996, the Company began reviewing various alternatives to improve its cost structure and enhance productivity and organizational efficiency. As part of this process, the Company took several actions in the second quarter which led to a pretax restructuring charge to operating expense of $19.6 million ($12.4 million after tax, or $0.15 per common share). These actions included an early retirement program in the Automotive Carrier Division, the elimination of various management positions in Commercial Leasing & Services and staff reductions in the Company's headquarters. Approximately 110 employees were affected by these actions. The Company also exited the commercial rental business at most of its locations in Germany and eliminated its company-owned car benefit program. In addition to recording restructuring liabilities totaling $10.6 million (of which $9.3 million remained at June 30, 1996), primarily for employee-related costs, the Company recorded asset write-downs of $6.3 million and increased pension liabilities by $2.7 million as a result of the actions taken. The remaining restructuring liabilities at June 30, 1996 are expected to be paid by the end of 1996. Savings as a result of these actions are projected to be approximately $12 million annually. The plans implemented in the second quarter, which are part of an ongoing cost reduction program, are expected to be substantially completed in the third quarter of 1996. KPMG PEAT MARWICK LLP CERTIFIED PUBLIC ACCOUNTANTS One Biscayne Tower Suite 2900 2 South Biscayne Boulevard Miami, FL 33131 Telephone 305-358-2300 Telecopier 305-577-0544 Independent Auditors' Review Report The Board of Directors and Shareholders Ryder System, Inc.: We have reviewed the accompanying consolidated condensed balance sheet of Ryder System, Inc. and subsidiaries as of June 30, 1996, and the related consolidated condensed statements of earnings for the three- and six-month periods ended June 30, 1996 and 1995 and the consolidated condensed statements of cash flows for the six-month periods ended June 30, 1996 and 1995. 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, 1995, and the related consolidated statements of earnings and cash flows for the year then ended (not presented herein); and in our report dated March 8, 1996, 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, 1995, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. As discussed in the notes to the consolidated condensed financial statements, in 1995, Ryder System, Inc. and subsidiaries changed its method of accounting for contributions received and contributions made. KPMG PEAT MARWICK LLP Miami, Florida July 22, 1996 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Three and six months ended June 30, 1996 and 1995 RESULTS OF OPERATIONS The Company reported earnings before income taxes and cumulative effect of change in accounting of $54 million in the second quarter of 1996, compared with $87 million in last year's second quarter. Earnings before income taxes and cumulative effect of change in accounting in the first half of 1996 were $71 million, compared with $132 million in the first half of 1995. Earnings in the second quarter and first half of 1996 were negatively impacted by a pretax restructuring charge of $20 million ($12 million after tax) and earnings in the second quarter and first half of 1995 benefited from a pretax credit of $8 million ($6 million after tax) from the resolution of certain operating tax matters. In the second quarter and first half of 1996, pretax results improved in dedicated logistics and consumer truck rental compared with a year ago. However, improvements in these businesses were more than offset by the restructuring charge, lower commercial rental operating margin, reduced operating margin in the Automotive Carrier Division, costs associated with international expansion and lower gains on vehicle sales. Net earnings in the second quarter of 1996 were $32 million, or $0.39 per common share, compared with $51 million, or $0.65 per common share, in the second quarter of 1995. In the first half of 1996, net earnings were $42 million, or $0.52 per common share, compared with $70 million, or $0.89 per common share, in the first half of 1995. Net earnings in the first half of 1995 included a first quarter after tax charge of $8 million ($0.10 per common share) for the cumulative effect of a change in accounting for charitable contributions (see "Accounting Change" below). Excluding the impact of the 1996 restructuring charge and the 1995 operating tax earnings credit and accounting change, net earnings were 3% lower in the second quarter and 25% lower in the first half of 1996 compared with the same periods a year ago. The Company's effective tax rates in the second quarter and first half of 1996 were relatively unchanged compared with the same periods in 1995. Revenue was 8% higher in both the second quarter and first half of 1996 compared with the same periods last year. Vehicle Leasing & Services revenue increased 10% in both periods, led by the division's two primary contractual product lines, dedicated logistics and full service truck leasing. Automotive Carriers revenue was 6% lower in the second quarter and 11% lower in the first half of 1996, compared with the same periods last year, due primarily to a reduction in the number of vehicles shipped. Vehicle shipments in the first half of 1996 were impacted by a first quarter strike at General Motors, the division's largest customer. Operating expense, excluding the 1996 restructuring charge, increased 9% in both the second quarter and first half of 1996 compared with last year. In addition to increases which were the result of higher business volumes, operating expense in both periods reflected higher operating expense ratios in the Automotive Carrier and public transportation services businesses, costs related to international expansion and an increase in the number of vehicles leased by the Company as lessee. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and six months ended June 30, 1996 and 1995 Depreciation expense (before gains on vehicle sales) increased 8% in the second quarter and 10% in the first half of 1996 compared with the same periods last year. Higher depreciation resulted from an increase in the size of the full service lease fleet, primarily as a result of strong sales of new logistics and full service lease contracts. Depreciation related to investments in new systems and technology development also contributed to the increase. Consistent with management's expectations, gains on vehicle sales were $3 million and $11 million lower in the second quarter and first half of 1996, respectively, compared with the same periods in 1995. The decrease in gains was primarily due to a reduction in the average gain per vehicle sold. Interest expense increased $7 million and $15 million in the second quarter and first half of 1996, respectively, compared with the same periods in 1995, due to higher outstanding debt levels resulting from growth in the full service lease fleet in 1995. The Company continued to maintain slightly less than one-third of its financing obligations at variable interest rates at June 30, 1996. In the second quarter of 1996, the Company began reviewing various alternatives to improve its cost structure and enhance productivity and organizational efficiency. As part of this process, the Company took several actions in the second quarter which led to a pretax restructuring charge to operating expense of $20 million ($12 million after tax, or $0.15 per common share). These actions included an early retirement program in the Automotive Carrier Division, the elimination of various management positions in Commercial Leasing & Services and staff reductions in the Company's headquarters. Approximately 110 employees were affected by these actions. The Company also exited the commercial rental business at most of its locations in Germany and eliminated its company-owned car benefit program. In addition to recording restructuring liabilities totaling $11 million (of which $9 million remained at June 30, 1996), primarily for employee-related costs, the Company recorded asset write-downs of $6 million and increased pension liabilities by $3 million as a result of the actions taken. The remaining restructuring liabilities at June 30, 1996 are expected to be paid by the end of 1996. Savings as a result of these actions are projected to be approximately $12 million annually. The plans implemented in the second quarter, which are part of an ongoing cost reduction program, are expected to be substantially completed in the third quarter of 1996. The Company expects to take further cost reduction actions over the remainder of 1996 which will likely result in additional restructuring charges. The Company also has a continuing strategy to focus the majority of its resources on its long-term contractual businesses. Consistent with this strategy, on July 19, 1996, the Company announced it was exploring the potential sale of its transaction-based consumer truck rental business. At June 30, 1996, this business had approximately 33,000 vehicles and total assets of approximately $600 million. Consumer truck rental revenue for the six months ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and six months ended June 30, 1996 and 1995 ended June 30, 1996 and the year ended December 31, 1995 was $253 million and $547 million, respectively. At this time, it is not known whether or when a transaction will be completed. Vehicle Leasing & Services Revenue from full service truck leasing increased 10% in both the second quarter and first half of 1996, compared with the same periods last year, as a result of strong new business sales in 1995 and increased fuel revenue as a result of higher fuel prices in 1996 (full service lease contracts provide for the pass-through of fuel costs to customers). Dedicated logistics revenue increased 26% and 29% in the second quarter and first half of 1996, respectively, over the same 1995 periods, as a result of continued strong new business start-ups over the past 12 months. Revenue from public transportation services increased 10% in the second quarter and 9% in the first half of 1996, compared with the same periods last year, due primarily to growth in two of the product line's service offerings - public transit contracting and fleet management and maintenance. International Division revenue was 17% higher in the second quarter and 13% higher in the first half of 1996 compared with the same 1995 periods, due primarily to new full service lease and logistics contracts in the United Kingdom combined with growth in the division's expanding operations in Mexico, Argentina and Brazil. Despite operating with a smaller fleet, revenue from consumer truck rental was higher in both the second quarter and first half of 1996, compared with the same periods last year, due to an increase in rental transactions. Commercial truck rental revenue decreased 10% in both the second quarter and first half of 1996, compared with the same periods in 1995, due to lower demand from full service lease customers either awaiting delivery of new lease vehicles or satisfying short-term needs. Pretax earnings for Vehicle Leasing & Services were $56 million in the second quarter of 1996 compared with $75 million in the second quarter of 1995. For the six months ended June 30, 1996, pretax earnings were $82 million compared with $115 million last year. Excluding the division's portion of the restructuring charge recorded in the second quarter of 1996 ($13 million pretax) and its portion of the operating tax earnings credit recognized in the second quarter of 1995 ($5 million pretax), earnings before income taxes were 2% lower in the second quarter and 14% lower in the first half of 1996 compared with the same periods last year. Margin (revenue less direct operating expenses, depreciation and interest expense) from full service truck leasing was slightly higher in the second quarter and first half of 1996 compared with the same periods last year, due to increased revenue. However, margin as a percentage of revenue was lower for both periods, due primarily to lower pricing on new full service lease contracts signed in 1994 and 1995. Dedicated logistics margin and margin as a percentage of revenue were higher in the second quarter and first half of 1996, due primarily to the growth in revenue combined with lower workers' compensation expense as a result of favorable development of prior year claims. In public transportation services, margin and margin as a percentage of revenue were lower in the second quarter and first half of 1996 compared with last year, due mainly to the adverse effects of poor weather in the first quarter of 1996 on operating costs, as well as increased driver compensation and vehicle liability expenses. International Division margin and margin as a percentage of revenue were lower ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and six months ended June 30, 1996 and 1995 in the second quarter and first half of 1996 compared with the same periods in 1995, primarily due to costs associated with new logistics operations in the United Kingdom. Consumer truck rental margin and margin as a percentage of revenue were higher in the second quarter and first half of 1996 compared with the same periods in 1995, due to improved vehicle utilization which resulted from higher transactions on a smaller fleet. Commercial truck rental margin and margin as a percentage of revenue were lower in the same periods, due to the decline in revenue and a decrease in utilization on tractors typically rented on a short-term basis to full service lease customers. Consistent with management's plan to down-size the truck rental fleets, the combined number of rental power units at June 30, 1996 was 12% lower than at June 30, 1995. Management anticipates further reductions in the rental fleets over the remainder of the year. For the division as a whole, higher overall operating margin in the second quarter and first six months of 1996 was more than offset by the second quarter restructuring charge, lower gains on vehicle sales and higher indirect operating expenses, including costs relating to international expansion and new systems and technology development. Automotive Carriers Automotive Carriers revenue was 6% lower in the second quarter and 11% lower in the first half of 1996 compared with the same periods in 1995, due to a reduction in the number of vehicles shipped and average revenue per vehicle shipped in both periods, and a decrease in average length of haul in the first half. Vehicle shipments in the first six months of 1996 were impacted by a first quarter strike at two General Motors component plants which led to a temporary shutdown of the majority of General Motors' North American assembly plants. A slight increase in vehicle shipments for General Motors in the second quarter was not enough to offset a 21% first quarter decline. In addition, shipments for other manufacturers were lower in both the second quarter and first half of 1996 compared with the same periods in 1995. Revenue comparisons in the second half of 1996 should benefit from the addition of several new contracts which will begin operating in the third quarter. Automotive Carriers reported pretax earnings of $6 million in the second quarter of 1996, compared with $19 million in last year's second quarter. For the six months ended June 30, 1996, pretax earnings were $3 million compared with $28 million in the first half of last year. The division's portion of the second quarter restructuring charge was $4 million pretax and its portion of the second quarter 1995 operating tax earnings credit was $3 million pretax. In addition to the impact of these items, pretax earnings comparisons in both periods were affected by lower revenue, higher wages resulting from a May 1995 agreement with the International Brotherhood of Teamsters and higher vehicle liability expense. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and six months ended June 30, 1996 and 1995 The current labor contracts between the United Automobile Workers and the Big Three auto makers expire in September, 1996. The division's operating results would be negatively impacted should any protracted work stoppage occur at the Big Three auto makers, particularly General Motors. Other Other, which is comprised primarily of corporate administrative costs, reported net expenses in the second quarter and first half of 1996 of $8 million and $13 million, respectively, compared with net expenses of $7 million and $12 million, respectively, in the same periods last year. Expenses in the 1996 periods included a pretax restructuring charge of $3 million. Accounting Change The Company adopted Statement of Financial Accounting Standards No. 116, "Accounting for Contributions Received and Contributions Made," effective January 1, 1995. The Statement requires that promises to make contributions be recognized in the financial statements as an expense and a liability when a promise is made. As a result, the Company recorded a pretax charge of $12 million ($8 million after tax, or $0.10 per common share), to record the cumulative effect of the change in accounting principle and establish a liability for the present value of the Company's total outstanding charitable commitments as of January 1, 1995. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and six months ended June 30, 1996 and 1995 LIQUIDITY AND CAPITAL RESOURCES Total capital expenditures in the first half of 1996 were $770 million, compared with $1.25 billion in the first half of 1995. The reduction was consistent with management's plan to limit capital spending by being more selective in accepting new business and focusing on those products and services with the greatest returns. Capital expenditures in full service truck leasing in the U.S. and Canada were $443 million in the first half of 1996 - a decrease of $169 million compared with last year's first half - primarily due to portfolio selectivity and generally less demand for new vehicles. Consistent with management's plan to reduce rental fleet levels and allocate capital to the higher return contractual businesses, capital expenditures in commercial and consumer truck rental were lower in the first half of 1996 compared with last year's first half. In commercial truck rental, capital expenditures were $16 million in the first half of 1996 compared with $188 million in last year's first half, and in consumer truck rental, capital expenditures were $69 million compared with $207 million last year. International Division capital expenditures of $66 million in the first half of 1996 were relatively unchanged from a year ago. Automotive Carriers capital expenditures fell to $19 million in the first half of 1996, compared with $47 million in the first half of 1995, due to a lower level of fleet replacement in 1996. Capital expenditures in all other product lines were $157 million in the first half of 1996, an increase of $23 million compared with last year's first half, primarily reflecting higher expenditures on revenue earning equipment in public transportation services and increased expenditures on operating property and equipment, primarily relating to logistics and other systems initiatives. Management estimates that total capital expenditures for all of 1996 will be 25% to 30% lower compared with 1995. Total debt at June 30, 1996 was $2.7 billion, compared with $2.6 billion at December 31, 1995. U.S. commercial paper outstanding increased from $45 million at December 31, 1995 to $193 million at June 30, 1996. During the first six months of 1996, the Company made $102 million of scheduled unsecured note payments. Foreign debt increased $51 million in the first six months of 1996 due to growth in the Company's international operations. The Company's debt to equity ratio at June 30, 1996, was 210% compared with 223% at March 31, 1996 and 212% at December 31, 1995. 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. Proceeds from sale-leaseback transactions were $150 million in the first six months of both 1996 and 1995. Cash flow from operating activities in the first six months of 1996 was $342 million, compared with $439 million in the same period last year. The decrease resulted primarily from lower earnings and an increase in cash required for working capital (due mainly to larger reductions in accrued expenses and trade payables for vehicle purchases), partially offset by a higher non-cash depreciation charge. Cash flow from operating activities (excluding sales of receivables) plus asset sales as a percentage of capital expenditures was 69% in the first half of 1996, compared with 48% 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 six months ended June 30, 1996 and 1995 At June 30, 1996 and December 31, 1995, the Company had "floating to fixed" interest rate swap agreements outstanding with aggregate notional amounts totaling $166 million and $171 million, respectively. The Company also continued to maintain $100 million of "floating to floating" interest rate swap agreements at June 30, 1996. The Company had contractual lines of credit totaling $716 million at June 30, 1996, of which $482 million was available. The Company also had $268 million of debt securities available under a shelf registration statement filed in 1995. ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) -- Three and six months ended June 30, 1996 and 1995
SELECTED FINANCIAL AND OPERATIONAL DATA (Dollars in thousands) Second Quarter Six Months ----------------------- --------------------- 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------ Vehicle Leasing & Services Revenue: Commercial Leasing & Services: Full service lease and programmed maintenance $ 535,737 487,239 1,058,586 960,444 Commercial rental 133,382 147,917 254,532 281,497 Other 81,080 81,498 161,514 153,550 ----------- --------- --------- --------- 750,199 716,654 1,474,632 1,395,491 Dedicated Logistics 269,716 213,612 527,832 407,741 Consumer Truck Rental 146,680 145,188 252,566 248,232 Public Transportation 113,558 103,081 230,246 211,578 International 84,134 71,746 165,903 147,322 Eliminations (95,259) (93,488) (188,223) (178,635) ----------- --------- --------- --------- Total 1,269,028 1,156,793 2,462,956 2,231,729 ----------- --------- --------- --------- Operating expense 985,318 876,687 1,928,704 1,726,068 Depreciation expense 191,451 176,200 381,274 343,105 Gains on sale of revenue earning equipment (18,373) (20,637) (39,313) (48,765) Interest expense 54,955 47,850 108,973 94,491 Miscellaneous (income) expense, net (280) 1,407 1,332 1,530 ----------- --------- --------- --------- Earnings before income taxes $ 55,957 75,286 81,986 115,300 =========== ========= ========= ========= Fleet size (owned and leased including international): Full service lease 109,628 98,866 Commercial and consumer rental 74,343 80,776 Buses operated or managed 12,992 12,842 Ryder Truck Rental service locations 1,141 1,114 - ------------------------------------------------------------------------------------------------------------ Automotive Carriers Revenue $ 160,514 170,609 297,945 335,606 =========== ========= ========= ========= Earnings before income taxes $ 5,845 18,931 2,588 28,456 =========== ========= ========= ========= Total units transported (000) 1,638 1,668 3,097 3,282 Total miles traveled (000) 61,195 62,149 113,506 125,050 Auto transports: Owned and leased 2,791 3,423 Owner-operators 497 456 Locations 84 83 - ------------------------------------------------------------------------------------------------------------ Note: Certain 1995 amounts have been reclassified to conform to 1996 classifications.
PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders: (a) The annual meeting of stockholders of Ryder System, Inc. was held on May 3, 1996. (b) All director nominees described in (c) below were elected. The following directors continued in office after the meeting: M. Anthony Burns, Arthur H. Bernstein, Edward T. Foote II, John A. Georges, Vernon E. Jordan, Jr., James W. McLamore, Paul J. Rizzo and Alva O. Way. (c) Certain matters voted on at the meeting and the votes cast with respect to such matters are as follows: VOTES CAST ----------------------- BROKER FOR AGAINST ABSTAIN NON-VOTES ---------- ---------- ------- --------- Management Proposal - ------------------- Ratification of appointment of independent auditors 68,851,039 175,614 115,622 0 Stockholder Proposal - -------------------- Relating to annual election of all directors 35,005,299 29,632,180 413,868 4,090,928 Election of Directors - --------------------- Director Votes Received Votes Withheld Joseph L. Dionne 68,200,941 941,334 David T. Kearns 68,164,631 977,644 Lynn M. Martin 68,158,748 983,527 Mark H. Willes 68,191,311 950,964 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. (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 No reports on Form 8-K were filed by the Registrant during the quarter ended June 30, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RYDER SYSTEM, INC. (Registrant) Date: August 13, 1996 /s/ Edwin A. Huston ------------------- Edwin A. Huston Senior Executive Vice President-Finance and Chief Financial Officer (Principal Financial Officer) Date: August 13, 1996 /s/ Anthony G. Tegnelia ----------------------- Anthony G. Tegnelia Senior Vice President and Controller (Principal Accounting Officer) EX-11 2 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 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 LETTER RE UNAUDITED INTERIM FINANCIAL STATEMENTS KPMG PEAT MARWICK LLP CERTIFIED PUBLIC ACCOUNTANTS One Biscayne Tower Suite 2900 2 South Biscayne Boulevard Miami, FL 33131 Telephone 305-358-2300 Telecopier 305-577-0544 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 July 22, 1996 related to our review of interim financial information: Form S-3: - Registration Statement No. 33-20359 covering $1,000,000,000 aggregate principal amount of debt securities. - Registration Statement No. 33-50232 covering $800,000,000 aggregate principal amount of debt securities. - Registration Statement No. 33-58667 covering $800,000,000 aggregate principal amount of debt securities. Form S-8: - Registration Statement No. 33-20608 covering the Ryder System Employee Stock Purchase Plan. - Registration Statement No. 33-4333 covering the Ryder Employee Savings Plan. - Registration Statement No. 1-4364 covering the Ryder System Profit Incentive Stock Plan. - Registration Statement No. 33-69660 covering the Ryder System, Inc. 1980 Stock Incentive Plan. The Board of Directors and Shareholders Ryder System, Inc. Page 2 - Registration Statement No. 33-37677 covering the Ryder System UK Stock Purchase Scheme. - Registration Statement No. 33-442507 covering the Ryder Student Transportation Services, Inc. Retirement/Savings Plan. - Registration Statement No. 33-63990 covering the Ryder System, Inc. Directors' Stock Plan. - Registration Statement No. 33-58001 covering the Ryder System, Inc. Employee Savings Plan A. - Registration Statement No. 33-58003 covering the Ryder System, Inc. Employee Savings Plan B. - Registration Statement No. 33-58045 covering the Ryder System, Inc. Savings Restoration Plan. - Registration Statement No. 33-61509 covering the Ryder System, Inc. Stock for Merit Increase Replacement Plan. - Registration Statement No. 33-62013 covering the Ryder System, Inc. 1995 Stock Incentive 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. KPMG PEAT MARWICK LLP Miami, Florida August 13, 1996 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RYDER SYSTEM, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AND STATEMENTS OF EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 126,102 0 401,911 0 59,600 962,241 7,202,082 2,746,507 6,005,623 1,033,979 2,552,424 0 0 588,861 707,058 6,005,623 0 2,753,999 0 2,576,004 0 0 106,619 71,376 29,614 41,762 0 0 0 41,762 0.52 0
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