1
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-4364
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RYDER SYSTEM, INC.
(a Florida corporation)
3600 N. W. 82nd Avenue
Miami, Florida 33166
Telephone (305) 593-3726
I.R.S. Employer Identification No. 59-0739250
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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
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Ryder System, Inc. (the "Registrant" or the "Company") had 78,806,453 shares of
common stock ($0.50 par value per share) outstanding as of April 30, 1995.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Ryder System, Inc. and Consolidated Subsidiaries
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Three months ended March 31, 1995 and 1994
(In thousands, except per share amounts) 1995 1994
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REVENUE $1,233,481 1,071,837
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Operating expense 994,763 860,281
Depreciation expense, net of gains (1995 - $28,698; 1994 - $17,773) 148,494 139,547
Interest expense 45,109 31,916
Miscellaneous income (10) (237)
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1,188,356 1,031,507
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Earnings before income taxes and cumulative effect of change in accounting 45,125 40,330
Provision for income taxes 18,546 16,592
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Earnings before cumulative effect of change in accounting 26,579 23,738
Cumulative effect of change in accounting (7,759) -
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NET EARNINGS $ 18,820 23,738
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Earnings per common share:
Earnings before cumulative effect of change in accounting $ 0.34 0.30
Cumulative effect of change in accounting (0.10) -
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EARNINGS PER COMMON SHARE $ 0.24 0.30
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Cash dividends per common share $ 0.15 0.15
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Average common and common equivalent shares 78,992 78,444
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See accompanying notes to consolidated condensed financial statements.
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Item 1. Financial Statements (continued)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Ryder System, Inc. and Consolidated Subsidiaries
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Three months ended March 31, 1995 and 1994
(In thousands) 1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 18,820 23,738
Cumulative effect of change in accounting 7,759 -
Depreciation expense, net of gains 148,494 139,547
Deferred income taxes 10,788 6,892
Increase in working capital items and other, net (24,889) (76,379)
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160,972 93,798
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CASH FLOWS FROM FINANCING ACTIVITIES:
Debt proceeds 787,828 354,705
Debt repaid, including capital lease obligations (367,001) (80,032)
Common stock issued 227 6,582
Dividends on common stock (11,816) (11,634)
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409,238 269,621
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and revenue earning equipment (706,270) (447,157)
Sales of property and revenue earning equipment 110,553 77,902
Other, net 6,878 11,717
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(588,839) (357,538)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,629) 5,881
Cash and cash equivalents at January 1 75,878 56,691
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CASH AND CASH EQUIVALENTS AT MARCH 31 $ 57,249 62,572
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See accompanying notes to consolidated condensed financial statements.
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Item 1. Financial Statements (continued)
CONSOLIDATED CONDENSED BALANCE SHEETS
Ryder System, Inc. and Consolidated Subsidiaries
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March 31, December 31,
(Dollars in thousands, except per share amounts) 1995 1994
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ASSETS
Current assets:
Cash and cash equivalents $ 57,249 75,878
Receivables 382,949 316,855
Inventories 60,790 57,124
Tires in service 185,110 164,347
Deferred income taxes 56,067 51,619
Prepaid expenses and other current assets 146,074 92,999
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Total current assets 888,239 758,822
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Revenue earning equipment 5,674,611 5,330,586
Less accumulated depreciation (2,146,215) (2,195,522)
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Net revenue earning equipment 3,528,396 3,135,064
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Operating property and equipment 1,082,655 1,044,808
Less accumulated depreciation (466,265) (450,480)
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Net operating property and equipment 616,390 594,328
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Direct financing leases and other assets 236,232 223,680
Intangible assets and deferred charges 305,319 302,579
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$ 5,574,576 5,014,473
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 148,943 118,103
Accounts payable 528,735 422,532
Accrued expenses 558,408 552,518
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Total current liabilities 1,236,086 1,093,153
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Long-term debt 2,189,418 1,794,795
Other non-current liabilities 425,707 426,848
Deferred income taxes 582,260 570,653
Shareholders' equity:
Common stock of $0.50 par value per share (shares outstanding at
March 31, 1995 -78,772,397; December 31, 1994 - 78,760,742) 539,328 539,101
Retained earnings 610,230 603,226
Translation adjustment (8,453) (13,303)
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Total shareholders' equity 1,141,105 1,129,024
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$ 5,574,576 5,014,473
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See accompanying notes to consolidated condensed financial statements.
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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 1994 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. Approximately one-half of the charitable
commitments recognized as a result of adopting the new statement will
be paid in 1995 with the remainder payable from 1996 through 1999.
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KPMG PEAT MARWICK LLP
CERTIFIED PUBLIC ACCOUNTANTS
One Biscayne Tower Telephone 305-358-2300
Suite 2900 Telecopier 305-577-0544
2 South Biscayne Boulevard
Miami, FL 33131
Independent Auditors' Review Report
The Board of Directors and Shareholders
Ryder System, Inc.:
We have reviewed the consolidated condensed balance sheet of Ryder System, Inc.
and subsidiaries as of March 31, 1995, and the consolidated condensed
statements of earnings and cash flows for the three-month periods ended March
31, 1995 and 1994. These 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, 1994, and the related consolidated statements
of earnings and cash flows for the year then ended (not presented herein); and
in our report dated February 7, 1995, 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, 1994, 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
April 20, 1995
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition --
Three months ended March 31, 1995 and 1994
RESULTS OF OPERATIONS
Earnings before income taxes and the cumulative effect of a change in
accounting (see "Accounting Changes" below) were $45 million in the first
quarter of 1995, compared with $40 million in last year's first quarter. First
quarter earnings in 1995 reflected higher earnings for both Vehicle Leasing &
Services and Automotive Carriers. Earnings before the accounting change were
$27 million, or $0.34 per common share, compared with $24 million, or $0.30
per common share in the first quarter of 1994. The Company's first quarter
effective income tax rate was relatively unchanged compared with last year's
first quarter. Including an $8 million after tax charge for the cumulative
effect of a change in accounting for charitable contributions, the Company
reported net earnings of $19 million, or $0.24 per common share, in the first
quarter of 1995.
Revenue in the first quarter of 1995 was 15% higher than revenue in the first
quarter of 1994. Vehicle Leasing & Services revenue increased 17% compared
with last year primarily as a result of continued revenue growth within all of
the division's contractual product lines, particularly dedicated logistics and
full service truck leasing, combined with the impact of acquisitions made in
the United Kingdom in 1994. Automotive Carriers first quarter revenue was 4%
higher than last year's first quarter as a result of higher vehicle shipments.
Operating expense in the first quarter of 1995 increased 16% compared with the
same period in 1994 due primarily to costs associated with higher business
volumes.
Depreciation expense (net of gains) in the first quarter of 1995 increased 6%
compared with the first quarter of 1994. Depreciation before gains on vehicle
sales increased 13%. Higher depreciation resulted from a 13% increase in the
average size of the vehicle fleet, primarily as a result of strong sales of new
logistics and full service truck lease contracts in 1994. Gains on vehicle
sales were $29 million in the first quarter of 1995 compared with $18 million
in last year's first quarter. Higher gains reflected an increase in both the
number of vehicles sold and average gain per vehicle.
Interest expense increased $13 million, or 41%, in the first quarter of 1995
compared with the same period in 1994. The increase was due to higher
outstanding debt levels, as a result of expanded investment in the vehicle
fleet, combined with higher average rates on the company's variable rate debt.
Approximately one-third of the Company's financing obligations have variable
interest rates.
VEHICLE LEASING & SERVICES
First quarter 1995 Vehicle Leasing & Services revenue was 17% higher than last
year's first quarter. Revenue from full service truck leasing increased 13%
compared with last year's first quarter, while dedicated logistics revenue
increased 49%. The revenue growth in both of these contractual product lines
reflected strong new business sales in recent quarters and acquisitions made in
the United Kingdom. Sales of new logistics and full service truck lease
contracts continued to be strong in the first quarter of 1995. Revenue from
the division's public transportation services businesses in the first quarter
of 1995 increased 13% compared with last year's first quarter due to the
addition of several new contracts. First quarter revenue from commercial truck
rental increased 17% compared with the same period in 1994, reflecting higher
demand, including demand created by new full service truck lease customers
using rental vehicles while awaiting delivery of new lease vehicles. Revenue
from consumer truck rental in the first quarter of 1995 was relatively
unchanged from last year's first quarter reflecting higher demand for
long-distance rentals offset by lower demand for local rentals. The average
fleet size for both rental product lines was 14% higher in the first quarter of
1995 compared with last year's first quarter.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1995 and 1994
Pretax profits for Vehicle Leasing & Services were $40 million in the first
quarter of 1995 compared with $37 million in the first quarter of 1994. Margin
(revenue less direct operating expenses, depreciation and interest expense)
from full service truck leasing was higher in the first quarter of 1995
compared with last year's first quarter due to increased revenue. Margin as a
percentage of revenue was lower, however, as a result of lower prices on new
leases compared with prices on those expiring and higher interest expense.
Lower maintenance expense as a percentage of revenue, due in part to a
reduction in the overall age of the lease fleet, partially offset these
reductions in full service truck leasing margin percentage. Dedicated
logistics margin was higher in the first quarter of 1995 as a result of
increased revenue, while margin as a percentage of revenue was about the same.
Margin from the division's public transportation services businesses was
higher and margin as a percentage of revenue was about the same in the first
quarter of 1995 compared with the 1994 quarter.
Commercial truck rental margin was slightly higher in the first quarter of
1995, however, margin as a percentage of revenue was lower. This reduction in
margin percentage was due primarily to higher interest expense, a slight
decline in asset utilization on a larger fleet, and lower pricing due primarily
to a higher percentage of revenue coming from new lease customers awaiting
delivery of lease vehicles. Consumer truck rental margin and margin as a
percentage of revenue were both lower in the first quarter of 1995 due to
higher interest expense, slightly lower asset utilization as a result of lower
demand for local truck rentals, and lower revenue per transaction on long-
distance rentals. Lower vehicle liability expense partially offset these
consumer truck rental margin reductions. Operating results for consumer truck
rental and, to a lesser extent, commercial truck rental could be impacted over
the remainder of 1995 by any weakening in economic conditions within the U.S.
For the division as a whole, higher overall margin and a significant increase
in gains on vehicle sales in the first quarter of 1995, were largely offset by
higher indirect operating expenses resulting from general increases in business
activity, as well as continued investment related to reengineering initiatives
and the development of greater logistics and systems capabilities.
AUTOMOTIVE CARRIERS
First quarter 1995 revenue for Automotive Carriers was 4% higher than last
year's first quarter. Higher revenue in 1995 reflected an increase in the
number of units shipped, somewhat offset by a decline in average revenue per
unit shipped. Shipments of General Motors vehicles and vehicles from other
domestic manufacturers were higher in the first quarter of 1995 compared with
last year's first quarter, as a result of higher vehicle production in North
America.
Automotive Carriers pretax earnings were $10 million in the first quarter of
1995, compared with $8 million in last year's first quarter. First quarter
pretax earnings benefited primarily from higher revenue, improved maintenance
costs on a newer fleet and lower workers' compensation expense due primarily to
favorable developments on prior year claims. The earnings trend for Automotive
Carriers during the remainder of 1995 could be impacted by any slowdown in
vehicle production in North America.
OTHER
Other, which is comprised primarily of corporate administrative costs, reported
net expenses of $4 million in the first quarter of 1995 compared with net
expenses of $5 million in the same period last year. Lower 1995 expenses were
primarily due to higher reimbursement from the Company's operating segments.
ACCOUNTING CHANGES
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.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) --
Three months ended March 31, 1995 and 1994
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures and related debt increased substantially in the first
quarter of 1995, primarily in response to fleet growth due to new lease and
logistics sales. Total capital expenditures in the first quarter of 1995 were
$706 million, compared with $447 million in the first quarter of the prior
year. In the full service truck leasing business, capital expenditures were
$381 million, an increase of $140 million compared with last year's first
quarter, due to the recent higher levels of new business sales. Capital
expenditures in commercial and consumer truck rental in the first quarter of
1995 increased $57 million and $12 million, respectively, due primarily to the
timing of expenditures, and a plan to replace older units and expand the fleet
slightly. Capital expenditures in Automotive Carriers increased $25 million in
the first quarter of 1995 as a result of a program to replace older equipment
with newer, more efficient automobile hauling equipment. The remaining
increase in capital expenditures was primarily for operating property and
equipment and included expenditures for systems technology and development.
Debt increased from $1.9 billion at the end of 1994 to $2.3 billion at March
31, 1995. This increase was due to financing requirements associated with 1995
capital expenditures, driven primarily by record sales of new logistics and
full service truck lease contracts in 1994. During the first quarter of 1995,
the Company issued $434 million of fixed-rate unsecured medium-term notes.
U.S. commercial paper outstanding at the end of the first quarter of 1995 was
$351 million, compared with $44 million at December 31, 1994. The Company
redeemed $300 million of unsecured notes at par and made $43 million of
scheduled unsecured note payments during the first quarter of 1995. The
Company's debt to equity ratio at March 31, 1995 was 205%, compared with 169%
at December 31, 1994.
Cash flow from operating activities in the first quarter of 1995 was $161
million, compared with $94 million in the first quarter of 1994. The increase
resulted primarily from several changes in working capital items and an
increase in depreciation expense. The most significant working capital change
impacting cash flow comparisons was an increase in payables resulting from
higher recent capital expenditures. Cash flow from operating activities plus
asset sales as a percentage of capital expenditures was 38% in both the first
quarter of 1995 and the first quarter of 1994.
At both March 31, 1995 and December 31, 1994, the Company had interest rate
swap agreements with aggregate notional amounts outstanding of $673 million and
interest rate cap agreements with aggregate notional amounts totaling $350
million outstanding. These instruments have been assigned to specific
financial obligations, and amounts to be paid or received under the agreements
are recognized over the terms of the agreements as adjustments to earnings.
The Company has no derivative instruments held for trading purposes or that are
leveraged.
The Company had contractual lines of credit totaling $694 million at March 31,
1995, of which $331 million was available. In April 1995, the Company filed an
$800 million shelf registration statement with the Securities and Exchange
Commission. Proceeds from debt issues under the shelf registration are
expected to be used for capital expenditures, debt refinancing and general
corporate purposes.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued) - -
Three months ended March 31, 1995 and 1994
SELECTED FINANCIAL AND OPERATIONAL DATA
(Dollars in thousands)
1995 1994
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VEHICLE LEASING & SERVICES
Revenue:
Full service lease and programmed maintenance $ 503,750 444,840
Commercial and consumer rental 247,324 227,087
Dedicated logistics 220,973 148,517
Other 175,019 153,355
Eliminations (72,130) (56,550)
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Total 1,074,936 917,249
Operating expense 849,702 716,338
Depreciation expense 166,905 148,140
Gains on sale of revenue earning equipment (28,128) (17,671)
Interest expense 46,641 33,182
Miscellaneous expense, net 123 1
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Earnings before income taxes $ 39,693 37,259
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Fleet size (owned and leased):
Full service lease 92,202 80,282
Commercial and consumer rental 82,072 71,239
Buses operated or managed 12,455 11,919
Ryder Truck Rental service locations 1,116 993
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AUTOMOTIVE CARRIERS
Revenue $ 164,997 158,506
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Earnings before income taxes $ 9,525 8,180
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Total units transported (000) 1,614 1,504
Total miles traveled (000) 62,901 57,484
Auto transports:
Owned and leased 3,542 4,061
Owner-operators 495 514
Locations 83 89
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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 March 31, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYDER SYSTEM, INC.
(Registrant)
Date: May 12, 1995 /s/ Edwin A. Huston
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Edwin A. Huston
Senior Executive Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: May 12, 1995 /s/ Anthony G. Tegnelia
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Anthony G. Tegnelia
Senior Vice President
and Controller (Principal
Accounting Officer)