- -------------------------------------------------------------------------------- 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, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File No. 1-4364 _____________________________________ RYDER SYSTEM, INC. (a Florida corporation) 3600 N.W. 82nd Avenue Miami, Florida 33166 Telephone (305) 500-3726 I.R.S. Employer Identification No. 59-0739250 _____________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES X NO --- --- Ryder System, Inc. had 60,337,162 shares of common stock ($0.50 par value per share) outstanding as of April 30, 2001. - --------------------------------------------------------------------------------
RYDER SYSTEM, INC. TABLE OF CONTENTS <TABLE> <CAPTION> Page ---- PART I. FINANCIAL INFORMATION <S> <C> <C> ITEM 1. Financial Statements Consolidated Condensed Statements of Earnings - Three months ended March 31, 2001 and 2000 (unaudited) 3 Consolidated Condensed Balance Sheets - March 31, 2001 (unaudited) and December 31, 2000 4 Consolidated Condensed Statements of Cash Flows - Three months ended March 31, 2001 and 2000 (unaudited) 5 Notes to Consolidated Condensed Financial Statements (unaudited) 6 Independent Accountants' Review Report 12 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 13 ITEM 3. Quantitative and Qualitative Disclosure About Market Risk 24 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 25 Signatures 26 Exhibit Index 27 </TABLE> 2
PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Ryder System, Inc. and Subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (unaudited) - -------------------------------------------------------------------------------- Three months ended March 31, 2001 and 2000 (In thousands, except per share amounts) 2001 2000 - -------------------------------------------------------------------------------- Revenue $ 1,281,509 1,308,608 ------------- ------------- Operating expense 885,736 908,812 Freight under management expense 102,167 98,007 Depreciation expense 137,550 152,221 Gains on vehicle sales (3,107) (9,217) Equipment rental 103,639 86,847 Interest expense 34,321 41,952 Miscellaneous expense (income), net 4,121 (1,481) Restructuring and other charges, net 10,544 - ------------- ------------- 1,274,971 1,277,141 ------------- ------------- Earnings before income taxes 6,538 31,467 Provision for income taxes 2,419 11,643 ------------- ------------- Net earnings $ 4,119 19,824 ============= ============= Earnings per common share: Basic $ 0.07 0.33 ============= ============= Diluted $ 0.07 0.33 ============= ============= Cash dividends per common share $ 0.15 0.15 ============= ============= See accompanying notes to consolidated condensed financial statements. 3
ITEM 1. Financial Statements (continued) Ryder System, Inc. and Subsidiaries CONSOLIDATED CONDENSED BALANCE SHEETS <TABLE> <CAPTION> (unaudited) - --------------------------------------------------------------------------------------------------------------------------------- March 31, December 31, (In thousands, except share amounts) 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Assets Current assets: Cash and cash equivalents $ 87,422 121,970 Receivables, net of allowance for doubtful accounts of $7,754 and $9,236, respectively 445,939 399,623 Inventories 75,495 77,810 Tires in service 137,964 158,854 Prepaid expenses and other current assets 166,321 170,019 ------------------- ---------------- Total current assets 913,141 928,276 Revenue earning equipment, net of accumulated depreciation of $1,399,473 and $1,416,062, respectively 2,613,398 3,012,806 Operating property and equipment, net of accumulated depreciation of $639,173 and $632,216, respectively 606,276 612,626 Direct financing leases and other assets 718,680 693,097 Intangible assets and deferred charges 223,337 228,118 ------------------- ---------------- $ 5,074,832 5,474,923 =================== ================ Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt $ 284,597 412,738 Accounts payable 325,660 379,155 Accrued expenses 441,150 510,411 ------------------- ---------------- Total current liabilities 1,051,407 1,302,304 Long-term debt 1,478,802 1,604,242 Other non-current liabilities 300,653 298,365 Deferred income taxes 1,008,160 1,017,304 ------------------- ---------------- Total liabilities 3,839,022 4,222,215 ------------------- ---------------- Shareholders' equity: Preferred stock of no par value per share - Authorized 900,000; none outstanding March 31, 2001 or December 31, 2000 - - Common stock of $0.50 par value per share - Authorized 400,000,000; Outstanding, March 31, 2001 - 60,176,276; December 31, 2000 - 60,044,479 529,516 524,432 Retained earnings 762,913 767,802 Deferred compensation (6,665) (3,818) Accumulated other comprehensive loss (49,954) (35,708) ------------------- ---------------- Total shareholders' equity 1,235,810 1,252,708 ------------------- ---------------- $ 5,074,832 5,474,923 =================== ================ </TABLE> See accompanying notes to consolidated condensed financial statements. 4
ITEM 1. Financial Statements (continued) Ryder System, Inc. and Subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) <TABLE> <CAPTION> - --------------------------------------------------------------------------------------------------------------------------------- Three months ended March 31, 2001 and 2000 (In thousands) 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 4,119 19,824 Depreciation expense 137,550 152,221 Gains on vehicle sales (3,107) (9,217) Amortization expense and other non-cash charges, net 9,836 4,710 Deferred income tax expense 2,058 10,022 Changes in operating assets and liabilities, net of acquisitions: Increase (decrease) in aggregate balance of trade receivables sold (95,000) 234,000 Receivables 54,067 38,346 Inventories 2,315 (2,005) Prepaid expenses and other assets (7,333) (58,367) Accounts payable (53,521) 81,640 Accrued expenses and other non-current liabilities (75,935) (35,723) ----------------- ---------------- (24,951) 435,451 ----------------- ---------------- Cash flows from financing activities: Net change in commercial paper borrowings (218,022) 150,082 Debt proceeds 92,769 5,969 Debt repaid, including capital lease obligations (109,724) (193,445) Dividends on common stock (9,008) (8,910) Common stock issued 1,780 1,609 ----------------- ---------------- (242,205) (44,695) ----------------- ---------------- Cash flows from investing activities: Purchases of property and revenue earning equipment (250,203) (497,267) Sales of property and revenue earning equipment 44,545 78,114 Sale and leaseback of revenue earning equipment 410,739 222,978 Acquisitions, net of cash acquired - (3,551) Proceeds from sale of business 14,113 - Collections on direct finance leases 15,740 16,163 Other, net (2,326) (6,799) ----------------- ---------------- 232,608 (190,362) ----------------- ---------------- Increase (decrease) in cash and cash equivalents (34,548) 200,394 Cash and cash equivalents at January 1 121,970 112,993 ----------------- ---------------- Cash and cash equivalents at March 31 $ 87,422 313,387 ================= ================ </TABLE> See accompanying notes to consolidated condensed financial statements. 5
ITEM 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (A) INTERIM FINANCIAL STATEMENTS The accompanying unaudited consolidated condensed financial statements include the accounts of Ryder System, Inc. and subsidiaries (the "Company") and have been prepared by the Company in accordance with the accounting policies described in the 2000 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair presentation have been included and the disclosures herein are adequate to make the information presented not misleading. Operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. Certain prior year amounts have been reclassified to conform with current presentation. (B) EARNINGS PER SHARE INFORMATION Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share reflects the dilutive effect of potential common shares from securities such as stock options and unvested restricted stock. The dilutive effect of stock options is computed using the treasury stock method, which assumes the repurchase of common shares by the Company at the average market price for the period. A reconciliation of the number of shares used in computing basic and diluted earnings per share follows: <TABLE> <CAPTION> Three months ended March 31, 2001 and 2000 (In thousands) 2001 2000 ----------------------------------------------------- ------ ------ <S> <C> <C> Weighted average shares outstanding-Basic 59,877 59,381 Effect of dilutive options and unvested restricted stock 459 187 Weighted average shares outstanding-Diluted 60,336 59,568 ====== ====== Anti-dilutive options not included above 7,127 6,178 ====== ====== </TABLE> Key employee plans provide for the issuance of stock appreciation rights, limited stock appreciation rights, performance units or restricted stock at no cost to the employee. The value of the restricted stock, equal to fair market value at the time of grant, is recorded in shareholders' equity as deferred compensation and recognized as compensation expense as the restricted stock and stock units vest over the periods established for each grant. In the first quarter of 2001, the Company granted 165,755 shares of restricted stock at a weighted average grant date fair value of $20.62. No grants were made in the first quarter of 2000. (C) SEGMENT INFORMATION The Company's operating segments are aggregated into the following reportable business segments based primarily upon similar economic characteristics, products, services and delivery methods. The Company operates in four reportable business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing, commercial rental and programmed maintenance of trucks, tractors and trailers to customers, principally in the U.S., Canada and the United Kingdom; (2) Supply Chain Solutions (SCS), which provides comprehensive supply chain consulting and lead logistics management solutions that support 6
ITEM 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued) (C) SEGMENT INFORMATION (continued) customers' entire supply chains, from inbound raw materials through distribution of finished goods throughout North America, in Latin America, Europe and Asia; (3) Dedicated Contract Carriage (DCC), which provides vehicles and drivers as part of a dedicated transportation solution, principally in North America; and (4) e-Commerce which provides various Internet-enabled products and online services to assist in the management of freight, inventory and customer delivery, principally in North America. Beginning in the first quarter of 2001, e-Commerce is reported as a separate business segment. Initial costs to build the e-Commerce platform were included in Central Support Services (CSS) through 2000. At March 31, 2001, such costs have been reclassified from CSS for all previous periods in order to report e-Commerce results independently. Management evaluates business segment financial performance based upon several factors, of which the primary measure is contribution margin. Contribution margin represents each business segment's revenue, less direct costs and direct overheads related to the segment's operations. Business segment contribution margin for all segments (net of eliminations), less CSS expenses and restructuring and other charges, net, is equal to earnings before income taxes. CSS are those costs incurred to support all business segments, including sales and marketing, human resources, finance, shared management information systems, customer solutions, health and safety, legal and communications. The FMS segment leases revenue earning equipment, sells fuel and provides maintenance and other ancillary services to the SCS and DCC segments. Inter-segment revenues and contribution margin are accounted for at approximate fair value as if the transactions were made to third parties. Contribution margin related to inter-segment equipment and services billed to customers (equipment contribution) is included in both FMS and the business segment which served the customer, then eliminated. Equipment contribution included in SCS contribution margin was $4.2 million and $5.1 million for the three months ended March 31, 2001 and 2000, respectively. Equipment contribution included in DCC contribution margin was $4.6 million and $5.3 million for the three months ended March 31, 2001 and 2000, respectively. Interest expense is primarily allocated to the FMS business segment. The following table sets forth the revenue and contribution margin for each of the Company's business segments for the three months ended March 31, 2001 and 2000. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. <TABLE> <CAPTION> Three months ended March 31, 2001 and 2000 (In millions) 2001 2000 ----------------------------------------------- --------- --------- <S> <C> <C> Revenue: Fleet management solutions: Full service lease and program maintenance $ 465.1 460.1 Commercial rental 109.3 121.2 Fuel 182.4 196.6 Other 97.4 104.0 --------- --------- Total Fleet management solutions 854.2 881.9 --------- --------- Supply chain solutions 385.3 386.6 Dedicated contract carriage 130.6 133.6 e-Commerce 1.1 - Eliminations (89.7) (93.5) --------- --------- Total revenue $ 1,281.5 1,308.6 ========= ========= </TABLE>
ITEM 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued) (C) SEGMENT INFORMATION (continued) <TABLE> <CAPTION> Three months ended March 31, 2001 and 2000 (In millions) 2001 2000 ------------------------------------------------- --------- --------- <S> <C> <C> Contribution margin: Fleet management solutions $ 75.6 80.8 Supply chain solutions 7.6 14.6 Dedicated contract carriage 11.2 14.0 e-Commerce (2.6) (0.5) Eliminations (8.8) (10.4) --------- --------- 83.0 98.5 Central support services (66.0) (67.0) --------- --------- Earnings before restructuring and other charges and income taxes 17.0 31.5 Restructuring and other charges, net (10.5) - --------- --------- Earnings before income taxes $ 6.5 31.5 ========= ========= </TABLE> Asset information, including capital expenditures, is not maintained on a business segment basis nor provided to the chief operating decision-maker, and as such is not presented. (D) COMPREHENSIVE LOSS Comprehensive loss presents a measure of all changes in shareholders' equity except for changes resulting from transactions with shareholders in their capacity as shareholders. The Company's total comprehensive loss consists of net earnings, currency translation adjustments associated with foreign operations which use the local currency as their functional currency and recognition of an additional minimum pension liability. The additional minimum pension liability of $3.1 million at March 31, 2001 relates to the Company's Benefit Restoration Plan and represents the amount by which the plan's accumulated benefit obligation exceeds the unfunded accrued pension expense liability. Such additional minimum pension liability is offset by an intangible asset of $1.9 million equal to the Plan's unrecognized prior service cost and a reduction to comprehensive income of $1.2 million. No minimum pension liability adjustment was required for the quarter ended March 31, 2000. Currency translation adjustments for the three months ended March 31, 2001 and 2000 were $(13.0) million and $(2.3) million, respectively. Total comprehensive (loss) income for the three months ended March 31, 2001 and 2000 was $(10.1) million and $17.5 million, respectively. 8
ITEM 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued) (E) RESTRUCTURING AND OTHER CHARGES During the first quarter of 2001, the Company recorded restructuring and other charges of approximately $10.5 million. The components of the charges were as follows (in thousands): Severance and employee-related costs $ 6,637 Loss on the sale of business 3,270 Strategic consulting fees 2,836 Other charges (recoveries) (2,199) --------- Total $ 10,544 ========= In the fourth quarter of 2000, the Company communicated to its employees its planned strategic initiatives to reduce operating expenses. As part of such initiatives, the Company is reviewing employee functions and staffing levels to eliminate redundant work or otherwise restructure work in a manner that will lead to a reduction in the workforce. The process is expected to result in involuntary terminations of approximately 700 employees during 2001. Formal decisions on terminations are being made on a departmental basis. Severance and employee-related costs represents the expense for termination benefits for approximately 200 employees who were terminated during the first quarter of 2001. During the quarter ended March 31, 2001, the Company sold the contracts and related assets and liabilities associated with the outbound auto carriage portion of its Brazilian SCS operation. The Company incurred a loss of approximately $3.3 million on the sale of such business. Strategic consulting fees of approximately $2.8 million were incurred during 2001 in relation to the aforementioned strategic initiatives. Other charges (recoveries) represent a gain of approximately $2.2 million recorded in the first quarter of 2001 on the sale of the corporate aircraft. Activity related to restructuring reserves for the three months ended March 31, 2001 was as follows: <TABLE> <CAPTION> Dec. 31, March 31, 2000 2001 In thousands Balance Additions Deductions Balance -------------------------------- -------- --------- ---------- ---------- <S> <C> <C> <C> <C> Employee severance and benefits $ 3,908 6,637 2,881 7,664 Facilities and related costs 2,012 - 289 1,723 -------- --------- ---------- ---------- $ 5,920 6,637 3,170 9,387 ======== ========= ========= ========== </TABLE> Additions relate to 2001 restructuring employee severance benefits. Deductions represent payments made related to restructuring charges. At March 31, 2001, the remaining balances of restructuring reserves relate to severance and lease obligations related to closed facilities. Such obligations are contractually required to be paid over the next three years. 9
ITEM 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued) (F) DEBT AND OTHER FINANCING The Company's outstanding debt balances were as follows: <TABLE> <CAPTION> March 31, December 31, In millions 2001 2000 --------------------------------------------------------------------------------- <S> <C> <C> U.S. commercial paper $ 254.0 441.1 Canadian commercial paper - 31.7 Unsecured U.S. notes: Debentures 425.6 425.6 Medium-term notes 677.0 755.9 Unsecured foreign obligations 327.3 332.7 Other debt, including capital leases 79.5 30.0 --------------------------------------------------------------------------------- Total debt 1,763.4 2,017.0 Current portion (284.6) (412.8) --------------------------------------------------------------------------------- Long-term debt $ 1,478.8 1,604.2 ================================================================================= </TABLE> During the first quarter of 2001, the Company replaced its $720.0 million global revolving credit facility which was to expire in June 2002 with a new $860.0 million global revolving credit facility. The new facility is composed of $300.0 million which matures in March 2002 and is renewable annually, and $560.0 million which matures in March 2006. The primary purpose of the credit facility is to finance working capital and provide support for the issuance of commercial paper. At the Company's option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility's annual facility fee ranges from 12.5 to 15.0 basis points applied to the total facility of $860.0 million based on the Company's current credit ratings. At March 31, 2001, $500.1 million was available under the Company's global credit facility. Of such amount, $300.0 million was available at a maturity of less than one year. Foreign borrowings of $99.6 million were outstanding under the facility as of March 31, 2001. In September 1998, the Company filed an $800.0 million shelf registration statement with the Securities and Exchange Commission. Proceeds from debt issues under the shelf registration have been and are expected to be used for capital expenditures, debt refinancing and general corporate purposes. At March 31, 2001, the Company had $487.0 million of debt securities available for issuance under this shelf registration statement. In April 2001, the Company issued an additional $40.0 million of medium-term notes under the shelf registration. In the first quarter of 2001, the Company entered into a sale-leaseback transaction in which the Company sold a beneficial interest in certain revenue earning equipment and pledged a portion of the beneficial interests in the underlying customer leases to a separately rated and unconsolidated vehicle lease trusts (Ryder Vehicle Lease Trust 2001-A). A total of $426.0 million in securities (including $409.0 of bonds that are traded in public markets) were issued as supported by the future cash flow stream generated by full service lease contracts and the eventual disposition of the underlying leased vehicles. The related vehicles total 9,700 full service lease units in 40 states. 10
ITEM 1. Financial Statements (continued) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued) (G) OTHER MATTERS The Company is also a party to various other claims, legal actions and complaints arising in the ordinary course of business. While any proceeding or litigation has an element of uncertainty, management believes that the disposition of these matters will not have a material impact on the consolidated financial position, liquidity or results of operations of the Company. At March 31, 2001, the Company had letters of credit outstanding totaling $123.0 million, which primarily guarantee certain insurance activities. Certain of these letters of credit guarantee insurance activities associated with insurance claim liabilities transferred in conjunction with the sale of certain businesses reported in discontinued operations in previous years. To date, such insurance claims, representing per claim deductibles payable under third-party insurance policies, have been paid by the companies that assumed such liabilities. However, if all or a portion of such assumed claims of approximately $20.0 million are unable to be paid, the third-party insurers may have recourse against certain letters of credit provided by the Company in order to satisfy the unpaid claim deductibles. 11
KPMG LLP CERTIFIED PUBLIC ACCOUNTANTS One Biscayne Tower Telephone 305-358-2300 2 South Biscayne Boulevard Fax 305-913-2692 Suite 2900 Miami, Florida 33131 Independent Accountants' Review Report -------------------------------------- The Board of Directors and Shareholders Ryder System, Inc.: We have reviewed the accompanying consolidated condensed balance sheet of Ryder System, Inc. and subsidiaries as of March 31, 2001, and the related consolidated condensed statements of earnings and cash flows for the three months ended March 31, 2001 and 2000. These consolidated condensed financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated condensed financial statements referred to above in order for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Ryder System, Inc. and subsidiaries as of December 31, 2000, and the related consolidated statements of earnings, shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 7, 2001, 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, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /S/ KPMG LLP Miami, Florida April 19, 2001 12
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Three months ended March 31, 2001 and 2000 OVERVIEW The following discussion should be read in conjunction with the unaudited consolidated condensed financial statements and notes thereto included under ITEM 1. In addition, reference should be made to the Company's audited consolidated financial statements and notes thereto and related Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's most recent Annual Report on Form 10-K. The Company's operating segments are aggregated into the following reportable business segments based primarily upon similar economic characteristics, products, services and delivery methods. The Company operates in four reportable business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing, commercial rental and programmed maintenance of trucks, tractors and trailers to customers, principally in the U.S., Canada and the United Kingdom; (2) Supply Chain Solutions (SCS), which provides comprehensive supply chain consulting and lead logistics management solutions that support customers' entire supply chains, from inbound raw materials through distribution of finished goods throughout North America, in Latin America, Europe and Asia; (3) Dedicated Contract Carriage (DCC), which provides vehicles and drivers as part of a dedicated transportation solution, principally in North America; and (4) e-Commerce which provides various Internet-enabled products and online services to assist in the management of freight, inventory, and customer delivery, principally in North America. Beginning in the first quarter of 2001, e-Commerce is reported as a separate business segment. Initial costs to build the e-Commerce platform were included in Central Support Services (CSS) through 2000. At March 31, 2001, such costs have been reclassified from CSS for all previous periods in order to report e-Commerce results independently. Revenue decreased 2.1 percent to $1.28 billion for the three months ended March 31, 2001 compared with $1.31 billion in the same period of 2000. The decrease was due primarily to weak commercial rental results and lower fuel sales volumes attributable to the continued economic slowdown in the U.S. Revenue was also reduced by the impact of exchange rates on translation of foreign subsidiary revenues, particularly those in the U.K., and by the sale of the contracts and related net assets associated with the outbound auto carriage business of the Company's Brazilian SCS operation (see further details in the restructuring and other charges discussion of this Management's Discussion and Analysis). Such decreases were partially offset by growth in lease and contract maintenance revenue and an increase in North American SCS revenue, particularly in the electronics and high technology operating unit. Operating expense decreased $23.1 million, or 2.5 percent, to $885.7 million in the first quarter of 2001 compared with the same period in 2000. The decrease was a result of a reduction in overheads due to the Company implementing cost containment actions throughout the first quarter of 2001 and a reduction in fuel costs as a result of lower volumes. The decrease also reflects lower operating expense in the U.K. due to lost business and in South America as a result of the sale of the Company's outbound automotive transportation business in Brazil. Such reductions were partially offset by a decrease in pension income in 2001 compared with 2000. 13
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OVERVIEW (continued) Freight under management expense increased by $4.2 million, or 4.2 percent, to $102.2 million in the first quarter of 2001 compared with the same period in 2000. The increase is due to revenue growth in related operating units of the SCS business segment. Depreciation expense in the first quarter of 2001 decreased by $14.7 million, or 9.6 percent, to $137.6 million compared with the first quarter of 2000. The decrease resulted principally from sale-leaseback and other transactions which increased the number of leased (as opposed to owned) vehicles in the Company's fleet since the first quarter of 2000. The decrease in depreciation expense was partially offset by an increase in depreciation associated with reduced estimated residual values in 2001 associated with certain classes of tractors. In the third quarter of 2000, the Company reduced residual values for certain classes of vehicles currently in use and expected to be disposed of during the next two years. This was done consistent with the charge recorded in the third quarter of 2000 to reflect decreases in the estimate in residual values of certain classes of used tractors. In light of this change, the Company expects to record additional depreciation and rent expense over the next fifteen months on a declining basis. Gains on vehicle sales decreased $6.1 million, or 66.3 percent, to $3.1 million in the first quarter of 2001 compared with the first quarter in 2000 due to the continuing weak demand in the used truck market. Such weakness began to impact the Company during the second quarter of 2000. During the first three months of 2001, average sales proceeds per unit decreased by approximately 11.0 percent compared with the same period last year. However, average sales proceeds per unit increased approximately 5.0 percent compared with the fourth quarter of 2000. The average book value per unit of units sold for the three months ended March 31, 2001 was comparable with that of units sold in the same period of 2000. The Company periodically reviews and adjusts the residual values, reserves for guaranteed lease termination values and useful lives of revenue earning equipment based on current and expected operating trends and projected realizable values. The Company believes that its carrying values and estimated sales proceeds for revenue earning equipment are appropriate. However, a greater than anticipated decline in the market for used vehicles may require the Company to further adjust such values and estimates. Equipment rental primarily consists of rental costs on revenue earning equipment. Equipment rental costs increased $16.8 million, or 19.3 percent, to $103.6 million in the first quarter 2001 compared with 2000 as a result of sale- leaseback transactions, including securitization transactions, completed in the last six months. Interest expense decreased $7.6 million, or 18.2 percent to $34.3 million during the first quarter of 2001 compared with the same period in 2000. The decrease in interest expense principally reflects debt reductions associated with the use of proceeds from the aforementioned sale-leaseback transactions, generally lower market interest rates and greater use of the Company's revolving facility for the sale of trade receivables (in lieu of issuing commercial paper) compared with the prior period. Miscellaneous expense increased to $4.1 million in the first quarter of 2001 compared with miscellaneous income of $1.5 million in the first quarter of 2000. The increase is due primarily to losses on investments classified as trading securities used to fund certain benefit plans during the quarter ended March 31, 2001, compared with net gains on such investments in the quarter ended March 31, 2000. Such investments are included in Direct financing leases and other assets. The increase was also attributed to higher administrative and usage fees related to the increased use of the Company's revolving facility for the sale of trade receivables. 14
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OVERVIEW (continued) During the first quarter of 2001, the Company recorded restructuring and other charges of approximately $10.5 million. The components of the charges were as follows (in thousands): Severance and employee-related costs $ 6,637 Loss on the sale of business 3,270 Strategic consulting fees 2,836 Other charges (recoveries) (2,199) ---------- Total $ 10,544 ========== In the fourth quarter of 2000, the Company communicated to its employees its planned strategic initiatives to reduce operating expenses. As part of such initiatives, the Company is reviewing employee functions and staffing levels to eliminate redundant work or otherwise restructure work in a manner that will lead to a reduction in the workforce. The process is expected to result in involuntary terminations of approximately 700 employees during 2001. Formal decisions on terminations are being made on a departmental basis. Severance and employee-related costs represents the expense for termination benefits for approximately 200 employees who were terminated during the first quarter of 2001. During the quarter ended March 31, 2001, the Company sold the contracts and related assets and liabilities associated with the outbound auto carriage portion of its Brazilian SCS operation. The Company incurred a loss of approximately $3.3 million on the sale of such business. Strategic consulting fees of approximately $2.8 million were incurred during 2001 in relation to the aforementioned strategic initiatives. Other charges (recoveries) represent a gain of approximately $2.2 million recorded in the first quarter of 2001 on the sale of the corporate aircraft. Activity related to restructuring reserves for the three months ended March 31, 2001 was as follows: <TABLE> <CAPTION> Dec. 31, March 31, 2000 2001 In thousands Balance Additions Deductions Balance -------------------------------- -------- --------- ---------- ---------- <S> <C> <C> <C> <C> Employee severance and benefits $ 3,908 6,637 2,881 7,664 Facilities and related costs 2,012 - 289 1,723 -------- --------- ---------- ---------- $ 5,920 6,637 3,170 9,387 ======== ========= ========== ========== </TABLE> Additions relate to 2001 restructuring employee severance benefits. Deductions represent payments made related to restructuring charges. At March, 31, 2001, the remaining balances of restructuring reserves relate to severance and lease obligations related to closed facilities. Such obligations are contractually required to be paid over the next three years. The Company's effective income tax rate on earnings was 37.0 percent for the first quarters of 2001 and 2000. Net earnings in the first quarter of 2001 totaled $4.1 million, or $0.07 per diluted share, compared with $19.8 million, or $0.33 per diluted share, during the first quarter of 2000. 15
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OPERATING RESULTS BY BUSINESS SEGMENT <TABLE> <CAPTION> Three Months Ended March 31, ---------------------- In millions 2001 2000 -------- --------- <S> <C> <C> Fleet management solutions Total revenue $ 854.2 881.9 Fuel revenue (182.4) (196.6) -------- --------- Dry revenue $ 671.8 685.3 ======== ========= Contribution margin $ 75.6 80.8 ======== ========= Contribution margin as % of total revenue 8.9% 9.2% ======== ========= Contribution margin as % of dry revenue 11.3% 11.8% ======== ========= Supply chain solutions Total revenue $ 385.3 386.6 Freight Under Management (FUM) expense (100.3) (97.2) -------- --------- Operating revenue $ 285.0 289.4 ======== ========= Contribution margin $ 7.6 14.6 ======== ========= Contribution margin as % of total revenue 2.0% 3.8% ======== ========= Contribution margin as % of operating revenue 2.7% 5.0% ======== ========= Dedicated contract carriage Total revenue $ 130.6 133.6 Freight Under Management (FUM) expense (1.4) (0.9) -------- --------- Operating revenue $ 129.2 132.7 ======== ========= Contribution margin $ 11.2 14.0 ======== ========= Contribution margin as % of total revenue 8.6% 10.5% ======== ========= Contribution margin as % of operating revenue 8.7% 10.6% ======== ========= </TABLE> 16
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OPERATING RESULTS BY BUSINESS SEGMENT (continued) Management evaluates business segment financial performance based upon several factors, of which the primary measure is contribution margin. Contribution margin represents each business segment's revenue, less direct costs and direct overheads related to the segment's operations. Business segment contribution margin for all segments (net of eliminations), less CSS expenses and restructuring and other charges, net, is equal to earnings before income taxes. CSS are those costs incurred to support all business segments, including sales and marketing, human resources, finance, shared management information systems, customer solutions, health and safety, legal and communications. The FMS segment leases revenue earning equipment, sells fuel and provides maintenance and other ancillary services to the SCS and DCC segments. Inter-segment revenues and contribution margin are accounted for at approximate fair value as if the transactions were made to third parties. Contribution margin related to inter-segment equipment and services billed to customers (equipment contribution) is included in both FMS and the business segment which served the customer, then eliminated. Equipment contribution included in SCS contribution margin was $4.2 million and $5.1 million, respectively, for the three months ended March 31, 2001 and 2000. Equipment contribution included in DCC contribution margin was $4.6 million and $5.3 million, respectively, for the three months ended March 31, 2001 and 2000. Interest expense is primarily allocated to the FMS business segment. Fleet Management Solutions In the FMS segment, dry revenue (revenue excluding fuel) in the first quarter of 2001 totaled $671.8 million, a decrease of 2.0 percent from the same period in 2000. Full service lease and contract maintenance revenue increased 1.1 percent in the first quarter of 2001 as a result of an increase in the number of vehicles placed in service and increased revenue per unit. Rental revenue decreased 9.8 percent in the first quarter of 2001 due primarily to lower revenue per unit resulting from lower rental fleet utilization. Rental fleet utilization for the three months ended March 31, 2001 was 63.3 percent, compared to 67.7 percent for the same period in 2000. Pure rental revenue (total rental revenue less rental revenue related to units provided to full service lease customers) decreased 5.7 percent for the three months ended March 31, 2001 as compared with the same period in 2000. Pure rental revenue and rental fleet utilization statistics are monitored for the U.S. only; however, management believes such metrics to be indicative of rental product performance for the Company as a whole. Fuel revenue decreased 7.2 percent in the first quarter of 2001 over the same period in 2000 due primarily to decreased sales volume. The contribution margin as a percentage of dry revenue was 11.3 percent in the first quarter of 2001 compared with 11.8 percent in 2000. Decreased contribution margin in 2001 compared to the same period in 2000 is due primarily to the decrease in gains from the sale of equipment due to weakened used truck market demand. The decrease is also attributed to the decrease in rental contribution margin due to the decline in rental revenue and to lower pension income in 2001 compared with 2000. Such declines were partially offset by improvements in full service and contract maintenance contribution margin due to improved performance and reduced interest costs compared to the same period last year. 17
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OPERATING RESULTS BY BUSINESS SEGMENT (continued) Fleet Management Solutions (continued) The Company's fleet of owned and leased revenue earning equipment is summarized as follows (number of units): <TABLE> <CAPTION> March 31, December 31, By type: 2001 2000 ----------------- ----------------- <S> <C> <C> Trucks 67,800 66,800 Tractors 56,000 56,400 Trailers 48,400 48,500 Other 4,600 4,600 ----------------- ----------------- 176,800 176,300 ================= ================= March 31, December 31, By business: 2001 2000 ----------------- ----------------- Full service lease 130,600 130,700 Commercial rental 42,800 42,200 Service vehicles and other 3,400 3,400 ----------------- ----------------- 176,800 176,300 ================= ================= The totals in each of the tables above include the following non-revenue earning equipment: Not yet earning revenue (NYE) 2,800 2,400 No longer earning revenue (NLE) 9,200 8,300 ----------------- ----------------- 12,000 10,700 ================= ================= </TABLE> NYE units represent new units on hand that are being prepared for deployment to a lease customer or into the rental fleet. Preparations include activities such as adding lift gates, decals, cargo area and refrigeration units. NLE units represent units held for sale as well as units for which no revenue has been earned for the previous thirty days. These vehicles may be temporarily out of service, being prepared for sale or not rented due to lack of demand. 18
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OPERATING RESULTS BY BUSINESS SEGMENT (continued) Supply Chain Solutions In the SCS business segment, first quarter 2001 gross revenue of $385.3 million was consistent with the same period in 2000. First quarter 2001 operating revenue was $285.0 million, a decrease of 1.5 percent from the comparable period a year ago. Revenue growth in North America, Asia and Mexico was offset by revenue reductions in South America and Europe. North America revenue grew due to stronger performance by its electronics and high technology operating unit. Mexico revenue increased due to new business. The Company's Asian subsidiary was acquired at the end of the third quarter of 2000 and therefore had no revenue in the first quarter of 2000. Revenue reductions in South America were due to the slowing economies in Brazil and Argentina and to the sale of the contracts and related net assets associated with the outbound auto carriage business of the Company's Brazilian SCS operations. European revenue decreases were due primarily to the impact of exchange rates on translation of subsidiary revenues, particularly those in the U.K., as well as due to lost business in the U.K. The SCS business segment contribution margin decreased 47.9 percent to $7.6 million in the first quarter of 2001 compared with the first quarter of 2000. Contribution margin as a percentage of operating revenue was 2.7 percent in the first quarter of 2001, compared with 5.0 percent in the same quarter of 2000. The decrease in contribution margin was due primarily to the previously mentioned volume reductions, lost business and certain contract execution issues. The contract execution issues primarily represent higher operating costs related to certain contracts for which negotiations of revised terms that will allow the Company to pass the increased costs through to the customer have not been finalized. Dedicated Contract Carriage In the DCC business segment, first quarter gross revenue totaled $130.6 million, a decrease of 2.2 percent from the first quarter of 2000. First quarter operating revenue was $129.2 million, a decrease of 2.6 percent from the comparable period a year ago. Contribution margin decreased 20.0 percent to $11.2 million in the first quarter of 2001 compared with the first quarter of 2000. The contribution margin as a percentage of operating revenue was 8.7 percent, compared with 10.6 percent in the first quarter of 2000. The lower contribution margin in the first quarter of 2001 was due primarily to lost business, volume reductions and continued revenue related price pressures due to competition. Increased labor costs due to driver shortages have also led to the reduction in margin. 19
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 OPERATING RESULTS BY BUSINESS SEGMENT (continued) e-Commerce e-Commerce revenue was $1.1 million for the three months ended March 31, 2001. During 2000, the e-Commerce business segment was not yet in operation and therefore had no revenue. e-Commerce reported negative contribution margin of $2.6 million in the first quarter compared to negative contribution margin of $0.5 in the same period of 2000. e-Commerce revenue and margin results are in line with expectations for the quarter ended March 31, 2001. Central Support Services CSS expenses were as follows: Three Months Ended March 31, -------------------------- In millions 2001 2000 ----------- ----------- Sales and marketing $ 7.6 11.2 Human resources 5.4 4.6 Finance 13.6 13.2 Corporate services/public affairs 2.1 3.0 MIS 25.0 25.0 Customer solutions 3.8 4.5 Health and safety 2.3 2.3 Other 6.2 3.2 ----------- ----------- Total Central Support Services $ 66.0 67.0 =========== =========== The decrease in total CSS expense was due primarily to reductions in spending in sales and marketing and corporate services due to the Company's expense reduction initiatives. Such initiatives in these areas included ending the Company's sponsorship of the Doral Ryder Open and the sale of the Company's corporate jet, respectively. Other CSS expense was reduced in the first quarter of 2000 by $3.8 million of income representing CSS interest allocation to the business segments in excess of actual interest expense incurred by the Company due to reduced debt balances in the first quarter of 2000. 20
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following is a summary of the Company's cash flows from operating, financing and investing activities for the three months ended March 31, (in thousands): 2001 2000 ---- ---- Net cash provided by (used in): Operating activities $ (24,951) 435,451 Financing activities (242,205) (44,695) Investing activities 232,608 (190,362) ---------- --------- Net cash flows $ (34,548) 200,394 ========== ========= A summary of the individual items contributing to the cash flow changes is included in the Consolidated Condensed Statements of Cash Flows. The decrease in cash flow from operating activities in the first three months of 2001, compared with the same period last year, was primarily attributable to decreases in the aggregate balance of trade receivables sold. The increase in cash used in financing activities in the first three months of 2001, compared to the same period last year, was due to a lower balance in commercial paper borrowings in 2001 compared with 2000 offset by higher repayment of debt in 2000 with a portion of the cash received from the sale of trade receivables. The increase in cash provided by investing activities in the first three months of 2001 compared with the same period last year was attributable to lower capital expenditures in 2001, as well as higher proceeds provided from the sale and leaseback of revenue earning equipment in 2001 (see Debt and Other Financing note in the Notes to Consolidated Condensed Financial Statements included in this Form 10-Q). A summary of capital expenditures for the three months ended March 31 follows (in thousands): 2001 2000 ---- ---- Revenue earning equipment $ 227,946 479,568 Operating property and equipment 22,257 17,699 ---------- --------- $ 250,203 497,267 ========== ========= The decrease in capital expenditures was principally due to reduced demand for new units as a result of increased pricing discipline over new business which resulted in fewer sales but improved margins on business sold, improved controls over capital expenditures and a reduction in the volume of early terminations of full service leases compared to the first quarter of 2000. Management expects capital expenditures for the full year 2001 will be approximately 13 percent less than full year 2000 levels. The Company expects to fund its remaining 2001 capital expenditures with internally generated funds and borrowings. Financing and Other Funding Transactions Ryder utilizes external capital to support growth in its asset-based product lines. The Company has a variety of financing alternatives available to fund its capital needs. These alternatives include long- and medium-term public and private debt, asset-backed securities, operating leases as well as variable-rate financing available through bank credit facilities, commercial paper and receivable conduits. The Company also periodically enters into sale and leaseback agreements on revenue earning equipment, which are accounted for as operating leases. 21
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 LIQUIDITY AND CAPITAL RESOURCES (continued) Financing and Other Funding Transactions (continued) The Company's debt ratings as of March 31, 2001 were as follows: Commercial Unsecured Paper Notes ------------- ------------ Moody's Investors Service P2 Baa1 Standard & Poor's Ratings Group A2 BBB Fitch F2 BBB+ Total debt was $1.76 billion at March 31, 2001, a decrease of 12.6 percent from December 31, 2000. During the first three months of 2001, the Company retired $79.0 million of medium-term notes. U.S. commercial paper outstanding at March 31, 2001 decreased to $254.0 million, compared with $441.1 million at December 31, 2000, due primarily to debt pay down with proceeds received from the sale-leaseback transaction completed in the first quarter of 2001 (described in the Debt and Other Financing note to the Consolidated Condensed Financial Statements included in this Form 10-Q). The Company's foreign debt decreased approximately $39.8 million from December 31, 2000 to $344.9 million at March 31, 2001. The Company's percentage of variable-rate financing obligations was 27.1 percent at March 31, 2001 compared to 31.8 percent at December 31, 2000. The Company's debt-to-equity ratio at March 31, 2001 decreased to 142.7 percent from 161.0 percent at December 31, 2000. The Company participates in an agreement to sell, with limited recourse, up to $375.0 million of trade receivables on a revolving basis through July 2004. At March 31, 2001 and December 31, 2000, the outstanding balance of receivables sold pursuant to this agreement was $250.0 and $345.0 million, respectively. RECENT ACCOUNTING PRONOUNCEMENTS In September 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which replaces SFAS No. 125. SFAS No. 140 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities (the "Transfer" provisions) occurring after March 31, 2001, and is effective for recognition and reclassification of collateral and for disclosures relating to sale-leaseback transactions and collateral (the "Disclosure" provisions) for fiscal years ending after December 15, 2000. The Company adopted the Disclosure provisions of SFAS No. 140 as discussed in the 2000 Annual Report and adopted the Transfer provisions for transactions subsequent to March 31, 2001. Adoption of this statement did not have a material impact on the Company's financial position and did not impact cash flows or results of operations. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended, requires all derivatives, including certain derivatives imbedded in other contracts, to be recognized at fair value as either assets or liabilities on the balance sheet and establishes new accounting rules for hedging instruments. The Company adopted SFAS No. 133 on January 1, 2001. Adoption of this statement did not have a material impact on the Company's financial position and did not impact cash flows or results of operations. 22
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)-- Three months ended March 31, 2001 and 2000 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 Company's current plans and expectations and involve risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Generally, the words "believe," "expect," "estimate," "anticipate," "will" and similar expressions identify forward-looking statements. Important factors that could cause such differences include, among others: general economic conditions in the U.S. and worldwide; the market for the Company's used equipment; the highly competitive environment applicable to the Company's operations (including competition in supply chain solutions and dedicated contract carriage from other logistics companies as well as from air cargo, shippers, railroads and motor carriers and competition in full service leasing and commercial rental from companies providing similar services as well as truck and trailer manufacturers that provide leasing, extended warranty maintenance, rental and other transportation services); greater than expected expenses associated with the Company's activities (including increased cost of fuel, freight and transportation) or personnel needs; availability of equipment; changes in customers' business environments (or the loss of a significant customer) or changes in government regulations. The risks included here are not exhaustive. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on the Company's business. Accordingly, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 23
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk In the normal course of business, the Company is exposed to fluctuations in interest rates, foreign exchange rates and fuel prices. The Company manages such exposures in several ways including, in certain circumstances, the use of a variety of derivative financial instruments when deemed prudent. The Company does not enter into leveraged derivative financial transactions or use derivative financial instruments for trading purposes. The Company's quantitative and qualitative disclosures about market risk for changes in interest rates and foreign exchange rates have not materially changed since December 31, 2000. The Company's disclosures about market risk are contained in the Annual Report on Form 10-K for the year ended December 31, 2000. No interest rate swap or cap agreements or foreign currency option contracts or forward agreements were outstanding at March 31, 2001 or 2000. 24
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 February 16, 2001, previously filed with the Commission as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, are incorporated by reference into this report. (15) Letter regarding unaudited interim financial statements. (b) Reports on Form 8-K ------------------- On March 12, 2001, the Company furnished information under Item 9. Regulation FD Disclosure in a report on Form 8-K. The 8-K provides answers to questions that were submitted by analysts and investors prior and subsequent to the Company's February 7, 2001 earnings conference call. The Company also published the question and answer document (Q and A) on its web site (www.ryder.com). 25
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 8, 2001 /S/ CORLISS J. NELSON --------------------- Corliss J. Nelson Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 8, 2001 /S/ KATHLEEN S. PARTRIDGE -------------------------- Kathleen S. Partridge Senior Vice President and Controller (Principal Accounting Officer) 26
EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- (3.1) The Ryder System, Inc. Restated Articles of Incorporation, dated November 8, 1985, as amended through May 18, 1990, previously filed with the Commission as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, are incorporated by reference into this report. (3.2) The Ryder System, Inc. By-Laws, as amended through February 16, 2001, previously filed with the Commission as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, are incorporated by reference into this report. (15) Letter regarding unaudited interim financial statements. 27