Company Quick10K Filing
Quick10K
Ryder System
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$61.33 53 $3,270
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-08 Shareholder Vote, Exhibits
8-K 2019-04-30 Earnings, Regulation FD, Exhibits
8-K 2019-02-14 Earnings, Regulation FD, Exhibits
8-K 2018-10-26 Earnings, Regulation FD, Exhibits
8-K 2018-09-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-09-25 Officers, Regulation FD, Exhibits
8-K 2018-07-25 Earnings, Regulation FD, Exhibits
8-K 2018-05-09 Shareholder Vote, Exhibits
8-K 2018-04-24 Earnings, Regulation FD, Exhibits
8-K 2018-02-16 Earnings, Regulation FD, Exhibits
8-K 2018-02-09 Officers, Exhibits
8-K 2018-01-29 Earnings
ES Eversource Energy 22,350
HEI Heico 13,880
VRNT Verint Systems 4,030
SJI South Jersey Industries 2,950
RH RH 2,090
SFUN Fang Holdings 590
ASMB Assembly Biosciences 414
SFAS Steadfast Apartment REIT III 0
MCCX McorpCX 0
ANAV Alpha Network Alliance Ventures 0
R 2019-03-31
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-3.1 ryderex31-q12019.htm
EX-3.2 bylawsex32-q12019.htm
EX-10.1 ryderex101-q12019.htm
EX-10.2 ryderex102-q12019.htm
EX-10.3 ryderex103-q12019.htm
EX-10.4 ryderex104-q12019.htm
EX-10.5 ryderex105-q12019.htm
EX-10.6 ryderex106-q12019.htm
EX-10.7 ryderex107-q12019.htm
EX-10.8 ryderex108-q12019.htm
EX-31.1 ryderex311-q12019.htm
EX-31.2 ryderex312-q12019.htm
EX-32 ryderex32-q12019.htm

Ryder System Earnings 2019-03-31

R 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 ryder1stquarter201910-q.htm 10-Q Document
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
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 Number: 1-4364

ryderlogoeverbetterwtma37.jpg
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Florida
59-0739250
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
11690 N.W. 105th Street
 
Miami, Florida 33178
(305) 500-3726
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
R
New York Stock Exchange
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 þ        NO ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES þ        NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer ¨
Non-accelerated filer ¨
 
Smaller reporting company ¨
Emerging growth company ¨
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ YES   þ NO
The number of shares of Ryder System, Inc. Common Stock ($0.50 par value per share) outstanding at March 31, 2019, was 53,300,205.
 
 
 
 
 




RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
 
 
 
 
 
 
Page No.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
 
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands, except per share amounts)
Lease & related maintenance and rental revenues
$
899,559

 
824,991

Services revenue
1,132,048

 
928,144

Fuel services revenue
148,720

 
151,070

Total revenues
2,180,327

 
1,904,205

 
 
 
 
Cost of lease & related maintenance and rental
664,289

 
615,605

Cost of services
971,690

 
788,771

Cost of fuel services
143,275

 
146,903

Other operating expenses
33,626

 
32,975

Selling, general and administrative expenses
231,325

 
207,828

Non-operating pension costs
6,462

 
1,222

Used vehicle sales, net
8,217

 
7,431

Interest expense
55,336

 
38,160

Miscellaneous income, net
(8,222
)
 
(2,510
)
Restructuring and other items, net
6,178

 
15,121

 
2,112,176

 
1,851,506

Earnings from continuing operations before income taxes
68,151

 
52,699

Provision for income taxes
22,261


15,386

Earnings from continuing operations
45,890


37,313

Loss from discontinued operations, net of tax
(574
)
 
(427
)
Net earnings
$
45,316

 
36,886

 
 
 
 
Earnings (loss) per common share — Basic
 
 
 
Continuing operations
$
0.87

 
0.71

Discontinued operations
(0.01
)
 
(0.01
)
Net earnings
$
0.86

 
0.70

 
 
 
 
Earnings (loss) per common share — Diluted
 
 
 
Continuing operations
$
0.87

 
0.70

Discontinued operations
(0.01
)
 
(0.01
)
Net earnings
$
0.86

 
0.70

 
 
 
 
See accompanying notes to consolidated condensed financial statements.
Note: EPS amounts may not be additive due to rounding.

1


RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

        
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
 
 
 
 
Net earnings
$
45,316

 
36,886

 
 
 
 
Other comprehensive income:
 
 
 
 
 
 
 
Changes in currency translation adjustment and other
15,762

 
11,765

 
 
 
 
Amortization of pension and postretirement items
7,468

 
7,215

Income tax expense related to amortization of pension and postretirement items
(2,014
)
 
(1,609
)
   Amortization of pension and postretirement items, net of tax
5,454

 
5,606

 
 
 
 
Other comprehensive income, net of taxes
21,216

 
17,371

 
 
 
 
Comprehensive income
$
66,532

 
54,257

See accompanying notes to consolidated condensed financial statements.




2



RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
 

 
March 31,
2019
 
December 31,
2018
 
(Dollars in thousands, except
share amounts)
Assets:
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
62,787


68,111

Receivables, net of allowance of $17,497 and $17,182, respectively
1,221,769


1,242,058

Inventories
80,082


79,228

Prepaid expenses and other current assets
193,147


178,313

Total current assets
1,557,785

 
1,567,710

Revenue earning equipment, net
10,009,161


9,415,961

Operating property and equipment, net of accumulated depreciation of $1,277,906 and $1,256,037, respectively
871,524


862,054

Goodwill
474,742


475,206

Intangible assets, net of accumulated amortization of $67,145 and $65,048, respectively
57,068


59,075

Sales-type leases and other assets
978,705


967,802

Total assets
$
13,948,985


13,347,808

 
 
 
 
Liabilities and shareholders’ equity:
 
 
 
Current liabilities:
 
 
 
Short-term debt and current portion of long-term debt
$
1,117,489


937,131

Accounts payable
839,792


731,876

Accrued expenses and other current liabilities
797,298


847,739

Total current liabilities
2,754,579

 
2,516,746

Long-term debt
6,025,679


5,712,146

Other non-current liabilities
1,399,273


1,402,625

Deferred income taxes
1,202,650


1,179,723

Total liabilities
11,382,181

 
10,811,240

 
 
 
 
Shareholders’ equity:
 
 
 
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding,
March 31, 2019 or December 31, 2018

 

Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding,
March 31, 2019 — 53,300,205 December 31, 2018 — 53,116,485
26,651

 
26,559

Additional paid-in capital
1,086,714

 
1,084,391

Retained earnings
2,343,857

 
2,337,252

Accumulated other comprehensive loss
(890,418
)
 
(911,634
)
Total shareholders’ equity
2,566,804


2,536,568

Total liabilities and shareholders’ equity
$
13,948,985


13,347,808

See accompanying notes to consolidated condensed financial statements.

3



RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)


 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Cash flows from operating activities from continuing operations:
 
 
 
Net earnings
$
45,316

 
36,886

Less: Loss from discontinued operations, net of tax
(574
)
 
(427
)
Earnings from continuing operations
45,890

 
37,313

Depreciation expense
377,357

 
332,768

Goodwill impairment charge

 
15,513

Used vehicle sales, net
8,217

 
7,431

Amortization expense and other non-cash charges, net
48,522

 
32,061

Non-operating pension costs and share-based compensation expense
13,861

 
6,563

Deferred income tax expense
19,729

 
33,076

Collections on sales-type leases
34,017

 
21,580

Changes in operating assets and liabilities:
 
 
 
Receivables
26,181

 
22,265

Inventories
(756
)
 
(253
)
Prepaid expenses and other assets
(27,645
)
 
(46,053
)
Accounts payable
18,586

 
(30,851
)
Accrued expenses and other non-current liabilities
(78,629
)
 
(94,563
)
Net cash provided by operating activities from continuing operations
485,330

 
336,850

 
 
 
 
Cash flows from financing activities from continuing operations:
 
 
 
Net change in commercial paper borrowings and revolving credit facilities
158,258


237,960

Debt proceeds
799,300


446,500

Debt repaid
(478,411
)

(414,299
)
Dividends on common stock
(29,301
)
 
(27,795
)
Common stock issued
(332
)
 
1,417

Common stock repurchased
(14,156
)
 
(12,921
)
Debt issuance costs and other items
(1,070
)
 
(1,259
)
Net cash provided by financing activities from continuing operations
434,288

 
229,603

 
 
 
 
Cash flows from investing activities from continuing operations:
 
 
 
Purchases of property and revenue earning equipment
(1,026,711
)
 
(662,744
)
Sales of revenue earning equipment
101,549

 
89,023

Sales of operating property and equipment
1,918

 
933

Net cash used in investing activities from continuing operations
(923,244
)
 
(572,788
)
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(1,551
)
 
3,519

Decrease in cash, cash equivalents, and restricted cash from continuing operations
(5,177
)
 
(2,816
)
 
 
 
 
 
 
 
 
Decrease in cash, cash equivalents, and restricted cash from discontinued operations
(147
)
 
(348
)
 
 
 
 
Decrease in cash, cash equivalents, and restricted cash
(5,324
)
 
(3,164
)
Cash, cash equivalents, and restricted cash at January 1
68,111

 
83,022

Cash, cash equivalents, and restricted cash at March 31
$
62,787

 
79,858

See accompanying notes to consolidated condensed financial statements.

4



RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited)


 
 
Preferred
Stock
 
Common Stock
 
Additional
Paid-In Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
Amount
 
Shares
 
Par
 
 
 
 
Total
 
 
(Dollars in thousands, except share amounts)
Balance at January 1, 2019
 
$

 
53,116,485

 
$
26,559

 
1,084,391

 
2,337,252

 
(911,634
)
 
2,536,568

Comprehensive income
 

 

 

 

 
45,316

 
21,216

 
66,532

Common stock dividends declared and paid—$0.54 per share
 

 

 

 

 
(29,207
)
 

 
(29,207
)
Common stock issued under employee stock option and stock purchase plans (1)
 

 
409,294

 
205

 
(547
)
 

 

 
(342
)
Benefit plan stock sales (2)
 

 
270

 

 
10

 

 

 
10

Common stock repurchases
 

 
(225,844
)
 
(113
)
 
(4,539
)
 
(9,504
)
 

 
(14,156
)
Share-based compensation
 

 

 

 
7,399

 

 

 
7,399

Balance at March 31, 2019
 
$

 
53,300,205

 
$
26,651

 
1,086,714

 
2,343,857

 
(890,418
)
 
2,566,804



 
 
Preferred
Stock
 
Common Stock
 
Additional
Paid-In Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
Amount
 
Shares
 
Par
 
 
 
 
Total
 
 
(Dollars in thousands, except share amounts)
Balance at January 1, 2018
 
$

 
52,955,314

 
$
26,478

 
1,051,017

 
2,086,918

 
(710,836
)
 
2,453,577

Comprehensive income
 

 

 

 

 
36,886

 
17,371

 
54,257

Common stock dividends declared and paid—$0.52 per share
 

 

 

 

 
(27,695
)
 

 
(27,695
)
Common stock issued under employee stock option and stock purchase plans (1)
 

 
310,173

 
155

 
1,195

 

 

 
1,350

Benefit plan stock sales (2)
 

 
715

 

 
67

 

 

 
67

Common stock repurchases
 

 
(171,304
)
 
(86
)
 
(3,354
)
 
(9,482
)
 

 
(12,922
)
Share-based compensation
 

 

 

 
5,341

 

 

 
5,341

Adoption of new accounting standard (3)
 

 

 

 

 
100,567

 
(100,567
)
 

Balance at March 31, 2018
 
$

 
53,094,898

 
$
26,547

 
1,054,266

 
2,187,194

 
(794,032
)
 
2,473,975


__________________
(1)
Net of common shares delivered as payment for the exercise price or to satisfy the holders’ withholding tax liability upon exercise of options.
(2)
Represents open-market transactions of common shares by the trustee of Ryder’s deferred compensation plans.
(3)
Reflects the impact of adopting ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income in 2018, which resulted in a reclassification of stranded tax effects caused by the 2017 Tax Cuts and Jobs Act from accumulated other comprehensive loss to retained earnings.
See accompanying notes to consolidated condensed financial statements.


5

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)


1. GENERAL

Interim Financial Statements

The accompanying unaudited Consolidated Condensed Financial Statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder has a controlling voting interest (subsidiaries) and variable interest entities (VIEs) required to be consolidated in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with the accounting policies described in our 2018 Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements and notes thereto except for the update to our revenue recognition and leases significant accounting policies discussed below. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included and the disclosures herein are adequate. The operating results for interim periods are unaudited and are not necessarily indicative of the results that can be expected for a full year.

Update to Significant Accounting Policies

Our significant accounting policies are detailed in "Note 1: Summary of Significant Accounting Policies" within Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018. As discussed in Note 2, "Recent Accounting Pronouncements," effective January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) using the modified retrospective transition comparative method. We have recast all prior period amounts in this Form 10-Q to conform to the current period presentation based on our adoption of this new accounting standard. Refer to Note 2, "Recent Accounting Pronouncements," for additional information on the revised amounts. The significant changes to our accounting policies as a result of adopting Topic 842 are discussed below.

Revenue Recognition

Lease & related maintenance and rental revenues includes ChoiceLease and commercial rental revenues from our Fleet Management Solutions (FMS) business segment. We offer a full service lease as well as a lease with more flexible maintenance options under our ChoiceLease product line, which are marketed, priced and managed as bundled lease arrangements, and include equipment, service and financing components. We do not offer a stand-alone unbundled lease of new vehicles. We offer rental of vehicles under our commercial rental product line, which allows customers to supplement their fleet of vehicles on a short-term basis.

Our ChoiceLease arrangements include the lease of a vehicle (lease component) and the executory agreement for the maintenance, insurance, taxes and other services (non-lease components) related to the leased vehicles during the lease term. We generally lease new vehicles to our customers. Arrangement consideration is allocated between the lease component and non-lease component based on management's best estimate of the relative standalone selling price of each component. Our ChoiceLease arrangements provide for a fixed charge billing and a variable charge billing based on mileage or time usage. Fixed charges are typically billed at the beginning of the month and variable charges are typically billed a month in arrears. Revenue from the lease component of ChoiceLease agreements is recognized based on the classification of the arrangement, typically as either an operating or a sales-type lease. Our commercial rental arrangements include the short-term rental of a vehicle (one day up to one year in length). All of our rental arrangements are classified as operating leases and revenue is recognized on a straight-line basis.

The majority of our leases are classified as operating leases and we recognize revenue for the lease component of the product line on a straight-line basis. The non-lease component for maintenance services is accounted for in accordance with revenue guidance in Revenue from Contracts with Customers (Topic 606). Maintenance services are not typically performed evenly over the life of a ChoiceLease contract as the level of maintenance provided generally increases as vehicles age. We recognize maintenance revenue using an input method, consistent with the estimated pattern of the costs to maintain the underlying vehicles. This will generally result in the recognition of a contract liability for some portion of the customer's payments allocated to the maintenance service component of the arrangement. Included in lease & related maintenance and rental revenues is non-lease revenue from maintenance services recognized in accordance with Topic 606 of $239 million and $223 million for the three months ended March 31, 2019 and 2018, respectively.

6

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Effective with the adoption of Topic 842, we recorded an after-tax cumulative effect adjustment to decrease retained earnings as of January 1, 2017, by approximately $315 million primarily to recognize a contract liability (deferred revenue) related to maintenance services, and partially offset by costs capitalized related to sales commissions.

We recorded deferred revenue of approximately $564 million and $566 million as of March 31, 2019 and December 31, 2018, respectively, related to the maintenance services component of our ChoiceLease product line. Refer to Note 3, "Revenue," and Note 5, "Accrued Expenses and Other Liabilities." In addition, we recorded an asset of approximately $92 million and $93 million as of March 31, 2019 and December 31, 2018, respectively; related to incremental sales commissions paid to our sales force as a result of obtaining ChoiceLease contracts. Capitalized sales commissions includes initial direct costs of our leases in the amount of $53 million at March 31, 2019 and December 31, 2018, respectively, accounted for in accordance with Topic 842. Refer to Note 3, "Revenue."

Lease and rental agreements do not usually provide for scheduled rent increases or escalations. However, most lease agreements allow for rate changes based upon changes in the Consumer Price Index (CPI). ChoiceLease and rental agreements also provide for vehicle usage charges based on a time charge and/or a fixed per-mile charge. The time charge, the per-mile charge and the changes in rates attributed to changes in the CPI are considered contingent rentals and are not considered fixed or determinable until the CPI change or the equipment usage occurs. This consideration is allocated to the lease and non-lease components of the contract as it is billed to the customer based on the allocation determined at contract inception. Variable consideration allocated to the lease component is recognized in revenue on a straight-line basis for the remainder of the contract term and variable consideration allocated to the non-lease component is recognized in revenue using an input method, consistent with the estimated pattern of maintenance costs for the remainder of the contract term.

Leases not classified as operating leases are generally considered sales-type leases. We recognize revenue for sales-type leases using the effective interest method, which provides a constant periodic rate of return on the outstanding investment in the lease. We generally lease new vehicles under our sales-type lease arrangements. Therefore, there is generally not a difference between the net investment in the lease and the carrying value of the vehicles, and we do not recognize selling profit or loss at lease commencement. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, that are remitted to the applicable taxing authorities.

Significant Judgments and Estimates

Allocating consideration between lease and non-lease components in our ChoiceLease arrangements requires significant judgment. We do not sell the components of our ChoiceLease product offering on a stand-alone basis. Judgment is required to determine the standalone selling prices of the lease and non-lease components in order to allocate the consideration on a relative standalone selling price basis.

We determine the standalone price of the lease component using the projected cash flows of the lease assuming a certain targeted return. We consider a number of factors to determine the targeted return, including the net present value of the projected cash flows in a ChoiceLease arrangement discounted at our weighted average cost of capital.

Our ChoiceLease arrangements include maintenance as a non-lease component of the contract. We determine the standalone price of the maintenance component using an expected cost plus margin approach. The expected costs are based on our historical costs of providing maintenance services in our ChoiceLease arrangements. The margin is based on historical margin percentages for our full service maintenance contracts in the SelectCare product line, as the maintenance performance obligation in those contracts is similar to maintenance in our ChoiceLease arrangements. Full service maintenance arrangements in SelectCare are priced based on targeted margin percentages for new and used vehicles by type of vehicle (trucks, tractors, and trailers), considering the fixed and variable costs of providing maintenance services. Certain ChoiceLease arrangements include liability and/or physical damage insurance coverage to our customers. We charge a separate fixed monthly rate for these insurance offerings, which represents the standalone selling price.

We allocate the contract consideration (excluding insurance) between the lease and maintenance components based on the relative standalone selling prices of each of those services and allocate contract consideration for insurance based on the price of insurance, which is priced separately. If the lessee elects to obtain insurance coverage from us, the consideration for the fixed monthly rate is allocated to the insurance performance obligations.

Variable consideration, such as billings for mileage and from changes in CPI, is excluded from the allocation of consideration at the inception of the contract. Revenues associated with licensing and operating taxes that are billed as incurred

7

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



based on the contract arrangement are also excluded from the allocation of consideration at contract inception and allocated as earned. The variable consideration and licensing and operating tax revenues are allocated to the lease and maintenance components based on the same allocation percentages at contract inception (or the most recent contract modification) when earned.

Contract Balances

We do not have material contract assets as we generally invoice customers as we perform services. Contract receivables are recorded in “Receivables, net” in the Consolidated Condensed Balance Sheets. Payment terms vary by contract type, although terms generally include a requirement of payment within 15 to 90 days. As a practical expedient, we do not assess whether a contract has a significant financing component as the period between the receipt of customer payment and the transfer of service to the customer is less than a year.

Our contract liabilities consist of deferred revenue related to maintenance services. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts that are refundable. We classify deferred revenue for performance obligations we expect to perform within 12 months as current liabilities and for performance obligations to be performed later than 12 months as other non-current liabilities. Revenue is recognized upon satisfaction of the performance obligation.

As practical expedients, 1) we do not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less, and 2) we do not disclose information about remaining performance obligations when we have the right to invoice the customer and the revenue recognized corresponds directly with the value to the customer of our performance completed to date.

Leases

Leases as Lessor

We lease revenue earning equipment to customers for periods ranging from three to seven years for trucks and tractors and up to ten years for trailers. We determine if an arrangement is or contains a lease at inception. The standard lease agreement for revenue earning equipment provides both parties the right to terminate; therefore, we evaluate whether the lessee is reasonably certain to exercise the termination option in order to determine the appropriate lease term. If we terminate, the customer has the right (but not obligation) to purchase the vehicle. If the customer terminates, we have the option to require the customer to purchase the vehicle or pay a termination penalty. Our leases generally do not provide either party an option to renew the lease. We also rent revenue earning equipment to customers on a short-term basis, from one day up to one year in length. From time to time, we may also lease facilities to third parties. The majority of our leases are classified as operating leases. However, some of our revenue earning equipment leases are classified as sales-type leases.

Our determination of the residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) is established with a long-term view considering historical market price changes, current and expected future market price trends, expected lives of vehicles and extent of alternative uses. Factors that could cause actual results to materially differ from estimates include, but are not limited to, unforeseen changes in technology innovations, sudden changes in supply and demand, and competitor pricing. We have developed disciplines related to the management and maintenance of our leased vehicles designed to manage the risk associated with the residual values of our revenue earning equipment. In addition, we also monitor market trends throughout the year and assess residual values of vehicles expected to be sold in the near term and may adjust residual values for these vehicles.

Leases as Lessee

We lease facilities, revenue earning equipment, material handling equipment, automated washing machines, vehicles and office equipment. We determine if an arrangement is or contains a lease at inception. Effective with the adoption of Topic 842, we have established right-of-use (ROU) assets, which represent our right to use an underlying asset for the lease term and lease liabilities, which represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate of return, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Operating lease ROU assets also exclude lease incentives received. We pay variable lease charges related

8

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



to property taxes, insurance and maintenance as well as changes in CPI for leased facilities; equipment usage for revenue earning equipment, automated washing machines, vehicles and office equipment; and hours of operation for material handling equipment. For leases with a term of 12 months or less, with the exception of our real estate leases, we recognize lease payments in our income statement on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Lease terms for the facilities are generally three to five years with one or more five-year renewal options and the lease terms for revenue earning equipment, material handling equipment, automated washing machines and vehicles typically range from three to seven years typically with no extension options. For purposes of calculating ROU assets and operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Macroeconomic conditions is the primary factor used to estimate whether an option to extend a lease term will be exercised or not. None of our leasing arrangements contain restrictive financial covenants. Certain of our material handling equipment leases have residual value guarantees. We recorded operating lease ROU assets and finance lease assets totaling approximately $235 million and $245 million as of March 31, 2019 and December 31, 2018, respectively, related to leases as lessee. Refer to Note 6, "Leases".



9

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



2. RECENT ACCOUNTING PRONOUNCEMENTS

Cloud Computing Arrangements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. ASU 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Entities are permitted to apply either a retrospective or prospective approach to adopt the guidance. We are currently evaluating the impact of the adoption of this update on our consolidated financial position, results of operations, and cash flows.

Derivatives and Hedging

In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2017-12, Derivatives and Hedging (Topic 815), which simplifies and clarifies the accounting and disclosure for hedging
activities by more closely aligning the results of cash flow and fair value hedge accounting with the risk management activities of an entity. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted this standard during the first quarter of 2018 and it did not impact our consolidated financial position, results of operations or cash flows.

Leases

In February 2016, the FASB issued Topic 842, which sets out the principles for the identification, measurement, recognition, presentation and disclosure of leases. The FASB issued a number of subsequent updates to the standard. Topic 842 impacts the accounting for both lessors and lessees. We have adopted the standard effective January 1, 2019, using the modified retrospective transition method and initial application date of January 1, 2017. For all our facilities and equipment that we lease, we have elected the practical expedient to combine lease and non-lease components. For our existing operating and finance leases that commenced before the date of initial application, we have made an accounting policy election, as lessee, to use the incremental borrowing rate for our leases considering the remaining lease term and remaining minimum rental payments. After lease commencement of our operating leases as lessee, unless the ROU assets are impaired, we have made an accounting policy election to subsequently measure operating lease ROU assets by amortizing the ROU assets calculated as the difference between the straight line cost for the period (including amortization of initial direct costs) and the periodic accretion of the lease liability using the effective interest method. In calculating the change in ROU assets from a lease modification that decreases our rights as lessee to use one or more underlying assets, we have made an accounting policy election of remeasuring the ROU asset based on how much of the original right of use remains after modification.

The new standard requires lessors to identify and evaluate the lease and non-lease components in arrangements containing a lease, provides clarification on the scope of non-lease components and provides more guidance on how to identify and separate the components. From a lessor perspective, the adoption of the new lease standard primarily impacts our ChoiceLease product line, which includes a vehicle lease as well as maintenance and other services.

The standard requires lessees to classify leases as either finance or operating leases. This classification determines whether the related expense is recognized based on asset amortization and interest on the obligation (finance leases) or on a straight-line basis over the term of the lease (operating lease). We recorded a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. We have elected the practical expedient in Topic 842 to not apply these recognition requirements to leases with a term of 12 months or less with the exception of our real estate leases. Instead we recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.








10

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Adoption of the new lease standard impacted our previously reported Consolidated Condensed Statements of Earnings and Comprehensive Income results as follows (in millions, except per share amounts):
 
Three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
As Previously
 
Lessor
 
Lessee and Other
 
 
 
Reported
 
Adjustments (1)
 
Adjustments (1)
 
As Revised
Lease & related maintenance and rental revenues
$
824.3

 
0.5

 
0.3

 
825.0

Total revenues

1,903.5

 
0.5

 
0.3

 
1,904.2

Cost of lease & related maintenance and rental
619.2

 
(3.6
)
 

 
615.6

Cost of services (2)
787.2

 

 
1.5

 
788.8

Other operating expenses
33.5

 

 
(0.5
)
 
33.0

Selling, general and administrative expenses (2)
208.6

 
(0.4
)
 
(0.4
)
 
207.8

Interest expense
37.8

 

 
0.4

 
38.2

Restructuring and other items, net (2)
16.0

 

 
(0.9
)
 
15.1

Earnings from continuing operations before income taxes

48.1

 
4.5

 
0.1

 
52.7

Provision for income taxes
14.2

 
1.2

 

 
15.4

Earnings from continuing operations

33.9

 
3.3

 
0.1

 
37.3

Net earnings
33.5

 
3.3

 
0.1

 
36.9

 
 
 
 
 
 
 
 
Comprehensive income
51.0

 
3.4

 

 
54.3

 
 
 
 
 
 
 
 
Earnings per common share - Basic
 
 
 
 
 
 
 
        Continuing operations

$
0.65

 
0.06

 

 
0.71

        Net earnings

$
0.64

 
0.06

 

 
0.70

 
 
 
 
 
 
 
 
Earnings per common share - Diluted
 
 
 
 
 
 
 
        Continuing operations
$
0.64

 
0.06

 

 
0.70

        Net earnings
$
0.63

 
0.06

 

 
0.70

————————————
(1)
Amounts include the correction of a prior period error. The primary components of the error correction are a reduction of "Lease & related maintenance and rental revenues" of approximately $4.7 million and an offsetting reduction in depreciation expense (included in "Cost of lease & related maintenance and rental") of approximately $4.7 million. We determined certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. We concluded these errors were not material to any of our previously issued consolidated financial statements.
(2)
Adjustments primarily reflects the reclassification of our Singapore operations into "Restructuring and other items, net," that we will shut down during 2019.

Note: Amounts may not be additive due to rounding.














11

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Adoption of the new lease standard impacted our previously reported Consolidated Condensed Balance Sheet as follows (in millions):
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
As Previously
 
Lessor
 
Lessee
 
 
 
 
 
 
Reported
 
Adjustments (1)
 
Adjustments (1)
 
As Revised
Receivables, net
$
1,219.4

 
22.6

 

 
1,242.1

Prepaid expenses and other current assets
201.6

 
(23.3
)
 

 
178.3

Total current assets
1,568.4

 
(0.7
)
 

 
1,567.7

Revenue earning equipment, net
9,498.0

 
(84.2
)
 
2.2

 
9,416.0

Operating property and equipment, net
843.8

 

 
18.2

 
862.1

Sales-type leases and other assets
606.6

 
156.8

 
204.3

 
967.8

Total assets
13,051.1

 
72.0

 
224.7

 
13,347.8

Short-term debt and current portion of long term-debt
930.0

 

 
7.2

 
937.1

Accrued expenses and other current liabilities
630.5

 
145.1

 
72.2

 
847.7

Total current liabilities
2,292.3

 
145.1

 
79.3

 
2,516.7

Long-term debt
5,693.6

 

 
18.5

 
5,712.1

Other non-current liabilities
849.9

 
421.2

 
131.5

 
1,402.6

Deferred income taxes
1,304.8

 
(124.6
)
 
(0.5
)
 
1,179.7

Total liabilities
10,140.8

 
441.7

 
228.8

 
10,811.2

Retained earnings
2,710.7

 
(369.6
)
 
(3.8
)
 
2,337.3

Accumulated other comprehensive loss
(911.3
)
 
(0.1
)
 
(0.2
)
 
(911.6
)
Total shareholders' equity
2,910.3

 
(369.7
)
 
(4.1
)
 
2,536.6

Total liabilities and shareholders' equity
13,051.1

 
72.0

 
224.7

 
13,347.8

————————————
(1)
Amounts include the correction of a prior period error. The primary components of the error correction are an increase in "Receivables, net" of approximately $24 million, an increase in sales-type leases and other assets of approximately $65 million and a reduction in "Revenue earning equipment, net" of $83 million. We determined certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. We concluded these errors were not material to any of our previously issued consolidated financial statements.


Note: Amounts may not be additive due to rounding.


12

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Adoption of the new lease standard impacted our previously reported Consolidated Condensed Statements of Cash Flows as follows (in millions):
 
Three months ended March 31, 2018
 
As Previously Reported
 
New Lease Standard Adjustments
 
As Revised
Net earnings
33.5

 
3.4

 
36.9

Earnings from continuing operations
33.9

 
3.4

 
37.3

Depreciation expense
336.7

 
(3.9
)
 
332.8

Amortization expense and other non-cash charges, net
13.6

 
18.5

 
32.1

Deferred income tax expense
31.9

 
1.2

 
33.1

Collections on sales-type leases and other items

 
21.6

 
21.6

Changes in operating assets and liabilities:
 
 


 
 
Prepaid expenses and other assets
(26.0
)
 
(20.1
)
 
(46.1
)
Accrued expenses and other non-current liabilities
(95.9
)
 
1.3

 
(94.6
)
Net cash provided by operating activities from continuing operations
314.9

 
22.0

 
336.9

Debt repaid
(412.1
)
 
(2.2
)
 
(414.3
)
Net cash provided by financing activities from continuing operations
231.8

 
(2.2
)
 
229.6

Collections on direct finance leases and other items
19.7

 
(19.7
)
 

Net cash used in investing activities from continuing operations
(553.0
)
 
(19.7
)
 
(572.8
)
 
 
 
 
 
 


Note: Amounts may not be additive due to rounding.


13

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



3. REVENUE

Disaggregation of Revenue

The following tables disaggregate our revenue by primary geographical market, major product/service lines, and industry. During 2019, we adopted Topic 842 and have retrospectively adjusted 2018 for the impact of this new standard.

Primary Geographical Markets
 
Three months ended March 31, 2019
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
United States
$
1,198,943

 
349,621

 
529,393

 
(151,163
)
 
1,926,794

Canada
74,014

 

 
49,708

 
(5,401
)
 
118,321

Europe
78,642

 

 

 

 
78,642

Mexico

 

 
53,277

 

 
53,277

Singapore

 

 
3,293

 

 
3,293

Total revenue
$
1,351,599

 
349,621

 
635,671

 
(156,564
)
 
2,180,327




 
Three months ended March 31, 2018
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
United States (1)
1,085,446

 
298,970

 
401,883

 
(127,716
)
 
1,658,583

Canada
74,808

 

 
43,093

 
(4,806
)
 
113,095

Europe
82,796

 

 

 

 
82,796

Mexico (1)

 

 
44,032

 

 
44,032

Singapore

 

 
5,699

 

 
5,699

Total revenue
1,243,050

 
298,970

 
494,707

 
(132,522
)
 
1,904,205

————————————
(1) 2018 SCS total revenue amounts for the United States and Mexico include reclassifications to conform to the current period presentation.


Major Products/Service Lines
 
Three months ended March 31, 2019
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
ChoiceLease
$
748,579

 

 

 
(68,191
)
 
680,388

SelectCare
135,779

 

 

 
(12,250
)
 
123,529

Commercial rental
236,148

 

 

 
(16,977
)
 
219,171

Fuel
207,866

 

 

 
(59,146
)
 
148,720

Other
23,227

 

 

 

 
23,227

DTS

 
349,621

 

 

 
349,621

SCS

 

 
635,671

 

 
635,671

Total revenue
$
1,351,599

 
349,621

 
635,671

 
(156,564
)
 
2,180,327





14

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



 
Three months ended March 31, 2018
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
ChoiceLease
690,902

 

 

 
(60,377
)
 
630,525

SelectCare
121,873

 

 

 
(9,344
)
 
112,529

Commercial rental
204,530

 

 

 
(10,064
)
 
194,466

Fuel
203,807

 

 

 
(52,737
)
 
151,070

Other
21,938

 

 

 

 
21,938

DTS

 
298,970

 

 

 
298,970

SCS

 

 
494,707

 

 
494,707

Total revenue
1,243,050

 
298,970

 
494,707

 
(132,522
)
 
1,904,205



Industry

Our SCS business segment includes revenue from the below industries:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Automotive
$
253,679

 
207,792

Technology and healthcare
113,668

 
103,097

CPG and retail
217,098

 
135,358

Industrial and other
51,226

 
48,460

Total revenue
$
635,671

 
494,707


Contract Balances

We record a receivable related to revenue recognized when we have an unconditional right to invoice. There were no material contract assets as of March 31, 2019 or December 31, 2018. Trade receivables were $1.06 billion and $1.09 billion at March 31, 2019 and December 31, 2018, respectively. Impairment losses on receivables were not material during the first quarters of 2019 and 2018.

Contract liabilities relate to payments received in advance of performance under the contract. Changes in contract liabilities are due to our performance under the contract. The amount of revenue recognized during the three months ended March 31, 2019, that was included within deferred revenue at January 1, 2019, was $58 million. In addition, we deferred $57 million of revenue during the first quarter of 2019. Refer to Note 5, "Accrued Expenses and Other Liabilities," for additional information on deferred revenue.

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized (“contracted not recognized revenue”). Contracted not recognized revenue includes deferred revenue and amounts for full service ChoiceLease maintenance revenue that will be invoiced and recognized as revenue in future periods as we provide maintenance services to our customers. Contracted not recognized revenue excludes variable revenue as it is not included in the transaction price consideration allocated at contract inception. Contracted not recognized revenue was $2.7 billion as of March 31, 2019. As a practical expedient, revenue related to our insurance performance obligations is excluded from contracted not recognized revenue since insurance coverage is provided over time, and we recognize revenue in the amount we have the right to bill the customer, which corresponds directly with the value to the customer of our performance completed to date.



15

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Costs to Obtain and Fullfill a Contract

We capitalize incremental sales commissions paid to our sales force as a result of obtaining ChoiceLease, DTS and SCS service contracts as contract costs. We recorded capitalized sales commissions of $106 million and $107 million at March 31, 2019 and December 31, 2018, respectively. Capitalized sales commissions includes initial direct costs of our leases in the amount of $53 million at March 31, 2019 and December 31, 2018, respectively, accounted for in accordance with Topic 842. Capitalized sales commissions are presented in “Prepaid expenses and other current assets” and “Sales-type leases and other assets” in our Consolidated Condensed Balance Sheets.

Capitalized sales commissions related to our ChoiceLease product are amortized based on the same pattern that the revenue is recognized for the underlying lease or non-lease components of the contract. Incremental sales commissions capitalized in connection with our ChoiceLease contracts relate to the lease component and non-lease maintenance components of our contracts. We allocate the ChoiceLease commissions to the lease and non-lease components based on the same allocation of the contract consideration. The portion of capitalized commissions related to the lease component is amortized on a straight-line basis and the portion of the capitalized commissions related to the maintenance portion is amortized consistent with the estimated pattern of maintenance costs. The amortization period aligns with the term of our contract, which typically ranges from three to seven years, and amortization expense is included in “Selling, general and administrative expenses” in our Consolidated Condensed Statements of Earnings.

Capitalized commissions related to our DTS and SCS service contracts are amortized based on the same patten that the revenue is recognized for the underlying contracts. This generally results in a straight-line amortization as the amount of revenue billed to the customer under DTS and SCS contracts corresponds directly with the value to the customer of our performance completed to date. The amortization period aligns with the term of the contract, which typically ranges from three to five years, and amortization expense is included in “Selling, general and administrative expenses” in our Consolidated Condensed Statement of Earnings.

For the three months ended March 31, 2019 and 2018, the amount of amortization was $11 million and $6 million, respectively. As a practical expedient, we recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.




16

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

4. REVENUE EARNING EQUIPMENT, NET

 
March 31, 2019
 
December 31, 2018
 
Cost
 
Accumulated
Depreciation
 
Net  Book
Value (1)
 
Cost
 
Accumulated
Depreciation
 
Net  Book
Value (1)
 
(In thousands)
Held for use:
 
ChoiceLease
$
11,331,946

 
(3,743,391
)
 
7,588,555

 
10,824,989

 
(3,645,655
)
 
7,179,334

Commercial rental
3,315,660

 
(1,047,437
)
 
2,268,223

 
3,152,908

 
(1,047,346
)
 
2,105,562

Held for sale
537,173

 
(384,790
)
 
152,383

 
467,093

 
(336,028
)
 
131,065

Total
$
15,184,779

 
(5,175,618
)
 
10,009,161

 
14,444,990

 
(5,029,029
)
 
9,415,961

 ————————————
(1)
Revenue earning equipment, net includes vehicles under finance leases of $12 million, less accumulated depreciation of $6 million, at March 31, 2019, and $23 million, less accumulated depreciation of $13 million, at December 31, 2018.

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value are recognized at the time they arrive at our used truck sales centers and are presented within “Used vehicle sales, net” in the Consolidated Condensed Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For a certain population of our revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. Expected declines in market prices were also considered when valuing the vehicles held for sale. These vehicles held for sale were classified within Level 3 of the fair value hierarchy.

The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:
 
 
 
Total Losses (2)
 
March 31,
 
December 31,
 
Three months ended March 31,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Assets held for sale:
 
 
 
 
 
 
 
Revenue earning equipment (1):
 
 
 
 
 
 
 
Trucks
$
41,813

 
44,325

 
$
11,546

 
8,601

Tractors
43,269

 
35,397

 
4,968

 
3,377

Trailers
1,547

 
1,507

 
180

 
1,593

Total assets at fair value
$
86,629

 
81,229

 
$
16,694

 
13,571

 ————————————
(1)
Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where net book values exceeded fair values and fair value adjustments were recorded. The net book value of assets held for sale that were less than fair value was $66 million and $50 million as of March 31, 2019 and December 31, 2018, respectively.
(2)
Total losses represent fair value adjustments for all vehicles reclassified to held for sale throughout the period for which fair value was less than net book value.






17

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

The components of used vehicle sales, net were as follows:
 
Three months ended March 31,
 
2019
 
2018

(In thousands)
Gains on vehicle sales, net
$
(8,477
)
 
(6,140
)
Losses from fair value adjustments
16,694

 
13,571

Used vehicle sales, net
$
8,217

 
7,431


We own the majority of our revenue earning equipment. Revenue earning equipment that we lease as a lessee are immaterial, and are therefore not separately disclosed from owned revenue earning equipment.
   


18

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

5. ACCRUED EXPENSES AND OTHER LIABILITIES

 
March 31, 2019
 
December 31, 2018
 
Accrued
Expenses
 
Non-Current
Liabilities
 
Total
 
Accrued
Expenses
 
Non-Current
Liabilities
 
Total
 
(In thousands)
Salaries and wages
$
93,355

 

 
93,355

 
149,629

 

 
149,629

Deferred compensation
5,730

 
57,876

 
63,606

 
4,524

 
55,279

 
59,803

Pension benefits
3,764

 
455,989

 
459,753

 
3,754

 
456,979

 
460,733

Other postretirement benefits
1,391

 
18,114

 
19,505

 
1,387

 
18,097

 
19,484

Other employee benefits
7,728

 

 
7,728

 
28,370

 

 
28,370

Insurance obligations (1)
149,946

 
254,270

 
404,216

 
139,314

 
247,552

 
386,866

Operating taxes
108,343

 

 
108,343

 
100,399

 

 
100,399

Income taxes
2,872

 
19,655

 
22,527

 
3,491

 
18,477

 
21,968

Interest
40,373

 

 
40,373

 
39,522

 

 
39,522

Deposits, mainly from customers
81,930

 
3,460

 
85,390

 
80,401

 
3,390

 
83,791

Operating lease liabilities
71,992

 
134,784

 
206,776

 
73,422

 
137,384

 
210,806

Deferred revenue (2)
168,271

 
415,166

 
583,437

 
160,902

 
421,176

 
582,078

Restructuring liabilities (3)
4,566

 

 
4,566

 
7,595

 

 
7,595

Other
57,037

 
39,959

 
96,996

 
55,029

 
44,291

 
99,320

Total
$
797,298

 
1,399,273

 
2,196,571

 
847,739

 
1,402,625

 
2,250,364

 ————————————
(1)
Insurance obligations are primarily comprised of self-insured claim liabilities.
(2)
Deferred revenue is primarily related to the non-lease maintenance services component of our ChoiceLease product line.
(3)
The reduction in restructuring liabilities from December 31, 2018, principally represents cash payments for employee termination costs. The majority of the balance remaining in restructuring liabilities is expected to be paid by the end of 2019.



19

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



6. LEASES
Leases as Lessor

The components of lease income were as follows:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Operating leases
 
 
 
     Lease income related to lease payments
$
360,309

 
334,367

Lease income related to commercial rental (1)
219,171

 
194,466

 
 
 
 
Sales type leases
 
 
 
     Interest income related to net investment in leases
11,456

 
9,797

 
 
 
 
Variable lease income excluding commercial rental (1)
55,439

 
52,227

————————————
(1)
Lease income related to commercial rental includes both fixed and variable lease income. Variable lease income is approximately 15% to 25% of total commercial rental income based on management's internal estimates.


The components of net investment in sales-type leases were as follows:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Net investment in the lease — lease payment receivable
$
514,531

 
505,057

Net investment in the lease — unguaranteed residual assets
46,828

 
46,209

 
$
561,359

 
551,266

————————————
Note: The net investment in the sales-type lease shown above are included in "Accounts receivables, net" and "Sales-type leases and other assets" in the Consolidated Condensed Balance Sheets.


Maturities of sales-type lease receivables were as follows:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
2019 (excluding three months ended March 31, 2019)
$
103,957

 
133,557

2020
143,811

 
136,924

2021
121,433

 
114,983

2022
92,028

 
85,146

2023
58,175

 
52,161

Thereafter
91,033

 
78,935

 
 
 
 
Total undiscounted cash flows
610,437

 
601,706

Present value of lease payments (recognized as lease receivables)
(514,531
)
 
(505,057
)
Difference between undiscounted cash flows and discounted cash flows
95,906

 
96,649







20

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Maturities of operating lease payments were as follows:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
2019 (excluding three months ended March 31, 2019)
$
936,560

 
1,159,851

2020
1,008,773

 
892,721

2021
756,134

 
646,008

2022
507,429

 
421,050

2023
319,320

 
249,255

Thereafter
291,636

 
203,632

 
 
 
 
Total undiscounted cash flows
$
3,819,852

 
3,572,517



Leases as Lessee

The components of lease expense were as follows:
 
 
 
Three months ended March 31,
 
Classification
 
2019
 
2018
 
 
 
(In thousands)
Finance lease cost
 
 
 
 
 
     Amortization of right-of-use assets
Other operating expenses, SG&A
 
$
7,788

 
5,143

     Interest on lease liabilities
Interest expense
 
643

 
597

Operating lease cost
Other operating expenses, SG&A
 
23,218

 
19,687

Short-term lease and other
Other operating expenses, SG&A
 
1,124

 
982

Variable lease cost
Other operating expenses, SG&A
 
3,016

 
2,353

Sublease income
Cost of lease & related maintenance and rental, cost of services
 
(5,824
)
 
(6,364
)
Total lease cost
 
 
$
29,965

 
22,398


Supplemental cash flow information related to leases was as follows:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Cash paid for amounts included in measurement of liabilities
 
 
 
     Operating cash flows from finance leases
$
643

 
597

     Operating cash flows from operating leases
22,974

 
19,303

     Financing cash flows from finance leases
7,466

 
5,039

Right-of-use assets obtained in exchange for lease obligations:
 
 
 
Finance leases
2,418

 
2,006

Operating leases
16,605

 
16,908












21

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Supplemental balance sheet information relates to leases was as follows:

 
Classification
 
March 31, 2019
 
December 31, 2018
 
 
 
(In thousands)
Assets
 
 
 
 
 
Operating lease right-of-use assets
Sales-type leases and other assets
 
$
199,048

 
203,834

Finance lease assets
Operating property and equipment, net and revenue earning equipment, net
 
36,007

 
41,647

 
 
 
 
 
 
Total leased assets
 
 
$
235,055

 
245,481

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Current
 
 
 
 
 
     Operating
Accrued expenses and other current liabilities
 
$
71,992

 
73,422

     Finance
Short-term debt and current portion of long-term debt
 
11,256

 
14,543

 
 
 
 
 
 
Noncurrent
 
 
 
 
 
     Operating
Other non-current liabilities
 
134,784

 
137,384

     Finance
Long-term debt
 
32,446

 
32,909

 
 
 
 
 
 
Total lease liabilities
 
 
$
250,478

 
258,258

 
 
 
 
 
 

 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Weighted-average remaining lease term
 
 
 
     Operating
4 years

 
4 years

     Finance
7 years

 
7 years

Weighted-average discount rate
 
 
 
     Operating
3.7
%
 
3.7
%
     Finance
8.3
%
 
8.0
%



















22

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Maturities of lease liabilities were as follows:
 
Operating
Leases
 
Finance Leases
 
Total
 
(In thousands)
2019 (excluding three months ended March 31, 2019)
$
61,234

 
10,527

 
71,761

2020
58,772

 
10,523

 
69,295

2021
39,367

 
8,790

 
48,157

2022
29,231

 
6,112

 
35,343

2023
14,302

 
3,786

 
18,088

Thereafter
20,022

 
13,688

 
33,710

Total lease payments
222,928

 
53,426

 
276,354

Less: Imputed Interest
(16,152
)
 
(9,724
)
 
(25,876
)
Present value of lease liabilities
$
206,776

 
43,702

 
250,478

 
 
 
 
 
 

As of March 31, 2019, we have additional facility operating leases that have not yet commenced of $8 million. The operating leases will commence in 2019 with lease terms of 3 to 5 years.



23

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

7. DEBT
 
Weighted-Average
Interest Rate
 
 
 
 
 
 
 
March 31,
2019
 
December 31,
2018
 
Maturities
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
 
 
(In thousands)
Short-term debt and current portion of long-term debt:
 
 
 
 
 
 
 
 
 
Short-term debt
1.46%
 
2.69%
 

 
$
210,185

 
81,522

Current portion of long-term debt, including finance leases
 
 
 
 
 
907,304

 
855,609

Total short-term debt and current portion of long-term debt
 
 
 
 
 
1,117,489

 
937,131

Long-term debt:
 
 
 
 
 
 
 
 
 
U.S. commercial paper (1)
2.76%
 
2.78%
 
2023
 
695,272

 
454,397

Canadian commercial paper (1)
1.99%
 
2.28%
 
2023
 
105,169

 
123,491

Trade receivables program
—%
 
3.15%
 
2019
 

 
200,000

Global revolving credit facility
2.28%
 
2.25%
 
2023
 
13,224

 
12,581

Unsecured U.S. notes — Medium-term notes (1)(2)
3.30%
 
3.22%
 
2019-2025
 
5,207,369

 
4,853,496

Unsecured U.S. obligations
3.49%
 
3.50%
 
2019-2024
 
250,000

 
50,000

Unsecured foreign obligations
2.67%
 
1.61%
 
2020-2021
 
33,710

 
216,719

Asset-backed U.S. obligations (3)
2.36%
 
2.37%
 
2019-2025
 
605,634

 
627,707

Finance lease obligations
8.32%
 
7.97%
 
2019-2073
 
43,702

 
47,452

Total long-term debt
 
 
 
 
 
 
6,954,080

 
6,585,843

Debt issuance costs
 
 
 
 
 
 
(21,097
)
 
(18,088
)
 
 
 
 
 
 
 
6,932,983

 
6,567,755

Current portion of long-term debt, including finance leases
 
 
 
 
 
(907,304
)
 
(855,609
)
Long-term debt
 
 
 
 
 
 
6,025,679

 
5,712,146

Total debt
 
 
 
 
 
 
$
7,143,168

 
6,649,277

 ————————————
(1)
Amounts are net of unamortized original issue discounts of $7 million at March 31, 2019 and December 31, 2018, respectively.
(2)
Amounts are inclusive of fair market value adjustments on notes subject to hedging of $6 million and $10 million at March 31, 2019 and December 31, 2018, respectively. The notional amount of the executed interest rate swaps designated as fair value hedges was $725 million at March 31, 2019 and December 31, 2018. Refer to Note 8, "Derivatives," for additional information.
(3)
Asset-backed U.S. obligations are related to financing transactions backed by a portion of our revenue earning equipment.

We maintain a $1.4 billion global revolving credit facility with a syndicate of twelve lending institutions led by Bank of America N.A., BNP Paribas, Lloyds Bank Plc, Mizuho Bank, Ltd., MUFG Bank, Ltd., Royal Bank of Canada, U.S. Bank N.A. and Wells Fargo Bank, N.A. The facility matures in September 2023. The agreement provides for annual facility fees that range from 7.5 basis points to 20 basis points based on Ryder's long-term credit ratings. The annual facility fee is currently 10 basis points, which applies to the total facility size of $1.4 billion.

The credit facility is primarily used to finance working capital but can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at March 31, 2019). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility contains no provisions limiting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions and certain affirmative and negative covenants.

In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or equal to 300%. Net worth, as defined in the credit facility, represents shareholders' equity excluding any accumulated other comprehensive income or loss associated with our pension and other postretirement plans. The ratio at March 31, 2019, was 197%. At March 31, 2019, there was $572 million available under the credit facility.


24

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

Our global revolving credit facility enables us to refinance short-term obligations on a long-term basis. Short-term commercial paper obligations not required for working capital needs are classified as long-term as we have both the intent and ability to refinance on a long-term basis. In addition, we have the intent and ability to refinance the current portion of certain long-term debt on a long-term basis. At March 31, 2019, we classified $800 million of short-term commercial paper, $350 million of the current portion of long-term debt and $69 million of short-term debt as long-term debt. At December 31, 2018, we classified $578 million of short-term commercial paper, $200 million of trade receivables borrowings, $250 million of the current portion of long-term debt and $50 million of short-term debt as long-term debt.

In February 2019, we issued $600 million of unsecured medium-term notes maturing in March 2024. The proceeds from these notes were used to pay off maturing debt and for general corporate purposes. If these notes are downgraded below investment grade following, and as a result of, a change in control, the note holders can require us to repurchase all or a portion of the notes at a purchase price equal to 101% of principal value plus accrued and unpaid interest.

In the first quarter of 2019, we executed two $100 million bank term loans maturing in February and March 2024, respectively. The proceeds from these loans were used to pay off maturing debt and for general corporate purposes.

We have a trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to a bankruptcy remote, consolidated subsidiary of Ryder, that in turn sells, on a revolving basis, an ownership interest in certain of these accounts receivable to a committed purchaser. The subsidiary is considered a VIE and is consolidated based on our control of the entity’s activities. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in interest rates. The available proceeds that may be received under the program are limited to $225 million. If no event occurs that causes early termination, the 364-day program will expire on June 12, 2019. The program contains provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of the collateralized receivables. Sales of receivables under this program are accounted for as secured borrowings based on our continuing involvement in the transferred assets. No amounts were outstanding under the program at March 31, 2019. At December 31, 2018, $200 million was outstanding under the program.

At March 31, 2019 and December 31, 2018, we had letters of credit and surety bonds outstanding totaling $373 million and $375 million, respectively, which primarily guarantee the payment of insurance claims.

The fair value of total debt (excluding capital lease and asset-backed U.S. obligations) at March 31, 2019 and December 31, 2018, was approximately $6.57 billion and $5.97 billion, respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and other debt were classified within Level 2 of the fair value hierarchy. The carrying amounts reported in the Consolidated Condensed Balance Sheets for “Cash and cash equivalents,” “Receivables, net” and “Accounts payable” approximate fair value because of the immediate or short-term maturities of these financial instruments.


25

RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

8. DERIVATIVES

From time to time, we enter into interest rate derivatives to manage our fixed and variable interest rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. We assess the risk that changes in interest rates will have either on the fair value of debt obligations or on the amount of future interest payments by monitoring changes in interest rate exposures and by evaluating hedging opportunities. We regularly monitor interest rate risk attributable to both our outstanding or forecasted debt obligations as well as any offsetting hedge positions. This risk management process involves the use of analytical techniques, including cash flow sensitivity analyses, to estimate the expected impact of changes in interest rates on our future cash flows.
 
As of March 31, 2019, we had interest rate swaps outstanding that are designated as fair value hedges for certain debt obligations, with a total notional value of $725 million and maturities through 2022. Interest rate swaps are measured at fair value on a recurring basis using Level 2 fair value inputs. The fair value of these interest rate swaps was a liability of $6 million