<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1996
------------------------------------------------------
Commission File Number 1-7654
----------------------------------------------------------
XTRA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-0954158
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 State Street, Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(617) 367-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 7, 1996
- ----------------------- -------------------------------
Common Stock, Par Value 15,659,999
$.50 Per Share
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
INDEX
-----
Page No.
--------
Part I. Financial Information
---------------------
Management Representation. ................................... 3
Consolidated Balance Sheets
June 30, 1996 and September 30, 1995 ........................ 4
Consolidated Income Statements
For the Three Months and Nine Months Ended
June 30, 1996 and 1995 ...................................... 5
Consolidated Statements of Cash Flows
For the Nine Months Ended
June 30, 1996 and 1995 ...................................... 6
Consolidated Statements of Stockholders' Equity
For the Period September 30, 1994
Through June 30, 1996........................................ 7
Notes to Consolidated Financial Statements ................... 8 - 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 11 - 17
Part II. Other Information
Item 5 Other Matters...................................... 18 - 20
Item 6 Exhibits and Reports on Form 8-K................... 21
Signatures ............................................... 22
Exhibit Index ............................................... 23
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
MANAGEMENT REPRESENTATION
-------------------------
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that the disclosures are adequate
to make the information presented not misleading.
The Board of Directors carries out its responsibility for the financial
statements included herein through its Audit Committee, composed of non-employee
Directors. During the year, the Committee meets periodically with both
management and the independent public accountants to ensure that each is
carrying out its responsibilities. The independent public accountants have full
and free access to the Audit Committee and meet with its members, with and
without management being present, to discuss auditing and financial reporting
matters.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K.
This financial information reflects, in the opinion of management, all
adjustments consisting of only normal recurring adjustments necessary to present
fairly the results for the interim periods. The results of operations for such
interim periods are not necessarily indicative of the results to be expected for
the full year.
-3-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------------
(Millions of dollars except per share and share amounts)
<TABLE>
<CAPTION>
June 30,
1996 September 30,
(unaudited) 1995 (1)
------------- --------------
Assets
- -----------
<S> <C> <C>
Cash $ 8.3 $ 6.3
Trade receivables, net 57.5 62.3
Lease contracts receivable 40.2 35.3
Other assets 22.8 20.8
Property and equipment, at cost
Revenue equipment 1,920.8 1,812.1
Land, buildings and other 65.1 66.5
------------- --------------
1,985.9 1,878.6
Less - Accumulated depreciation (547.7) (480.3)
------------- --------------
Net property and equipment 1,438.2 1,398.3
------------- --------------
$ 1,567.0 $ 1,523.0
============= ==============
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities
- -----------
Accounts payable and accrued expenses $ 65.2 $ 73.0
Debt 939.2 897.5
Deferred income taxes 215.4 193.7
------------- --------------
Total liabilities 1,219.8 1,164.2
============= ==============
Commitments and Contingencies
Stockholders' Equity
- --------------------
Common Stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding;
15,857,399 shares at June 30, 1996
and 16,568,801 at September 30, 1995 7.9 8.3
Capital in excess of par value 76.7 107.6
Retained earnings 265.0 243.4
Cumulative translation adjustment (2.4) (0.5)
------------- --------------
Total stockholders' equity 347.2 358.8
------------- --------------
$ 1,567.0 $ 1,523.0
============= ==============
</TABLE>
(1) Derived from XTRA Corporation's audited September 30, 1995 financial
statements.
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
---------------------------------
(Millions of dollars except per share and share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 101.4 $ 86.3 $ 314.7 $ 269.6
Operating Expenses
Depreciation on rental equipment 36.4 28.2 109.1 81.4
Rental equipment operating expense 25.0 20.6 73.9 62.0
Selling & administrative expense 10.2 8.4 31.2 24.7
-------- -------- -------- --------
71.6 57.2 214.2 168.1
-------- -------- -------- --------
Operating income 29.8 29.1 100.5 101.5
Interest Expense 16.7 9.0 49.8 25.4
Foreign Exchange Loss - - 0.4 -
-------- -------- -------- --------
Income from operations before
provision for income taxes 13.1 20.1 50.3 76.1
Provision for Income Taxes 5.3 8.3 20.4 31.6
-------- -------- -------- --------
Net Income $ 7.8 $ 11.8 $ 29.9 $ 44.5
======== ======== ======== ========
Net income per share of common stock -
primary and fully diluted $ 0.49 $ 0.70 $ 1.85 $ 2.62
Weighted average number of fully diluted
common shares outstanding (in thousands) 15,995 16,860 16,179 16,979
Cash dividends declared per share $ 0.18 $ 0.16 $ 0.52 $ 0.46
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30, 1996
--------------------
1996 1995
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 29.9 $ 44.5
Add non-cash income and expense items:
Depreciation & amortization, net 105.1 76.7
Deferred income taxes 20.2 17.4
Bad debt expense 2.3 2.8
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses (8.2) (11.1)
Cash receipts from lease contracts receivable 12.8 14.0
Recovery of property and equipment net book value 27.9 21.4
--------- ---------
Net cash provided by operating activities 190.0 165.7
--------- ---------
Cash Flows for Investing Activities:
Additions to property and equipment (186.0) (235.4)
Acquisitions of certain net assets of
Matson Leasing Co, Inc. (4.4) (361.9)
--------- ---------
Cash used for investing activities (190.4) (597.3)
--------- ---------
Cash Flows from Financing Activities:
Borrowings of long-term debt 273.6 445.8
Payments of long-term debt (231.6) (35.4)
Repurchase of common stock (31.3) (8.3)
Dividends paid (8.3) (7.8)
--------- ---------
Cash provided by financing activities 2.4 394.3
--------- ---------
Net increase/(decrease) in cash 2.0 (37.3)
Cash at beginning of period 6.3 43.2
--------- ---------
Cash at end of period $ 8.3 $ 5.9
========= =========
Total Interest Paid $ 47.4 $ 25.8
Total Income Taxes Paid (net of refunds) $ 0.2 $ 16.6
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------------
(Millions of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Common
Stock Capital in Cumulative
$.50 Excess of Retained Translation
Par Value Par Value Earnings Adjustment
--------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 $ 8.4 $ 125.4 $ 196.6 $ 0.1
Net income - - 57.3 -
Common Stock cash dividends
declared at $.62 per share - - (10.5) -
Option exercised and related tax benefits 0.1 2.0 - -
Common stock repurchased (0.2) (19.8)
Translation adjustment - - - (0.6)
--------- ---------- -------- -----------
Balance at September 30, 1995 $ 8.3 $ 107.6 $ 243.4 $ (0.5)
Net income - - 29.9 -
Common Stock cash dividends
declared at $.52 per share - - (8.3) -
Common stock repurchased (0.4) (30.9) -
Translation adjustment - - - (1.9)
--------- ---------- -------- -----------
Balance at June 30, 1996 $ 7.9 $ 76.7 $ 265.0 $ (2.4)
========= ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-7-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) The consolidated financial statements include the accounts of XTRA
Corporation and its wholly-owned subsidiaries (the "Company"). All
material intercompany accounts and transactions have been eliminated.
Certain amounts in prior period financial statements have been reclassified
to be consistent with the current periods' presentation.
(2) The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for
fiscal 1995 was approximately 42%. For the nine months ended June 30, 1996,
the Company has recorded a provision for income taxes using an estimated
effective income tax rate of approximately 41%. The Company's effective
income tax rate for fiscal 1995 and its estimated effective income tax rate
for fiscal 1996 are higher than the statutory U.S. Federal income tax rate
due primarily to state income taxes.
(3) The Company's long-term debt includes a current portion of $38 million at
June 30, 1996 and $56 million at September 30, 1995.
(4) In June 1995, the Company acquired certain net assets of Matson Leasing
Company, Inc., a major lessor of marine container equipment which at that
time operated a rental fleet of approximately 170,000 twenty-foot
equivalent units. Total consideration for the assets approximated $360
million in cash, including $10 million for purchased containers, and a
final payment of $4 million made in the first quarter of fiscal 1996. The
transaction was accounted for as a purchase.
The unaudited pro forma condensed consolidated income statement of the
Company, as if Matson Leasing Company, Inc. had been acquired on October 1,
1994 is as follows:
For the three months ended June 30, 1995
----
(Millions of dollars except per share amount)
-----------------------------------------------
Revenues $104.7
Net income 13.0
Fully diluted earnings per common share $ .77
-8-
<PAGE>
For the nine months ended June 30, 1995
------
(Millions of dollars except per share amount)
---------------------------------------------
Revenues $323.5
Net income 48.0
Fully diluted earnings per common share $ 2.82
(5) The Illinois Environmental Protection Agency has notified a subsidiary of
the Company of alleged environmental contamination resulting from zinc
smelting operations by a prior owner of property that the subsidiary owns
in Fairmont City, Illinois. The Company has had initial discussions with
the successors in interest currently responsible for the liabilities of the
prior owner with respect to participation in an investigation and cleanup
of the facility under the Illinois voluntary remediation program. Based
upon the Company's current understanding of the nature of the
contamination, the Company believes that the resolution of this matter will
not have a material impact on the Company's results of operations, cash
flows or financial condition.
(6) XTRA Corporation's wholly-owned subsidiary, XTRA Missouri, Inc., is a
holding company which owns the stock of XTRA, Inc. and also manages the
Company's office space. Both XTRA Corporation's and XTRA Missouri, Inc.'s
balance sheets consist substantially of the aggregate assets, liabilities,
earnings and equity of XTRA, Inc. Therefore, the Company's management has
determined that separate financial statement disclosure of XTRA Missouri,
Inc. is not material to investors. In addition, XTRA Corporation and XTRA
Missouri, Inc. have jointly and severally guaranteed certain debt of XTRA,
Inc.
The condensed consolidated financial data for XTRA, Inc., a wholly-owned
subsidiary of XTRA Missouri, Inc. included in the XTRA Corporation
consolidated balance sheets dated June 30, 1996 and September 30, 1995 and
income statements for the three and nine months ended June 30, 1996 and
1995 is summarized below:
<TABLE>
<CAPTION>
Balance Sheet Data:
------------------- June 30, September 30,
(Millions of dollars) 1996 1995
--------- -------------
<S> <C> <C>
Receivables, net $ 97.7 $ 97.7
Property and equipment, net 1,438.1 1,395.5
Other assets 30.8 27.0
-------- ---------
Total assets $1,566.6 $1,520.2
======== =========
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C>
Debt $ 939.2 $ 897.5
Deferred income taxes 215.4 193.7
Other liabilities 65.5 76.5
-------- --------
Total liabilities 1,220.1 1,167.7
Stockholders' equity 346.5 352.5
-------- --------
Total liabilities and stockholders' equity $1,566.6 $1,520.2
======== ========
</TABLE>
Income Statement Data:
- ----------------------
(Millions of dollars)
<TABLE>
For the three months ended June 30, 1996 1995
-------- --------
<S> <C> <C>
Revenues $ 101.5 $ 86.3
Income before provision for income taxes 13.0 20.1
Net income $ 7.7 $ 11.8
For the nine months ended June 30, 1996 1995
-------- --------
Revenues $ 314.7 $ 269.6
Income before provision for income taxes 50.2 76.1
Net income $ 29.8 $ 44.5
</TABLE>
-10-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The discussion below may contain certain forward-looking statements, such
as estimates of economic and industry conditions, equipment utilization and
capital expenditures. Actual results may vary from those contained in such
forward-looking statements. See "Cautionary Statements for Purposes of the
'Safe Harbor' Provisions of the Private Securities Litigation Act of 1995"
contained in Part II, Item 5.
The Three Months Ended June 30, 1996
- ------------------------------------
Versus the Three Months Ended June 30, 1995:
- --------------------------------------------
This discussion includes the marine container operating results for the
three months ended June 30, 1996 and accordingly, these results may not be
comparable to the three months ended June 30, 1995 due to the completion of the
acquisition of Matson Leasing Company, Inc. on June 30, 1995.
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are generated by leasing over-the-road trailers, marine
containers, intermodal trailers, chassis and domestic containers. Revenues are
a function of lease rates and working units; the latter depends on fleet size
and equipment utilization.
Revenues increased by 17% or $15.1 million for the three months ended June
30, 1996 over the same period a year ago, primarily due to the acquisition of
the marine container business. Partially offsetting the increase was a decrease
in revenues derived from the Company's domestic businesses, primarily intermodal
trailers. The decrease in utilization of the Company's domestic transportation
equipment reflects reduced freight levels, shifting traffic trends in the
industry and increased industry-wide capacity. The over-supply of domestic
transportation equipment is primarily due to the record level of industry
purchases in 1994 and 1995. While 1996 industry purchases of equipment have
been reduced considerably, the over-capacity, while diminished, continues to
exist.
In addition, growth in usage of marine containers, on a worldwide basis,
has declined due to a general over-supply of equipment and reduced demand,
particularly in the Far East. More balanced world-wide trade has resulted in
more efficient use of equipment by shippers and hence
-11-
<PAGE>
lower usage of leased containers. XTRA's marine container utilization has
declined from 90% in the fourth quarter of fiscal 1995 to 79% in the third
quarter of fiscal 1996.
During 1995 and for the first part of 1996, the domestic freight
transportation industry did not experience the moderate growth seen in the
domestic economy as lower consumer spending, inventory corrections and softness
in such key measures as the auto industry and housing starts caused reduced
freight volumes. These factors as well as excess industry capacity resulted in
lower utilization of the Company's equipment. Recent signs of improvement in
these economic factors as well as modest improvements in key industry
indicators such as the level of intermodal loadings and reduced purchases of new
transportation equipment, suggest that industry conditions may be improving
modestly.
The following table sets forth average equipment utilization and average
fleet size during the three months ended June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Utilization 79% 83%
Units 278,000 129,000
</TABLE>
The increase in average fleet size is primarily attributable to the
acquisition of the marine container business on June 30, 1995.
Historically, the third fiscal quarter reflects a seasonally lower period
of utilization and hence profitability. Third quarter utilization levels were
consistent with second quarter levels which may be indicative of a stabilization
in business conditions in our various lease markets. To date, the Company has
experienced some seasonal improvements in utilization from the third quarter
level; however business conditions remain challenging.
Operating Expenses
- ------------------
Total operating expenses increased by 25% or $14.4 million from the same
period of fiscal 1995 primarily due to higher depreciation expense which
increased by 29% or $8.2 million. The increased depreciation resulted primarily
from the addition of the marine container fleet as well as an increase in the
fleet of over-the-road trailers. In addition, rental equipment operating
expenses and selling and administrative expenses both increased 21% or $4.4
and $1.8 million, respectively, principally due to costs related to the marine
container business.
-12-
<PAGE>
Interest Expense
- ----------------
Interest expense increased by 86% or $7.7 million for the three months
ended June 30, 1996, due to an increase in average net debt outstanding
partially offset by a decrease in average interest rates. The increase in
average net debt outstanding was primarily the result of the acquisition of the
marine container business on June 30, 1995.
Income Before Provision for Income Taxes
- ----------------------------------------
Pretax earnings decreased 35% or $7.0 million for the three months ended
June 30, 1996 over the same period a year ago primarily due to lower domestic
equipment utilization and as a result of the Company's high percentage of fixed
costs.
Provision for Income Taxes
- --------------------------
The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for fiscal
1995 was approximately 42%. For the three months ended June 30, 1996, the
Company has recorded a provision for income taxes using an estimated effective
income tax rate of approximately 41%. The Company's effective income tax rate
for fiscal 1995 and its estimated effective income tax rate for fiscal 1996 are
higher than the statutory U.S. Federal income tax rate due primarily to state
income taxes.
-13-
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The discussion below may contain certain forward-looking statements, such as
estimates of economic and industry conditions, equipment utilization and capital
expenditures. Actual results may vary from those contained in such forward-
looking statements. See "Cautionary Statements for Purposes of the 'Safe
Harbor' Provisions of the Private Securities Litigation Act of 1995" contained
in Part II, Item 5.
The Nine Months Ended June 30, 1996
- -----------------------------------
Versus the Nine Months Ended June 30, 1995:
- -------------------------------------------
This discussion includes the marine container operating results for the
nine months ended June 30, 1996 and accordingly, these results may not be
comparable to the nine months ended June 30, 1995 due to the completion of the
acquisition of Matson Leasing Company, Inc. on June 30, 1995.
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are generated by leasing over-the-road trailers, marine
containers, intermodal trailers, chassis and domestic containers. Revenues are a
function of lease rates and working units; the latter depends on fleet size and
equipment utilization.
Revenues increased by 17% or $45.1 million for the nine months ended June
30, 1996 over the same period a year ago, primarily due to the acquisition of
the marine container business. Partially offsetting the increase was a decrease
in revenues derived from the Company's domestic businesses, primarily intermodal
trailers. The decrease in utilization of the Company's domestic transportation
equipment reflects reduced freight levels, shifting traffic trends in the
industry and increased industry-wide capacity. The over-supply of domestic
transportation equipment is primarily due to the record level of industry
purchases in 1994 and 1995. While 1996 industry purchases of equipment have been
reduced considerably, the over-capacity, while diminished, continues to exist.
In addition, growth in usage of marine containers, on a worldwide basis,
has declined due to a general over-supply of equipment and reduced demand,
particularly in the Far East. Better world-wide trade balance has resulted in
more efficient use of equipment by shippers and hence
-14-
<PAGE>
lower usage of leased containers. XTRA's marine container utilization has
declined from 90% in the fourth quarter of fiscal 1995 and averaged 81% for
the nine months ended June 30, 1996.
During 1995 and for the first part of 1996, the domestic freight
transportation industry did not experience the moderate growth seen in the
domestic economy as lower consumer spending, inventory corrections and softness
in such key measures as the auto industry and housing starts caused reduced
freight volumes. These factors as well as excess industry capacity resulted in
lower utilization of the Company's equipment. Recent signs of improvement in
these economic factors as well as modest improvements in key industry indicators
such as the level of intermodal loadings and reduced purchases of new
transportation equipment, suggest that industry conditions may be improving
modestly.
The following table sets forth average equipment utilization and average
fleet size during the nine months ended June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Utilization 81% 87%
Units 272,000 129,000
</TABLE>
The increase in average fleet size is primarily attributable to the
acquisition of the marine container business on June 30, 1995.
Historically, the second and third fiscal quarter reflects a seasonally
lower period of utilization and hence profitability. Third quarter utilization
levels were consistent with second quarter levels which may be indicative of a
stabilization in business conditions in our various lease markets. To date, we
have experienced some seasonal improvements in utilization from the third
quarter level; however business conditions remain challenging.
Operating Expenses
- ------------------
Total operating expenses increased by 27% or $46.1 million from the same
period of fiscal 1995 primarily due to higher depreciation expense which
increased by 34% or $27.7 million. The increased depreciation resulted primarily
from the addition of the marine container fleet as well as an increase in the
fleet of over-the-road trailers. In addition, rental equipment operating
expenses and selling and administrative expenses increased 19% and 26% or $11.9
and $6.5 million, respectively, principally due to costs related to the marine
container business.
-15-
<PAGE>
Interest Expense
- ----------------
Interest expense increased by 96% or $24.4 million for the nine months
ended June 30, 1996, due to an increase in average net debt outstanding
partially offset by a decrease in average interest rates. The increase in
average net debt outstanding was primarily the result of the acquisition of the
marine container business on June 30, 1995.
Foreign Exchange Loss
- ---------------------
Foreign exchange loss of $.4 million for the nine months ended June 30,
1996 is attributable to the translation of certain liabilities of the Company's
intermodal and over-the-road businesses. This loss is a result of the decreasing
value of the Canadian dollar versus the U.S. dollar during the first fiscal
quarter.
Income Before Provision for Income Taxes
- ----------------------------------------
Pretax earnings decreased 34% or $25.8 million for the nine months ended
June 30, 1996 over the same period a year ago primarily due to lower domestic
equipment utilization and as a result of the Company's high percentage of fixed
costs.
Provision for Income Taxes
- --------------------------
The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for fiscal
1995 was approximately 42%. For the nine months ended June 30, 1996, the Company
has recorded a provision for income taxes using an estimated effective income
tax rate of approximately 41%. The Company's effective income tax rate for
fiscal 1995 and its estimated effective income tax rate for fiscal 1996 are
higher than the statutory U.S. Federal income tax rate due primarily to state
income taxes.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended June 30, 1996, the Company generated cash
flows from operations of $190 million. During the same period, XTRA invested
$190 million in property and equipment, paid dividends of $8 million and
repurchased common stock of $32 million. Net debt outstanding (debt less cash)
increased $40 million.
-16-
<PAGE>
As of August 1, 1996, committed capital expenditures for fiscal 1996
amounted to approximately $215 million of which $190 million has already been
expended in the first three quarters. Given current industry conditions, it is
unlikely that total capital expenditures for 1996 will increase. 1997 capital
spending is expected to be significantly less than 1996 with spending in the
first half of the fiscal year being particularly modest.
On August 1, 1996, XTRA's Board of Directors declared a quarterly cash
dividend of $.18 per share, payable on August 30, 1996, to stockholders of
record on August 15, 1996.
From October 1, 1995 to August 7, 1996, the Company had repurchased $41
million of its common stock pursuant to its $100 million common stock repurchase
program. Since the implementation of the program in fiscal 1995, the Company has
repurchased $61 million of common stock.
From October 1, 1995 to August 7, 1996, the Company sold $243 million in
Medium-Term Notes with a weighted average life of 7.9 years and an average
interest rate of 6.5%. As of June 30, 1996, approximately 19% of the Company's
debt is at floating rates, compared to 37% at September 30, 1995.
In fiscal 1996, the Company filed a Shelf Registration Statement bringing
its total available registered securities to approximately $740 million. The
Shelf Registration consists of Preferred Stock and Common Stock, and Senior and
Subordinated debt securities. As of August 7, 1996, $604 million of securities
were available under the Shelf Registration Statement.
On August 7, 1996, the Company had $126 million of unused credit available
under its Revolving Credit Agreement.
-17-
<PAGE>
Part II - OTHER INFORMATION
---------------------------
Item 5 - Other Matters
- ----------------------
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
- -------------------------------------------------------------------------
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
- ------------------------------------------------
The Company may occasionally make forward-looking statements and estimates
such as forecasts and projections of the Company's future performance or
statements of management's plans and objectives. These forward-looking
statements may be contained in, among other things, SEC filings and press
releases made by the Company and in oral statements made by the officers of the
Company. Actual results could differ materially from those in such forward-
looking statements. Therefore, no assurances can be given that the results in
such forward-looking statements will be achieved. Important factors that could
cause the Company's actual results to differ from those contained in such
forward-looking statements include, among others, the factors mentioned below.
VARIABLE REVENUES AND FIXED OPERATING EXPENSES:
- ----------------------------------------------
The Company's revenues are variable due to their dependence on the level of
domestic and international economic activity. In addition, the Company has a
high percentage of fixed operating expenses, including depreciation, a portion
of rental equipment operating expense and selling and administrative expenses.
As a result, the Company's pretax profits are cyclical. If domestic or global
economic activity remains slow, operating margins may be adversely affected.
See below for further discussion.
Variability of Revenues:
- ------------------------
The Company's revenues are variable and are based on lease rates, utilization,
supply of and demand for equipment. See below for further discussion.
Lease Rates:
- -----------
Lease rates depend on the type of lease, length of term, maintenance provided
and the type and age of the equipment. Future lease rates may increase or
decrease depending on competition, economic conditions and other factors.
-18-
<PAGE>
Utilization:
- ------------
Utilization is the ratio of revenue earning units to the total fleet.
Utilization is directly impacted by the level of economic activity in North
America, world trade activity, the supply of and demand for available equipment,
the actions of competitors and other factors in the freight transportation
industry.
Supply of Equipment:
- --------------------
New equipment, supplied by a number of manufacturers, is built to the Company's
specifications and reflects industry standards and customer needs. There is
often a considerable amount of time between when an order is placed and when the
equipment is delivered. In addition, it is difficult to accurately predict
demand for the Company's equipment in future periods. As a result, the
Company's performance in a given period may be adversely affected either because
of its inability to quickly increase fleet size (because of extended back
orders) to take advantage of unexpectedly strong demand, or to quickly reduce
fleet size in order to react to reduced demand.
Demand:
- -------
Demand for equipment is affected by economic factors, equipment supply and
shifting traffic trends in the industry. A softening domestic or international
economy may result in lower levels of freight shipments. Shifting traffic
trends in the industry, such as truckers competing more aggressively, may divert
some intermodal freight to over-the-road. Other items affecting demand which may
impact leasing needs can include adverse weather conditions such as floods or
snow storms or strikes by transportation unions.
Operating Expenses:
- -------------------
The Company's operating expenses consist of a high percentage of fixed costs and
thus profitability can change as revenues fluctuate due to increases and
decreases in utilization and/or lease rates. The fixed costs include
depreciation, a portion of rental equipment operating expense and selling and
administrative expenses. As a result, income from operations can be cyclical. If
revenues decline in any period, operating margins may change from those reported
in prior periods due to the fixed nature of a significant portion of the
Company's expenses.
CAPITAL NEEDS:
- --------------
The acquisition of new equipment, both for growth as well as replacement of
older equipment, is capital intensive. In addition, over the past several
years, the Company has increased its fleet
-19-
<PAGE>
through acquisitions of other companies such as Strick Lease and Matson Leasing
Company, Inc., requiring additional capital. While the Company generally has
had available a variety of sources to finance such expenditures and acquisitions
at favorable rates or terms, the availability of such capital depends heavily
upon prevailing market conditions, the Company's capital structure and its
credit ratings. No assurances can be given that financing will continue to be
available at attractive rates or with covenants that are not more restrictive
than the Company's current debt covenants.
INTEREST RATES:
- ---------------
Over the past several years, interest rates have remained at historically low
levels. Because of the Company's heavy dependence upon external financing to
fund its capital needs and acquisitions, the level of interest rates directly
effects the Company's profitability. The Company attempts to moderate the
effect of changing interest rates by maintaining a high percentage of its debt
with fixed rates. However, an increase in interest rates or a downgrading in
the Company's debt ratings would adversely impact the cost of new borrowings,
thereby adversely effecting its profitability.
FOREIGN EXCHANGE RATES:
- -----------------------
A portion of the Company's North American over-the-road and intermodal business
is transacted in local currencies. As a result, the Company's financial results
are subject to foreign exchange rate fluctuations.
ACQUISITIONS:
- ------------
Over the past years, the Company has used acquisitions of fleets operated by
other companies to help grow its business. In order for the Company to take
advantage of favorable acquisition opportunities as they are presented, it may
be necessary for the Company to significantly increase its debt leverage ratios
which could adversely effect its credit ratings. Also, the ability of the
Company to take advantage of acquisition opportunities will depend on the
availability of capital. See above for discussion.
-20-
<PAGE>
Part II - OTHER INFORMATION
----------------------------
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
- --- --------
Exhibit No. Description
- ----------- -----------
11.1 Statement of the calculation of earnings per share for
the three and nine months ended June 30, 1996 and 1995
12.1 Statement of the calculation of earnings to fixed charges
for the nine months ended June 30, 1996 and 1995 for XTRA
Corporation
12.2 Statement of the calculation of earnings to fixed charges
for the nine months ended June 30, 1996 and 1995 for XTRA,
Inc.
27.0 Financial Data Schedule
(b) Reports of Form 8-K
- --- -------------------
On August 8, 1996, a Current Report on Form 8-K was filed by the Company
to disclose certain financial information for the fiscal third quarter ended
June 30, 1996.
-21-
<PAGE>
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.
XTRA CORPORATION
----------------------------------
(Registrant)
Date: August 9, 1996 /s/ Michael J. Soja
------------------------------------- ----------------------------------
Michael J. Soja
Vice President and
Chief Financial Officer
Date: August 9, 1996 /s/ Robert B. Blakeley
------------------------------------- ----------------------------------
Robert B. Blakeley
Controller and
Chief Accounting Officer
-22-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
11.1 Statement of the calculation of earnings per share for the three
and nine months ended June 30, 1996 and 1995
12.1 Statement of the calculation of earnings to fixed charges for the
nine months ended June 30, 1996 and 1995 for XTRA Corporation
12.2 Statement of the calculation of earnings to fixed charges for the
nine months ended June 30, 1996 and 1995 for XTRA, Inc.
27.0 Financial Data Schedule
<PAGE>
Exhibit 11.1
XTRA Corporation
Earnings Per Share and Weighted Average Shares Outstanding Calculation
----------------------------------------------------------------------
For the three and nine months ended June 30, 1996 and 1995
(Millions of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income $ 7.8 $ 11.8 $ 29.9 $ 44.5
-------- ------- ------- -------
Weighted average number of fully diluted common
shares outstanding (in thousands) 15,995 16,860 16,179 16,979
Earnings per common and
dilutive common equivalent share $ 0.49 $ 0.70 $ 1.85 $ 2.62
-------- ------- ------- -------
Computation of Primary Shares Outstanding (in thousands)
- --------------------------------------------------------
Weighted average common shares outstanding 15,970 16,775 16,147 16,890
Common stock equivalents for primary EPS: 25 85 30 88
-------- ------- ------- -------
Weighted average number of common
shares outstanding (primary) 15,995 16,860 16,177 16,978
-------- ------- ------- -------
Computation of Fully Diluted Shares Outstanding (in thousands)
- --------------------------------------------------------------
Weighted average common shares outstanding 15,970 16,775 16,147 16,890
Common stock equivalents for fully diluted EPS: 25 85 32 89
-------- ------- ------- -------
Weighted average number of common
shares outstanding (fully diluted) 15,995 16,860 16,179 16,979
======== ======= ======= =======
</TABLE>
<PAGE>
Exhibit 12.1
XTRA, INC.
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
---------------------------------------------------------
For the nine months ended June 30, 1996 and 1995
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 50.3 $ 76.1
Add: Fixed charges (below) 49.9 25.7
-------- --------
$ 100.2 $ 101.8
======== ========
FIXED CHARGES
Interest expense $ 49.8 $ 25.4
Interest portion of rent expense 0.1 0.3
-------- --------
$ 49.9 $ 25.7
======== ========
Ratio of Earnings to Fixed Charges 2.0 4.0
======== ========
</TABLE>
Note: For purpose of computing the ratio of earnings to fixed charges,
"earnings" represents income from operations before taxes plus fixed
charges. "Fixed charges" for operations consist of interest on
indebtedness and the portion of rental expense which represents
interest.
<PAGE>
Exhibit 12.2
XTRA, INC.
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
---------------------------------------------------------
For the nine months ended June 30, 1996 and 1995
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 50.2 $ 76.1
Add: Fixed charges (below) 49.9 25.7
-------- --------
$ 100.1 $ 101.8
======== ========
FIXED CHARGES
Interest expense $ 49.8 $ 25.4
Interest portion of rent expense 0.1 0.3
-------- --------
$ 49.9 $ 25.7
======== ========
Ratio of Earnings to Fixed Charges 2.0 4.0
======== ========
</TABLE>
Note: For purpose of computing the ratio of earnings to fixed charges,
"earnings" represents income from operations before taxes plus fixed
charges. "Fixed charges" for operations consist of interest on
indebtedness and the portion of rental expense which represents
interest.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF XTRA CORPORATION FOR THE PERIOD
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,300,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,985,900,000
<DEPRECIATION> 547,700,000
<TOTAL-ASSETS> 1,567,000,000
<CURRENT-LIABILITIES> 0
<BONDS> 939,200,000
0
0
<COMMON> 7,900,000
<OTHER-SE> 339,300,000
<TOTAL-LIABILITY-AND-EQUITY> 1,567,000,000
<SALES> 0
<TOTAL-REVENUES> 314,700,000
<CGS> 0
<TOTAL-COSTS> 214,200,000
<OTHER-EXPENSES> 400,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,800,000
<INCOME-PRETAX> 50,300,000
<INCOME-TAX> 20,400,000
<INCOME-CONTINUING> 29,900,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,900,000
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
</TABLE>
