<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 March 31, 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 May 1, 1996
- ----------------------- ------------------------------
Common Stock, Par Value 16,021,699
$.50 Per Share
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
INDEX
-----
Page No.
--------
Part I. Financial Information
---------------------
Management Representation............................... 3
Consolidated Balance Sheets
March 31, 1996 and September 30, 1995.................. 4
Consolidated Income Statements
For the Three Months and Six Months Ended
March 31, 1996 and 1995................................ 5
Consolidated Statements of Cash Flows
For the Six Months Ended
March 31, 1996 and 1995............................... 6
Consolidated Statements of Stockholders' Equity
For the Period September 30, 1994
Through March 31, 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 3. Legal Proceedings............................. 18
Item 5. Other Matters................................. 19 - 21
Item 6. Exhibits and Reports on Form 8-K.............. 22
Signatures ........................................... 23
Exhibit Index ........................................ 24
<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>
March 31,
1996 September 30,
(unaudited) 1995 (1)
-------------- ----------------
Assets
- ---------
<S> <C> <C>
Cash $ 6.6 $ 6.3
Trade receivables, net 56.3 62.3
Lease contracts receivable 38.7 35.3
Property and equipment, at cost
Revenue equipment 1,889.5 1,812.1
Land, buildings and other 64.9 66.5
-------------- ----------------
1,954.4 1,878.6
Less-Accumulated depreciation (529.8) (480.3)
-------------- ----------------
Net property and equipment 1,424.6 1,398.3
-------------- ----------------
Other assets 27.0 20.8
-------------- ----------------
$ 1,553.2 $ 1,523.0
============== ================
Liabilities and Stockholders' Equity
- -------------------------------------
Liabilities
- -----------
Accounts payable $ 6.1 $ 7.5
Accrued interest expense 18.4 11.1
Other accrued expenses 52.3 54.4
Debt 918.9 897.5
Deferred income taxes 207.4 193.7
-------------- ----------------
Total liabilities 1,203.1 1,164.2
-------------- ----------------
Commitments and Contingencies
Stockholders' Equity
- --------------------
Common Stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding;
16,014,567 shares at March 31, 1996
and 16,568,801 at September 30, 1995 8.0 8.3
Capital in excess of par value 84.3 107.6
Retained earnings 260.1 243.4
Cumulative translation adjustment (2.3) (0.5)
-------------- ----------------
Total stockholders' equity 350.1 358.8
-------------- ----------------
$ 1,553.2 $ 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>
PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
------------------------------
(Millions of dollars except per share and share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 101.1 $ 87.1 $ 213.2 $ 183.4
Operating Expenses
Depreciation on rental equipment 36.4 26.8 72.7 53.3
Rental equipment operating expense 24.0 20.7 48.9 41.4
Selling & administrative expense 10.5 8.2 21.0 16.2
------- ------- ------- -------
70.9 55.7 142.6 110.9
------- ------- ------- -------
Operating income 30.2 31.4 70.6 72.5
Interest Expense 16.4 8.1 33.0 16.5
Foreign Exchange Loss - - 0.4 -
------- ------- ------- -------
Income from operations before
provision for income taxes 13.8 23.3 37.2 56.0
Provision for Income Taxes 5.6 9.7 15.1 23.2
------- ------- ------- -------
Net Income $ 8.2 $ 13.6 $ 22.1 $ 32.8
======= ======= ======= =======
Net income per share of common stock-
primary and fully diluted $ 0.51 $ 0.80 $ 1.36 $ 1.92
Weighted average number of fully
diluted common shares outstanding
(in thousands) 16,107 17,041 16,272 17,040
Cash dividends declared $ 0.18 $ 0.16 $ 0.34 $ 0.30
</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>
Six Months Ended
March 31, 1996
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 22.1 $ 32.8
Add non-cash income and expense items:
Depreciation & amortization, net 70.0 51.8
Deferred income taxes 14.5 15.7
Bad debt expense 1.9 2.0
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses (0.3) (2.5)
Cash receipts from lease contracts receivable 8.5 9.2
Recovery of property and equipment net book value 18.0 11.3
---------- ----------
Net cash provided by operating activities 134.7 120.3
---------- ----------
Cash Flows for Investing Activities:
Additions to property and equipment (122.5) (125.6)
Acquisition of certain net assets of Matson Leasing Co, Inc. (4.4) --
---------- ----------
Cash used for investing activities (126.9) (125.6)
---------- ----------
Cash Flows for Financing Activities:
Borrowing of long-term debt 242.6 41.9
Payments of long-term debt (221.1) (70.9)
Repurchase of common stock (23.6) --
Dividends paid (5.4) (5.1)
---------- ----------
Cash used for financing activities (7.5) (34.1)
---------- ----------
Net increase/(decrease) in cash 0.3 (39.4)
---------- ----------
Cash at beginning of period 6.3 43.2
---------- ----------
Cash at end of period 6.6 3.8
---------- ----------
Total interest Paid $ 24.9 $ 17.4
---------- ----------
Total Income Taxes Paid (net of refunds) $ -- $ 10.6
---------- ----------
</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 Transaction
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) -
Options 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 - - 22.1 -
Common Stock cash dividends
declared at $.34 per share - - (5.4) -
Common stock repurchased (0.3) (23.3) -
Translation adjustment - - - (1.8)
-------- -------- --------- ----------
Balance at March 31, 1996 $ 8.0 $ 84.3 $ 260.1 $ (2.3)
======== ======== ========= ==========
</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 six months ended March 31, 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 $43 million at
March 31, 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:
<TABLE>
<CAPTION>
For the three months ended March 31, 1995
----
<S> <C>
(Millions of dollars except per share amount)
---------------------------------------------
Revenues $104.8
Net income 14.5
Fully diluted earnings per common share $ .85
</TABLE>
8.
<PAGE>
<TABLE>
<CAPTION>
For the six months ended March 31, 1995
----
(Millions of dollars except per share amount)
---------------------------------------------
<S> <C>
Revenues $218.8
Net income 35.0
Fully diluted earnings per common share $ 2.05
</TABLE>
(5) XTRA's 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 March 31, 1996 and September 30, 1995 and
income statements for the three and six months ended March 31, 1996 and
1995 is summarized below:
<TABLE>
<CAPTION>
Balance Sheet Data: March 31, September 30,
-------------------
(Millions of dollars) 1996 1995
------------ -------------
<S> <C> <C>
Receivables, net $ 95.0 $ 97.7
Property and equipment, net 1,424.2 1,395.5
Other assets 33.5 27.0
-------- --------
Total assets $1,552.7 $1,520.2
======== ========
Debt $ 918.9 $ 897.5
Deferred income taxes 207.4 193.7
Other liabilities 80.6 76.5
-------- --------
Total liabilities 1,206.9 1,167.7
-------- --------
Stockholders' equity 345.8 352.5
-------- --------
Total liabilities and stockholders' equity $1,552.7 $1,520.2
======== ========
</TABLE>
9.
<PAGE>
<TABLE>
<CAPTION>
Income Statement Data:
- ----------------------
(Millions of dollars)
For the three months ended March 31, 1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 101.0 $ 87.1
Income before provision for income taxes 13.7 23.3
Net income $ 8.2 $ 13.6
<CAPTION>
For the six months ended March 31, 1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 213.2 $ 183.4
Income before provision for income taxes 37.1 55.9
Net income $ 22.1 $ 32.7
</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 March 31, 1996
- -------------------------------------
Versus the Three Months Ended March 31, 1995:
- ---------------------------------------------
This discussion includes the marine container operating results for the
three months ended March 31, 1996 and accordingly, these results may not be
comparable to the three months ended March 31, 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 16% or $14.0 million for the three months ended March
31, 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
and over-the-road trailers. Domestic equipment demand has declined
significantly as a result of a slowing economy, reduced freight levels and
shifting traffic trends in the industry. In the first six months of fiscal
1996, the transportation industry has not experienced the moderate growth seen
in the domestic economy as lower consumer spending and softness in the auto
industry and in housing starts have reduced the amount of freight shipped.
Therefore, domestic transportation companies require less leased equipment to
supplement their existing fleets. XTRA's domestic equipment utilization has
been negatively impacted by these factors as well as by an oversupply of
equipment resulting from significant industry-wide equipment purchases made
through mid 1995.
11.
<PAGE>
In addition, marine container utilization, on a worldwide basis, has
decreased due to oversupply and reduced demand, particularly in the Far East.
XTRA's marine container utilization has declined from 90% in the fourth quarter
of fiscal 1995 to 80% in the second quarter of fiscal 1996.
The following table sets forth average equipment utilization and average
fleet size during the three months ended March 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Utilization 79% 85%
Units 273,000 128,000
</TABLE>
The increase in average fleet size is primarily attributable to the
acquisition of the marine container business on June 30, 1995.
Historically, the Company's second and third quarters reflect the
seasonality of the transportation business and represent a period of lower
utilization and hence profitability. For the three months ended March 31,
1996, the Company did not achieve the levels of utilization experienced in the
same period of the prior year due to the economic and industry conditions
discussed above. These conditions have continued into the early portion of the
third quarter of fiscal 1996 and equipment utilization has not improved over the
79% level in the second quarter. Therefore, equipment utilization levels for the
entire third quarter of fiscal 1996 are not expected to achieve the levels of
the third quarter of fiscal 1995.
Operating Expenses
- ------------------
Total operating expenses increased by 27% or $15.2 million from the same
period of fiscal 1995 primarily due to higher depreciation expense which
increased by 36% or $9.6 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 16% and 28% or $3.3
and $2.3 million, respectively, principally due to costs related to the marine
container business.
Interest Expense
- ----------------
Interest expense increased by 102% or $8.3 million for the three month
ended March 31, 1996, due primarily to an increse in average net debt
outstanding partially offset by a decrease in average interest rates. The
increase rates average net debt outstanding was primarily the result of the
acqusition of the marine container business on June 30, 1995.
12.
<PAGE>
Income Before Provision for Income Taxes
- ----------------------------------------
Pretax earnings decreased 41% or $9.5 million for the three months ended
March 31, 1996 over the same period a year ago primarily due to lower
utilization caused by decreased demand for intermodal trailers, and to a lesser
extent over-the-road trailers 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 March 31, 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 Six Months Ended March 31, 1996
- -----------------------------------
Versus the Six Months Ended March 31, 1995:
- -------------------------------------------
This discussion includes the marine container operating results for the six
months ended March 31, 1996 and accordingly, these results may not be comparable
to the six months ended March 31, 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 16% or $29.8 million for the six months ended March
31, 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
and over-the-road trailers. Domestic equipment demand has declined
significantly as a result of a slowing economy, reduced freight levels and
shifting traffic trends in the industry. In the first six months of fiscal
1996, the transportation industry has not experienced the moderate growth seen
in the domestic economy as lower consumer spending and softness in the auto
industry and in housing starts have reduced the amount of freight shipped.
Therefore, domestic transportation companies require less leased equipment to
supplement their existing fleets. XTRA's domestic equipment utilization has
been negatively impacted by these factors as well as by an oversupply of
equipment resulting from significant industry-wide equipment purchases made
through mid 1995.
14.
<PAGE>
In addition, marine container utilization, on a worldwide basis, has
decreased due to oversupply and reduced demand, particularly in the Far East.
XTRA's marine container utilization has declined from 90% in the fourth quarter
of fiscal 1995 to 83% in the first six months of fiscal 1996.
The following table sets forth average equipment utilization and average
fleet size during the six months ended March 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Utilization 82% 89%
Units 269,000 128,000
</TABLE>
The increase in average fleet size is primarily attributable to the
acquisition of the marine container business on June 30, 1995.
Historically, the Company's second and third quarters reflect the
seasonality of the transportation business and represent a period of lower
utilization and hence profitability. For the six months ended March 31, 1996,
the Company did not achieve the levels of utilization experienced in the same
period of the prior year due to the economic and industry conditions discussed
above. These conditions have continued into the early portion of the third
quarter of fiscal 1996 and equipment utilization has not improved over the 82%
level year-to-date in fiscal 1996. Therefore, equipment utilization levels for
the entire third quarter of fiscal 1996 are not expected to achieve the levels
of the third quarter of fiscal 1995.
Operating Expenses
- ------------------
Total operating expenses increased by 29% or $31.7 million from the same
period of fiscal 1995 primarily due to higher depreciation expense which
increased by 36% or $19.4 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 18% and 30% or $7.5
and $4.8 million, respectively, principally due to costs related to the marine
container business and increased costs related to management information
systems.
Interest Expense
- ----------------
Interest expense increased by 100% or $16.5 million for the six months
ended March 31, 1996, due primarily 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, 1996.
15.
<PAGE>
Foreign Exchange Loss
- ---------------------
Foreign exchange loss of $.4 million for the six months ended March 31,
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 US dollar during the first fiscal
quarter.
Income Before Provision for Income Taxes
- ----------------------------------------
Pretax earnings decreased 34% or $18.8 million for the six months ended
March 31, 1996 over the same period a year ago primarily due to lower
utilization caused by decreased demand for intermodal trailers, and to a lesser
extent over-the-road trailers 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 six months ended March 31, 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 six months ended March 31, 1996, the Company generated cash
flows from operations of $135 million. During the same period, XTRA invested
$127 million in property and equipment, paid dividends of $5 million and
repurchased common stock of $24 million. Net debt outstanding (debt less cash)
increased $21 million.
As of May 2, 1996, committed capital expenditures for fiscal 1996 amounted
to approximately $195 million of which $123 million has already been expended in
the first two quarters. While the Company may increase capital spending in 1996
if conditions warrant, given current industry conditions, it is unlikely to
significantly exceed the committed capital spending level of $195 million.
16.
<PAGE>
On May 2, 1996, XTRA's Board of Directors declared a quarterly cash
dividend of $.18 per share, payable on May 31, 1996, to stockholders of record
on May 15, 1996.
From October 1, 1995 to May 10, 1996, the Company had repurchased $26
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 $46 million of common stock.
From October 1, 1995 to May 2, 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 March 31, 1996, approximately 16% 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 May 2, 1996, $605 million of securities
were available under the Shelf Registration Statement.
On May 2, 1996, the Company had $124 million of unused credit available
under its Revolving Credit Agreement.
17.
<PAGE>
Part II - OTHER INFORMATION
---------------------------
Item 3 - Legal Proceedings
- --------------------------
There are no material pending legal proceedings in which the Company is
named as a defendant.
The Company has reached agreements to resolve the alleged involvement of a
subsidiary of the Company with respect to the environmental problems at Edgerton
Sand and Gravel Landfill site in Edgerton, Wisconsin and an adjacent
manufacturing facility owned by the subsidiary prior to 1978. These agreements
will resolve the amount of the Company's financial obligations with respect to
the remediation as well as the provision of an alternative water supply to
affected residences in the area of the landfill site. The Company's financial
obligations under these agreements which are not material to the financial
condition of the Company, have previously been fully provided for in the
Company's financial statements.
18.
<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.
19.
<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 severe 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 can change profitability 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 grown its fleet
20.
<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.
21.
<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 six months ended March 31, 1996
and 1995
12.1 Statement of the calculation of earnings to fixed
charges for the six months ended March 31, 1996 and
1995 for XTRA Corporation
12.2 Statement of the calculation of earnings to fixed
charges for the six months ended March 31, 1996 and
1995 for XTRA, Inc.
27.0 Financial Data Schedule
(b) Reports of Form 8-K
- --- -------------------
On May 6, 1996, a Current Report on Form 8-K was filed by the Company to
disclose certain financial information for the fiscal second quarter ended March
31, 1996.
22.
<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: May 14, 1996 /s/ Michael J. Soja
-------------------- --------------------------------------
Michael J. Soja
Vice President and
Chief Financial Officer
Date: May 14, 1996 /s/ Robert B. Blakeley
--------------------- --------------------------------------
Robert B. Blakeley
Controller and
Chief Accounting Officer
23.
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
11.1 Statement of the calculation of earnings per share for the three
and six months ended March 31, 1996 and 1995
12.1 Statement of the calculation of earnings to fixed charges for the
six months ended March 31, 1996 and 1995 for XTRA Corporation
12.2 Statement of the calculation of earnings to fixed charges for the
six months ended March 31, 1996 and 1995 for XTRA, Inc.
27.0 Financial Data Schedule
24.
<PAGE>
Exhibit 11.1
XTRA Corporation
Earnings Per Share and Weighted Average Shares Outstanding Calculation
----------------------------------------------------------------------
For the three and six months ended March 31, 1996 and 1995
(Millions of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ----------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $ 8.2 $ 13.6 $ 22.1 $ 32.8
========== =========== =========== ===========
Weighted average number of fully diluted common
shares outstanding (in thousands) 16,107 17,041 16,272 17,040
Earnings per common and
diluted common equivalent share $ 0.51 $ 0.80 $ 1.36 $ 1.92
========== =========== =========== ===========
Computation of Primary Shares Outstanding (in thousands)
- -------------------------------------------------------
Weighted average common shares outstanding 16,072 16,952 16,235 16,947
Common stock equivalents for primary EPS: 30 89 32 90
---------- ----------- ----------- -----------
Weighted average number of common
shares outstanding (primary) 16,102 17,041 16,267 17,037
========== =========== =========== ===========
Computation of Fully Diluted Shares Outstanding (in thousands)
- -------------------------------------------------------------
Weighted average common shares outstanding 16,072 16,952 16,235 16,946
Common stock equivalents for fully diluted EPS: 35 89 37 93
---------- ----------- ----------- -----------
Weighted average number of common
shares outstanding (fully diluted) 16,107 17,041 16,272 17,040
========== =========== =========== ===========
</TABLE>
<PAGE>
Exhibit 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
---------------------------------------------------------
For the six months ended March 31, 1996 and 1995
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 37.2 $ 56.0
Add: Fixed charges (below) 33.1 16.7
-------- --------
$ 70.3 $ 72.7
======== ========
FIXED CHARGES
Interest expense $ 33.0 $ 16.5
Interest portion of rent expense 0.1 0.2
-------- --------
$ 33.1 $ 16.7
======== ========
Ratio of Earnings to Fixed Charges 2.1 4.4
======== ========
</TABLE>
Note: For purposes 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 six months ended March 31, 1996 and 1995
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 37.1 $ 55.9
Add: Fixed charges (below) 33.1 16.7
------- -------
$ 70.2 $ 72.6
======= =======
FIXED CHARGES
Interest expense $ 33.0 $ 16.5
1S6.5
Interest portion of rent expense 0.1 0.2
------- -------
$ 33.1 $ 16.7
======= =======
Ratio of Earnings to Fixed Charges 2.1 4.4
======= =======
</TABLE>
Note: For purposes of computing the ratio of earnings to fixed charges,
"earnings" represents income from operations before taxes plus fixed
charges. "Fixed charges" for operations consists 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 March 31, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 6,600,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,954,400,000
<DEPRECIATION> 529,800,000
<TOTAL-ASSETS> 1,553,200,000
<CURRENT-LIABILITIES> 0
<BONDS> 918,900,000
0
0
<COMMON> 8,000,000
<OTHER-SE> 342,100,000
<TOTAL-LIABILITY-AND-EQUITY> 1,553,200,000
<SALES> 0
<TOTAL-REVENUES> 213,200,000
<CGS> 0
<TOTAL-COSTS> 142,600,000
<OTHER-EXPENSES> 400,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,000,000
<INCOME-PRETAX> 37,200,000
<INCOME-TAX> 15,100,000
<INCOME-CONTINUING> 22,100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,100,000
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
