<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-K*
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-7654
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1996
-------------------------------------
XTRA Corporation (Exact name of Registrant as specified in its charter)
DELAWARE 06-0954158
(State or other jurisdiction (I.R.S. Employer Identification number)
of incorporation or organization)
60 STATE STREET (617) 367-5000
BOSTON, MASSACHUSETTS 02109 (Registrant's telephone number)
(Address of principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
-------------------------------------
Title of each class Name of exchange on which registered
Common Stock, Par Value $.50 per Share New York Stock Exchange
-------------------------------------
Securities registered pursuant to Section 12(g) of the Act: none
-------------------------------------
Shares Outstanding of the Registrant's Common Stock at November 14, 1996:
15,246,099
Aggregate market value of voting stock held by non-affiliates of the registrant
at November 14, 1996: $612,000,000
-------------------------------------
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 twelve 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 ninety days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X.
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended September 30, 1996, of which this Form 10-K is a part, are incorporated by
reference in Parts I, II and IV. Portions of the Registrant's definitive Proxy
Statement for use at the 1996 Annual Meeting of Stockholders are incorporated
by reference in Part III.
*Exhibits to Form 10-K and Parent Company Financial Statements and Schedules
have been included only in copies of the Form 10-K filed with the Securities
and Exchange Commission.
A copy of this Form 10-K, including a list of exhibits and the Parent Company
Financial Statements and Schedules, is available free of charge to stockholders
upon written request to: Vice President and Chief Financial Officer, XTRA
Corporation, 60 State Street, Boston, Massachusetts 02109. In addition, upon
similar request, copies of individual exhibits will be furnished upon payment
of a reasonable fee.
<PAGE>
PART I.
-------------------------------------
Item 1. Business
XTRA Corporation (the "Company" or "XTRA") leases, primarily on an operating
basis, freight transportation equipment including over-the-road trailers, marine
containers, intermodal trailers, chassis and domestic containers. XTRA leases
over-the-road and intermodal equipment throughout North America, predominantly
within the United States, to private fleet owners, railroads, contract and
common carriers, as well as marine containers which are leased worldwide to
steamship lines. Customers lease equipment primarily to cover cyclical, seasonal
and geographical shortages and as a substitute for purchasing. The choice of
equipment used is influenced by lease rates, terms, availability, condition and
size of equipment, as well as other factors.
XTRA's equipment utilization and lease rates, and hence profitability, are
impacted by the level of economic activity in North America, world trade
activity, the supply of and demand for available equipment, the actions of its
competitors and other factors in the freight transportation industry.
Utilization and hence profitability is usually seasonally lower in the second
and third fiscal quarters than in the first and fourth fiscal quarters. In
general, the Company's receivable collection experience has been good. However,
industry downturns tend to lengthen the collection period of certain
receivables.
Lease Types and Rates
The Company leases its equipment on both a per diem and term basis. Per diem
leases are for an initial period of less than one year and allow the customer
to return the equipment without notice, although some per diem leases limit the
amount and locations of equipment termination. Term leases provide for an
initial period of one year or greater; generally one to five years. Lease rates
depend upon the type of lease, length of term, maintenance provided and the type
and age of the equipment. Generally, customers are responsible for damage to the
equipment except for ordinary maintenance, although full-service leases are
available on some equipment types.
Equipment Fleet
The Company's equipment fleet has grown through fleet acquisitions of other
leasing companies and through purchases of new equipment. The new equipment,
supplied by a number of manufacturers, is built to the Company's specifications
and reflects industry standards and customers needs. The Company's fleet
consisted of the following units and net investment at the end of its last five
fiscal years:
<TABLE>
<CAPTION>
Units in thousands, millions of dollars
----------------------------------------- Net Investment
Equipment Fleet(1) 1992 1993 1994 1995 1996 at 9/30/96
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Over-the-road trailers 30 65 69 76 75 $ 632
Marine containers - - - 126 152 419
Intermodal trailers 33 33 34 29 24 197
Chassis 7 15 16 21 24 119
Domestic containers 8 8 8 8 8 36
---- ---- ---- ------ ------ -------
Total 78 121 127 260 283 $ 1,403
---- ---- ---- ------ ------ -------
Net investment $478 $763 $860 $1,387 $1,403
---- ---- ---- ------ ------
</TABLE>
(1) The Company's fleet size and net investment includes equipment owned by
the Company, equipment leased-in from third parties under operating and
capital leases and equipment leased to third parties under finance leases.
For purposes of this presentation, the net investment in equipment leased
to the Company on an
<PAGE>
operating basis represents the present value of the remaining lease
payments. The net investment in revenue equipment leased to customers
under finance leases as well as equipment owned by the Company or leased
to the Company under capital leases represents the net carrying value of
this equipment. The significant increases in net investment in equipment
in 1993 and 1995 were primarily due to acquisitions. See Note 2 of the
Notes to Consolidated Financial Statements for information relating to
acquisitions.
For information regarding business information by geographic area, see Note 8 of
the Notes to Consolidated Financial Statements. For additional information,
including financing and capital expenditures, see Management's Discussion and
Analysis of Financial Condition and Results of Operations. Such information is
incorporated herein by reference.
Over-the-Road Trailers
XTRA's over-the-road fleet of 75,000 units, mostly dry cargo vans, consists
primarily of units 48' and 53' long by 102" wide. This equipment is leased to
private fleet owners, contract carriers and common carriers. Approximately 41%
of the trailer fleet was leased on a term basis at the end of fiscal 1996 with
the balance available for lease on a per diem basis.
Marine Containers
The Company's marine containers are standard, dry cargo 20' and 40' steel
containers leased primarily to steamship lines for transporting freight on ships
worldwide. XTRA's fleet consists of 152,000 units or 212,000 twenty-foot
equivalent units (TEUs), an industry measure of fleet size. Approximately 33%
of XTRA's marine container fleet was leased on a term basis at the end of fiscal
1996 with the remainder of the fleet available for lease on a per diem basis.
Intermodal Trailers
Intermodal trailers are designed to be carried on rail flatcars, pulled by
tractor over the highway and, to a lesser extent, transported by water carriers
on ships and barges. The Company's intermodal trailer fleet of 24,000 units
consists primarily of units 45' and 48' long by 102" wide. The Company's
intermodal trailers are leased primarily to North American railroads and water
carriers. Approximately 33% of the intermodal trailer fleet was leased on a term
basis at the end of fiscal 1996 with the remainder of the fleet available for
lease on a per diem basis.
Chassis
Chassis are wheeled rectangular frames used to transport containers over the
highway. Marine chassis are generally 20' or 40' in length to accommodate marine
containers and domestic chassis are generally 48' or 53' in length and handle
domestic containers. XTRA's marine and domestic chassis are used as transport
vehicles for marine and domestic containers which are loaded or unloaded at
shipyards, rail terminals or consignee locations. The Company's fleet of 24,000
units consists primarily of marine chassis and are leased to steamship lines,
railroads and motor carriers. Approximately 61% of the chassis fleet was leased
on a term basis at the end of fiscal 1996 with the balance available for lease
on a per diem basis.
<PAGE>
Domestic Containers
Domestic containers are boxes used to transport freight via rail on railcars or
highway on chassis within North America. These containers are a substitute for
intermodal and over-the-road trailers, particularly on long-haul, heavy volume
routes. XTRA's fleet of approximately 8,000 units consists primarily of 48' long
by 102" wide units leased to North American railroads and other domestic freight
carriers. Approximately 75% of the Company's domestic container fleet was leased
on a term lease basis at the end of fiscal 1996 with the balance available for
lease on a per diem basis.
Competition
Leasing transportation equipment is a highly competitive business and is
affected by factors related to the freight transportation market. Lease terms
and lease rates, as well as availability, condition and size of equipment are
all important factors to the lessee. In addition, various types of
transportation equipment compete for business. Over-the-road trailers,
intermodal trailers, marine and domestic containers, and railroad rolling stock
are all potential vehicles for the movement of freight.
XTRA believes it is the second largest North American lessor of over-the-road
trailers with its principal competitor having a slightly larger fleet. Recent
estimates place the number of over-the-road trailers available for lease in
North America at approximately 260,000.
At the end of fiscal 1996, the world's marine container leasing fleet is
estimated at 5 million TEUs. XTRA believes it is one of the eight largest
marine container lessors in the world. The two largest lessors account for
approximately 50% of the leasing market.
The Company believes that the North American intermodal trailer fleet has
decreased from approximately 110,000 trailers at the end of 1991 to
approximately 95,000 trailers at the end of fiscal 1996. Some industry analysts
believe that demand will continue to decrease. The Company monitors the size of
the North American fleet relative to current and expected future demand and
bases its trailer acquisition and disposition decisions, in part, on these
factors. XTRA believes it is the second largest North American lessor of
intermodal trailers.
XTRA believes it is the fifth largest North American chassis lessor with
approximately 9% of the leasing fleet. The Company believes it is the third
largest lessor of domestic containers with approximately 13% of the fleet.
Locations and Operations
XTRA's North American equipment is leased from equipment pools operated by
Company employees at 92 locations. The marine container operations are managed
by 14 Company offices and 9 agency locations, which utilize 105 independent
depot locations worldwide to store and maintain equipment.
<PAGE>
Employees
The Company had approximately 900 employees at September 30, 1996.
Corporate Organization
The Company was organized in 1957. XTRA's management subsidiary X-L-CO, INC. is
located at 60 State Street, Boston, Massachusetts 02109 (telephone number (617)
367-5000).
XTRA Inc., a subsidiary of XTRA Corporation, owns substantially all of the
Company's transportation equipment and conducts the Company's leasing business
through certain of its subsidiaries pursuant to management service agreements.
On October 1, 1996, XTRA Missouri, Inc., an intermediate holding company, was
merged into the Company. As a result of the merger, XTRA Inc. became a wholly-
owned direct subsidiary of the Company. For disclosure on significant
subsidiaries, see Note 12 of the Notes to Consolidated Financial Statements.
Item 2. Properties
The Company maintains 92 facilities for the storage and distribution of its
over-the-road and intermodal equipment throughout North America, occupying 677
acres, of which 386 are owned. Except for locations in Chicago and the St. Louis
area, consisting of 54 and 157 acres, respectively, these facilities are
generally 2 to 16 acres. The marine container business is managed through 14
offices worldwide.
Item 3. Legal Proceedings
The Company has reached agreements to resolve its alleged involvement with
respect to the environmental problems at the Edgerton Sand and Gravel Landfill
site in Edgerton, Wisconsin and an adjacent manufacturing facility owned by its
subsidiary prior to 1978. These agreements resolved 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 were
not material to the financial condition of the Company and had previously been
fully provided for in the Company's financial statements.
The Illinois Environmental Protection Agency has notified a subsidiary of the
Company of alleged environmental contamination resulting from the zinc smelting
operations by a prior owner of property that the subsidiary owns in Fairmont
City, Illinois. The Company has had its 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.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to stockholders of the Company during the fourth
quarter of 1996.
<PAGE>
Item 4A. Executive Officers of the Registrant
The executive officers of the Company, the age of each, and the period during
which each has served in his present office are as follows:
Lewis Rubin (58) - President and Chief Executive Officer. Mr. Rubin was
President and Chief Executive Officer of Flexi-Van Corporation, a Company
engaged in the leasing of intermodal transportation equipment, from 1981 to
1983. He served as President and Chief Executive Officer of Gelco CTI Container
Services, a subsidiary of Gelco Corporation, and as an Executive Vice President
of Gelco Corporation from 1984 to 1988. Mr. Rubin was elected President and
Chief Operating Officer of the Company in 1990. He was elected to his present
position in 1990.
Robert B. Blakeley (36) - Vice President and Controller. Mr. Blakeley joined the
Company in 1984, was promoted to Assistant Controller in 1987 and was elected to
Controller and Chief Accounting Officer in 1991. Mr. Blakeley was elected to
his present position in 1996.
Jeffrey R. Blum (44) - Vice President, Administration and Human Resources. Mr.
Blum joined the Company and was elected to his current position in 1995. Prior
to 1995, Mr. Blum served in similar capacities at First Winthrop Corporation
from 1993 to 1995 and Signal Capital Corporation prior to 1993.
Michael K. Fox (50) - Vice President, XTRA Intermodal. Mr. Fox joined the
Company in 1981 and was elected to several managerial positions. He was elected
Divisional Executive Vice President, XTRA Intermodal in 1993. He was elected to
his present position in 1994.
William H. Franz (45) - Vice President, XTRA Lease. Mr. Franz was previously
employed by two large over-the-road lessors, Transport International Pool and
Strick Lease. He joined the Company in 1992 and was elected to the position of
Divisional Executive Vice President, XTRA Lease in 1993. He was elected to his
present position in 1993.
Frederick M. Gutterson (54) - Vice President, XTRA International. Mr. Gutterson
was President and Chief Executive Officer of Matson Leasing Company, Inc. since
its inception in 1989. He was elected to his present position in 1995 following
the Matson acquisition.
Christopher P. Joyce (35) - Vice President and Treasurer. Mr. Joyce joined the
Company in 1985. He was promoted to Assistant Treasurer in 1991 and was elected
to Treasurer in 1993. Mr. Joyce was elected to his present position in 1996.
James R. Lajoie (56) - Vice President, General Counsel and Secretary. Mr. Lajoie
joined the Company as General Counsel in 1981. He was elected Vice President and
General Counsel in 1987 and was elected to his present position in 1990.
Michael J. Soja (47) - Vice President and Chief Financial Officer. Mr. Soja
joined the Company as Assistant Controller in 1974, was elected Controller in
1978, and elected Vice President in 1979. He was elected Vice President, Finance
and Administration in 1981 and was elected Vice President, Finance and Treasurer
in 1990. Mr. Soja was elected to his present position in 1990.
Charles D. Willmott (44) - Vice President, Marketing and Planning. Mr. Willmott
was President of Distribution International Corporation, the holding company for
the Strick Companies, prior to joining the Company in 1992. Mr. Willmott was
elected to his present position in 1993, following the Strick Lease acquisition.
All terms of office expire as of the date of the Board of Directors' meeting
following the next Annual Meeting of Stockholders and until their respective
successors are elected and qualified.
<PAGE>
PART II.
-------------------------------------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is listed on the New York Stock Exchange and trades
under the symbol "XTR". The approximate number of record holders as of November
14, 1996 was 877. The following table sets forth the range of high and low sale
prices of the Company's Common Stock on the New York Stock Exchange Composite
Tape and dividends declared during fiscal years ended September 30, 1995 and
1996.
<TABLE>
<CAPTION>
Dividends
High Low Declared
--------------------------------------
<S> <C> <C> <C>
1995: First Quarter $51 7/8 $40 $.14
Second Quarter 52 1/2 44 1/8 .16
Third Quarter 51 1/8 44 3/8 .16
Fourth Quarter 49 1/4 42 3/4 .16
1996: First Quarter 44 3/4 41 5/8 .16
Second Quarter 46 3/4 39 3/4 .18
Third Quarter 47 3/8 44 1/4 .18
Fourth Quarter 45 7/8 40 1/2 .18
</TABLE>
The Company has paid quarterly cash dividends on its Common Stock since
January 1977. Future dividends will be determined by the Board of Directors and
will be dependent upon the earnings, financial condition and cash requirements
of the Company and other relevant factors existing at the time.
The Company's sources of funds for the payment of dividends on its capital
stock are advances and dividends from its direct and indirect wholly-owned
subsidiaries, including XTRA, Inc. The primary sources of funds for XTRA, Inc.
are cash flows from operations, advances from its subsidiaries and external
financing. The Company's loan agreements contain covenants that restrict the
payment of dividends by the Company or repurchases of common stock and certain
loan agreements contain covenants that restrict advances to and payment of
dividends to the Company by its subsidiaries, including XTRA Inc. Under the
most restrictive provisions of the Company's loan agreements, the repurchase of
common stock and/or the amount of cash dividends which could be paid on the
Company's capital stock was limited to $94 million at September 30, 1996.
Item 6. Selected Financial Data
This information is set forth in the table appearing on page 1 of the Company's
1996 Annual Report, which table is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item appears in the Company's 1996 Annual
Report beginning at page 21 and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
For the Financial Statements and Supplementary Data for XTRA Corporation and its
subsidiaries, see Index to Financial Statements on page 17 of the Company's
1996 Annual Report, which Financial Statements and Supplementary Data are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
<PAGE>
PART III.
-------------------------------------
Item 10. Directors and Executive Officers of the Registrant
(a) Directors - Information with respect to all directors may be found in the
Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders (the "1997 Proxy Statement") under the caption "Information
with Respect to Director Nominees," which is to be filed with the Securities
and Exchange Commission. Such information is incorporated herein by
reference.
(b) Executive Officers - Information with respect to executive officers of the
registrant appears in Item 4A of this Report on Form 10-K.
Item 11. Executive Compensation
This information is contained in the 1997 Proxy Statement under the captions
"Executive Compensation Tables" and "Compensation of Directors." Such
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is contained in the 1997 Proxy Statement under the captions
"Stock Ownership by Directors and Executive Officers" and "Beneficial Ownership
of More Than Five Percent of Voting Securities." Such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
This information is contained in the 1997 Proxy Statement under the captions
"Information with Respect to Director Nominees" and "Certain Transactions."
Such information is incorporated herein by reference.
<PAGE>
PART IV.
-------------------------------------
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Required exhibits are included only in the Form 10-K filed with the
Securities and Exchange Commission.
(b) The Company filed a Current Report on Form 8-K, dated November 27, 1996,
which disclosed certain financial information for the fiscal fourth quarter
ended September 30, 1996.
(c) For Financial Statements and Schedule, see Index to Financial Statements on
page 17 of the Company's 1996 Annual Report, which Financial Statements and
Schedules are incorporated herein by reference.
-------------------------------------
<PAGE>
XTRA CORPORATION SCHEDULE I
(PARENT COMPANY ONLY)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1996
In Millions except per share amounts
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Investment in Subsidiary $ 355.9 $ 344.2
Advances to Subsidiaries 3.5 0.2
---------- ----------
$ 359.4 $ 344.4
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Commitments and Contingencies
Stockholders' Equity
Preferred Stock, without par value;
total authorized: 3,000,000 shares
Common Stock, par value $.50 per share;
authorized 30,000,000 shares; issues
and outstanding 16,568,801 at September
30, 1995 and 15,550,499 at September 30,
1996 $ 8.3 $ 7.8
Capital in excess of par value 107.6 63.3
Retained earnings 243.5 273.3
---------- ----------
Total Stockholders' Equity 359.4 344.4
---------- ----------
$ 359.4 $ 344.4
---------- ----------
</TABLE>
The accompanying Notes A, B, and C and the Notes to Consolidated Financial
Statements are an integral part of these financial statements.
<PAGE>
XTRA CORPORATION SCHEDULE I
(PARENT COMPANY ONLY)
INCOME STATEMENTS
FOR THE THREE YEARS ENDED
SEPTEMBER 30, 1996
In Millions
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Equity in earnings of subsidiaries $57.6 $57.3 $41.1
---------- ---------- ----------
$57.6 $57.3 $41.1
---------- ---------- ----------
</TABLE>
The accompanying Notes A, B, and C and the Notes to Consolidated Financial
Statements are an integral part of these financial statements.
<PAGE>
XTRA CORPORATION SCHEDULE I
(PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
In Millions
1994 1995 1996
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operations:
Income from operations $57.6 $57.3 $41.1
Deduct non-cash income and expense items:
Equity in earnings of subsidiaries (57.6) (57.3) (41.1)
Add other cash items:
Dividends received from subsidiary 9.1 10.5 11.2
Repurchase of common stock - 20.0 45.8
Net change in receivables, miscellaneous
assets,
payables and accrued expenses 0.5 (2.0) (0.9)
-------- ------- -------
Total cash provided from operations 9.6 28.5 56.1
Cash flows from financing activities
Net change in advances to subsidiaries (0.5) 2.0 0.9
Dividends paid (9.1) (10.5) (11.2)
Repurchase of Common Stock - (20.0) (45.8)
-------- ------- -------
Total cash used for financing activities (9.6) (28.5) (56.1)
Net change in cash 0.0 0.0 0.0
Cash at beginning of year 0.0 0.0 0.0
-------- ------- -------
Cash at end of year $0.0 $0.0 $0.0
======== ======= =======
</TABLE>
The accompanying Notes A, B, and C and the Notes to Consolidated Financial
Statements are an integral part of these financial statements.
<PAGE>
XTRA CORPORATION
NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS
(A) Summary of Significant Accounting Policies
Accounting for Investment in Subsidiary
XTRA Corporation, the Parent company, recorded its investment in its
subsidiary, XTRA Missouri, Inc. at cost plus its equity in the
undistributed earnings of this subsidiary. All administrative and
interest expenses incurred by the Parent Company are allocated to its
direct and indirect wholly-owned subsidiaries.
(B) Capital Stock
Dividends
XTRA Corporation declared cash dividends of $.54, $.62 and $.70 per
share in the years ended September 30, 1994, 1995 and 1996,
respectively. XTRA Corporation paid out cash dividends to stockholders
totaling $9.1 million, $10.5 million and $11.2 million during fiscal
1994, 1995 and 1996, respectively.
The principal source of dividends for the Parent Company are funds
advanced from its direct and indirect wholly-owned subsidiaries,
including XTRA, Inc.
Repurchase of Common Stock
The Company has authorized the repurchase of up to $200 million of its
common stock. The timing of the repurchases, which could occur over an
extended period of time, will depend on price, market conditions and
other factors. As of November 14, 1996, the Company had repurchased
approximately $79 million of common stock.
(C) Debt and Transfers to Subsidiaries
The Parent Company has guaranteed certain debt of its indirect wholly-
owned subsidiary, including the Revolving Credit Agreement, Series Notes
and Term Loans. (See Note 4 of the Parent Company's consolidated 1996
Annual Report.)
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of XTRA Corporation:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in XTRA Corporation's Annual Report to
Stockholders incorporated by reference in the Company's Annual Report on Form
10-K for the year ended September 30, 1996, and have issued our report thereon
dated November 13, 1996. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in the index
to financial statements and incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended September 30, 1996, is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 13, 1996
<PAGE>
Signatures
Pursuant to the requirements of Section 13 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)
By /s/ Lewis Rubin
-----------------------------
President and Chief Executive Officer
November 14, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signatures Title Date
/s/ Robert B. Goergen Chairman of the November 14, 1996
Board of Directors
/s/ Robert M. Gintel Vice Chairman of the November 14, 1996
Board of Directors
/s/ Lewis Rubin President, Chief Executive November 14, 1996
Officer and Director
/s/ Michael J. Soja Vice President November 14, 1996
and Chief Financial Officer
/s/ Robert B. Blakeley Vice President and November 14, 1996
Controller
/s/ Gilbert Butler Director November 14, 1996
/s/ H. William Brown Director November 14, 1996
/s/ J. Russell Duncan Director November 14, 1996
/s/ Herbert C. Knortz Director November 14, 1996
/s/ Francis J. Palamara Director November 14, 1996
/s/ Martin L. Solomon Director November 14, 1996
<PAGE>
EXHIBIT INDEX
XTRA Corporation Form 10-K
(for fiscal year ended 9-30-96)
Exhibit Item
3.1 Restated Certificate of Incorporation of XTRA Corporation
(filed with the Securities and Exchange Commission as Exhibit 3.1
to Registrant's Annual Report on Form 10-K for the year ended
September 30, 1989, and incorporated herein by reference).
3.1.1 Certificate of Elimination of Designation, Preference and Rights
of Series A Participating Preferred Stock (filed with the Securities
and Exchange Commission as Exhibit 3.1 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1991, and
incorporated herein by reference).
3.1.2 Certificate of Elimination of Designation, Preference and Rights of
$1.9375 Series B Cumulative Convertible Preferred Stock (filed
with the Securities and Exchange Commission on March 5, 1993 as
Exhibit 4.5 to Registrant's Registration Statement on Form S-3
(file No. 33-59132), and incorporated herein by reference).
3.1.3 Certificate of Amendment of Restated Certificate of Incorporation
(filed with the Securities and Exchange Commission on March 5, 1993
as Exhibit 4.4 to Registrant's Registration Statement on Form S-3
(file No. 33-59132), and incorporated herein by reference).
3.1.4 Certificate of Elimination of Designation, Preference and Rights
of the Series C Cumulative Redeemable Exchangeable Preferred Stock
(filed with the Securities and Exchange Commission on July 26, 1994
as Exhibit 4.5 to Registrant's Registration Statement on Form S-3
(file No. 33-54747), and incorporated herein by reference).
3.2 Amended and Restated By Laws of XTRA Corporation, as amended through
January 24, 1996 (filed with the Securities and Exchange Commission as
Exhibit 3(b) to Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995, and incorporated herein by reference).
4.1 Indenture, dated as of February 1, 1989, between XTRA, Inc., XTRA
Corporation and Chemical Bank, and First Supplemental Indenture, dated
as of February 1, 1989, between XTRA, Inc., XTRA Corporation and
Chemical Bank (filed with the Securities and Exchange Commission as
Exhibits 4.1 and 4.2, respectively, to Registrant's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1988, and incorporated
herein by reference).
<PAGE>
4.1.1 Second Supplemental Indenture, dated as of December 10, 1991, to the
Indenture identified in Exhibit 4.1 above, between XTRA, Inc., XTRA
Corporation and Chemical Bank (filed with the Securities and
Exchange Commission as Exhibit 4.4.1 to Registrant's Annual Report
on Form 10-K for the year ended September 30, 1991, and incorporated
herein by reference).
4.1.2 Third Supplemental Indenture, dated as of November 1, 1992, to the
Indenture identified in Exhibit 4.1 above, between XTRA, Inc.,
XTRA Corporation and Chemical Bank (filed with the Securities and
Exchange Commission as Exhibit 4.2 to Registrant's Quarterly Report
on Form 10-Q for the Quarter ended December 31, 1992, and
incorporated herein by reference).
4.1.3 Fourth Supplemental Indenture, dated as of September 30, 1994, to
the Indenture identified in Exhibit 4.1 above, between XTRA, Inc.,
XTRA Corporation and Chemical Bank (filed with the Securities and
Exchange Commission as Exhibit 4.1.3 to Registrant's Annual Report
on Form 10-K for the year ended September 30, 1994, and incorporated
herein by reference).
4.2 Indenture, dated as of August 15, 1994, between XTRA, Inc., XTRA
Corporation and the First National Bank of Boston (filed with
the Securities and Exchange Commission as Exhibits 4.1 to
Registrant's Current Report on Form 8-K dated August 15, 1994, and
incorporated herein by reference).
4.2.1 First Supplemental Indenture, dated as of September 30, 1994, to
the Indenture identified in Exhibit 4.2 above, between XTRA, Inc.,
XTRA Corporation and the First National Bank of Boston (filed with
the Securities and Exchange Commission as Exhibit 4.2.1 to
Registrant's Annual Report on Form 10-K for the year ended
September 30, 1994, and incorporated herein by reference).
4.2.2 Form of fixed-rate Series C Medium-Term Note (filed with the Securities
and Exchange Commission as Exhibit 4.2.2 to Registrant's Annual Report
on Form 10-K for the year ended September 30, 1994, and incorporated
herein by reference).
4.2.3 Form of floating-rate Series C Medium-Term Note (filed with the
Securities and Exchange Commission as Exhibit 4.2.3 to Registrant's
Annual Report on Form 10-K for the year ended September 30, 1994, and
incorporated herein by reference).
Note: Registrant agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of any other instrument with
respect to long-term debt of the registrant and its subsidiaries.
Such other instruments are not filed herewith because no
such instrument relates to outstanding debt in amount greater
than 10% of the total assets of the Registrant and its subsidiaries
on a consolidated basis.
4.3 Credit Agreement, dated as of June 30, 1995, among XTRA, Inc., Bank
of America Illinois and Each of the Other Financial Institutions
From Time To Time Parties Thereto, with Bank of America National
Trust and Savings Association as Administrative Agent and The
First National Bank of Boston as Documentation Agent (filed with the
Securities and Exchange Commission as Exhibit 2.2 to Registrant's
Current Report on Form 8-K dated July 14, 1995, and incorporated
herein by reference).
4.3.1 Guaranty, dated June 30, 1995 by XTRA Corporation (filed with the
Securities and Exchange Commission as Exhibit 2.3 to Registrant's
Current Report on Form 8-K dated July 14, 1995, and incorporated
herein by reference).
4.3.2 First Amendment, dated as of June 28, 1996, to the Credit Agreement
identified in Exhibit 4.3 above, among Bank of America Illinois and
Each of the Other Financial Institutions From Time To Time Parties
Thereto, with Bank of America National Trust and Savings Association
as Administrative Agent and The First National Bank of Boston as
Documentation Agent, filed herewith.
10.1 Agreement and Plan of Reorganization, dated as of July 26, 1992,
among Registrant, ST Trailer Corp., Distribution International
Corporation ("DI"), Strick Corporation and certain individuals
owning approximately 70% of the capital of stock of DI (filed with the
Securities and Exchange Commission as Exhibit 2.1 to Registrant's
Current Report on Form 8-K dated August 4, 1992, and incorporated
herein by reference).
10.2 U.S. Fleet Finance Services Agreement dated as of October 1, 1994
between XTRA, Inc., and XTRA Intermodal, Inc. (filed with the
Securities and Exchange Commission as Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the year ended September 30, 1994, and
incorporated herein by reference).
10.3 U.S. Fleet Finance Services Agreement dated as of October 1, 1994
between XTRA, Inc., and XTRA Lease Inc. (filed with the
Securities and Exchange Commission as Exhibit 10.3 to Registrant's
Annual Report on Form 10-K for the year ended September 30, 1994, and
incorporated herein by reference).
<PAGE>
EXECUTIVE COMPENSATION PLANS
10.4 Fleet Finance Services Agreement dated as of July 1, 1995 between XTRA
Inc., and XTRA International Ltd. (filed with the Securities and
Exchange Commission as Exhibit 10.4 to Registrant's Annual Report on
Form 10-K for the year ended September 30, 1994, and incorporated
herein by reference).
10.5 1991 Stock Option Plan for Non-Employee Directors (filed with the
Securities and Exchange Commission as Exhibit 10.3 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and
incorporated herein by reference).
10.5.1 First Amendment to the 1991 Stock Option Plan for Non-Employee
Directors identified in Exhibit 10.5 above (filed with the Securities
and Exchange Commission as Exhibit 10.3.1 to Registrant's Annual Report
on Form 10-K for the year ended September 30, 1993, and incorporated
herein by reference).
10.6 1987 Stock Incentive Plan, as amended through November 16, 1995
(filed with the Securities and Exchange Commission as Exhibit 10.1
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, and incorporated herein by reference).
10.7 Deferred Director Fee Option Plan (filed with the Securities and
Exchange Commission as Exhibit 10.5 to Registrant's Annual Report
on Form 10-K for the year ended September 30, 1993, and incorporated
herein by reference).
10.8 Deferred Compensation Plan for Non-Employee Directors, effective
January 1, 1994 (filed with the Securities and Exchange Commission as
Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the year
ended September 30, 1993, and incorporated herein by reference).
10.9 Deferred Compensation Plan for Senior Executives, effective January 1,
1994 (filed with the Securities and Exchange Commission as Exhibit 10.7
to Registrant's Annual Report on Form 10-K for the year ended
September 30, 1993, and incorporated herein by reference).
10.10 Annual Incentive Plan (filed with the Securities and Exchange
Commission as Exhibit 10.2 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991, and incorporated herein by
reference).
<PAGE>
10.11 Form of Indemnification Agreement entered into between the
Registrant and certain former Directors and certain former and
current officers of the registrant and its subsidairies (filed with the
Securities and Exchange Commission on June 11, 1987 as Exhibit 10 to
Resgistrant's Registration Statement on Form S-3 (file No. 33-14996),
and incorporated herein by reference).
10.12 Agreement, dated as of June 30, 1995, between XTRA Corporation and
Frederick M. Gutterson, filed herewith.
10.13 Individual Pension Agreement, dated as of July 1, 1994, between XTRA
Corporation and Lewis Rubin (filed with the Securities and Exchange
Commission as Exhibit 10.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, and incorporated
herein by reference).
10.14 Asset Purchase Agreement, dated as of June 30, 1995, among XTRA, Inc.,
and Matson Navigation Company, Inc. and Matson Leasing Company, Inc.
(filed with the Securities and Exchange Commission as Exhibit 2.1 to
Registrant's Current Report on Form 8-K dated July 14, 1995, and
incorporated herein by reference).
11.1 Statement re computation of per share earnings.
11.2 Statement re Calculation of Weighted Average Shares Outstanding.
12.1 Statement re computation of ratios (XTRA Corporation).
12.2 Statement re computation of ratios (XTRA Inc.).
13.1 Five Year Selected Financial Data.
13.2 Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three Years Ended September 30, 1995
(not covered by the Report of Independent Public Accountants).
13.3 XTRA Corporation and Subsidiaries Consolidated Financial Statements.
21 Subsidiaries of Registrant.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
<PAGE>
EXHIBIT 4.3.2
FIRST AMENDMENT
TO
CREDIT AGREEMENT
This FIRST AMENDMENT (the "FIRST AMENDMENT") by and among XTRA, INC., a Maine
corporation (the "COMPANY"), BANK OF AMERICA ILLINOIS, an Illinois banking
corporation ("BAI") and each of the other Banks and the Agents (each as defined
in the Credit Agreement described below), is entered into as of the 28th day of
June, 1996.
R E C I T A L S
A. The Company, BAI and each of the other Banks and the Agents have
previously entered into that certain Credit Agreement dated as of June 30, 1995
(the "CREDIT AGREEMENT").
B. Each of the Company, the Ultimate Parent and the Parent has requested
that the Banks and the Agents amend certain provisions of the Credit Agreement.
C. The Term Loan has been repaid in full and the Company is not entitled
to request any further Loans with respect to the Term Loan.
D. The Bank and the Agents are willing to amend the Credit Agreement
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein, any extension of credit or other financial accommodation heretofore, now
or hereafter made by any of the Banks or of the Agents to the Company and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. RECITALS. The foregoing recitals are accurate and are incorporated
herein and made a part hereof.
2. DEFINITIONS. Each initially capitalized term used herein without
definition shall have the meaning set forth for such term in the Credit
Agreement.
3. AMENDMENTS.
A. The definition of "Indebtedness" set forth in Section 1.1 of the
Credit Agreement is hereby amended by deleting such definition in its entirety
and substituting in lieu thereof the following:
<PAGE>
""INDEBTEDNESS" means, with respect to any Person, (A) the principal
amount of all indebtedness of such Person (I) for borrowed money, (II)
for the deferred purchase price of property, unless the price thereof
was payable in full within twelve months from the date on which the
obligation was created, or (III) evidenced by notes, bonds or other
instruments; (B) all Lease Obligations of such Person; and (C) all
guaranties and other contingent obligations of such Person in respect
of all indebtedness referred to in the foregoing CLAUSES (A) and (B)
of any other Person."
B. The definition of "Interest Charges" set forth in Section 1.1 of the
Credit Agreement is hereby amended by deleting such definition in its entirety
and substituting in lieu thereof the following:
""INTEREST CHARGES" means, for any period, all expenses (net of any
interest income earned during such period) accrued for interest
(including imputed interest, accrued original issue discount and
interest payable in kind) on all Indebtedness for such period
(including Indebtedness consisting of Lease Obligations in respect of
Capitalized Leases, but excluding Indebtedness consisting of Lease
Obligations other than Capitalized Leases), all as determined in
accordance with GAAP."
C. The definition of "Liabilities" set forth in Section 1.1 of the Credit
Agreement is hereby amended by deleting such definition in its entirety and
substituting in lieu thereof the following:
" "LIABILITIES" means, with respect to any Person at any date as of
which the amount thereof shall be determined, an amount equal (without
duplication) to (A) all liabilities of such Person determined in
accordance with GAAP PLUS (B) all Indebtedness of such Person PLUS (C)
the aggregate amount of such Person's reimbursement obligations in
respect of letters of credit MINUS (D) the aggregate deferred income
tax liability of such Person."
D. The definition of "Net Worth" set forth in Section 1.1 of the Credit
Agreement is hereby amended by deleting the first sentence of such definition in
its entirety and substituting in lieu thereof the following first sentence:
" "NET WORTH" means, at any date as of which the amount thereof shall
be determined with respect to any Person, the sum of the following
amounts which would be set forth on a balance sheet of such Person on
such date, in each
<PAGE>
case as determined in accordance with GAAP: (A) the par value (or
values stated on the books of such Person) of the capital stock of all
classes of such Person, other than capital stock held in the treasury
of such Person, PLUS (B) the amount of the surplus, whether capital or
earned, of such Person, MINUS (C) the amount which would be carried in
the asset side of such balance sheet of such Person in respect of
goodwill, trade names, trademarks, patents, unamortized debt issuance
expense and other intangibles, MINUS (D) any increase in the net book
value of fixed assets arising from a revaluation thereof after
September 30, 1995."
E. The definition of "Subordinated Indebtedness" set forth in Section 1.1
of the Credit Agreement is hereby deleted in its entirety.
F. The definition of "Term Out Date" set forth in Section 1.1 of the
Credit Agreement is hereby amended by deleting the date "June 30, 1997" from
such definition and substituting in lieu thereof the date "June 30, 1998".
G. Section 7.1(f) of the Credit Agreement is hereby amended by deleting
therefrom the following phrase: "(excluding Subordinated Indebtedness)."
H. Section 7.2 of the Credit Agreement is hereby deleted in its entirety
and the following substituted in lieu thereof:
" 7.2 LEVERAGE RATIO OF COMPANY. The Company shall not permit the
ratio of Liabilities of the Company to Net Worth of the Company to
exceed 4.50 to 1.00 as of the end of any fiscal quarter."
I. Section 7.5 of the Credit Agreement is hereby deleted in its entirety
and the following substituted in lieu thereof:
"7.5 CONSOLIDATED LEVERAGE RATIO. The Ultimate Parent shall not
permit the ratio of Consolidated Liabilities of the Ultimate Parent
and its Subsidiaries to Consolidated Net Worth of the Ultimate Parent
and its Subsidiaries to exceed (A) 4.50 to 1.00 at any time prior to
the Term Out Date and (B) 4.00 to 1.00 at any time on or after the
Term Out Date."
J. Section 8 (f) of the Credit Agreement is hereby deleted in its
entirety and the following substituted in lieu thereof:
"(F) the Ultimate Parent, the Parent, the Company or any of their
respective Subsidiaries shall default (as principal or guarantor or
other surety) in the payment of any principal or premium, if any, of,
or interest or fees
<PAGE>
on, any other Indebtedness to any Bank, or any other Indebtedness in
respect of borrowed money in an aggregate principal amount of
$10,000,000 or more (which default is in payment thereof at its stated
maturity or shall result in such Indebtedness becoming or being
declared due prior to the scheduled maturity thereof) or if the
Ultimate Parent, the Parent, the Company or any of their respective
Subsidiaries shall fail to comply (and such failure to comply has not
been cured or waived) with any of the terms of any document evidencing
any such Indebtedness, or any mortgage, pledge, assignment, indenture
or other document relating thereto, and as a consequence of any of the
foregoing, the holder of such Indebtedness shall have the right to
declare all amounts payable with respect thereto to be due and payable
by reason of such default prior to the scheduled maturity thereof or
demand payment of all amounts payable in respect of any Indebtedness
payable on demand; or
K. Schedules 1.1(A) and 1.1 (B) of the Credit Amendment are hereby
amended by deleting them in their entirety and substituting in lieu thereof
Schedules 1.1(A) and 1.1(B), respectively, annexed hereto.
L. Schedule 1.1(C) of the Credit Agreement is hereby deleted in its
entirety.
M. Sections 7.2 through 7.5 of the Compliance Certificate set forth in
Exhibit E to the Credit Agreement are hereby deleted and the provisions of
Exhibit A hereto are hereby substituted in lieu thereof.
4. CONDITIONS TO EFFECTIVENESS. Provided that no Default or Event of
Default shall then exist, this First Amendment shall be deemed to be effective
as of the date ("EFFECTIVE DATE") which is the later to occur of (a) June 28,
1996, and (b) the date on which the Administrative Agent shall have received
each of the following for the benefit of the Banks and the Agents, in form and
substance satisfactory to the Administrative Agent and the Banks:
a. This First Amendment to Credit Agreement duly executed and
delivered by the Company and each of the Agents and the Banks;
b. The duly executed Ratification and Confirmation to Guaranty duly
executed and delivered by the Ultimate Parent in favor of the Banks (a form
of such Ratification and Confirmation is annexed as Exhibit B hereto) (the
"ULTIMATE PARENT RATIFICATION");
c. The duly executed Ratification and Confirmation to Guaranty duly
executed and delivered by the Parent in favor of
<PAGE>
the Banks (a form of such Ratification and Confirmation is annexed as
Exhibit C hereto) (the "PARENT RATIFICATION");
d. The duly executed replacement Notes, as appropriate, to evidence
the change in each Bank's respective Commitment amount with respect to the
Loans (forms of such replacement Notes are annexed as Exhibits D-1 through
D-12 hereto) (collectively, the "REVISED NOTES");
e. True, complete and accurate copies, duly certified by an officer
of the Company, of all documents evidencing any necessary corporate action,
resolutions, consents and governmental approvals, if any, required for the
execution, delivery and performance of this First Amendment, the Revised
Notes, and any other document, instrument or agreement executed or
delivered in connection therewith by the Company;
f. True, complete and accurate copies, duly certified by an officer
of the Ultimate Parent, of all documents evidencing any necessary corporate
action, resolutions, consents and governmental approvals, if any, required
for the execution, delivery and performance of the Ultimate Parent
Confirmation and any other document, instrument or agreement executed or
delivered in connection therewith by the Ultimate Parent;
g. True, complete and accurate copies, duly certified by an officer
of the Parent, of all documents evidencing any necessary corporate action,
resolutions, consents and governmental approvals, if any, required for the
execution, delivery and performance of the Parent Confirmation and any
other document, instrument or agreement executed or delivered in connection
therewith by the Parent;
h. An opinion of counsel to the Company, the Ultimate Parent and the
Parent addressed to the Agents and the Banks dated as of the Effective Date
in form and substance satisfactory to the Agents; and,
i. Such other documents, instruments or agreements as the Agents and
the Banks may reasonably request.
5. SURRENDER OF NOTES. Each Bank receiving a Revised Note executed by the
Company, shall thereupon simultaneously surrender to the Administrative Agent
for delivery to the Company its prior Note, in each case marked "surrendered,".
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Agents and the
Banks to enter into this First Amendment, the Company hereby represents,
warrants and certifies to each of the Agents and the Banks that as of the date
of this First Amendment and as of the Effective Date:
<PAGE>
a. no Default or Event of Default exists before and after giving
effect to the amendment contained herein;
b. each and every representation and warranty contained in the Loan
Documents is true, correct, complete and accurate with the same effect as
if then made, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall have been true, correct, complete and accurate on and as
of such earlier date); and
c. the Company is in compliance with all of the covenants contained
in the Loan Documents.
7. FULL FORCE AND EFFECT. Except as specifically modified or amended by
the terms of this First Amendment or the Revised Notes, the other Loan Documents
and all provisions contained therein are and shall continue in full force and
effect and are hereby ratified and confirmed.
8. COUNTERPARTS. This First Amendment may be executed in any number of
separate counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
9. MISCELLANEOUS. This First Amendment shall be binding upon the Company
and its successors and assigns, and shall inure to the benefit of, and be
enforceable by, the Agents and the Banks and their respective successors and
assigns and shall be governed by, and construed and enforced in accordance with,
the internal laws in effect in the State of Illinois without giving effect to
principles of choice of law.
[INDIVIDUAL SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
XTRA, INC.
By: /s/ Christopher P. Joyce
---------------------------------
Name: Christopher P. Joyce
Title: Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
Agent
By: /s/ Craig Munro
---------------------------------
Name: Craig Munro
Title: Managing Direcor
THE FIRST NATIONAL BANK OF BOSTON, as
Documentation Agent
By: /s/ Alicia Szendiuch
---------------------------------
Name: Alicia Szendiuch
Title: Director
ABN AMRO NORTH AMERICA, INC.,
as Agent for ABN AMRO BANK N.V.
By: /s/ James E. Davis
---------------------------------
Name: James E. Davis
Title: Vice President
By: /s/ R.E. James Hunter
---------------------------------
Name: R. E. James Hunter
Title: Group Vice President
BANK OF AMERICA ILLINOIS
By: /s/ Craig Munro
---------------------------------
Name: Craig Munro
Title: Managing Director
<PAGE>
CORESTATES BANK, N.A.
By: /s/ Verna R. Prentice
---------------------------------
Name: Verna R. Prentice
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
---------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
LTCB TRUST COMPANY
By: /s/ Noboru Kubota
---------------------------------
Name: Noboru Kubota
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/ Inba Ponnusamy
---------------------------------
Name: Inba Ponnusamy
Title: Vice President
PNC BANK, N.A.
By: /s/ Tom Colwell
---------------------------------
Name: Tom Colwell
Title: Vice President
<PAGE>
ROYAL BANK OF CANADA
By: /s/ D.G. Calancie
---------------------------------
Name: D.G. Calancie
Title: Senior Manager
FLEET BANK, N.A.
By: /s/ Robert F. Young
---------------------------------
Name: Robert F. Young
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison A. Mason
---------------------------------
Name: Alison A. Mason
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Alicia Szendiuch
---------------------------------
Name: Alicia Szendiuch
Title: Director
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By: /s/ Gina M. Kearns
---------------------------------
Name: Gina M. Kearns
Title: Vice President & Manager
<PAGE>
EXHIBIT 10.12
XTRA Corporation
60 State Street
Boston, Massachusetts 02109
June 30, 1995
Frederick M. Gutterson
128 Tracy Lane
Alamo, California 94507
Dear Fred:
I am pleased to offer you the position of President of XTRA International
Ltd. ("XTRA International"), an indirect wholly-owned subsidiary of XTRA
Corporation ("XTRA"), and Vice President of XTRA. If you accept our offer,
your starting date will be June 30, 1995.
You will be expected to devote your full business time and your best
professional efforts to the performance of your duties and responsibilities
for XTRA International and XTRA and to abide by all of their policies and
procedures, as in effect from time to time. As President of XTRA International
and Vice President of XTRA, your responsibilities will include such duties
and responsibilities as may be assigned to you from time to time by the Board
of Directors of XTRA. In connection with your employment, you will be entitled
to the compensation and benefits described below.
Base Salary. Your base salary will be at the rate of $250,000 per annum,
less applicable legal deductions, payable in accordance with the regular payroll
practices of XTRA for its executives.
Cash Incentive Bonus Plan. Commencing October 1, 1995, you will be
entitled to participate in XTRA's Annual Incentive Plan, from time to time in
effect, with a target award level of 40% of base salary. In accordance with
the terms of the Annual Incentive Plan, your actual award may be up to 60% of
base salary.
Long-Term Cash Incentive Plan. XTRA will make available to you the Long-
Term Incentive Plan (the "Long-Term Plan"), as described on Exhibit A hereto.
For purposes of the Long-Term Plan, the terms set forth on Exhibit B attached
hereto shall have the meanings set forth on Exhibit B. You recognize that
certain payments to you under the Long-Term Plan could be ineligible for
deduction by XTRA under Section 162(m) of the Internal Revenue
<PAGE>
Code. Accordingly, XTRA reserves the right to cause any payout which you have
earned under the plan to be deferred, together with a market rate of interest,
to the extent necessary so that the payments thereunder continue to qualify for
deduction by XTRA. XTRA acknowledges that any such deferral will not affect
your fully vested rights in such amounts.
Fiscal 1995 Performance Bonus. You will be entitled to a performance bonus
of $90,000 if XTRA International achieves its forecast for the fiscal quarter
ended September 30, 1995 as set forth on Exhibit C attached hereto (the
"Forecast"). If XTRA International achieves less than 100% of the Forecast but
at least 80% of the Forecast, you will instead be entitled to a performance
bonus of $75,000. If you earn a performance bonus, it will be paid during the
first quarter of fiscal 1996 in accordance with the timing of payments under
XTRA's other cash bonus plans.
Other Benefits. During your employment, you will be eligible to
participate in all benefit plans made available by the XTRA from time to time
to its senior executives and the senior executives of its subsidiaries, subject
to plan terms and generally applicable policies, including any contributions
generally required of such executives.
Business Expenses. XTRA shall pay or reimburse you for all customary
business expenses incurred or paid by you in the performance of your duties and
responsibilities, subject to such policies and limitations of XTRA as may be in
effect from time to time. Without limiting the foregoing, XTRA shall pay or
reimburse you for a parking space at XTRA International's head office in San
Francisco, California and one membership in a luncheon club in San Francisco.
Options. As soon as practical after the date hereof, the Compensation
Committee of XTRA's Board of Directors will grant you an option under the 1987
XTRA Corporation Incentive Stock Plan (subject to all the terms and conditions
of such plan), to purchase 40,000 shares of common stock, which option shall be
granted with a fair market value exercise price, as required by the plan, on the
date of grant, and will vest in equal installments on the first, second and
third anniversary of the date hereof.
Your participation in the plans described above shall not be deemed to
create any rights to continued employment, and your employment will be continued
to be considered "at-will".
In accepting this offer, you give us assurance that you have not relied on
any agreements or representations, express or implied, with respect to your
employment that are not set forth expressly in this letter, other than the your
Employment Agreement dated December, 1994, which has been assumed by XTRA.
<PAGE>
Fred, formalities aside, I am personally delighted that you are joining us
and look forward to your contribution.
Sincerely,
/s/ LEWIS RUBIN
Lewis Rubin, President
XTRA Corporation
Accepted and agreed:
/s/ FREDERICK M. GUTTERSON
Frederick M. Gutterson
Date: June 30, 1995
<PAGE>
EXHIBIT A
XTRA Marine
Long-Term Incentive Plan Outline
1. PURPOSE: The Purpose of the Long-Term Incentive Plan (the "Plan") of
XTRA INTERNATIONAL LTD. ("XTRA Marine") is to motivate the head of XTRA
Marine to achieve planned operating income levels by providing him with
a stake in the long-term success of the business and also to help retain
him.
2. PARTICIPATION: Participation will include only the head of XTRA Marine.
3. TIME FRAME: The plan would cover a single, 4 year performance period,
commencing October 1, 1995.
4. PERFORMANCE MEASURE: Cumulative Operating Income over Threshold will be
the performance measure for the plan.
Cumulative Operating Income is the sum of the Operating Incomes (as
defined on attached Schedule I) for each year of the performance period
(except as provided in Section 6(A)(1)).
Threshold Operating Income is set using a rate of $* million per year
which results in a threshold of $* million for the 4 year performance
period.
Cumulative Operating Income over Threshold is Cumulative Operating
Income minus Threshold Operating Income.
5. AWARD SIZE: Award size will be equal to *% percent of Cumulative
Operating Income over Threshold. Note: The award is not capped. See
the attached spreadsheet for a sensitivity analysis of award size and
Operating Income level.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
ILLUSTRATION:
1996 - 1999 Projected
---------------------
Cumulative Operating Income $*
Threshold Operating Income $*
Cumulative Operating Income over Threshold $*
1 Award Size: *%
Award Size: *
6. TERMINATION OF EMPLOYMENT:
A. In the event the Participant's employment with the Company is
terminated without Cause or terminates as a result of the
Participant's death or disability and the Participant has been
an active employee for at least 2 years of the 4-year
performance period, the Participant will be entitled to a
partial payment. The partial payment will be calculated (if
necessary) using:
(1) Cumulative Operating Income through the fiscal quarter
ended preceding termination and
(2) Threshold Operating Income multiplied by the following
fraction: the number of full fiscal quarters of the
performance period elapsed at the date of terminated
divided by 16.
If the Participant is entitled to an award under this Section
6(A), it will be paid during the first quarter of the fiscal
year commencing upon or immediately following the Participant's
termination of employment.
B. In the event that the Participant's employment with the Company
is terminated without Cause or terminates as a result of the
Participant's death or disability and the Participant has been
an active employee for less than 2 years of the 4-year
performance period, the Participant forfeits all rights to any
award under the Plan.
6. In the event of the Participant's employment with the Company terminates
for Cause or
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
as a result of the resignation or retirement of the Participant before
the end of the 4-year performance period, the Participant forfeits all
rights to any award under the Plan.
7. PAYMENT. Except as provided in Section 6(A), if the Participant is
entitled to an award, it will be paid during the first quarter of fiscal
2000 in accordance with the timing of payments under XTRA's other cash
bonus plans
XTRA Marine
Long-Term Incentive Plan
Figures in Thousands (000s)
Projected Financials
*
Worldwide Marine Operating Income
*
Worldwide Marine
Equipment and Utilization Data
*
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
EXHIBIT B
"Cause" shall mean: (i) your material failure to perform (other than by
reason of disability), or material negligence in the performance of your duties
and responsibilities to XTRA and XTRA International, or (ii) other conduct that
is materially harmful to the business, interests or reputation of XTRA or XTRA
International.
"disability" shall mean that you become disabled during your employment
hereunder, and, as a result, are unable to perform substantially all of your
duties and responsibilities to XTRA and XTRA International for 120 days during
any twelve month period.
"Operating Income" shall mean income of XTRA International before interest,
taxes and extraordinary items, all as determined in accordance with generally
accepted accounting principles.
<PAGE>
Exhibit 11.1
XTRA Corporation
Earnings Per Share Calculations
For the Four Quarters ended September 30, 1996 and 1995
(Millions of dollars except per share amounts)
QUARTER ENDED:
<TABLE>
<CAPTION>
12/31/95 3/31/96 6/30/96 9/30/96 YTD 1996
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Income $ 13.9 $ 8.2 $ 7.8 $ 11.2 $ 41.1
-------- ------- ------- ------- --------
Primary EPS:
Primary Shares Outstanding (in millions): 16.4 16.1 16.0 15.7 16.1
Primary Earnings Per Share: $ 0.85 $ 0.51 $ 0.49 $ 0.71 $ 2.56
-------- -------- ------- ------- --------
Fully Diluted EPS:
Fully Diluted Shares Outstanding (in millions): 16.4 16.1 16.0 15.7 16.1
Fully Diluted Earnings Per Share: $ 0.85 $ 0.51 $ 0.49 $ 0.71 $ 2.56
-------- -------- ------- ------- --------
</TABLE>
QUARTER ENDED:
<TABLE>
<CAPTION>
12/31/94 3/31/95 6/30/95 9/30/95 YTD 1995
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Income $ 19.1 $ 13.6 $ 11.8 $ 12.8 $ 57.3
-------- ------- ------- ------- --------
Primary EPS:
Primary Shares Outstanding (in millions): 17.0 17.0 16.9 16.8 16.9
Primary Earnings Per Share: $ 1.12 $ 0.80 $ 0.70 $ 0.76 $ 3.39
-------- ------- ------- ------- --------
Fully Diluted EPS:
Fully Diluted Shares Outstanding (in millions): 17.0 17.0 16.9 16.8 16.9
Fully Diluted Earnings Per Share: $ 1.12 $ 0.80 $ 0.70 $ 0.76 $ 3.39
-------- ------- ------- ------- --------
</TABLE>
<PAGE>
Exhibit 11.2
XTRA Corporation
Calculation of Weighted Average Shares Outstanding
For the Four Quarters ended September 30, 1996 and 1995
(Millions of Shares)
QUARTER ENDED:
<TABLE>
<CAPTION>
12/31/95 3/31/96 6/30/96 9/30/96 YTD 1996
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Computation of Primary Shares Outstanding
Weighted average common shares outstanding 16.4 16.1 16.0 15.7 16.1
Common stock equivalents for primary EPS:
Stock options outstanding - - - - -
-------- ------- ------- ------- --------
Weighted average number of common
shares outstanding (primary) 16.4 16.1 16.0 15.7 16.1
-------- ------- ------- ------- --------
Computation of Fully Diluted Shares Outstanding
Weighted average common shares outstanding 16.4 16.1 16.0 15.7 16.1
Common stock equivalents for fully diluted EPS:
Stock options outstanding - - - - -
-------- ------- ------- -------- --------
Weighted average number of common
shares outstanding (fully diluted) 16.4 16.1 16.0 15.7 16.1
-------- ------- ------- ------- --------
</TABLE>
QUARTER ENDED:
<TABLE>
<CAPTION>
12/31/94 3/31/95 6/30/95 9/30/95 YTD 1995
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Computation of Primary Shares Outstanding
Weighted average common shares outstanding 16.9 17.0 16.8 16.8 16.8
Common stock equivalents for primary EPS:
Stock options outstanding 0.1 - 0.1 - 0.1
-------- ------- ------- ------- --------
Weighted average number of common
shares outstanding (primary) 17.0 17.0 16.9 16.8 16.9
-------- ------- ------- ------- --------
Computation of Fully Diluted Shares Outstanding
Weighted average common shares outstanding 16.9 17.0 16.8 16.8 16.8
Common stock equivalents for fully diluted EPS:
Stock options outstanding 0.1 - 0.1 - 0.1
-------- ------- ------- ------- --------
Weighted average number of common
shares outstanding (fully diluted) 17.0 17.0 16.9 16.8 16.9
-------- ------- ------- ------- --------
</TABLE>
<PAGE>
Exhibit 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
For the twelve months ended September 30, 1996
(Millions of dollars)
<TABLE>
<CAPTION>
1996
--------
<S> <C>
EARNINGS
Income from operations before provision for income taxes $ 69.1
Add: Fixed charges (below) 66.2
--------
$ 135.3
--------
FIXED CHARGES
Interest expense $ 66.0
Interest portion of rent expense 0.2
--------
$ 66.2
--------
Ratio of Earnings to Fixed Charges 2.0
--------
</TABLE>
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 twelve months ended September 30, 1996
(Millions of dollars)
<TABLE>
<CAPTION>
1996
--------
<S> <C>
EARNINGS
Income from operations before provision for income taxes $ 68.9
Add: Fixed charges (below) 66.2
--------
$ 135.1
--------
FIXED CHARGES
Interest expense $ 66.0
Interest portion of rent expense 0.2
--------
$ 66.2
--------
Ratio of Earnings to Fixed Charges 2.0
--------
</TABLE>
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 13.1
Five Year Selected Financial Data
Year ended September 30
(Millions of dollars except
per share amounts)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 202.6 $ 329.2 $ 355.3 $ 377.7 $ 422.5
Cash provided from operations 127.4 196.4 233.4 237.5 272.4
Income before income taxes 44.3 72.4 98.4 98.0 69.1
Net income 27.0 37.8(2) 57.6 57.3 41.1
Per Share Information
Fully diluted earnings per common share $ 1.75 $ 2.09(2) $ 3.38 $ 3.39 $ 2.56
Dividends declared per common share $ .39 $ .46 $ .54 $ .62 $ .70
Financial Position
Capital expenditures (including value of
equipment acquired under operating leases)(1) $ 37.1 $ 409.6 $ 235.9 $ 698.9 $ 209.6
Total assets 535.2 858.0 1,004.9 1,516.4 1,536.8
Total debt and redeemable preferred stock 241.4 388.3 443.8 897.5 892.0
Total stockholders' equity 190.7 280.3 330.5 358.8 341.5
</TABLE>
(1) Includes capital expenditures for acquisitions. See Note 2 of the Notes to
consolidated Financial Statements.
(2) Includes the effect of the Revenue Reconciliation Bill of 1993 which raised
the federal corporate tax rate from 34% to 35%. The Company restated the
deferred tax liabilities and assets to reflect the higher rate recording
additional tax expense of approximately $5 million.
<PAGE>
EXHIBIT 13.2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
for the Three Years Ended September 30, 1996
(Not covered by Report of Independent Public Accountants)
The discussion below contains certain forward-looking statements relating to,
among other things, 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
Reform Act of 1995" contained below.
XTRA Corporation leases, primarily on an operating basis, freight
transportation equipment including over-the-road trailers, marine containers,
intermodal trailers, chassis and domestic containers. XTRA's equipment
utilization and lease rates, and hence profitability, are impacted by the supply
of and demand for available equipment, the level of economic activity in North
America, world trade activity, the actions of its competitors and other factors
in the freight transportation industry. The discussion and data below are
presented on a consolidated basis.
The Company's pretax profits have been cyclical, principally due to the
variability of the Company's revenues and the high percentage of fixed costs.
To moderate this cyclicality, the Company attempts to maintain a balance between
the amount of equipment leased on a per diem and term basis and maintains a mix
of various types of freight transportation equipment available for lease. The
Company has historically maintained a high proportion of its debt at fixed rates
to reduce the impact of fluctuations in interest rates. The June 1995
acquisition of marine containers from Matson Leasing Company, Inc. initially
financed with floating rate debt, resulted in a higher percentage of floating
rate debt at September 30, 1995, 37%, as compared to 18% at September 30, 1996.
The marine container acquisition, in addition to providing a further
diversification of its customer base, has reduced XTRA's dependence on the North
American transportation industry. Although the marine container business is
international, substantially all transactions are denominated in U.S. dollars.
This discussion includes the marine container operating results for the three
months ended September 30, 1995 and the full fiscal year 1996 and accordingly,
these results may not be comparable to the year ended September 30, 1994 and may
not be indicative of future results.
Revenues
Revenues are a function of lease rates and working units; the latter depends on
fleet size and equipment utilization. Revenues increased by 6% from $355 million
in fiscal 1994 to $378 million in fiscal 1995, primarily due to the June 30,
1995 acquisition of the marine container business as well as an increase in
over-the-road working units and an increase in average lease rates. Partially
offsetting the increase in fiscal 1995 revenues was a decrease in revenues
derived from intermodal trailers due to reduced demand attributable to the
softening economy, an increased supply of equipment and shifting traffic trends
in the industry. Beginning in the second quarter of fiscal 1995, as a result of
decreased levels of domestic freight, truckers began competing more aggressively
with railroads, thus diverting some intermodal freight to over-the-road.
Revenues increased 12% or $45 million in fiscal 1996 principally due to the
inclusion of the marine container business for the full fiscal year versus one
quarter of the year in 1995, partially offset by lower revenues generated from
the Company's domestic business, primarily intermodal trailers. The economic
and industry conditions experienced in fiscal 1995 continued into fiscal 1996
as the transportation industry did not experience the moderate growth seen in
the domestic economy. The decrease in utilization of the Company's domestic
transportation equipment reflects reduced freight levels and increased
industry-wide equipment supply. The over-supply of domestic transportation
equipment is due to the record level of industry purchases in 1994 and 1995.
In 1996, industry purchases of equipment were reduced considerably. However,
the over-capacity, while diminished, continues to exist.
Growth in usage of marine containers, on a worldwide basis, has declined due
to lower growth in freight demand, particularly in the Far East. Additionally,
better world-wide trade balance has resulted in more efficient use of equipment
by shippers and hence lower usage of leased containers. Increases in the supply
of marine containers resulting from substantial industry-wide purchases have
also reduced demand for leased containers. XTRA's marine container utilization
declined from 90% in the fourth quarter of fiscal 1995 to average 81% for
fiscal 1996.
<PAGE>
Recent signs of growth in the domestic economy as well as some improvement
in key industry indicators, such as the level of intermodal loadings and reduced
purchases of new transportation equipment, suggest that domestic industry
conditions may be improving modestly although an excess supply of equipment
still exists.
The following table sets forth, for the Company, average utilization (dollar
weighted by investment in each type of equipment) and average fleet size in
units (including units leased under operating leases) during the last three
years.
<TABLE>
<CAPTION>
Year ended September 30 1994 1995 1996
--------------------
<S> <C> <C> <C>
Utilization 92% 86% 81%
Units (in thousands) 123 160 274
</TABLE>
The increases in average fleet size in fiscal 1995 and 1996 are primarily
attributable to the acquisition of the marine container business in fiscal 1995.
Utilization, which is the ratio of revenue-earning units to the total fleet,
is derived from billing information, usage reports and other information from
customers, assumptions based on historical experience and equipment inventories
taken at Company depots, and is an approximation. Utilization is impacted by the
level of economic activity in North America, world trade activity and the supply
of and demand for available equipment.
Operating Expenses
Depreciation expense increased 12% or $13 million in 1995 due to an increase in
average fleet size which included the effect of the marine container
acquisition in the fourth quarter. In 1996, depreciation expense increased 25%
or $29 million due primarily to the addition of the marine container fleet for
the full fiscal year as well as an increase in the over-the-road fleet.
In 1995, lower rental equipment operating expenses for over-the-road trailer
and intermodal equipment were mostly offset by operating expenses related to the
addition of the marine container business in the fourth quarter. In 1996, rental
equipment operating expenses increased 15% or $13 million primarily due to the
inclusion of the marine container business for the full fiscal year.
In 1995, selling and administrative expenses increased 14% or $4 million
principally due to the marine container business added in the fourth quarter and
increased costs related to the development and implementation of management
information systems. In 1996, selling and administrative expenses increased 20%
or $7 million primarily due to the marine container business included for the
full fiscal year.
Interest Expense
Interest expense is a function of the amount of average net debt outstanding
(long-term debt less cash) and average interest rates. The following table sets
forth total average net debt outstanding and interest expense as a percentage
of total average net debt outstanding.
<TABLE>
<CAPTION>
Year ended September 30 1994 1995 1996
--------------------
<S> <C> <C> <C>
Average net debt outstanding (millions of dollars) $375 $518 $906
Interest expense as a percentage of average net debt
outstanding 9.1% 8.0% 7.3%
</TABLE>
In 1995 and 1996, interest expense increased 22% and 60% or $8 million and $25
million, respectively, primarily due to an increase in average net debt
outstanding partially offset by a decrease in the average effective interest
rate. In fiscal 1996, the increase in average net debt outstanding was primarily
the result of the June 30, 1995 acquisition of the marine container business.
Foreign Exchange Loss
The foreign exchange loss of $.4 million in fiscal 1996 is attributable to the
translation of certain intercompany liabilities of the Company's Canadian
businesses. This loss is a result of the decreasing value of the Canadian dollar
versus the U.S. dollar.
<PAGE>
Income Before Provision for Income Taxes
Pretax earnings remained relatively unchanged in 1995 despite lower utilization.
Increased profitability resulting from the marine container operations acquired
late in the year as well as a larger working fleet of over-the-road trailers was
offset by decreased demand for intermodal trailers . In 1996, pretax earnings
decreased 29% or $29 million 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 Company's effective income tax rate was approximately 42% in fiscal years
1994 and 1995 and approximately 41% in fiscal 1996. For additional information
regarding the provision for income taxes, see Notes 1 and 5 of the Notes to
Consolidated Financial Statements.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Significant capital investment is required by the Company's leasing operations,
not only for growth but also for replacement of units retired from service.
However, during periods of slower economic growth, capital expenditures may be
curtailed until demand for transportation equipment increases.
The following table sets forth capital expenditures by equipment type,
including units acquired by acquisition, units purchased and units leased-in
from third parties under operating leases. The Company's committed capital
expenditures for 1997 are as of November 13, 1996.
<TABLE>
<CAPTION>
(Millions of dollars) 1994 1995 1996 1997
----------------------------
<S> <C> <C> <C> <C>
Over-the-road trailers $151 $204 $100 $44
Marine containers - 379 79 11
Intermodal trailers 70 50 2 2
Chassis 8 46 22 -
Other 7 20 7 2
---- ---- ---- ---
Total $236 $699 $210 $59
---- ---- ---- ---
</TABLE>
The Company recognizes the importance of managing capital spending as
essential to maintaining the quality of its fleet. The Company grows its fleet
by acquiring equipment from other leasing companies and by purchasing new and
used equipment. In 1994, capital expenditures were $236 million, including $46
million of equipment acquired in three separate acquisitions. Responding to the
strong demand for its products in 1994 and continuing into early 1995,
expenditures in 1995 increased to $699 million, including $360 million paid to
acquire the marine container fleet. In 1996, capital expenditures decreased to
$210 million in response to deteriorating industry conditions. As of November
13, 1996, XTRA's committed capital expenditures for 1997 amounted to $59
million. The Company may increase capital spending in 1997 if conditions
warrant. Actual capital expenditures for 1997 will depend on the Company's
assessment of business conditions.
During the three years ended September 30, 1996, the Company generated $743
million of cash flow from operations. During this same period, XTRA invested
$1.2 billion in property and equipment including acquisitions, paid dividends
of $31 million, repurchased $66 million of common stock and increased net debt
(debt less cash) outstanding by $505 million.
Although some level of future capital spending can be financed internally, the
ability to fund expenditures above that level will depend upon the availability
of external financing.
In addition to cash flow from operations, XTRA generally has available to it
a variety of external means to finance future growth of its leasing equipment
fleet. The Company's external financing options include a combination of a
revolving credit agreement, medium-term and long-term borrowings in the public
debt market, intermediate and long-term financing from banks, institutional
investors and lease financing. The Company has registered with the Securities
and Exchange Commission $742 million of securities consisting of Preferred Stock
and Common Stock of the Company and Senior and Subordinated Debt Securities of
its subsidiary XTRA, Inc., fully and unconditionally
<PAGE>
guaranteed by XTRA Corporation (see Note 4 of Notes to Consolidated Financial
Statements). As of November 13, 1996, XTRA Inc. has $604 million available for
future issuance under this Shelf Registration. As of November 13, 1996 the
Company had $140 million of unused credit available under its $300 million
Revolving Credit Agreement. The Company's access to external financing will
depend upon prevailing market conditions and the Company's credit ratings. There
can be no assurance that the Company will be able to borrow funds in those
markets at attractive rates or with covenants that are not more restrictive than
the Company's current debt covenants. The Company also has potential access to
external funds through the issuance of capital stock. XTRA deems its sources of
financing adequate to meet projected needs.
The Company's source of funds for the payment of dividends on its capital
stock are advances and dividends from its direct and indirect wholly-owned
subsidiaries, including XTRA, Inc. The primary sources of funds for XTRA, Inc.
are cash flows from operations, advances from its subsidiaries and external
financing. Several of the Company's loan agreements contain covenants that
restrict the payment of dividends by the Company or repurchases of common stock.
In addition, certain loan agreements contain covenants that restrict advances
to and the payment of dividends to the Company by its subsidiaries, including
XTRA, Inc. Under the most restrictive provisions of the Company's loan
agreements, the repurchase of common stock and/or the amount of cash dividends
which could be paid on the Company's capital stock was limited to $94 million
at September 30, 1996. For additional information regarding debt, see Note 4 of
the Notes to Consolidated Financial Statements.
The Company has authorized the repurchase of up to $200 million of XTRA's
common stock. The timing of the repurchases, which could occur over an extended
period of time, will depend on price, market conditions and other factors. As of
November 13, 1996, the Company had repurchased $79 million of common stock under
this authorization.
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 and the supply of and demand for
equipment. In addition, the Company has a high percentage of fixed operating
expenses, including depreciation, a portion of both 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.
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.
<PAGE>
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 may be
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 may impact the Company's businesses, such as truckers competing
more aggressively, and divert some intermodel freight to over-the-road or vice
versa. 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 expenses 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 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 expenditutes 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
convenants that are not more restrictive than the Company's current debt
convenants.
Interest Rates
Over the past several years, interest rates have remained at historically low
levels. Because of the Company's dependence upon external financing to fund its
capital needs and acquisition, 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. An increase in interest rates or a downgrade in the Company's debt
ratings would adversely impact the cost of new borrowings, thereby 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 aquisitions 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 financial liquidity and capital resources above for
discussion.
Consolidations of the Company's Customer Base
Consolidations of the Company's customer base, such as railroad or steamship
lines, mergers or acquisitions, may result in reduced demand for leased
equipment.
<PAGE>
EXHIBIT 13.3
Index to Financial Statements
(Information required by Part II, Items 7 and 8 and Part IV,
Item 14 of Form 10-K)
XTRA Corporation and Subsidiaries Consolidated Financial Statements and Schedule
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Financial Statements Page
<S> <C>
Consolidated balance sheets - September 30, 1995 and 1996 2
Consolidated income statements for the three years ended
September 30, 1996 3
Consolidated statements of cash flows for the three years
ended September 30, 1996 4
Unaudited quarterly condensed consolidated income statements
for the years ended September 30, 1995 and 1996 5
Consolidated statements of stockholders' equity for the three
years ended September 30, 1996 6
Notes to consolidated financial statements 7
Report of independent public accountants 17
</TABLE>
<PAGE>
Consolidated XTRA Corporation
Balance Sheets and Subsidiaries
<TABLE>
<CAPTION>
September 30, 1995 and 1996
(Millions of dollars except
per share and share amounts) 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Property and equipment at cost
Revenue equipment $1,812.1 $1,911.7
Land, buildings and other 66.5 65.1
-------- --------
1,878.6 1,976.8
Less-Accumulated depreciation (480.3) (569.8)
-------- --------
Net property and equipment 1,398.3 1,407.0
Cash 6.3 7.7
Trade receivables, net 55.7 52.3
Lease contracts receivable 35.3 41.7
Other assets 20.8 28.1
-------- --------
$1,516.4 $1,536.8
-------- --------
Liabilities and Stockholders' Equity
Liabilities
Debt $ 897.5 $ 892.0
Deferred income taxes 193.7 226.9
Accounts payable and accrued expenses 66.4 76.4
-------- --------
Total liabilities 1,157.6 1,195.3
Commitments and contingencies (Note 6)
Stockholders' equity
Preferred Stock, without par value;
total authorized: 3,000,000 shares
Common Stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding:
16,568,801 shares at September 30, 1995;
15,550,499 shares at September 30, 1996 8.3 7.8
Capital in excess of par value 107.6 63.3
Retained earnings 243.4 273.3
Cumulative translation adjustment (.5) (2.9)
-------- --------
Total stockholders' equity 358.8 341.5
-------- --------
$1,516.4 $1,536.8
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Consolidated XTRA Corporation
Income Statements and Subsidiaries
<TABLE>
<CAPTION>
For the three years ended September 30, 1996
(Millions of dollars except per share amounts) 1994 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $355.3 $377.7 $422.5
Operating expenses
Depreciation on rental equipment 104.6 117.1 145.9
Rental equipment operating expense 88.8 87.6 100.7
Selling and administrative expense 29.6 33.6 40.4
------ ------ ------
223.0 238.3 287.0
------ ------ ------
Operating income 132.3 139.4 135.5
Interest expense 33.9 41.4 66.0
Foreign exchange loss - - .4
------ ------ ------
Income before provision for income taxes 98.4 98.0 69.1
Provision for income taxes 40.8 40.7 28.0
------ ------ ------
Net income $ 57.6 $ 57.3 $ 41.1
------ ------ ------
Earnings per fully diluted common share $ 3.38 $ 3.39 $ 2.56
Weighted average number of fully diluted
common and common equivalent shares
outstanding (in millions) 17.0 16.9 16.1
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
19
Consolidated Statements of XTRA Corporation
Cash Flows and Subsidiaries
<TABLE>
<CAPTION>
For the three years ended September 30, 1996
(Millions of dollars) 1994 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operations
Net income $ 57.6 $ 57.3 $ 41.1
Add non-cash income and expense items:
Depreciation and amortization, net 99.2 110.6 146.2
Deferred income taxes, net 20.6 30.3 30.7
Bad debt expense 4.2 4.2 3.5
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses 11.8 (12.2) 2.5
Cash receipts on lease contracts receivable 18.5 19.2 17.6
Recovery of property and equipment net
book value 21.5 28.1 30.8
------ ------ ------
Total cash provided from operations 233.4 237.5 272.4
------ ------ ------
Cash used for investment activities
Additions to property and equipment (245.0)(1) (339.2) (205.2)
Acquisition of certain net assets of
Matson Leasing Co., Inc. - (357.5) (4.4)
------ ------ ------
Total cash used for investment activities (245.0) (696.7) (209.6)
------ ------ ------
Cash flows from financing activities
Borrowings of debt 131.8 492.2 246.6
Payments of debt (76.9) (41.5) (251.9)
Net proceeds from exercise of stock options - 2.1 0.9
Repurchase of Common Stock - (20.0) (45.8)
Dividends paid (9.1) (10.5) (11.2)
------ ------ ------
Total cash provided by (used for)
financing activities 45.8 422.3 (61.4)
------ ------ ------
Net increase (decrease) in cash 34.2 (36.9) 1.4
Cash at beginning of year 9.0 43.2 6.3
------ ------ ------
Cash at end of year $ 43.2 $ 6.3 $ 7.7
------ ------ ------
Total interest paid $ 31.6 $ 34.8 $ 51.8
Total income taxes paid (net of refunds) $ 15.6 $ 16.8 $ (2.3)
</TABLE>
(1) Includes certain acquisitions completed in 1994. See Note 2 of the Notes
to Consolidated Financial Statements.
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Quarterly XTRA Corporation
Condensed Consolidated and Subsidiaries
Income Statements
For the four quarters ended September 30, 1995 and 1996 First Second Third Fourth
(Millions of dollars except per share amounts) Quarter Quarter Quarter Quarter
---------------------------------------------
<S> <C> <C> <C> <C>
1995
Revenues $ 96.3 $ 87.1 $ 86.2 $ 108.1
Expenses(1) 63.6 63.8 66.1 86.2
------- ------- ------- -------
Income before income taxes 32.7 23.3 20.1 21.9
Provision for income taxes 13.6 9.7 8.3 9.1
------- ------- ------- -------
Net income $ 19.1 $ 13.6 $ 11.8 $ 12.8
------- ------- ------- -------
Earnings per fully diluted common share $ 1.12 $ .80 $ .70 $ .76
Weighted average number of fully diluted common
shares outstanding (in millions) 17.0 17.0 16.9 16.8
1996
Revenues $ 112.2 $ 101.1 $ 101.4 $ 107.8
Expenses(1) 88.8 87.3 88.3 89.0
------- ------- ------- -------
Income before income taxes 23.4 13.8 13.1 18.8
Provision for income taxes 9.5 5.6 5.3 7.6
------- ------- ------- -------
Net income $ 13.9 $ 8.2 $ 7.8 $ 11.2
------- ------- ------- -------
Earnings per fully diluted common share $ .85 $ .51 $ .49 $ .71
Weighted average number of fully diluted common
shares outstanding (in millions) 16.4 16.1 16.0 15.7
</TABLE>
[FN]
(1) Includes operating and interest expenses.
5
<PAGE>
Consolidated Statements of XTRA Corporation
Stockholders' Equity and Subsidiaries
<TABLE>
<CAPTION>
Common Capital in
Stock Excess Cumulative
For the three years ended September 30, 1996 $.50 Par of Par Retained Translation
(Millions of dollars) Value Value Earnings Adjustment
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1993 $8.4 $124.2 $148.1 $ (.5)
Net income - - 57.6 -
Common Stock cash dividends declared at $.54 per share - - (9.1) -
Options exercised and related tax benefits,
net of shares forfeited under restricted stock plan - 1.2 - -
Translation adjustment - - - .6
---- ------ ------ -----
Balance at September 30, 1994 8.4 125.4 196.6 .1
Net income - - 57.3 -
Common Stock cash dividends declared at $.62 per share - - (10.5) -
Options exercised and related tax benefits .1 2.0 - -
Repurchase of Common Stock (.2) (19.8) - -
Translation adjustment - - - (.6)
---- ------ ------ -----
Balance at September 30, 1995 8.3 107.6 243.4 (.5)
Net income - - 41.1 -
Common Stock cash dividends declared at $.70 per share - - (11.2) -
Options exercised and related tax benefits - .9 - -
Repurchase of Common Stock (.5) (45.2) - -
Translation adjustment - - - (2.4)
---- ------ ------ -----
Balance at September 30, 1996 $7.8 $ 63.3 $273.3 $(2.9)
---- ------ ------ -----
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Notes to Consolidated XTRA Corporation
Financial Statements and Subsidiaries
(1) Summary of Significant Accounting Policies
Principles of Consolidation
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 the prior
year financial statements have been reclassified to be consistent with the
current year's presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
Provisions for income taxes recognize the tax effect of all revenue and expense
transactions as well as any change during the period in deferred tax assets and
liabilities. The effects of changes in tax rates and laws on deferred tax assets
and liabilities are reflected in net income in the period in which such changes
are enacted.
Leases
The Company records the majority of its leases using the operating method of
accounting. Full-payout or near full-payout leases are accounted for under the
finance method.
Depreciation
The Company provides for depreciation by using the straight-line method to
amortize the cost of property and equipment to its estimated residual value over
its estimated useful life. Revenue equipment is depreciated using estimated
useful lives of 10 to 20 years. In addition, the Company reviews the condition
and types of its revenue equipment to determine if any permanent impairment has
occurred.
When equipment is sold or retired, its cost and accumulated depreciation are
removed from the balance sheet, and any gain or loss is included in revenues.
Revenue equipment with an original cost of approximately $80 million, which has
reached the end of its estimated useful life, remains in service and is included
in Revenue Equipment at September 30, 1996.
Repair and Maintenance
Repair and maintenance expenses are charged to operating expenses when incurred
and amounted to $27 million, $26 million and $27 million in 1994, 1995 and 1996,
respectively.
Earnings per Share
The computation of earnings per common share is based on net income divided by
the weighted average number of outstanding common shares and common share
equivalents.
7
<PAGE>
Foreign Currency Translation
The Company translates the assets and liabilities of its foreign operations at
the exchange rates in effect at year-end. Revenues and expenses are translated
using average exchange rates in effect during the year. Gains and losses from
foreign currency translation are credited or charged to cumulative translation
adjustment included in stockholders' equity in the accompanying Consolidated
Balance Sheets. The translation of certain intercompany liabilities of the
Company's North American businesses are included in foreign exchange loss.
(2) Acquisitions
In fiscal 1994, the Company acquired certain assets of three leasing companies
for approximately $46 million. The total rental fleets acquired amounted to
approximately 6,000 units, primarily over-the-road trailers.
On June 30, 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 and
included approximately $10 million for recently purchased containers. The
transaction was accounted for as a purchase.
The unaudited pro forma condensed consolidated income statements of the
Company, as if Matson Leasing Company, Inc. had been acquired on October 1,
1993 is as follows:
<TABLE>
<CAPTION>
For the twelve months ended September 30,
(Millions of dollars except per share data) 1994 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Revenues $421.2 $431.6
Net income 60.9 60.7
Earnings per fully diluted common share $ 3.58 $ 3.59
</TABLE>
(3) Equipment Leases
The Company uses the operating method of accounting for the majority of its
equipment leases. Under this method, revenue is recognized in the month earned
based on the terms of the lease contract, and the equipment is depreciated to
its estimated residual value over its estimated useful life.
The finance method of accounting is used for revenue equipment leased to
customers on a full-payout or near full-payout basis at lease inception. Under
this method, finance lease income, the difference between the total lease
receivable and the net book value less the unguaranteed residual value of the
related equipment, is deferred and amortized as revenue over the lease term
using the interest method, which provides a level rate of return on the net
investment in the lease.
The following schedule summarizes the future minimum rental receipts on
operating and finance leases by year as of September 30, 1996:
<TABLE>
<CAPTION>
Operating Finance
(Millions of dollars) Leases Leases
- -----------------------------------------------------------------------------
<S> <C> <C>
1997 $133.9 $16.0
1998 80.5 12.6
1999 47.5 9.4
2000 25.9 7.2
2001 12.6 4.8
2002 and thereafter 5.6 1.1
------ -----
Total $306.0 $51.1
------ -----
</TABLE>
8
<PAGE>
The components of the net investment in finance leases as of September 30,
1995 and 1996 were as follows:
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Minimum lease payments receivable $ 40.7 $ 51.1
Add: estimated unguaranteed residual values 8.4 8.0
------ -----
49.1 59.1
Less: deferred finance lease income (13.8) (17.4)
------ -----
Lease contracts receivable, net $ 35.3 $ 41.7
------ -----
Current portion of lease contracts receivable, net $ 9.3 $ 10.7
Long-term portion of lease contracts receivable, net 26.0 31.0
------ -----
Lease contracts receivable, net $ 35.3 $ 41.7
------ -----
</TABLE>
(4) Debt
Debt as of September 30, 1995 and 1996 consisted of the following:
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1996
<S> <C> <C>
Unsecured financing
Medium-term Notes $418.5 $661.0
Revolving Credit Agreement 185.2 160.0
Term Loan 190.0 -
------ -----
Total unsecured financing 793.7 821.0
Total secured financing 103.8 71.0
------ -----
Total debt 897.5 892.0
Less: current portion (56.4) (55.8)
------ -----
Long-term debt $841.1 $836.2
------ -----
</TABLE>
The $661 million of Medium-term Notes outstanding under shelf registrations
have a weighted average interest rate of 7.0% and maturities from 1996 to 2010.
At September 30, 1996, $604 million remained available under the shelf
registration for future debt issuance. The weighted average interest rates
incurred were 7.9%, 7.6% and 7.1% during 1994, 1995 and 1996, respectively.
The Company's Revolving Credit Agreement has bank commitments of $300 million
at September 30, 1996 and a revolving period maturity date of June 30, 1998.
Pricing on the Revolving Credit Agreement is dependent on the Company's credit
ratings and is based on a fixed spread over the London Interbank Offered Rate
(LIBOR). The Company currently pays a facility fee on any unused commitment in
the facility.
Unless the Company requests and the banks approve a renewal or extension of
the agreement, borrowings outstanding on the revolving period maturity date
will be converted to a five year term loan payable in equal quarterly
installments with a final term maturity of June 30, 2003. The Company borrows
on a short-term basis by issuing commercial paper and using uncommitted lines
of credit. Short-term borrowings are back stopped by the unused borrowing
capacity under the Revolving Credit Agreement, and hence have been classified
as Revolving Credit Agreement borrowings. All borrowings classified as Revolving
Credit Agreement borrowings at September 30, 1995 and September 30, 1996 were
comprised of such uncommitted lines and commercial paper. Such borrowings have
a weighted average
9
<PAGE>
interest rate of 5.6%. At September 30, 1996, $140 million
of unused commitment was available. The weighted average interest rates incurred
under the Revolving Credit Agreement, consisting primarily of short-term
borrowings, were 4.1%, 6.0% and 5.8% during 1994, 1995 and 1996, respectively.
The secured financing, consisting primarily of capital lease obligations and
term loans has a weighted average interest rate of 9.2% and is payable in
installments through 2001. The weighted average interest rates incurred under
the secured financing were 9.1%, 9.3% and 9.4%, during 1994, 1995 and 1996,
respectively.
Revenue equipment recorded on the consolidated balance sheets related to
capital leases and secured debt was as follows at September 30, 1995 and 1996:
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1996
<S> <C> <C>
Revenue equipment $179.0 $140.6
Accumulated depreciation (72.5) (62.7)
------ ------
Net secured equipment $106.5 $ 77.9
------ ------
</TABLE>
Assuming the Company were to convert the Revolving Credit Agreement to a term
loan on its revolving period maturity date, the amount of minimum maturities of
all debt during each of the next five fiscal years and thereafter would be as
follows:
<TABLE>
<CAPTION>
(Millions of dollars) Total Debt
<S> <C>
1997 $ 55.8
1998 76.9
1999 101.9
2000 107.8
2001 105.1
2002 and thereafter 444.5
-------
Total payments and maturities $ 892.0
-------
</TABLE>
The Company's loan agreements contain minimum debt service tests and various
restrictive covenants including, without limitation, restrictions on incurring
debt in relation to revenue equipment and stockholders' equity and limitations
on secured borrowings. The Company's loan agreements contain covenants that
restrict the payment of dividends by the Company or repurchases of common stock.
In addition, certain loan agreements contain covenants that restrict advances
to and the payment of dividends to the Company by its subsidiaries, including
XTRA, Inc. Under the most restrictive provisions of the Company's loan
agreements, the repurchase of common stock and/or the amount of cash dividends
which could be paid on the Company's capital stock was limited to $94 million
at September 30, 1996.
10
<PAGE>
(5) Income Taxes
The components of the provision for income taxes for 1994, 1995 and 1996 are
as follows:
<TABLE>
<CAPTION>
(Millions of dollars) 1994 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax provision
Federal $16.2 $ 7.6 $ (3.5)
State 4.0 2.8 .8
----- ----- -----
Current tax provision 20.2 10.4 (2.7)
----- ----- -----
Deferred tax provision
Federal 15.8 23.2 25.2
State 4.8 7.1 5.5
----- ----- -----
Deferred tax provision 20.6 30.3 30.7
----- ----- -----
Provision for income taxes $40.8 $40.7 $28.0
----- ----- -----
</TABLE>
The provision differs from income taxes currently payable because certain
items of income and expense are recognized in different periods for financial
statement purposes than for tax return purposes.
The reasons for the difference between the statutory U.S. Federal income tax
rates and the Company's effective income tax rates for 1994, 1995 and 1996 are
as follows:
<TABLE>
<CAPTION>
Percent of Pretax Income 1994 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
Increase in taxes resulting from:
State taxes 5.5 6.3 5.3
Other, net 1.0 .2 .2
----- ----- -----
Effective income tax rate 41.5% 41.5% 40.5%
----- ----- -----
</TABLE>
The components of the net deferred tax liability as of September 30, 1995 and
1996 are as follows:
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Capital lease obligations $ 31.1 $ 23.8
Investment tax credits 2.6 3.0
Alternative minimum tax credits 9.6 17.6
Other 20.4 17.7
------ ------
Total deferred tax assets $ 63.7 $ 62.1
------ ------
Liabilities
Revenue equipment $231.4 $264.3
Other 26.0 24.7
------ ------
Total deferred tax liabilities 257.4 289.0
------ ------
Net deferred tax liability $193.7 $226.9
------ ------
</TABLE>
The Company estimates that after filing its fiscal 1996 tax return, it will
have $3 million of investment tax credit carryforwards and $18 million of
alternative minimum tax credit carryforwards available to reduce future federal
income tax liabilities. The investment tax credit carryforwards expire beginning
in 2000. The benefit of both tax credit carryforwards has been recorded in the
Company's financial statements. The Company has not recognized a valuation
allowance for deferred tax assets.
11
<PAGE>
(6) Commitments and Contingencies
The Company has leased rental equipment with an original cost of $4 million
under operating leases. In addition, the Company's offices and certain
facilities are occupied under leases expiring at various dates.
At September 30, 1996, the Company's rental commitments under the
non-cancelable portion of these leases for the next five years and in total
thereafter were as follows:
<TABLE>
<CAPTION>
Total Lease
(Millions of dollars) Commitments
<S> <C>
1997 $ 6.3
1998 5.2
1999 3.5
2000 2.8
2001 2.3
2002 and thereafter 6.3
-----
$ 26.4
-----
</TABLE>
Rental equipment lease financing expense amounted to $7 million, $2 million
and $1 million in 1994, 1995 and and 1996, respectively which is included in the
income statement under the caption Depreciation on rental equipment. Other
rental expense amounted to $4 million in 1994 and 1995 and $5 million in 1996.
As of November 13, 1996, the Company had committed capital expenditures of $59
million, principally for revenue equipment in fiscal 1997.
The Company has reached agreements to resolve its alleged involvement with
respect to the environmental problems at the Edgerton Sand and Gravel Landfill
site in Edgerton, Wisconsin and an adjacent manufacturing facility owned by its
subsidiary prior to 1978. These agreements resolved 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 were
not material to the financial condition of the Company and had previously been
fully provided for in the Company's financial statements.
The Illinois Environmental Protection Agency has notified a subsidiary of the
Company of alleged environmental contamination resulting from the 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.
(7) Retirement Plans
The Company provides retirement benefits to substantially all of its employees
through a qualified and funded defined contribution retirement plan. The
Company's yearly profit sharing cash contributions are discretionary and the
retirement trust fund's assets are administered by a trustee. The Company's
contributions include an employee- matching contribution to a 401(k) plan and a
profit sharing contribution and are based on a specified percentage of employee
qualified compensation. Participants are entitled to their vested portion of the
retirement assets upon termination of employment. The Company recorded defined
contribution pension expense of approximately $2 million in 1994, 1995 and 1996.
12
<PAGE>
(8) Business Information
The Company leases domestic and international transportation equipment. The
over-the-road and intermodal equipment is leased throughout North America and
the marine containers are moved between countries in international commerce.
Information about the business of the Company by geographic area for 1995 and
1996 is presented in the table below. Prior to 1995, all of the Company's
business was conducted in North America.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1996
-------------------
<S> <C> <C>
Revenues:
North America $ 358.1 $ 347.4
International 19.6 75.1
-------- --------
$ 377.7 $ 422.5
-------- --------
Operating Income:
North America $ 131.2 $ 115.6
International 8.2 19.9
-------- --------
$ 139.4 $ 135.5
-------- --------
Identifiable Assets:
North America $1,126.1 $1,100.2
International 390.3 436.6
-------- --------
$1,516.4 $1,536.8
-------- --------
</TABLE>
(9) Common Stock
Repurchase of Common Stock
The Company has authorized the repurchase of up to $200 million of its common
stock. The timing of the repurchases, which could occur over an extended period
of time, will depend on price, market conditions and other factors. As of
November 13, 1996, the Company had repurchased approximately $79 million of
common stock.
1987 Stock Incentive Plan
The 1987 Stock Incentive Plan authorizes the issuance of 1,150,000 shares of
common stock under the plan. The plan enables the Company to grant awards to
key employees including restricted stock awards, stock options and stock
appreciation rights, subject primarily to the requirement of continuing
employment. The awards under this plan are available for grant over a period of
ten years from the date on which the plan was adopted, but grants may vest
beyond the ten year period. Stock options issued by the Company are exercisable
at a future time as specified by the Company and generally expire from five to
ten years from the date of grant. The exercise price of stock options may not
be less than the fair market value of the common stock at the date of grant.
1990 Stock Option Agreement
In fiscal 1990, the Company granted one employee two options to purchase an
aggregate of 80,000 shares of common stock with exercise prices of $10.89 to
$16.00. In fiscal 1991, one of the options was amended to change the option
price from $16.00 to $11.50. In fiscal 1994, options to purchase 30,000 shares
were exercised at an option price of $11.50 per share. In fiscal 1995, options
to purchase the remaining 50,000 shares at $10.89 per share were exercised.
13
<PAGE>
1991 Stock Option Plan for Non-Employee Directors
The 1991 Stock Option Plan for Non-Employee Directors authorizes the granting of
options for a maximum of 50,000 shares. The option price per share is equal to
the fair market value of the common stock on the date of grant. The term of each
option is five years and options become exercisable one year after the date of
grant.
The XTRA Corporation Deferred Director Fee Option Plan
The Deferred Director Fee Option Plan allows a non-employee director to elect to
receive, in lieu of his annual retainer fee and/or board and committee meeting
fees, a non-qualified stock option covering a specified amount of shares. The
option exercise price is 50% of the fair market value of the shares at the time
the options are awarded and the amount of shares is determined by dividing the
director's fees by the exercise price.
The following table summarizes the transactions pursuant to the Company's Stock
Option Plans for the three-year period ended September 30, 1996:
<TABLE>
<CAPTION>
Shares Option Price
(000's) Per Share ($)
-------------------------
<S> <C> <C>
Options outstanding at September 30, 1993: 227 9.75 to 43.75
Granted 79 24.25 to 50.50
Exercised (54) 10.82 to 36.13
Forfeited (3) 36.13 to 50.50
---
Options outstanding at September 30, 1994: 249 9.75 to 50.50
Granted 501 22.81 to 50.63
Exercised (78) 9.75 to 36.13
Forfeited (6) 36.13 to 50.50
---
Options outstanding at September 30, 1995: 666 10.82 to 50.63
Granted 21 20.75 to 45.38
Exercised (36) 10.82 to 37.75
Forfeited (11) 36.13 to 50.63
---
Options outstanding at September 30, 1996: 640 15.69 to 50.63
---
Exercisable options at September 30, 1996: 587 15.69 to 50.63
Options available for grant at September 30, 1996: 233
</TABLE>
Accounting for Stock-Based Compensation
In December 1995, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based
Compensation", which is to become effective for fiscal years beginning after
December 15, 1995. SFAS No. 123 requires that employee stock-based compensation
be recorded or disclosed at its fair value. The Company expects to continue to
account for stock-based compensation under APB No. 25 and does not anticipate
adopting the new accounting provision for stock-based compensation. SFAS 123
requires that companies which do not choose to account for stock-based
compensation as prescribed by this statement, shall disclose, among other
information, the proforma effects on earnings per share as if SFAS 123 had been
adopted.
14
<PAGE>
(10) Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
Cash and Short-term Investments
The carrying amount approximates fair value because of the short maturity of
those instruments.
Debt
The fair value of the Company's fixed rate debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities. The fair value of the
Company's floating rate debt is its carrying amount.
Interest Rate Swap Agreements
The fair value of interest rate swaps (used for hedging purposes) was the
estimated amount that the Company would have paid to terminate the swap
agreements taking into account interest rates and the credit-worthiness of the
swap counterparties. These agreements matured in fiscal 1996.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
For the two years ended September 30, 1996 Carrying Fair
(Millions of dollars) Amount Value
---------------------
<S> <C> <C>
1995
Cash and short-term investments $ 7.0 $ 7.0
Debt 897.5 905.1
Interest rate swaps - (.7)
1996
Cash and short-term investments $ 8.1 $ 8.1
Debt 892.0 877.0
</TABLE>
(11) Allowance for Doubtful Accounts
Allowance for doubtful accounts as of September 30, 1994, 1995 and 1996
consist of the following:
<TABLE>
For the year ended September 30,
(Millions of dollars) 1994 1995 1996
--------------------
<S> <C> <C> <C>
Balance at beginning of year $ 9.6 $10.9 $15.9
Additions charged to operating expenses 4.2 4.2 3.5
Additions charged to revenues .2 .4 -
Deductions(1) 3.1 3.0 5.9
Other(2) - 3.4 -
----- ----- -----
Balance at end of year $10.9 $15.9 $13.5
----- ----- -----
</TABLE>
(1) Amounts charged against reserves, net of recoveries.
(2) Includes the addition of reserves for accounts receivable related to
acquisitions.
15
<PAGE>
(12) Selected Financial Data of Significant Subsidiaries
The condensed consolidated data for XTRA Inc., a wholly-owned subsidiary of XTRA
Corporation, included in the consolidated financial information of the Company,
is summarized below:
XTRA, Inc.
and Subsidiaries
<TABLE>
<CAPTION>
For the three years ended September 30, 1996
(Millions of dollars) 1994 1995 1996
------------------------
<S> <C> <C> <C>
Income Statement Data
Revenues $ 355.3 $ 377.7 $ 422.5
Income before provision for income taxes 98.4 97.9 68.9
Net income 57.6 57.2 40.9
Selected Balance Sheet Data
Receivables, net $ 95.3 $ 90.9 $ 93.9
Net property and equipment 842.8 1,395.5 1,406.8
Other assets 64.0 27.0 35.7
-------- -------- --------
Total assets $1,002.1 $1,513.4 $1,536.4
-------- -------- --------
Debt $ 443.8 $ 897.5 $ 892.0
Deferred income taxes 165.7 193.7 226.9
Other liabilities 66.3 69.7 76.8
-------- -------- --------
Total liabilities 675.8 1,160.9 1,195.7
Stockholders' equity 326.3 352.5 340.7
-------- -------- --------
Total liabilities and stockholders' equity $1,002.1 $1,513.4 $1,536.4
-------- -------- --------
</TABLE>
16
<PAGE>
Report of Independent Public Accountants
To the Stockholders of XTRA Corporation:
We have audited the accompanying consolidated balance sheets of XTRA Corporation
(a Delaware corporation) and subsidiaries as of September 30, 1995 and 1996, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of XTRA Corporation and
subsidiaries as of September 30, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ending
September 30, 1996, in conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 13, 1996
17
<PAGE>
Parent and Subsidiaries*
Name State or Province of Incorporation
-----------------------------------------------------
XTRA Corporation Delaware
Subsidiary of XTRA Corporation
XTRA, Inc. Maine
Subsidiaries of XTRA, Inc.
XTRA Intermodal, Inc. Delaware
XTRA International Ltd Delaware
X-L-CO., INC. Delaware
XLI, Inc. Delaware
Subsidiaries of XLI, Inc.
Distribution International Corporation Delaware
Subsidiaries of Distribution International Corporation
Strick Canada Limited Ontario
XTRA Lease, Inc. Delaware
* Certain inactive subsidiaries have been omitted.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report, incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (No. 33-41360, No.
33-57609, No. 33-25519, No. 33-57607, and No. 33-45564) and on Form S-3
(No. 33-54747 and No. 33-65293).
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 13, 1996
<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 September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 7,700,000
<SECURITIES> 400,000
<RECEIVABLES> 65,800,000
<ALLOWANCES> 13,500,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,976,800,000
<DEPRECIATION> 569,800,000
<TOTAL-ASSETS> 1,536,800,000
<CURRENT-LIABILITIES> 0
<BONDS> 892,000,000
0
0
<COMMON> 7,800,000
<OTHER-SE> 333,700,000
<TOTAL-LIABILITY-AND-EQUITY> 1,536,800,000
<SALES> 0
<TOTAL-REVENUES> 422,500,000
<CGS> 0
<TOTAL-COSTS> 287,100,000
<OTHER-EXPENSES> 400,000
<LOSS-PROVISION> 3,500,000
<INTEREST-EXPENSE> 66,000,000
<INCOME-PRETAX> 69,100,000
<INCOME-TAX> 28,000,000
<INCOME-CONTINUING> 41,100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,100,000
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.56
</TABLE>
