<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1996
------------------------------------------------------
Commission File Number 1-7654
----------------------------------------------------------
XTRA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-0954158
- --------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 State Street, Boston, Massachusetts 02109
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(617) 367-5000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 31, 1997
- --------------------------------- -----------------------------------
Common Stock, Par Value 15,251,334
$.50 Per Share
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
---------------------
Management Representation........................ 3
Consolidated Balance Sheets
December 31, 1996 and September 30, 1996....... 4
Consolidated Income Statements
For the Three Months Ended
December 31, 1996 and 1995..................... 5
Consolidated Statements of Cash Flows
For the Three Months Ended
December 31, 1996 and 1995..................... 6
Consolidated Statements of Stockholders' Equity
For the Period September 30, 1995
Through December 31, 1996...................... 7
Notes to Consolidated Financial Statements....... 8 - 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 10 - 13
Part II. Other Information
-----------------
Item 4. Submission of Matters to a Vote of
Security Holders......................... 14
Item 5. Other Matters............................ 15 - 17
Item 6. Exhibits and Reports on Form 8-K......... 18
Signatures........................................ 19
Exhibit Index..................................... 20
Exhibits.......................................... 21
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
MANAGEMENT REPRESENTATION
-------------------------
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that the disclosures are adequate
to make the information presented not misleading.
The Board of Directors carries out its responsibility for the financial
statements included herein through its Audit Committee, composed of non-employee
Directors. During the year, the Committee meets periodically with both
management and the independent public accountants to ensure that each is
carrying out its responsibilities. The independent public accountants have full
and free access to the Audit Committee and meet with its members, with and
without management being present, to discuss auditing and financial reporting
matters.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K.
This financial information reflects, in the opinion of management, all
adjustments consisting of only normal recurring adjustments necessary to present
fairly the results for the interim periods. The results of operations for such
interim periods are not necessarily indicative of the results to be expected for
the full year.
3
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
1996 September 30,
(unaudited) 1996 (1)
-------------- ---------------
<S> <C> <C>
Assets
- ------
Property and equipment, at cost
Revenue equipment $ 1,909.4 $ 1,911.7
Land, buildings and other 65.6 65.1
-------------- ---------------
1,975.0 1,976.8
Less - Accumulated depreciation (595.1) (569.8)
-------------- ---------------
Net property and equipment 1,379.9 1,407.0
Cash 6.3 7.7
Trade receivables, net 58.5 52.3
Lease contracts receivable 41.6 41.7
Other assets 24.8 28.1
-------------- ---------------
$ 1,511.1 $ 1,536.8
============== ===============
Liabilities and Stockholders' Equity
- ----------------------------------------
Liabilities
Debt $ 875.0 $ 892.0
Deferred income taxes 234.7 226.9
Accounts payable and accrued expenses 63.2 76.4
-------------- ---------------
Total liabilities 1,172.9 1,195.3
-------------- ---------------
Commitments and Contingencies
Stockholders' equity
Common Stock, par value $.50 per share;
authorized:
30,000,000 shares; issued and
outstanding;
15,246,099 shares at December 31,
1996
and 15,550,499 at September 30, 7.6 7.8
1996
Capital in excess of par value 50.5 63.3
Retained earnings 283.7 273.3
Cumulative translation adjustment (3.6) (2.9)
-------------- ---------------
Total stockholders' equity 338.2 341.5
-------------- ---------------
$ 1,511.1 $ 1,536.8
============== ===============
</TABLE>
(1) Derived from XTRA Corporation's audited September 30, 1996 financial
statements.
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
------------------------------
(MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------
1996 1995
-------- -------
<S> <C> <C>
Revenues $ 111.4 $ 112.2
Operating expenses
Depreciation on rental equipment 36.5 36.3
Rental equipment operating expense 26.4 25.4
Selling and administrative expense 10.8 10.0
-------- -------
73.7 71.7
-------- -------
Operating income 37.7 40.5
Interest expense 15.9 16.7
Foreign exchange loss - 0.4
-------- -------
Income from operations before
provision for income taxes 21.8 23.4
Provision for income taxes 8.7 9.5
-------- -------
Net income $ 13.1 $ 13.9
======== =======
Earnings per fully diluted common share $ 0.85 $ 0.85
Weighted average number of fully diluted
common shares outstanding (in 15.3 16.4
millions)
Cash dividends declared per share $ 0.18 $ 0.16
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net income $ 13.1 $ 13.9
Add non-cash income and expense items:
Depreciation and amortization, net 36.6 35.3
Deferred income taxes 7.8 9.0
Bad debt expense 1.3 1.1
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses (19.1) (13.7)
Cash receipts from lease contracts receivable 5.0 4.4
Recovery of property and equipment net book value 6.1 7.1
---------- -------------
Total cash provided from operations 50.8 57.1
---------- -------------
Cash used for investment activities:
Additions to property and equipment (19.6) (61.2)
Acquisition of certain net assets of
Matson Leasing Co, Inc. - (4.4)
---------- -------------
Total cash used for investment activities (19.6) (65.6)
---------- -------------
Cash flows from financing activities:
Borrowings of long-term debt - 102.9
Payments of long-term debt (16.9) (86.9)
Repurchase of common stock (13.0) (10.6)
Dividends paid (2.7) (2.5)
---------- -------------
Total cash provided by/(used for)
financing activities (32.6) 2.9
---------- -------------
Net decrease in cash (1.4) (5.6)
Cash at beginning of period 7.7 6.3
---------- -------------
Cash at end of period $ 6.3 $ 0.7
========== =============
Total interest paid $ 27.1 $ 18.2
Total net income taxes paid (refunded) $ (0.5) $ (1.5)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Common
Stock Capital in Cumulative
$.50 Excess of Retained Translation
Par Value Par Value Earnings Adjustment
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Balance at September 30, 1995 $ 8.3 $ 107.6 $243.4 $ (0.5)
Net income - - 41.1 -
Common Stock cash dividends
declared at $.70 per share - - (11.2) -
Options exercised and related tax
benefits - 0.9 - -
Common Stock repurchased (0.5) (45.2) -
Translation adjustment - - - (2.4)
----- ------- ------ ------
Balance at September 30, 1996 7.8 63.3 273.3 (2.9)
Net income - - 13.1 -
Common Stock cash dividends
declared at $.18 per share - - (2.7) -
Common Stock repurchased (0.2) (12.8)
Translation adjustment - - - (0.7)
----- ------- ------ ------
Balance at December 31, 1996 $ 7.6 $ 50.5 $283.7 $ (3.6)
===== ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) The consolidated financial statements include the accounts of XTRA
Corporation and its wholly-owned subsidiaries (the "Company"). All
material intercompany accounts and transactions have been eliminated.
Certain amounts in prior period financial statements have been reclassified
to be consistent with the current periods' presentation.
(2) The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for
fiscal 1996 was approximately 41%. For the three months ended December 31,
1996, the Company has recorded a provision for income taxes using an
estimated effective income tax rate of approximately 40%. The Company's
effective income tax rate for fiscal 1996 and its estimated effective
income tax rate for fiscal 1997 are higher than the statutory U.S. Federal
income tax rate due primarily to state income taxes.
(3) The Company's long-term debt includes a current portion of $51 million at
December 31, 1996 and $56 million at September 30, 1996.
(4) 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. XTRA Corporation's assets
consist substantially of the aggregate assets, liabilities, earnings and
equity of XTRA, Inc. In addition, XTRA Corporation generally guarantees
the debt of XTRA, Inc.
The condensed consolidated financial data for XTRA, Inc. included in the
consolidated financial information of the Company is summarized below:
<TABLE>
<CAPTION>
Selected Income Statement Data:
- -------------------------------
(Millions of dollars)
For the three months ended December 31, 1996 1995
------- -------
<S> <C> <C>
Revenues $ 111.4 $ 112.2
Income before provision for income taxes 21.8 23.4
Net income 13.1 13.9
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data: December 31, September 30,
- ---------------------------- 1996 1996
(Millions of dollars) ------------ -------------
<S> <C> <C>
Net property and equipment $1,379.9 $1,406.8
Receivables, net 100.1 93.9
Other assets 31.1 35.7
-------- --------
Total assets $1,511.1 $1,536.4
======== ========
Debt $ 875.0 $ 892.0
Deferred income taxes 234.7 226.9
Other liabilities 63.3 76.8
-------- --------
Total liabilities 1,173.0 1,195.7
-------- --------
Stockholders' equity 338.1 340.7
-------- --------
Total liabilities and stockholders'
equity $1,511.1 $1,536.4
======== ========
</TABLE>
9
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The discussion below may contain certain forward-looking statements, such
as estimates of economic and industry conditions, equipment utilization and
capital expenditures. Actual results may vary from those contained in such
forward-looking statements. See "Cautionary Statements for Purposes of the
'Safe Harbor' Provisions of the Private Securities Litigation Act of 1995"
contained in Part II, Item 5.
The Three Months Ended December 31, 1996
- -----------------------------------------
Versus the Three Months Ended December 31, 1995:
- ------------------------------------------------
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are generated by leasing domestic and international transportation
equipment. The Company's over-the-road and intermodal equipment is leased
throughout North America and marine containers are moved between countries in
international commerce. Revenues are a function of lease rates and working
units; the latter depends on fleet size and equipment utilization.
The following table sets forth the Company's average equipment utilization
(dollar weighted by investment in each type of equipment), average fleet size in
units (including units leased in under operating leases), and net investment in
equipment as of the three months ended December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
North America:
--------------
Utilization 88% 85%
Units 130,000 133,000
Net investment in equipment (in millions) $ 958 $ 1,003
International:
--------------
Utilization 78% 85%
Units 154,000 132,000
Net investment in equipment (in millions) $ 419 $ 399
Consolidated:
-------------
Utilization 85% 85%
Units 284,000 265,000
Net investment in equipment (in millions) $ 1,377 $ 1,402
</TABLE>
Revenues decreased by 1% or $.8 million for the three months ended December
31, 1996 over the same period a year ago. The Company's average equipment
utilization and net investment in equipment remained relatively unchanged from
the preceding year.
10
<PAGE>
The Company's North American business revenue declined $.7 million from the
same quarter a year ago due mainly to lower gains on sales resulting from a
decline in the sale of intermodal trailers. The Company's North American
utilization, which began to improve during the second half of fiscal 1996,
averaged 88% for the first quarter of fiscal 1997, as compared to 85% in the
first quarter of fiscal 1996. Lower industry-wide capital spending and
increasing demand, as seen in improving intermodal and railcar loadings and
truck tonnage, have positively impacted the supply/demand balance. As the
railroads shift toward more container usage, the Company continues to downsize
the intermodal trailer fleet. XTRA's intermodal trailer fleet averaged 24,000
units, versus 29,000 units in the comparable prior year period.
International revenues were unchanged from the same quarter of the prior
year. An increase in the number of working units was offset by a lower average
effective lease rate. International utilization decreased to 78% from 85% in
the comparable quarter. 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, improved worldwide trade balance has resulted in more
efficient use of equipment by shippers and hence lower usage of leased
containers. In 1996, increases in the supply of marine containers resulting
from substantial industry-wide purchases reduced demand for leased containers.
While industry container purchases are down considerably over the past year,
significant improvement in utilization is not expected in 1997. The
overcapacity and sluggish demand for marine containers continues to exert
pressure on the Company's international lease rates. The Company's average
international fleet size increased in fiscal 1997 to 154,000 units from 132,000
units in the comparable prior year period.
For the three months ended December 31, 1996, the Company's North American
utilization improved and international utilization declined from the same period
a year ago due to the economic and industry conditions discussed above. These
conditions have continued into the early portion of the second quarter of fiscal
1997. Historically, the Company's second and third quarters reflect the
seasonality of the transportation business and represent a period of lower
utilization and hence lower profitability. For the full 1997 fiscal year,
average equipment utilization is expected to be modestly higher than the 1996
average of 81%.
Operating Expenses
- ------------------
Total operating expenses increased by 3% or $2.0 million from the same
period of fiscal 1996. Rental equipment operating expense increased by 4% or
$1.0 million due to higher storage and repositioning costs associated with the
marine container business. Selling and administrative expenses increased 8% or
$.8 million with no one factor contributing significantly to the increase.
11
<PAGE>
Interest Expense
- ----------------
Interest expense decreased by 5% or $.8 million for the three months
ended December 31, 1996, due primarily to a decrease in average net debt
outstanding, as well as a decrease in the average effective interest rate.
Foreign Exchange Loss
- ---------------------
In fiscal 1996, the Company recorded a foreign exchange loss of $.4 million
which was attributable to the translation of certain liabilities of the
Company's Canadian business. This loss was a result of the decreasing value of
the Canadian dollar versus the U.S. dollar during the quarter.
Income Before Provision for Income Taxes
- ----------------------------------------
Pretax earnings decreased 7% or $1.6 million for the three months ended
December 31, 1996 over the same period a year ago primarily due to lower marine
container utilization which resulted in higher storage and repositioning costs.
Provision for Income Taxes
- --------------------------
The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for fiscal
1996 was approximately 41%. For the three months ended December 31, 1996, the
Company has recorded a provision for income taxes using an estimated effective
income tax rate of approximately 40%. The Company's effective income tax rate
for fiscal 1996 and its estimated effective income tax rate for fiscal 1997 are
higher than the statutory U.S. Federal income tax rate due primarily to state
income taxes.
Liquidity and Capital Resources
- -------------------------------
During the three months ended December 31, 1996, the Company generated cash
flows from operations of $51 million. During the same period, XTRA invested $20
million in property and equipment, paid dividends of $3 million and repurchased
common stock of $13 million. Net debt outstanding (debt less cash) decreased
$15 million.
As of January 23, 1997, committed capital expenditures for fiscal 1997
amounted to approximately $145 million. The Company may increase capital
spending in 1997 if conditions warrant. However, given current industry
conditions, it is unlikely that spending for new equipment excluding
acquisitions will exceed the 1996 capital expenditure level of approximately
$210 million.
On January 23, 1997, XTRA's Board of Directors raised the regular quarterly
cash dividend from $.18 to $.20 per share and declared a quarterly cash dividend
of $.20 per share, payable on February 28, 1997, to stockholders of record on
February 14, 1997.
From October 1, 1996 to January 23, 1997, the Company had repurchased $13
million of its common stock pursuant to its $200 million common stock repurchase
program. Since the implementation of the program in fiscal 1995, the Company
has repurchased $79 million of its
12
<PAGE>
common stock.
As of January 31, 1997, XTRA Inc. had $604 million available for future
issuance under its $742 million Shelf Registration. As of January 31, 1997, the
Company had $156 million of unused credit available under its $300 million
Revolving Credit Agreement.
13
<PAGE>
Part II - OTHER INFORMATION
-----------------------------
Item 4 - Submission of Matter to a Vote of Security Holders
- ------------------------------------------------------------
At the 1997 Annual Meeting of Stockholders held on January 23, 1997, at
which a quorum was present, the stockholders re-elected seven of the incumbent
Directors and approved the following proposal by the number of shares of common
stock as noted:
(1) Nominees for the office of Director:
<TABLE>
<CAPTION>
Number of Shares
--------------------
Voted For Withheld
---------- --------
<S> <C> <C>
H. William Brown 14,269,706 23,229
Robert M. Gintel 14,266,069 26,866
Robert B. Goergen 14,270,006 22,929
Herbert C. Knortz 14,264,749 28,186
Francis J. Palamara 14,264,591 28,344
Lewis Rubin 14,268,894 24,040
Martin L. Solomon 14,268,631 24,303
</TABLE>
<TABLE>
<CAPTION>
Number of Shares Voted
-----------------------------
For Against Abstain
----- ------- -------
<S> <C> <C> <C>
(2) To approve amendments to the 14,073,070 192,359 27,505
Company's 1991 Stock Option
Plan for Non-Employee
Directors: i) to increase
from 50,000 to 100,000 the
number of shares reserved for
issuance under the Plan, ii)
to increase the number of
shares covered by options
awarded annually to directors
from 500 to 1,000 and iii) to
provide for initial grants to
newly elected directors for
options covering 4,000 shares
of the Company's Common
Stock.
</TABLE>
14
<PAGE>
Item 5 - Other Matters
- ----------------------
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
- -------------------------------------------------------------------------
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
- ------------------------------------------------
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations may contain certain forward-looking statements,
including estimates of economic and industry conditions, equipment utilization
and capital expenditures. In addition, 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, which are based on lease rates, utilization, supply of
and demand for equipment, are variable due to their dependence on the level of
domestic and international economic activity, as well as changing industry
levels of equipment supply. In addition, the Company has a high percentage of
fixed operating expenses, including depreciation, a portion of rental equipment
operating expense and selling and administrative expenses. As a result, the
Company's pretax profits are cyclical. If domestic or global economic activity
remains slow or if an oversupply of industry equipment exists, operating margins
may be adversely affected. 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.
Supply of Equipment:
- --------------------
New equipment, supplied by a number of manufacturers, is built to the Company's
specifications and reflects industry standards and customer needs. There is
often a considerable amount of time between when an order is placed and when the
equipment is delivered. In addition, it is difficult to accurately predict
demand for the Company's equipment in future periods. As a result, the
Company's performance in a given period may be adversely affected either because
of its inability to quickly increase fleet size (because of extended back
orders) to take advantage of
15
<PAGE>
unexpectedly strong demand, or to quickly reduce fleet size in order to react
to reduced demand.
Demand:
- -------
Demand for equipment is affected by economic factors, equipment supply and
shifting traffic trends in the industry. A softening domestic or international
economy may result in lower levels of freight shipments. Shifting traffic
trends in the industry, such as truckers competing more aggressively, may divert
some intermodal freight to over-the-road. Other items affecting demand which may
impact leasing needs can include severe adverse weather conditions such as
floods or snow storms or strikes by transportation unions.
Operating Expenses:
- -------------------
The Company's operating expenses consist of a high percentage of fixed
costs and thus profitability can change as revenues fluctuate due to increases
and decreases in utilization and/or lease rates. The fixed costs include
depreciation, a portion of rental equipment operating expense and selling and
administrative expenses. As a result, income from operations can be cyclical.
If revenues decline in any period, operating margins may change from those
reported in prior periods due to the fixed nature of a significant portion of
the Company's expenses.
CAPITAL NEEDS:
- --------------
The acquisition of new equipment, both for growth as well as replacement of
older equipment, requires significant capital. 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 expenditures and acquisitions at favorable rates or
terms, the availability of such capital depends heavily upon prevailing market
conditions, the Company's capital structure and its credit ratings. No
assurances can be given that financing will continue to be available at
attractive rates or with covenants that are not more restrictive than the
Company's current debt covenants.
INTEREST RATES:
- ---------------
Over the past several years, interest rates have remained at historically low
levels. Because of the Company's heavy dependence upon external financing to
fund its capital needs and acquisitions, the level of interest rates directly
affects 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
adversely effecting its profitability.
FOREIGN EXCHANGE RATES:
- -----------------------
A portion of the Company's North American over-the-road and intermodal business
is transacted in local currencies. As a result, the Company's financial results
are subject to foreign exchange rate fluctuations.
ACQUISITIONS:
- ------------
Over the past years, the Company has used acquisitions of fleets operated by
other companies to help grow its business. In order for the Company to take
advantage of favorable acquisition opportunities as they are presented, it may
be necessary for the Company to significantly increase its debt leverage ratio
which could adversely effect its credit ratings. Also, the ability of
16
<PAGE>
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 through mergers or acquisitions of the Company's customer base,
including railroad or steamship lines, may result in reduced demand for leased
equipment.
17
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
- --- --------
Exhibit No. Description
- ----------- -----------
10.1 1991 Stock Option Plan for Non-Employee Directors, as amended
through November 14, 1996
11.1 Statement of the calculation of earnings per share for the three
months ended December 31, 1996 and 1995
12.1 Statement of the calculation of earnings to fixed charges for the
three months ended December 31, 1996 and 1995 for XTRA
Corporation
12.2 Statement of the calculation of earnings to fixed charges for the
three months ended December 31, 1996 and 1995 for XTRA, Inc.
27.0 Financial Data Schedule
(b) Reports of Form 8-K
- --- -------------------
On January 24, 1997, a Current Report on Form 8-K was filed by the Company
to disclose certain financial information for the fiscal first quarter ended
December 31, 1996.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XTRA CORPORATION
-------------------------------------
(Registrant)
Date: February 7, 1997 /s/ Michael J. Soja
-------------------- -------------------------------------
Michael J. Soja
Vice President and
Chief Financial Officer
Date: February 7, 1997 /s/ Robert B. Blakeley
-------------------- -------------------------------------
Robert B. Blakeley
Vice President and
Controller
19
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
10.1 1991 Stock Option Plan for Non-Employee
Directors, as amended through November
14, 1996 21 - 25
11.1 Statement of the calculation of earnings
per share for the three months ended
December 31, 1996 and 1995 26
12.1 Statement of the calculation of earnings
to fixed charges for the three months
ended December 31, 1996 and 1995 for
XTRA Corporation 27
12.2 Statement of the calculation of earnings
to fixed charges for the three months
ended December 31, 1996 and 1995 for
XTRA, Inc. 28
27 Financial Data Schedule 29
</TABLE>
<PAGE>
EXHIBIT 10.1
XTRA CORPORATION
1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
-------
The purpose of this 1991 Stock Option Plan for Non-Employee Directors
(the "Plan") is to advance the interests of XTRA Corporation (the "Company") by
enhancing the ability of the Company to attract and retain Directors who are in
a position to make significant contributions to the success of the Company and
to reward Directors for such contributions through ownership of shares of the
Company's common stock (the "Stock").
2. ADMINISTRATION
--------------
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall have authority, not inconsistent with the express provisions of
the Plan, to adopt, amend and rescind rules and regulations for the
administration of the Plan, and to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
shall bind all parties.
3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall become effective on the date on which the Plan is
approved by the stockholders of the Company. Options granted under Section 6(a)
of the Plan prior to that date shall be subject to approval of the Plan by the
stockholders. No option shall be granted under the Plan after the completion of
ten years from the date on which the Plan was adopted by the Board, but options
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
--------------------------
(a) Number of Shares. Subject to adjustment as provided in Section
----------------
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of options granted under the Plan shall be 100,000. If any option
granted under the Plan terminates without having been exercised in full, the
number of shares of Stock as to which such option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
<PAGE>
EXHIBIT 10.1
(b) Shares to be Delivered. Shares delivered under the Plan shall be
----------------------
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split
----------------
or combination of shares, recapitalization or other change in the Company's
capital stock, the number and kind of shares of stock or securities of the
Company subject to options then outstanding or subsequently granted under the
Plan, the maximum number of shares or securities that may be delivered under the
Plan, the exercise price, and other relevant provisions shall be appropriately
adjusted by the Committee, whose determination shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
-----------------------
Directors eligible to receive options under the Plan ("Eligible
Directors") shall be any Director who is not an employee of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) Number of Options.
-----------------
Eligible Directors who are Directors on the date of adoption of the
Plan by the Board of Directors shall be awarded 4,000 shares of Stock on that
date. Newly elected Eligible Directors who are subsequently elected to the
Board shall also be awarded options covering 4,000 shares of Stock on the date
of their first election to the Board.
Following the initial grants, each Eligible Director shall be awarded
options covering 1,000 shares of Stock on the day immediately succeeding the day
of each Annual Meeting of the Stockholders of the Company, provided such
individual is then an Eligible Director.
(b) Exercise Price. The exercise price of each option shall be 100%
--------------
of the fair market value per share of the Stock at the time the option is
granted, but not less, in the case of an original issue of authorized stock,
than par value per share. For this purpose, "fair market value" on any given
date means the highest closing sale price on the date immediately preceding the
date in question of a share of Stock on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such Stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such Stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such Stock is listed, or, if such
Stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such Stock on the date immediately preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotation System or any similar system then in use, or if no such
<PAGE>
EXHIBIT 10.1
quotation system is available, the fair market value on the date in question as
determined in good faith by the Committee.
(c) Duration of Options. The latest date on which an option may be
-------------------
exercised (the "Final Exercise Date") shall be the date which is five years from
the date the option was granted.
(d) Exercise of Options.
-------------------
(1) Each option shall become exercisable in full on the earlier of
(i) the first anniversary of the grant date or (ii) the date
immediately prior to the date of the next annual meeting of
stockholders following the grant date provided that such date is
at least three hundred fifty five (355) days after such grant
date.
(2) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (a) the option certificate and any other
documents required by the Committee and (b) payment in full for
the number of shares for which the option is exercised.
(3) If an option is exercised by the executor or administrator of a
deceased Director, or by the person or persons to whom the option
has been transferred by the Director's will or the applicable laws
of descent and distribution, the Company shall be under no
obligation to deliver Stock pursuant to such exercise until the
Company is satisfied as to the authority of the person or persons
exercising the option.
(e) Payment for and Delivery of Stock. Stock purchased under the
---------------------------------
Plan shall be paid for as follows: (i) in cash or by check, bank draft or money
order payable to the order of the Company, (ii) through the delivery of shares
of Stock which have been beneficially owned by the Eligible Director for not
less than six months prior to the date of exercise and having a fair market
value on the last business day preceding the date of exercise equal to the
purchase price or (iii) by a combination of cash and Stock as provided in
clauses (i) and (ii) above.
An option holder shall not have the rights of a stockholder with
regard to awards under the Plan except as to Stock actually received by him
under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the
<PAGE>
EXHIBIT 10.1
Company's counsel. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the option, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
(f) Nontransferability of Options. No option may be transferred
-----------------------------
other than by will or by the laws of descent and distribution, and, during a
Director's lifetime, an option may be exercised only by him.
(g) Death. Upon the death of any Eligible Director granted options
-----
under this Plan, all options not then exercisable shall terminate. All options
held by the Director that are exercisable immediately prior to death may be
exercised by his executor or administrator, or by the person or persons to whom
the option is transferred by will or the applicable laws of descent and
distribution, at any time within the three-year period ending with the third
anniversary of the Director's death (subject, however, to the limitations of
Section 6(c) regarding the maximum exercise period for such option). After
completion of that three year period (or the period set forth in Section 6(c),
whichever ends earlier), such options shall terminate to the extent not
previously exercised.
(h) Other Termination of Status of Director. If a Director's service
---------------------------------------
with the Company terminates for any reason other than death, all options held by
the Director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)), but shall terminate
immediately if the Director was removed for cause or resigned under
circumstances which in the opinion of the Committee casts such discredit on him
as to justify termination of his options. After completion of that three-month
period (or the period set forth in Section 6(c), whichever ends earlier), such
options shall terminate to the extent not previously exercised, expired or
terminated.
(i) Mergers, etc. Subject to Section 7, in the event of any merger
-------------
or consolidation involving the Company, any sale of substantially all of the
Company's assets or a dissolution or liquidation of the Company, all options
held by each Eligible Director shall terminate, but at least 20 days prior to
the effective date of any such merger, sale, dissolution, or liquidation, the
Committee shall make all options outstanding hereunder immediately exercisable,
provided that the Committee may instead arrange that the successor or surviving
corporation, if any, grant replacement options.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
---------------------------------------------------------------
Neither adoption of the Plan nor the grant of options to a Director
shall affect the Company's right to grant to such Director options that are not
subject to the Plan, to issue
<PAGE>
EXHIBIT 10.1
to such Directors Stock as a bonus or otherwise, or to adopt other plans or
arrangements under which Stock may be issued to Directors.
The Committee may at any time or times amend the Plan for any purpose
which may at the time be permitted by law, or may at any time terminate the Plan
as to any further grants of options; provided, however, that (except to the
extent expressly required or permitted herein above) no such amendment shall,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) increase the number of
options granted to Eligible Directors, (c) amend the definition of Eligible
Director so as to enlarge the group of Directors eligible to receive options
under the Plan, (d) reduce the price at which options may be granted, (e) change
or extend the times at which options may be granted, or (f) amend the provisions
of this Section 7, and no such amendment shall adversely affect the rights of
any Director (without his consent) under any option previously granted, and,
provided further, that Sections 4(a) and (c) and 6(a)-(d) of the Plan may not be
amended more than once every six months other than to comport with changes in
the Internal Revenue Code or the rules thereunder.
*********************
As adopted by the Board of Directors: AUGUST 6, 1991
As approved by the Stockholders: JANUARY 29, 1992
As amended by the Board of Directors: NOVEMBER 18, 1993
As approved by the Stockholders: JANUARY 27, 1994
As amended by the Compensation Committee: JANUARY 25, 1996
As amended by the Compensation Committee: NOVEMBER 13, 1996
As approved by the Board of Directors: NOVEMBER 14, 1996
As approved by the Stockholders: JANUARY 23, 1997
<PAGE>
EXHIBIT 11.1
XTRA CORPORATION
EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES OUTSTANDING
----------------------------------------------------------
CALCULATION
------------
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Net Income $ 13.1 $ 13.9
======= =======
Weighted average number of fully
diluted common
shares outstanding (in thousands) 15,318 16,431
Earnings per fully diluted common share $ 0.85 $ 0.85
======= =======
Computation of Primary Shares
Outstanding (in thousands)
- -------------------------------
Weighted average common shares 15,299 16,396
outstanding
Common stock equivalents for primary
EPS: 17 35
------- -------
Weighted average number of common
shares outstanding (primary) 15,316 16,431
======= =======
Computation of Fully Diluted Shares
Outstanding (in thousands)
- -----------------------------------
Weighted average common shares
outstanding 15,299 16,396
Common stock equivalents for fully
diluted EPS: 19 35
------- -------
Weighted average number of common
shares outstanding (fully diluted) 15,318 16,431
======= =======
</TABLE>
<PAGE>
Exhibit 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
---------------------------------------------------------
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
EARNINGS
Income from operations before provision $ 21.8 $ 23.4
for income taxes
Add: Fixed charges (below) 15.9 16.8
------ ------
$ 37.7 $ 40.2
====== ======
FIXED CHARGES
Interest expense $ 15.9 $ 16.7
Interest portion of rent expense - 0.1
------ ------
$ 15.9 $ 16.8
====== ======
Ratio of Earnings to Fixed Charges 2.4 2.4
====== ======
</TABLE>
Note: For purposes of computing the ratio of earnings to fixed charges,
"earnings" represent 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 THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
EARNINGS
Income from operations before provision
for income taxes $ 21.8 $ 23.4
Add: Fixed charges (below) 15.9 16.8
------ ------
$ 37.7 $ 40.2
====== ======
FIXED CHARGES
Interest expense $ 15.9 $ 16.7
Interest portion of rent expense - 0.1
------ ------
$ 15.9 $ 16.8
====== ======
Ratio of Earnings to Fixed Charges 2.4 2.4
====== ======
</TABLE>
Note: For purposes of computing the ratio of earnings to fixed charges,
"earnings" represent income from operations before taxes plus fixed
charges. "Fixed charges" for operations consist of interest on
indebtedness and the portion of rental expense which represents interest.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF XTRA CORPORATION FOR THE PERIOD
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 6,300,000
<SECURITIES> 400,000
<RECEIVABLES> 72,600,000
<ALLOWANCES> 14,100,000
<INVENTORY> 0
<CURRENT-ASSETS> 86,300,000
<PP&E> 1,975,000,000
<DEPRECIATION> 595,100,000
<TOTAL-ASSETS> 1,511,100,000
<CURRENT-LIABILITIES> 113,800,000
<BONDS> 875,000,000
0
0
<COMMON> 7,600,000
<OTHER-SE> 330,600,000
<TOTAL-LIABILITY-AND-EQUITY> 1,511,100,000
<SALES> 0
<TOTAL-REVENUES> 111,400,000
<CGS> 0
<TOTAL-COSTS> 73,700,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,900,000
<INCOME-PRETAX> 21,800,000
<INCOME-TAX> 8,700,000
<INCOME-CONTINUING> 13,100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,100,000
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
