<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1998
----------------------------------------------------
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 April 30, 1998
- ----------------------- ---------------------------------
Common Stock, Par Value 15,312,353
$.50 Per Share
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
INDEX
-----
Page No.
--------
Part I. Financial Information
---------------------
Management Representation.......................... 3
Consolidated Balance Sheets
March 31, 1998 and September 30, 1997............. 4
Consolidated Income Statements
For the Three Months and Six Months Ended
March 31, 1998 and 1997........................... 5
Consolidated Statements of Cash Flows
For the Six Months Ended
March 31, 1998 and 1997........................... 6
Consolidated Statements of Stockholders' Equity
For the Period September 30, 1996
Through March 31, 1998............................ 7
Notes to Consolidated Financial Statements......... 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 11
Part II. Other Information
-----------------
Item 5. Other Matters.......................... 17
Item 6. Exhibits and Reports on Form 8-K....... 20
Signatures........................................ 21
Exhibit Index..................................... 22
2
<PAGE>
PART 1 - 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>
March 31,
1998 September 30,
(Unadited) 1997(1)
---------- ---------------
<S> <C> <C>
Assets
- ------
Property and equipment $ 2,114 $ 2,112
Accumulated depreciation (709) (658)
---------- ---------------
Net property and equipment 1,405 1,454
Lease contracts receivable 44 43
Trade receivables, net 60 65
Other assets 19 19
Cash 7 4
---------- ---------------
$ 1,535 $ 1,585
========== ===============
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Debt $ 805 $ 892
Deferred income taxes 269 252
Accounts payable and accrued expenses 79 81
---------- ---------------
Total liabilities 1,153 1,225
---------- ---------------
Commitments and contingencies:
Stockholders' equity:
Common stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding;
15,312,353 shares at March 31, 1998
and 15,276,600 at September 30, 1997 8 8
Capital in excess of par value 53 52
Retained earnings 327 304
Cumulative translation adjustment (6) (4)
---------- ---------------
Total stockholders' equity 382 360
---------- ---------------
$ 1,535 $ 1,585
========== ===============
</TABLE>
(1)Derived from XTRA Corporation's audited September 30, 1997 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 Six Months Ended
March 31, March 31,
-------------------- ------------------
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 109 $ 102 $ 230 $ 213
Operating expenses
Depreciation on rental equipment 38 36 76 72
Rental equipment operating expenses 28 28 54 54
Selling and administrative expense 11 10 22 21
--------- -------- -------- -------
77 74 152 147
--------- -------- -------- -------
Operating income 32 28 78 66
Interest expense 14 15 30 31
--------- -------- -------- -------
Pretax income 18 13 48 35
Provision for income taxes 7 5 19 14
--------- -------- -------- -------
Net income $ 11 $ 8 $ 29 $ 21
========= ======== ========= =======
Basic earnings per common share $ 0.71 $ 0.49 $ 1.89 $1.34
Basic common shares outstanding
(in millions) 15.3 15.3 15.3 15.3
Diluted earnings per common share $ 0.71 $ 0.49 $ 1.88 $1.34
Dilued common shares outstanding
(in millions) 15.4 15.3 15.4 15.3
Cash dividends declared per share $ 0.22 0.20 0.42 0.38
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operations:
Net income $ 29 $ 21
Add non-cash income and expense items:
Depreciation and amortization, net 75 73
Deferred income taxes 17 13
Bad debt expense 2 2
Add other cash items:
Net change in receivables, other assets,
payable and accrued expenses - (5)
Cash receipts from lease contracts receivable 13 10
Recovery of property and equipment net book value 12 14
-------- -------
Total cash provided from operations 148 128
-------- -------
Cash used for investment activities:
Additions to property and equipment (53) (89)
-------- -------
Total cash used for investing activities (53) (89)
-------- -------
Cash flows from financing activities:
Borrowings of long term debt - 9
Payments of long-term debt (87) (28)
Options exercised and related tax benefits 1 -
Repurchase of common stock, net - (13)
Dividends paid (6) (6)
-------- -------
Total cash used for financing activities (92) (38)
-------- -------
Net increase in cash 3 1
Cash at beginning of period 4 8
-------- -------
Cash at end of period $ 7 $ 9
======== =======
Total interest paid $ 30 $ 35
Total income taxes paid $ 3 $ -
</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
$0.50 Excess of Retained Translation
Par Value Par Value Earnings Adjustment
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at September 30, 1996 $ 8 $ 64 $ 273 $ (3)
Net income - - 43 -
Common stock cash dividends
declared at $.78 per share - - (12) -
Options exercised and related tax benefits - 1 - -
Common stock repurchased - (13) - -
Translation adjustment - - - (1)
------------ ------------ ------------ -----------
Balance at September 30, 1997 8 52 304 (4)
Net income - - 29 -
Common stock cash dividends
declared at $.42 per share - - (6) -
Options exercised and related tax benefits - 1 - -
Translation adjustment - - - (2)
------------ ------------ ------------ ------------
Balance at March 31, 1998 $ 8 $ 53 $ 327 $ (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 period's 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 1997 was 40%. For the six months ended March 31, 1998, the Company
recorded a provision for income taxes using an estimated effective income
tax rate of 40%. The Company's effective income tax rate for fiscal 1997
and its estimated effective income tax rate for fiscal 1998 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 $47 million at
March 31, 1998 and $57 million at September 30, 1997.
(4) XTRA Corporation's assets consist substantially of the aggregate assets,
liabilities, earnings and equity of XTRA, Inc., a wholly-owned direct
subsidiary. 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:
Selected Income Statement Data:
-------------------------------
(Millions of dollars)
<TABLE>
<CAPTION>
For the three months ended March 31, 1998 1997
------ ------
<S> <C> <C>
Revenues $ 109 $ 102
Income before provision for income taxes 18 13
Net income 11 8
<CAPTION>
For the six months ended March 31, 1998 1997
------ ------
<S> <C> <C>
Revenues $ 230 $ 213
Incomes before provision for income taxes 48 35
Net income 29 21
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data:
---------------------------- March 31 September 30,
(Millions of dollars) 1998 1997
----------- -------------
<S> <C> <C>
Net property and equipment $ 1,405 $ 1,454
Receivables, net 104 108
Other assets 26 23
----------- -------------
Total assets $ 1,535 $ 1,585
=========== =============
Debt $ 805 $ 892
Deferred income taxes 269 252
Other liabilities 84 86
----------- -------------
Total liabilities 1,158 1,230
----------- -------------
Stockholders' equity 377 355
----------- -------------
Total liabilities and stockholders' equity $ 1,535 $ 1,585
=========== =============
</TABLE>
(5) In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which is effective for financial statements
issued for periods ending after December 15, 1997. SFAS 128 supersedes
Accounting Principles Board Opinion No. 15 (APB 15) and establishes new
standards for the presentation of earnings per share. Under SFAS 128,
"Basic Earnings Per Share" excludes dilution and is computed by dividing
income available to common stockholders by weighted average shares
outstanding. "Diluted Earnings Per Share" reflects the effect of all other
dilutive outstanding common stock equivalents and is computed similarly to
primary earnings per share according to APB 15.
9
<PAGE>
The following tables provide a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations, as
required by SFAS 128:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1998 1997 1998 1997
------- -------- ------- ------
<S> <C> <C> <C> <C>
Net income (in millions)(numerator) $ 11 $ 8 $ 29 $ 21
======= ======== ======= ======
Computation of Basic Shares Outstanding (in
- -------------------------------------------
thousands, except per share amounts)
- ------------------------------------
Weighted average number of basic common
shares outstanding (denominator) 15,299 15,250 15,291 15,275
======= ======= ======= =======
Basic earnings per common share $ 0.71 $ 0.49 $ 1.89 $ 1.34
======= ======= ======= =======
Computation of Diluted Shares Outstanding
- -----------------------------------------
(in thousands, except per share amounts)
- ----------------------------------------
Weighted average common shares outstanding 15,299 15,250 15,291 15,275
Common stock equivalents for diluted common
shares outstanding: 98 12 74 14
------- ------- ------- -------
Weighted average number of diluted common
shares outstanding (denominator) 15,397 15,262 15,365 15,289
======= ======= ======= =======
Diluted earnings per common share $ 0.71 $ 0.49 $ 1.88 $ 1.34
------- ------- ------- -------
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The discussion below contains certain forward-looking statements, including
estimates of economic and industry conditions, equipment utilization, and
capital expenditures. Actual results may vary from those contained in such
forward-looking statements. See "Cautionary Statements for Purposes of the
`Safe Harbor' Provisions of the Private Securities Litigation Act of 1995"
contained in Part II, Item 5.
The Three Months Ended March 31, 1998
- --------------------------------------
Versus the Three Months Ended March 31, 1997:
- ---------------------------------------------
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are generated by leasing, primarily on an operating basis,
domestic and international transportation equipment. The Company's over-the-road
and intermodal equipment is used throughout North America and marine containers
are moved between countries in international commerce. Revenues are primarily a
function of lease rates and working units; the latter depend on fleet size and
equipment utilization.
The following table sets forth the Company's average equipment utilization
(dollar-weighted by net investment in equipment), average fleet size in units,
and average net investment in revenue equipment for the three months ended March
31, 1998 and 1997. The Company's fleet size and average net investment include
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.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
North America:
- --------------
Utilization 85% 83%
Units 131,000 129,000
Net investment in equipment (in millions) $ 1,004 $ 969
International:
- --------------
Utilization 82% 77%
Units 165,000 156,000
Net investment in equipment (in millions) $ 409 $ 419
Consolidated:
- -------------
Utilization 84% 81%
Units 296,000 285,000
Net investment in equipment (in millions) $ 1,413 $ 1,388
</TABLE>
11
<PAGE>
Revenues increased by 7% or $7 million for the three months ended March 31,
1998 over the same period a year ago. The Company's average equipment
utilization improved from 81% in the second quarter of fiscal year 1997 to 84%
in the second quarter of fiscal 1998. Average net investment in equipment
increased by $25 million from the same quarter of the prior year due primarily
to an increase in the net investment in over-the-road trailers, which was
partially offset by a decline in the net investment in the intermodal and marine
container fleets. For the full fiscal year 1998, average equipment utilization
is expected to be higher than the 1997 average of 84%.
The Company's North American revenues increased $6 million from the same
quarter a year ago due to strong levels of domestic freight leading to more
working units, as well as an improvement in over-the-road lease rates. The
Company's North American utilization averaged 85% in the second quarter of
fiscal 1998, as compared to 83% in the comparable prior year period. Increasing
demand for equipment was reflected in improved intermodal loadings and increased
truck tonnage, both of which are indicators of domestic freight levels in the
U.S.
The Company's North American over-the-road trailer fleet averaged 75,000
units, or 49% of average net investment in equipment in the second quarter of
fiscal year 1998, compared to 74,000 units, or 45% of average net investment in
equipment, in the comparable prior year period. The Company continues to review
its North American intermodal trailer fleet as the railroads shift toward more
domestic container usage. Given the overall demand for intermodal trailers and
the expected continued trend toward containers from trailers, XTRA believes its
fleet is appropriately sized. XTRA's intermodal trailer fleet averaged 23,000
units, or 11% of average net investment in equipment in the second quarter of
1998, versus 24,000 units, or 13% of average net investment in equipment, in the
comparable prior year period.
International revenues increased $1 million from the same quarter of the
prior year. An increase in revenues attributable to more working units was
partially offset by lower average effective lease rates. Equipment utilization
improved to 82% from 77% in the comparable prior year period. Over-capacity of
leased containers and the low purchase price of new containers continue to exert
pressure on container lease rates. In 1997, more balanced worldwide trade
resulted in more efficient use of equipment by shippers and hence lower usage of
leased containers. In 1998, trade flows of container freight into and out of
the United States appear to be returning to the historical norm of strong
excesses of imports, which should benefit the marine container leasing industry.
The Company's average international fleet size increased to 165,000 units in the
second quarter of fiscal 1998 from 156,000 units in the comparable prior year
period.
Operating Expenses
- ------------------
Total operating expenses increased by 4% or $3 million for the three months
ended March 31, 1998 from the same period of fiscal 1997. Depreciation expense
increased by 6% or $2 million due to a larger average fleet investment. Rental
equipment operating expense remained unchanged from the comparable prior year
period. Selling and administrative expenses increased by 10% or $1 million from
the comparable prior year period, with no one factor contributing significantly
to the increase.
12
<PAGE>
Interest Expense
- ----------------
For the three months ended March 31, 1998, interest expense decreased by 7%
or $1 million from the same period of fiscal 1997, due primarily to a decrease
in average debt.
Pretax Income
- -------------
Pretax earnings increased 38% or $5 million for the three months ended
March 31, 1998 over the same period a year ago primarily due to higher equipment
utilization.
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
1997 was 40%. For the three months ended March 31, 1998, the Company has
recorded a provision for income taxes using an estimated effective income tax
rate of 40%. The Company's effective income tax rate for fiscal 1997 and its
estimated effective income tax rate for fiscal 1998 are higher than the
statutory U.S. Federal income tax rate due primarily to state income taxes.
The Six Months Ended March 31, 1998
- ------------------------------------
Versus the Six Months Ended March 31, 1997:
- -------------------------------------------
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are generated by leasing, primarily on an operating basis,
domestic and international transportation equipment. The Company's over-the-road
and intermodal equipment is used throughout North America and marine containers
are moved between countries in international commerce. Revenues are primarily a
function of lease rates and working units; the latter depend on fleet size and
equipment utilization.
13
<PAGE>
The following table sets forth the Company's average equipment utilization
(dollar-weighted by net investment in equipment), average fleet size in units,
and average net investment in revenue equipment for the six months ended March
31, 1998 and 1997. The Company's fleet size and average net investment include
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.
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------
1998 1997
------- -------
<S> <C> <C>
North America:
- --------------
Utilization 88% 85%
Units 132,000 129,000
Net investment in equipment (in millions) $ 1,015 $ 982
International:
- --------------
Utilization 83% 77%
Units 164,000 155,000
Net investment in equipment (in millions) $ 411 $ 419
Consolidated:
- -------------
Utilization 87% 83%
Units 296,000 284,000
Net investment in equipment (in millions) $ 1,426 $ 1,401
</TABLE>
Revenues increased by 8% or $17 million for the six months ended March 31,
1998 over the same period a year ago. The Company's average equipment
utilization improved from 83% in the first six months of fiscal year 1997 to 87%
in the first six months of fiscal 1998. Average net investment in equipment
increased by $25 million from the same period of the prior year due primarily to
an increase in the net investment in over-the-road trailers, which was partially
offset by a decline in the net investment in the intermodal and marine container
fleets. For the full fiscal year 1998, average equipment utilization is
expected to be higher than the 1997 average of 84%.
The Company's North American revenues increased $14 million from the same
period a year ago due to strong levels of domestic freight leading to more
working units, as well as an improvement in lease rates. The Company's North
American utilization averaged 88% in the first six months of fiscal 1998, as
compared to 85% in the comparable prior year period. Increasing demand for
equipment was reflected in improved intermodal loadings and increased truck
tonnage, both of which are indicators of domestic freight levels in the U.S.
The Company's North American over-the-road trailer fleet averaged 76,000
units, or 49% of average net investment in equipment in the first half of fiscal
year 1998, compared to 74,000 units, or 45% of average net investment in
equipment, in the comparable prior year period. The Company continues to review
its North American intermodal trailer fleet as the railroads shift
14
<PAGE>
toward more domestic container usage. Given the overall demand for intermodal
trailers and the expected continued trend toward containers from trailers, XTRA
believes its fleet is appropriately sized. XTRA's intermodal trailer fleet
averaged 23,000 units, or 11% of average net investment in equipment in the
first half of 1998, versus 24,000 units, or 14% of average net investment in
equipment, in the comparable prior year period.
International revenues increased $3 million from the same period of the
prior year. An increase in revenues attributable to more working units was
partially offset by lower average effective lease rates. Equipment utilization
improved to 83% from 77% in the comparable prior year period. Over-capacity of
containers and the low purchase price of new containers continue to exert
pressure on container lease rates. In 1997, more balanced worldwide trade
resulted in more efficient use of equipment by shippers and hence lower usage of
leased containers. In 1998, trade flows of container freight into and out of
the United States appear to be returning to the historical norm of strong
excesses of imports, which should benefit utilization in the marine container
leasing industry. The Company's average international fleet size increased to
164,000 units in the first half of fiscal 1998 from 155,000 units in the
comparable prior year period.
Operating Expenses
- ------------------
Total operating expenses increased by 3% or $5 million for the six months
ended March 31, 1998 from the same period of fiscal 1997. Depreciation expense
increased by 6% or $4 million due to a larger fleet investment. Rental
equipment operating expense was unchanged from the comparable prior year period.
Selling and administrative expenses increased by 5% or $1 million with no one
factor contributing significantly to the increase.
Interest Expense
- ----------------
Interest expense decreased by 3% or $1 million for the six months ended
March 31, 1998 from the same period of fiscal 1997, due primarily to lower
average debt.
Pretax Income
- -------------
Pretax earnings increased 37% or $13 million for the six months ended March
31, 1998 over the same period a year ago primarily due to higher equipment
utilization.
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
1997 was 40%. For the six months ended March 31, 1998, the Company has recorded
a provision for income taxes using an estimated effective income tax rate of
40%. The Company's effective income tax rate for fiscal 1997 and its estimated
effective income tax rate for fiscal 1998 are higher than the statutory U.S.
Federal income tax rate primarily due to state income taxes.
15
<PAGE>
Liquidity and Capital Resources
- -------------------------------
During the six months ended March 31, 1998, the Company generated cash
flows from operations of $148 million. During the same period, XTRA invested
$53 million in property and equipment and paid dividends of $6 million. Net
debt outstanding (debt less cash) decreased $90 million.
As of May 7, 1998, committed capital expenditures for fiscal 1998 amounted
to $187 million. Any additional capital expenditures for the remainder of fiscal
year 1998 will likely be modest. The Company has also currently committed
capital spending for fiscal year 1999 amounting to $26 million, reflecting
continued strong demand for over-the-road trailers.
On April 30, 1998, XTRA's Board of Directors declared a quarterly cash
dividend of $.22 per share, payable on May 29, 1998, to stockholders of record
on May 15, 1998.
As of April 30, 1998, XTRA Inc. had $532 million available for future
issuance under its $604 million Shelf Registration. As of April 30, 1998, the
Company had $198 million of unused credit available under its $300 million
Revolving Credit Agreement.
Year 2000
- ---------
The Company does not expect to incur significant costs during the next two
years to address the impact of the "Year 2000 problem" on its information
systems. The "Year 2000 problem," which is common to most corporations, concerns
the inability of information systems, primarily computer software programs, to
properly recognize and process date sensitive information as the year 2000
approaches. The Company has completed an assessment of the majority of its
systems and has developed specific workplans to address the issues. The Company
currently believes it will be able to modify or replace its affected systems in
time to minimize any detrimental effects on operations. The Company expects that
the costs it will incur to ensure its systems are Year 2000 compliant will not
be material to the Company's results of operations, liquidity, or consolidated
financial position.
16
<PAGE>
Part II - OTHER INFORMATION
-----------------------------
Item 5 - Other Matters
- ----------------------
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
- -------------------------------------------------------------------------
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
- ------------------------------------------------
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains 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
contained 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. An additional risk factor is the Company's ability to
address the "Year 2000 problem" in a timely and efficient manner.
VARIABLE REVENUES AND FIXED OPERATING EXPENSES
- ----------------------------------------------
The Company's revenues, which are based on lease rates, utilization, and 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, which include depreciation, a portion of rental
equipment operating expenses, 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. 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.
17
<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 is
often a considerable amount of time between when an order is placed and when the
equipment is delivered. In addition, it is difficult to accurately predict
demand for the Company's equipment in future periods. As a result, the Company's
performance in a given period may be adversely affected either because of its
inability to quickly increase fleet size because of extended back orders, to
take advantage of unexpectedly strong demand, or to quickly reduce fleet size 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 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, requires significant capital. In addition, in the past, the
Company has grown its fleet through acquisitions of other companies, 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 relatively low
levels. Due to 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
affecting its profitability.
18
<PAGE>
FOREIGN EXCHANGE RATES
- ----------------------
A portion of the Company's 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 occur, it may be
necessary for the Company to significantly increase its debt leverage ratio
which could adversely affect its credit ratings. Also, the ability of the
Company to take advantage of acquisition opportunities will depend on the
availability of capital. See liquidity and capital resources in Management's
Discussion and Analysis of Financial Condition and Results of Operations 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.
19
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--- --------
Exhibit No. Description
- ----------- -----------
12.1 Statement of the calculation of earnings to fixed charges for
the six months ended March 31, 1998 and 1997 for XTRA
Corporation
12.2 Statement of the calculation of earnings to fixed charges for
the six months ended March 31, 1998 and 1997 for XTRA, Inc.
27 Financial Data Schedule
27.1 Amended Financial Data Schedule for March 31, 1997
27.2 Amended Financial Data Schedule for December 31, 1996
(b) Reports on Form 8-K
- --- -------------------
On May 5, 1998, a Current Report on Form 8-K was filed by the Company to
disclose certain financial information under Item 5, "Other Events", for the
fiscal second quarter ended March 31, 1998.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XTRA CORPORATION
----------------------------
(Registrant)
Date: May 8, 1998 /s/ Michael J. Soja
-------------- ----------------------------
Michael J. Soja
Vice President and Chief Financial Officer
Date: May 8, 1998 /s/ Robert B. Blakeley
-------------- ----------------------------
Robert B. Blakeley
Vice President and Controller
21
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
12.1 Statement of the calculation of earnings to fixed charges for the six
months ended March 31, 1998 and 1997 for XTRA Corporation 23
12.2 Statement of the calculation of earnings to fixed charges for the six
months ended March 31, 1998 and 1997 for XTRA, Inc. 24
27 Financial Data Schedule 25
27.1 Amended Financial Data Schedule for March 31, 1997 26
27.2 Amended Financial Data Schedule for December 31, 1996 27
</TABLE>
22
<PAGE>
EXHIBIT 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
EARNINGS
Incomes from operations before provision for income taxes $ 48 $ 35
Add: Fixed charges (below) 30 31
------- -------
$ 78 $ 66
======= =======
FIXED CHARGES $ 30 $ 31
======= =======
Ratio of Earnings to Fixed Charges 2.6 2.1
======= =======
</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 SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 48 $ 35
Add: Fixed charges (below) 30 31
------ ------
$ 78 $ 66
====== ======
FIXED CHARGES $ 30 $ 31
====== ======
Ratio of Earnings to Fixed Charges 2.6 2.1
====== ======
</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 MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 7,000,000
<SECURITIES> 0
<RECEIVABLES> 75,000,000
<ALLOWANCES> 15,000,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,114,000,000
<DEPRECIATION> 709,000,000
<TOTAL-ASSETS> 1,535,000,000
<CURRENT-LIABILITIES> 0
<BONDS> 805,000,000
0
0
<COMMON> 8,000,000
<OTHER-SE> 374,000,000
<TOTAL-LIABILITY-AND-EQUITY> 1,535,000,000
<SALES> 0
<TOTAL-REVENUES> 230,000,000
<CGS> 0
<TOTAL-COSTS> 152,000,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,000,000
<INCOME-PRETAX> 48,000,000
<INCOME-TAX> 19,000,000
<INCOME-CONTINUING> 29,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,000,000
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.88
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF XTRA CORPORATION FOR THE PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 8,600,000
<SECURITIES> 0
<RECEIVABLES> 67,500,000
<ALLOWANCES> 14,100,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,014,900,000
<DEPRECIATION> 615,500,000
<TOTAL-ASSETS> 1,532,400,000
<CURRENT-LIABILITIES> 0
<BONDS> 873,400,000
0
0
<COMMON> 7,600,000
<OTHER-SE> 334,700,000
<TOTAL-LIABILITY-AND-EQUITY> 1,532,400,000
<SALES> 0
<TOTAL-REVENUES> 212,900,000
<CGS> 0
<TOTAL-COSTS> 147,500,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,100,000
<INCOME-PRETAX> 34,100,000
<INCOME-TAX> 13,600,000
<INCOME-CONTINUING> 20,500,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,500,000
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
</TABLE>
<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> 0
<RECEIVABLES> 72,600,000
<ALLOWANCES> 14,100,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,975,000,000
<DEPRECIATION> 595,100,000
<TOTAL-ASSETS> 1,511,100,000
<CURRENT-LIABILITIES> 0
<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>
