<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, 1999
-----------------------------------------------------
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.)
200 Nyala Farms Road, Westport, Connecticut 06880
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(203) 221-1005
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
60 State Street, Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(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, 2000
- ----------------------- --------------------------------
Common Stock, Par Value 12,072,838
$.50 Per Share ----------
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
---------------------
Item 1. Financial Statements
--------------------
Management Representation.............................................................. 3
Consolidated Balance Sheets
December 31, 1999 and September 30, 1999.............................................. 4
Consolidated Income Statements
For the Three Months Ended
December 31, 1999 and 1998............................................................ 5
Consolidated Statements of Cash Flows
For the Three Months Ended
December 31, 1999 and 1998............................................................ 6
Consolidated Statements of Stockholders' Equity
For the Three Months Ended
December 31, 1999 and 1998............................................................ 7
Notes to Consolidated Financial Statements............................................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..
------------------------------------------------------------------------------------- 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................. 17
----------------------------------------------------------
Part II. Other Information
-----------------
Item 5. Other Matters.......................................................................... 18
Item 6. Exhibits and Reports on Form 8-K....................................................... 20
Signatures............................................................................. 21
Exhibit Index.......................................................................... 22
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
------------------------------
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
ITEM 1 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 is assisted in its review of financial
statements by its Audit Committee, composed of non-employee Directors. During
the year, the Committee meets periodically with both management and the
independent public accountants to oversee each in 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)
<TABLE>
<CAPTION>
December 31,
1999 September 30,
(unaudited) 1999 /(1)/
-------------- ---------------
<S> <C> <C>
Assets
- ------
Property and equipment $ 2,258 $ 2,266
Accumulated depreciation (840) (827)
-------------- --------------
Net property and equipment 1,418 1,439
Lease contracts receivable 35 38
Trade receivables, net 88 78
Other assets 14 14
Cash 1 4
-------------- --------------
$ 1,556 $ 1,573
============== ==============
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Debt $ 841 $ 852
Deferred income taxes 322 309
Accounts payable and accrued expenses 65 75
-------------- --------------
Total liabilities 1,228 1,236
-------------- --------------
Commitments and contingencies:
Stockholders' equity:
Common stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding;
12,070,950 shares at December 31, 1999
and 12,812,400 shares at September 30, 1999 6 6
Capital in excess of par value - -
Retained earnings 331 341
Unearned compensation - restricted stock (3) (3)
Accumulated other comprehensive income (6) (7)
-------------- --------------
Total stockholders' equity 328 337
-------------- --------------
$ 1,556 1,573
============== ==============
</TABLE>
/(1)/ Derived from XTRA Corporation's audited September 30, 1999 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,
1999 1998
-------------- --------------
<S> <C> <C>
Revenues $ 127 $ 123
Operating expenses
Depreciation on rental equipment 38 38
Rental equipment lease financing 1 -
Rental equipment operating expenses 28 27
Selling and administrative expense 12 13
-------------- --------------
79 78
-------------- --------------
Operating income 48 45
Interest expense 15 14
-------------- --------------
Income from operations before
provision for income taxes and unusual item 33 31
Unusual item: costs related to terminated merger - 1
-------------- --------------
Pretax income 33 30
Provision for income taxes 13 12
-------------- --------------
Net income $ 20 $ 18
============== ==============
Earnings per basic common share $ 1.61 $ 1.18
Basic shares outstanding (in millions) 12.6 15.4
Earnings per diluted common share $ 1.61 $ 1.18
Diluted shares outstanding (in millions) 12.6 15.4
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
-------------- ------------
<S> <C> <C>
Cash flows from operations:
Net income $ 20 $ 18
Add non-cash income and expense items:
Depreciation and amortization, net 37 38
Deferred income taxes, net 13 11
Bad debt expense 2 1
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses (24) (21)
Cash receipts from lease contracts receivable 7 6
Recovery of property and equipment net book value 20 4
-------------- ------------
Total cash provided from operations 75 57
-------------- ------------
Cash used for investment activities:
Additions to property and equipment (37) (59)
-------------- ------------
Total cash used for investing activities (37) (59)
-------------- ------------
Cash flows from financing activities:
Borrowings of long-term debt 45 -
Payments of long-term debt (56) (1)
Repurchase of common stock (30) -
-------------- ------------
Total cash used for financing activities (41) (1)
-------------- ------------
Net decrease in cash (3) (3)
Cash at beginning of period 4 3
-------------- ------------
Cash at end of period $ 1 $ -
============== ============
Total interest paid $ 22 $ 23
Total net income taxes paid $ 1 $ -
</TABLE>
The accompanying notes are integral part of these consolidated financial
statements.
6
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
Three months ended December 31, 1999 and 1998
---------------------------------------------
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Common Unearned Accumulated
Stock Capital in Compensation Other Total
$ 0.50 Excess of Retained on Restricted Comprehensive Stockholders'
Par Value Par Value Earnings Stock Income Equity
-------------- ---------------- -------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 8 $ 57 $ 354 $ - $ (11) $ 408
Comprehensive income:
Net income - - 18 - - 18
Foreign currency translation
adjustment - - - - - -
-------------- ---------------- -------------- ------------- --------------- ----------------
Total comprehensive income - - 18 - - 18
Shares granted under restricted
stock plan, options exercised,
forfeitures, and related
tax benefits, net - 4 - - - 4
-------------- ---------------- -------------- ------------- --------------- ----------------
Balance at December 31, 1998 $ 8 $ 61 $ 372 $ - $ (11) $ 430
============== ================ ============== ============= =============== ================
Balance at September 30, 1999 $ 6 $ - $ 341 $ (3) $ (7) $ 337
Comprehensive Income:
Net income - - 20 - - 20
Foreign currency translation
adjustment - - - - 1 1
-------------- ---------------- -------------- ------------- --------------- ----------------
Total comprehensive income - - 20 - 1 21
Common stock repurchased - - (30) - - -
-------------- ---------------- -------------- ------------- --------------- ----------------
Balance at December 31, 1999 $ 6 $ - $ 331 $ (3) $ (6) $ 328
============== ================ ============== ============= =============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
7
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
(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 1999 was 40%. For the three months ended December 31, 1999 the
Company recorded a provision for income taxes using an estimated effective
income tax rate of 39.5%. The Company's effective income tax rate for
fiscal 1999 and its estimated effective income tax rate for fiscal 2000
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 $128 million at
December 31, 1999 and $94 million at September 30, 1999.
During the first quarter of fiscal year 2000, the Company issued $45
million of Medium-term Notes with a weighted average interest rate of 7.0%
and a weighted average life of 3 years. At December 31, 1999, the Company
has $412 million remaining available under its current shelf registration
for future debt issuance.
8
<PAGE>
(4) XTRA Corporation's assets consist substantially of the aggregate assets,
liabilities, earnings and equity of XTRA, Inc., a wholly-owned direct
subsidiary. 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 Balance Sheet Data: December 31, September 30,
(Millions of dollars) 1999 1999
------------ -------------
Net property and equipment $ 1,410 $ 1,435
Receivables, net 123 115
Other assets 15 18
------------ ------------
Total assets $ 1,548 $ 1,568
============ ============
Debt $ 841 $ 852
Deferred income taxes 322 309
Other liabilities 60 72
----------- ------------
Total liabilities 1,223 1,233
----------- ------------
Stockholders' equity 325 335
----------- ------------
Total liabilities and
stockholders' equity $ 1,548 $ 1,568
=========== ============
Selected Income Statement Data:
------------------------------
(Millions of dollars) Three Months Ended
December 31,
1999 1998
----------- ------------
Revenues $ 127 $ 123
Pretax income 33 31
Net income 20 19
9
<PAGE>
(5) The following table provides a reconciliation of the numerators and
denominators Of the basic and diluted earnings per share computations:
Three Months Ended
December 31,
1999 1998
---------- ----------
Net income (numerator) $ 20 $ 18
========== ==========
Computation of Basic Shares Outstanding (in
- -------------------------------------------
thousands, except per share amounts)
- ------------------------------------
Weighted average number of basic
shares outstanding (denominator) 12,595 15,373
========== ==========
Basic earnings per common share $ 1.61 $ 1.18
========== ==========
Computation of Diluted Shares Outstanding
- -----------------------------------------
(in thousands, except per share amounts)
- ----------------------------------------
Weighted average number of basic
shares outstanding 12,595 15,373
Common stock equivalents for diluted
shares outstanding: 5 7
---------- ----------
Weighted average number of diluted
shares outstanding (denominator) 12,600 15,380
========== ==========
Diluted earnings per common share $ 1.61 $ 1.18
========== ==========
(6) Pursuant to the aggregation criteria of SFAS 131, an entity may aggregate
operating segments if it has similar characteristics and if they are
similar on the following five dimensions: (1) nature of products and
services, (2) nature of production process, (3) types of customers, (4)
distribution methods, and (5) nature of its regulatory environment. The
Company's operating divisions and related transportation equipment have
been aggregated into two reportable segments: North America and
International
10
<PAGE>
The North American reporting segment consists of the Company's XTRA Lease
and Intermodal divisions, which lease over-the-road and intermodal equipment
predominantly within the United States. The International division leases marine
containers worldwide. The following tables provide information about the
Company's reportable segments:
<TABLE>
<CAPTION>
Segment Information: Three months ended December 31
------------------- ----------------------------------
North
(Dollars in millions) America International Total
--------------------- ------- ------------- -----
<S> <C> <C> <C>
1999:
Revenues $ 112 $ 15 $ 127
Operating income 46 2 48
1998:
Revenues $ 105 $ 18 $ 123
Operating income 43 2 45
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of combined operating Three months ended
------------------------------------
profit: December 31
------- --------------------
1999 1998
---- ----
<S> <C> <C>
Operating income for reportable segments 48 45
Interest expense 15 14
Non-recurring charges - (1)
--------------------
Pretax income $ 33 $ 30
====================
</TABLE>
(7) On September 17, 1999, the Board of Directors approved a new $100 million
stock repurchase authorization, which became effective upon the completion
of the prior $200 million stock repurchase program. During the three months
ended December 31, 1999, the Company repurchased .7 million shares for an
aggregated $30 million. Combined repurchases for fiscal 1999 and the first
quarter of fiscal 2000 aggregated $141 million or 3.4 million shares, which
represents 22% of the total shares outstanding at the beginning of fiscal
1999. As of December 31, 1999, the Company had approximately $81 million
remaining under its current $100 million stock repurchase authorization.
11
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
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.
XTRA Corporation leases, primarily on an operating basis, freight
transportation equipment including over-the-road trailers, intermodal trailers,
chassis, marine containers, and domestic containers. XTRA's equipment
utilization, lease rates, and therefore, profitability, are impacted by the
supply of and demand for available equipment, the level of economic activity in
North America, world trade activity, the actions of its competitors, and other
factors in the freight transportation industry. Utilization and profitability
are usually seasonally lower in the second and third fiscal quarters than in the
first and fourth fiscal quarters. In general, the Company's receivable
collection experience has been good. However, industry downturns tend to
lengthen the collection period of certain receivables.
The Company's pretax profits have been cyclical, principally due to the
variability of the Company's revenues and the high percentage of fixed costs. To
moderate this cyclicality, the Company attempts to maintain a balance between
the amount of equipment leased on a per diem and term basis and maintains a mix
of various types of freight transportation equipment available for lease. The
Company has historically maintained a high proportion of its debt at fixed rates
to reduce the impact of fluctuations in interest rates.
XTRA's marine container leasing operation reduces XTRA's dependence on the
North American transportation industry. Although the marine container business
is international, substantially all transactions are denominated in U.S.
dollars.
The Three Months Ended December 31, 1999
- ----------------------------------------
Versus the Three Months Ended December 31, 1998:
- ------------------------------------------------
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are a function of lease rates and working units; the latter
depends on fleet size and equipment utilization. Utilization is calculated as
the ratio of revenue-earning units to the total fleet The total fleet is derived
from billing information, usage reports and other information from customers;
assumptions based on historical experience, and equipment inventories taken at
Company depots, and is an approximation. Utilization is impacted by the supply
of, and demand for, available equipment, the level of economic activity in North
America, and world trade activity.
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
12
<PAGE>
in revenue equipment for the three months ended December 31, 1999 and 1998. The
Company's average fleet size and 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
December 31,
1999 1998
-------- --------
<S> <C> <C>
XTRA Lease
- ----------
Utilization 92% 92%
Units 88,000 82,000
Net investment in equipment (in millions) $ 929 $ 794
XTRA Intermodal
- ---------------
Utilization 87% 86%
Units 52,000 53,000
Net investment in equipment (in millions) $ 247 $ 277
Total North America
- -------------------
Utilization 91% 90%
Units 140,000 135,000
Net investment in equipment (in millions) $ 1,176 $ 1,071
International
- -------------
Utilization 78% 74%
Units 146,000 165,000
Net investment in equipment (in millions) $ 307 $ 384
Consolidated
- ------------
Utilization 88% 86%
Units 286,000 300,000
Net investment in equipment (in millions) $ 1,483 $ 1,455
</TABLE>
Consolidated revenues increased by 3% or $4 million for the three months
ended December 31, 1999 compared to the same period a year ago. The Company's
average equipment utilization increased from 86% in the first quarter of fiscal
year 1999 to 88% in the first quarter of fiscal 2000. Average net investment in
equipment increased by $28 million from the same quarter of the prior year due
primarily to an increase in net investment in over-the-road trailers, partially
offset by a decline in net investment in intermodal trailers and marine
containers.
The Company's North American revenues increased $8 million from the same
quarter a year ago due primarily to an increase in working units and by a modest
increase in lease rates. The Company's North American utilization averaged 91%
in the first quarter of fiscal 2000, as
13
<PAGE>
compared to 90% in the comparable prior year period. XTRA Lease's revenues
increased $9 million from the comparable prior year quarter due to strong levels
of domestic freight and year 2000 concerns leading to more over-the-road trailer
working units. XTRA Lease's utilization averaged 92%, the same as the comparable
prior quarter, on a larger fleet than the year earlier quarter. XTRA
Intermodal's revenues decreased $1 million from the same quarter of fiscal 1999
due to a decline in intermodal trailer working units and a slight decline in
lease rates. XTRA Intermodal's utilization averaged 87% in the first quarter of
fiscal 2000, compared to 86% in the same period of fiscal 1999.
The Company's North American over-the-road trailer fleet averaged 86,000
units, or 61% of average net investment in equipment in the first quarter of
fiscal year 2000, compared to 80,000 units, or 54% of average net investment in
equipment, in the comparable prior year period. Most of XTRA's capital
expenditures have been for over-the-road equipment during the last fiscal year
and the same investment focus is anticipated for fiscal year 2000.
The Company continues to downsize its North American intermodal trailer
fleet as the railroads shift toward more domestic container usage. XTRA's
intermodal trailer fleet averaged 20,000 units, or 8% of average net investment
in equipment in the first quarter of 2000, versus 22,000 units, or 10% of
average net investment in equipment, in the comparable prior year period.
International revenues decreased $4 million from the same quarter of the
prior year, due primarily to a decrease in working units and approximately 10%
lower lease rates than the prior year quarter. Equipment utilization improved to
78% from 74% in the comparable prior year period. The Company's average
international fleet size decreased to 146,000 units in the first quarter of
fiscal 2000 from 165,000 units in the comparable prior year period. During the
first quarter of fiscal 2000, the Company sold 5,000 containers under its
disposal program; a cumulative 18,000 containers out of approximately 20,000
units originally targeted for disposal have been sold over the last year and
expects to sell the remaining containers by March 31, 2000. XTRA does not
currently anticipate making any further investment in the marine container
business.
Operating Expenses
- ------------------
Total operating expenses increased by 2% or $1 million for the three months
ended December 31, 1999 from the same period of fiscal 1999. Depreciation
expense remained unchanged from the comparable prior year period. Rental
equipment lease financing expenses of $1 million were incurred in the first
quarter of fiscal 2000 versus no expense in the first quarter of fiscal 1999.
Rental equipment operating expense increased by 5% or $1 million due primarily
to increased tire and repair and maintenance costs associated with the
intermodal trailer fleet. Selling and administrative expenses decreased by 9% or
$1 million as a result of the efficiencies of the Shared Service Center and the
marine container management outsourcing, partially offset by increases in bad
debt and information technology expenses.
14
<PAGE>
Interest Expense
- ----------------
Interest expense increased by 7% or $1 million for the three months ended
December 31, 2000 from the same period of fiscal 1999, due primarily to higher
average net debt outstanding.
Unusual Item: Costs Related to Terminated Merger
- ------------------------------------------------
During the first quarter of fiscal 1999, the Company terminated its
proposed merger with Wheels MergerCo. As a result, XTRA recorded $1 million in
the first quarter of 1999 as an unusual item on the income statement. These
costs represent the balance of expenses related to the terminated merger.
Pretax Income
- -------------
Pretax earnings, excluding the impact of the unusual item noted above,
increased 6% or $2 million for the three months ended December 31, 1999 over the
same period a year ago primarily due to an increase in revenues.
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
1999 was 40%. For the three months ended December 31, 1999 the Company recorded
a provision for income taxes using an estimated effective income tax rate of
39.5%. The Company's effective income tax rate for fiscal 1999 and its estimated
effective income tax rate for fiscal 2000 are higher than the statutory U.S.
Federal income tax rate due primarily to state income taxes.
Share Repurchases
- -----------------
On September 17, 1999, the Board of Directors approved a new $100 million
stock repurchase authorization, which became effective upon the completion of
the prior $200 million stock repurchase program. During the three months ended
December 31, 1999, the Company repurchased .7 million shares for $30 million.
Combined repurchases for fiscal 1999 and the first quarter of fiscal 2000
aggregated $141 million or 3.4 million shares, which represents 22% of the total
shares outstanding at the beginning of fiscal 1999. As of December 31, 1999, the
Company had $81 million of authorization remaining under its current $100
million stock repurchase authorization. The repurchases to date will be
accretive to earnings and have increased the debt to equity ratio to within the
Company's target leverage range of 2.5 - 3.0:1.0.
Liquidity and Capital Resources
- -------------------------------
During the three months ended December 31, 1999, the Company generated cash
flows from operations of $75 million.Cash flows from operations (recovery of
property and equipment)includes $10 million of sale proceeds from equipment
purchased in the previous quarter and refinanced under an off balance sheet
lease during the first quarter of fiscal 2000.
15
<PAGE>
During the same period, the Company purchased $61 million of property and
equipment, including $37 million purchased and $24 million of equipment financed
under an off balance sheet lease. Net debt outstanding (debt less cash)
decreased $8 million.
As of January 2000, committed capital expenditures for revenue equipment
for fiscal 2000 amounted to approximately $115 million. This amount could
increase if business conditions warrant.
The Company entered into a $34 million, 10-year operating lease agreement
during the first quarter of fiscal 2000. The lease is classified as an off
balance sheet lease financing.
During the first quarter of fiscal 2000, the Company issued $45 million of
Medium Term Notes with a weighted average interest rate of 7.0% and a weighted
life of 3 years.
As of February 2, 2000, XTRA Inc. had $412 million available for future
issuance under its $604 million shelf registration.
During the first quarter of fiscal 2000, the Company increased its bank
commitments under the Revolving Credit Agreement to $250 million. Pricing is
dependent on the Company's credit ratings and the rate is based on a fixed
spread over LIBOR. As of February 2, 2000, the Company had $145 million of
unused credit available under its $250 million Revolving Credit Agreement.
Year 2000
- ---------
As of February 2, 2000, the Company had not encountered any significant
business disruptions as a result of internal or external Year 2000 issues. While
no such disruption has developed, Year 2000 issues may arise in the future. The
Company will continue to monitor and work to remediate any issues that may
arise. Although the Company does not currently expect a material disruption of
its business from a Year 2000 issue, such future events cannot be known with
certainty.
New Accounting Pronouncements
- -----------------------------
In the first quarter of fiscal 2000, the Company adopted SOP 98-1,
"Accounting for the Costs of Computer Software Developed for or Obtained for
Internal-Use". The provisions of the SOP require the capitalization of certain
costs incurred in connection with developing or obtaining software for internal
use. Prior to the adoption of SOP 98-1, the Company expensed its internal
software development costs and capitalized its external software development
costs. The Company does not believe that the adoption will not have a material
impact on the Company's future earnings or financial position.
16
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE
-------------------------------------
DISCLOSURES ABOUT MARKET RISK
-----------------------------
At December 31, 1999, there were no material changes in the market risks
reported in the Company's Form 10-K for the fiscal year ended September 30,
1999.
17
<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 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.
VARIABLE REVENUES AND OPERATING RESULTS
- ---------------------------------------
The Company's revenues may vary significantly from period to period, whereas a
high percentage of its operating costs are fixed. As a result of the variability
of the Company's revenues and the Company's limited ability to reduce its fixed
operating costs, the Company's profitability may be cyclical and subject to
significant fluctuation from period to period. The Company's revenues are a
function of lease rates and working units; the latter depends on fleet size and
equipment utilization (the ratio of revenue earning equipment to the total
fleet). Some of the factors which affect lease rates and working units are
competition, economic conditions and world trade activity, the supply of and
demand for available equipment, aggressive purchasing of equipment by the
Company's customers and competitors leading to an excess supply of equipment and
reduced lease rates and utilization, shifting traffic trends in the industry,
severe adverse weather conditions, strikes by transportation unions and other
factors in the freight transportation industry. The Company's fixed costs
include depreciation, rental equipment lease financing, a portion of both rental
equipment operating expenses and selling and administrative expenses.
AVAILABILITY OF NEW EQUIPMENT
- -----------------------------
New equipment is built to the Company's specifications and reflects industry
standards and customer needs. The Company purchases new equipment from a number
of manufacturers. Certain of these manufacturers have consolidated and, in the
process, eliminated manufacturing facilities. These manufacturers are, in turn,
dependent on the prompt delivery and supply of the components required to
assemble trailers, chassis and containers. Historically, delivery times have
varied from three to fifteen months from when the Company places an order. There
can be no assurance that the appropriate equipment will be available when needed
by the Company. In
18
<PAGE>
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 by its inability to quickly increase fleet
size, due to extended back orders, in response to unexpectedly strong demand.
COMPETITION
- -----------
Leasing transportation equipment is a highly competitive business and is
affected by factors related to the transportation market. Lease terms and lease
rates, as well as availability, condition and size of equipment and customer
service are all important factors to the lessee. The Company has many
competitors, some of which have leasing fleets that are larger in size than the
Company's leasing fleet and some of which have greater resources. Various types
of transportation equipment compete for freight movement. Over-the-road
trailers, intermodal trailers, marine and domestic containers and railroad
rolling stock are all potential vehicles for the movement of freight.
CUSTOMER CONSOLIDATION
- ----------------------
Certain industries in which the Company competes, including trucking and
shipping, are in the process of consolidation. As a result of this
consolidation, the Company's customers may be better able to manage their
equipment requirements and may seek increased efficiencies through direct
ownership of equipment. In such event, the ratio of leased equipment to owned
equipment might decrease, which could reduce the overall market for the
Company's services.
AVAILABILITY OF CAPITAL
- -----------------------
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, requiring additional capital. The Company plans to continue to pursue
acquisition opportunities. Historically, the Company generally has had available
a variety of sources to finance such expenditures and acquisitions at favorable
rates and terms. However, 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 the Company will be able to obtain
sufficient financing on terms that are acceptable to it to fund its operations
and capital expenditures or to enable the Company to take advantage of favorable
acquisition opportunities.
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 three months ended December 31, 1999 and 1998 for
XTRA Corporation
12.2 Statement of the calculation of earnings to fixed charges
for the three months ended December 31, 1999 and 1998 for
XTRA, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
- --- -------------------
On February 2, 2000, 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, 1999.
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: February 14, 2000 /s/ Michael J. Soja
----------------- ------------------------------------------
Michael J. Soja
Vice President and Chief Financial Officer
Date: February 14, 2000 /s/ Thomas S. McHugh
----------------- ------------------------------------------
Thomas S. McHugh
Controller
21
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
12.1 Statement of the calculation of earnings to fixed charges for the
three months ended December 31, 1999 and 1998 for XTRA
Corporation
12.2 Statement of the calculation of earnings to fixed charges for the
three months ended December 31, 1999 and 1998 for XTRA, Inc.
27 Financial Data Schedule
22
<PAGE>
Exhibit 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
For the three months ended December 31, 1999 and 1998
(Millions of dollars)
________________________________________________________________________________
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
EARNINGS
Pretax income $ 33 $ 30
Add: Fixed charges (below) 16 14
-------- --------
$ 49 $ 44
======== ========
FIXED CHARGES $ 16 $ 14
======== ========
Ratio of Earnings to Fixed Charges 3.1 3.2
======== ========
</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, the portion rental equipment lease financing which
represents interest 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, 1999 and 1998
(Millions of dollars)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
EARNINGS
Pretax income $ 33 $ 31
Add: Fixed charges (below) 16 14
------ ------
$ 49 $ 45
====== ======
FIXED CHARGES $ 16 $ 14
====== ======
Ratio of Earnings to Fixed Charges 3.1 3.2
====== ======
</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, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,000,000
<SECURITIES> 0
<RECEIVABLES> 104,000,000
<ALLOWANCES> 16,000,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,258,000,000
<DEPRECIATION> 840,000,000
<TOTAL-ASSETS> 1,556,000,000
<CURRENT-LIABILITIES> 0
<BONDS> 841,000,000
0
0
<COMMON> 6,000,000
<OTHER-SE> 322,000,000
<TOTAL-LIABILITY-AND-EQUITY> 1,556,000,000
<SALES> 0
<TOTAL-REVENUES> 127,000,000
<CGS> 0
<TOTAL-COSTS> 79,000,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,000,000
<INCOME-PRETAX> 33,000,000
<INCOME-TAX> 13,000,000
<INCOME-CONTINUING> 20,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,000,000
<EPS-BASIC> 1.61
<EPS-DILUTED> 1.61
</TABLE>
