<PAGE>
Page 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1996 OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _________ TO _________
Commission file number 33-74198
TRANS OCEAN CONTAINER CORPORATION
(Exact name of registrant as specified in the charter)
Delaware 94-3155379
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Manhattanville Road, Purchase, New York 10577
(Address of principal executive offices)(Zip Code)
(914) 682-3300
(Registrant's telephone number including area code)
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
As of November 13, 1996, 100 shares of common stock, $.001 par value,
were outstanding.
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION,
MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM
10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT
PERMITTED UNDER GENERAL INSTRUCTION H(2).
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TRANS OCEAN CONTAINER CORPORATION AND SUBSIDIARIES
FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of Trans Ocean
Container Corporation and Subsidiaries (collectively, the "Company") for the
periods ended September 30, 1996 and 1995, do not include complete financial
information and should be read in conjunction with the Consolidated Financial
Statements filed with the Commission on Form 10-K for the year ended December
31, 1995. The financial information presented in the financial statements
included in this report reflects all adjustments, consisting only of normal
recurring accruals, which are, in the opinion of management, necessary for a
fair statement of results for the interim periods presented. Results for the
interim periods are not necessarily indicative of the results for the entire
year for most of the Company's businesses.
* * * * *
On October 16, 1996, Transamerica Corporation ("Transamerica") acquired
indirect control of the registrant through a merger of a wholly-owned
subsidiary of Transamerica with and into Trans Ocean Ltd., the registrant's
parent corporation ("TOL"), in which TOL was the surviving corporation, for
consideration of approximately 1.57 million shares of Transamerica common
stock. As a result of such merger, Transamerica indirectly owns 100% of the
registrant's voting securities.
* * * * *
The consolidated ratios of earnings to fixed charges were computed by
dividing income before fixed charges and income taxes by the fixed charges.
Fixed charges consist of interest and debt expense and one-third of rent
expenses, which approximates the interest factor.
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Page 3
TRANS OCEAN CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, December 31,
1996 1995
Cash and cash equivalents . . . . . . . . . . . $ 11,551,000 $ 23,055,000
Receivables, net of allowance for doubtful
accounts of $2,233,000 and $1,405,000 as
of September 30, 1996 and December 31, 1995 . 37,916,000 38,946,000
Property and equipment, net of accumulated
depreciation and amortization . . . . . . . . 347,664,000 319,875,000
Intangible assets, net of accumulated
amortization of $12,522,000 and $11,766,000
as of September 30, 1996 and December 31,
1995 . . . . . . . . . . . . . . . . . . . . 6,621,000 7,377,000
Other assets . . . . . . . . . . . . . . . . . 9,929,000 11,262,000
____________ ____________
Total assets . . . . . . . . . . . . . . . . $413,681,000 $400,515,000
============ ============
LIABILITIES, REDEEMABLE SENIOR PREFERRED STOCK
AND COMMON STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities . . . $ 43,762,000 $ 47,861,000
Managed equipment program liabilities . . . . . 16,740,000 20,175,000
Due to parent and affiliates . . . . . . . . . 1,131,000 1,288,000
Senior debt obligations, including current
maturities of $19,640,000 and $18,373,000
as of September 30, 1996 and December 31,
1995 . . . . . . . . . . . . . . . . . . . . 212,451,000 193,670,000
Senior subordinated notes . . . . . . . . . . . 75,000,000 75,000,000
Deferred revenue . . . . . . . . . . . . . . . 3,955,000 4,810,000
Deferred income taxes . . . . . . . . . . . . . 22,811,000 21,639,000
____________ ____________
Total liabilities . . . . . . . . . . . . . . 375,850,000 364,443,000
____________ ____________
Redeemable senior preferred stock . . . . . . . 3,610,000 3,590,000
____________ ____________
Common stockholder's equity:
Common stock . . . . . . . . . . . . . . . . 1,000 1,000
Contributed capital . . . . . . . . . . . . . 2,501,000 2,501,000
Retained earnings . . . . . . . . . . . . . . 31,719,000 29,980,000
____________ ____________
Total common stockholder's equity . . . . . . 34,221,000 32,482,000
____________ ____________
Total liabilities, redeemable senior
preferred stock and common stockholder's
equity . . . . . . . . . . . . . . . . . . $413,681,000 $400,515,000
============ ============
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Page 4
<TABLE>
TRANS OCEAN CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Lease revenue . . . . . . . . . . . . . $ 43,125,000 $ 43,104,000 $130,542,000 $123,025,000
____________ ____________ ____________ ____________
Costs and expenses:
Managed equipment program
distributions . . . . . . . . . . . 11,431,000 13,370,000 37,804,000 39,889,000
Direct operating . . . . . . . . . . 13,193,000 9,154,000 35,294,000 26,877,000
Depreciation and amortization . . . . 6,364,000 5,788,000 18,296,000 15,488,000
Marketing and administrative . . . . 5,463,000 6,232,000 17,674,000 18,520,000
Interest . . . . . . . . . . . . . . 6,288,000 5,813,000 18,095,000 15,622,000
____________ ____________ ____________ ____________
Total costs and expenses . . . . . 42,739,000 40,357,000 127,163,000 116,396,000
____________ ____________ ____________ ____________
Income before provision for
income taxes . . . . . . . . . . 386,000 2,747,000 3,379,000 6,629,000
Provision for income taxes . . . . . . 188,000 899,000 1,325,000 2,333,000
____________ ____________ ____________ ____________
Net income . . . . . . . . . . . . $ 198,000 $ 1,848,000 $ 2,054,000 $ 4,296,000
============ ============ ============ ============
Ratio of earnings to fixed charges . . 1.15 1.35
</TABLE>
<PAGE>
Page 5
TRANS OCEAN CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
1996 1995
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . $ 2,054,000 $ 4,296,000
Adjustments to reconcile net income to
net cash provided by operating
activities -
Depreciation and amortization . . . . . 18,296,000 15,488,000
Gain on sale of property and equipment . (1,720,000) (822,000)
Provision for doubtful accounts . . . . 2,800,000 365,000
Amortization of deferred revenue . . . . (963,000) (1,414,000)
Provision for deferred income taxes . . 1,183,000 2,200,000
Other changes in assets and
liabilities -
Receivables . . . . . . . . . . . . . (1,770,000) (2,612,000)
Accounts payable and accrued
liabilities . . . . . . . . . . . . (4,110,000) 4,329,000
Managed equipment program liabilities (3,435,000) (2,265,000)
Due to parent and affiliates . . . . . (157,000) (503,000)
Other, net . . . . . . . . . . . . . . 1,333,000 82,000
_____________ _____________
Net cash provided by operating
activities . . . . . . . . . . . . 13,511,000 19,144,000
_____________ _____________
Cash flows from investing activities:
Purchase of property and equipment . . . . (105,900,000) (169,638,000)
Proceeds from sale of property and
equipment . . . . . . . . . . . . . . . 62,399,000 53,290,000
_____________ _____________
Net cash used in investing
activities . . . . . . . . . . . . (43,501,000) (116,348,000)
_____________ _____________
Cash flows from financing activities:
Revolving credit repayments . . . . . . . (161,500,000) (113,000,000)
Revolving credit borrowings . . . . . . . 158,000,000 155,500,000
Senior debt repayments . . . . . . . . . . (17,817,000) (12,740,000)
Senior debt borrowings . . . . . . . . . . 40,098,000 66,906,000
Dividend on preferred stock . . . . . . . (295,000) (296,000)
_____________ _____________
Net cash provided by financing
activities . . . . . . . . . . . . 18,486,000 96,370,000
_____________ _____________
Net decrease in cash and cash
equivalents . . . . . . . . . . . (11,504,000) (834,000)
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . . . . 23,055,000 18,451,000
_____________ _____________
Cash and cash equivalents, end of period . . $ 11,551,000 $ 17,617,000
============= =============
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Page 6
TRANS OCEAN CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Unaudited)
Nine Months Ended September 30,
1996 1995
Balance at beginning of year . . . . . . . . $29,980,000 $24,328,000
Net income . . . . . . . . . . . . . . . . 2,054,000 4,296,000
Dividend on preferred stock . . . . . . . (295,000) (296,000)
Preferred stock accretion . . . . . . . . (20,000) (20,000)
Merger of affiliates . . . . . . . . . . . (249,000)
___________ ___________
Balance at end of period . . . . . . . . . . $31,719,000 $28,059,000
=========== ===========
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Page 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Lease revenue increased $7.5 million or 6.1% in the first nine months of
1996 as compared with the first nine months of 1995. The increase resulted
primarily from increased fleet size, which was partially offset by declines in
overall fleet utilization and per diem lease rates.
Managed equipment program distributions decreased $2.1 million or 5.2% in
the first nine months of 1996 as compared with the first nine months of 1995
primarily due to a $1.5 million benefit resulting from the settlement of a
withholding tax issue.
Direct operating expenses increased $8.4 million or 31.3% in the nine
month period ended September 30, 1996 as compared with the nine month period
ended September 30, 1995. The increase resulted from an increase in bad debt
reserves of $2.4 million and increases in lease expense, as a result of
additional equipment operating leases, together with increases in repair and
maintenance, storage and positioning expenses, which were partially offset by
decreases in depot expense.
Depreciation and amortization expense increased $2.8 million or 18.1% in
the first nine months of 1996 as compared with the first nine months of 1995.
In each period, the increase was primarily attributable to an increase in
depreciation expense resulting from a larger number of owned containers.
Marketing and administrative expenses decreased $0.8 million or 4.6% in
the first nine months of 1996 as compared with the first nine months of 1995.
The decrease was primarily due to reductions in costs associated with
personnel and professional services.
Interest expense increased $2.5 million or 15.8% in the first nine months
of 1996 as compared with the first nine months of 1995. The increase was the
result of interest costs associated with the incurrence of additional debt to
finance equipment purchases, which was partially offset by a decrease in the
interest rates underlying most of the Company's debt obligations.
Derivatives
The Company from time to time utilizes various types of interest rate
contracts to reduce the impact of changes in interest rates on its variable
rate indebtedness. The Company entered into an interest rate swap agreement
which effectively converts the interest rate on $25,000,000 of variable rate
debt into fixed rate debt. This agreement provides for the Company to
exchange variable rate interest payments based on LIBOR for a fixed rate of
4.963% on $25,000,000 through February 1998. Net interest settlements under
the interest rate swap agreement are recorded as an adjustment to interest
expense.
<PAGE>
Page 8
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
b) Reports on FORM 8-K
The Company filed a report on FORM 8-K on October 25, 1996 relating
to the acquisition by Transamerica Corporation of Trans Ocean Ltd.,
the registrant's parent.
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.
TRANS OCEAN CONTAINER CORPORATION
Edward T. Mann
Vice President and Treasurer
Date: November 14, 1996
<PAGE>
EXHIBIT 12
TRANS OCEAN CONTAINER CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended September 30,
1996 1995
Fixed charges:
Interest and debt expense $18,095,000 $15,622,000
One-third of rental expense 3,979,000 3,566,000
___________ ___________
Total $22,074,000 $19,188,000
=========== ===========
Earnings:
Net Income $ 2,054,000 $ 4,296,000
Provision for income taxes 1,325,000 2,333,000
Fixed charges 22,074,000 19,188,000
___________ ___________
Total $25,453,000 $25,817,000
=========== ===========
Ratio of earnings to fixed charges 1.15 1.35
==== ====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF TRANS OCEAN
CONTAINER CORPORATION FOR THE PERIOD ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,551,000
<SECURITIES> 0
<RECEIVABLES> 40,149,000
<ALLOWANCES> 2,233,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 436,531,000
<DEPRECIATION> 88,867,000
<TOTAL-ASSETS> 413,681,000
<CURRENT-LIABILITIES> 0
<BONDS> 75,000,000
3,610,000
0
<COMMON> 1,000
<OTHER-SE> 34,220,000
<TOTAL-LIABILITY-AND-EQUITY> 413,681,000
<SALES> 0
<TOTAL-REVENUES> 130,542,000
<CGS> 0
<TOTAL-COSTS> 73,098,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,800,000
<INTEREST-EXPENSE> 18,095,000
<INCOME-PRETAX> 3,379,000
<INCOME-TAX> 1,325,000
<INCOME-CONTINUING> 2,054,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,054,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
