Item 1. Business
XTRA Corporation (the "Company" or "XTRA") was organized in 1957 and is engaged in transportation equipment leasing. The Company conducts its business through its subsidiaries, including XTRA, Inc. XTRA's management subsidiary X-L-CO., INC. is located at 60 State Street, Boston, Massachusetts 02109 (telephone number (617) 367-5000).
In September, 1994, the Company changed its corporate structure by establishing a new holding company, XTRA Missouri, Inc., as an intermediate subsidiary between the Company and XTRA, Inc. XTRA Missouri, Inc. is a holding company for the stock of XTRA, Inc. and also holds and manages the Company's office space for XTRA Lease, Inc. and XTRA Intermodal, Inc. The Company also changed its operating structure so that XTRA, Inc. now conducts both its over-the-road and intermodal business through its subsidiaries XTRA Lease, Inc. and XTRA Intermodal, Inc. pursuant to fleet management agreements. Under the fleet management agreements, which are terminable upon 30 days notice by either party, XTRA Lease, Inc. and XTRA Intermodal, Inc. pay fees to XTRA, Inc. for the use of equipment owned by XTRA, Inc. Accordingly, XTRA, Inc.'s primary source of revenues will be payments under the fleet management agreements, as well as dividends and advances from its subsidiaries. At September 30, 1994, 41% of XTRA, Inc.'s consolidated assets were accounted for by its subsidiaries. For fiscal 1995, approximately 94% of XTRA Inc.'s consolidated revenues are expected to be accounted for by its subsidiaries.
XTRA's leasing equipment is offered to private fleet owners, contract and common carriers, railroads and steamship lines in North America to cover cyclical, seasonal or geographical shortages and as a substitute for purchasing equipment. The Company's two leasing divisions are XTRA Lease and XTRA Intermodal. XTRA Lease, primarily on an operating basis, leases over-the-road trailers, older trailers for mobile storage use and to a limited extent intermodal trailers and chassis. XTRA Intermodal leases, primarily on an operating basis, intermodal trailers, chassis and domestic containers. Leasing transportation equipment is a highly competitive business. The choice of equipment used, whether that choice is made by the shipper, transportation company or shipping agent, is primarily influenced by lease rates, terms, location, availability, condition and size of equipment, as well as other factors related to the general freight transportation market. The principal categories of equipment leased by the Company are described below.
For information regarding revenues attributable to each division, see Note 8 of the Notes to Consolidated Financial Statements. For additional information, including financing, capital expenditures and equipment utilization of each division's leasing fleet, see Management's Discussion and Analysis of Financial Condition and Results of Operations. Such information is incorporated herein by reference.
The majority of the Company's leasing fleet is manufactured to its specifications by a number of manufacturers. Some of XTRA's equipment has been acquired through acquisitions of competitors. The Company's leasing fleet consisted of the following units at the end of its last five fiscal years:
XTRA's business is directly affected, in terms of equipment utilization and lease rates, by the level of domestic economic activity, the supply of available equipment, demand and other factors in the freight transportation industry. The Company's utilization and hence its profitability is usually seasonally lower in its second and third fiscal quarters than in its first and fourth fiscal quarters.
The Company leases its equipment on both a term and per diem basis. Term leases include both fixed-term leases and open-term leases. Under fixed-term leases, the customer agrees to lease the equipment for an initial period of one year or greater; the initial term is generally one to four years. Open-term leases typically allow the Company or the lessee to terminate the lease by giving 30 days notice, however these agreements tend to extend for three to five years except during prolonged domestic economic downturns. Under per diem leases, the customer generally has the option to return the equipment without notice.
In general, the Company's receivable collection experience has been good. However, economic downturns tend to lengthen the collection period of certain receivables.
Over-the-Road Trailers
XTRA's over-the-road fleet of 56,200 trailers, mostly dry cargo vans, consists primarily of units 48' long by 102'' wide. XTRA's over-the-road trailer equipment is leased to private fleet owners, contract carriers and common carriers of general commodities. Approximately 43% of the trailers were leased on a term basis at the end of 1994 with the balance available for lease on a per diem basis. Generally, lessees are responsible for damage to equipment, except for ordinary maintenance, with full-service leases also available. Lease rates depend upon the length of term, the extent to which the Company provides maintenance and the type and age of the equipment.
Storage Trailers
XTRA's storage fleet consists of older former over-the-road and intermodal trailers. This fleet of 12,600 units is leased to a variety of customers under the trade name XTRA SPACE. Approximately 15% of the storage fleet was leased on a term basis at the end of 1994 with the balance available for lease on a per diem basis.
Intermodal Transportation
Intermodal transport involves moving freight through some combination of rail movement on rail flatcars, over water by ship and/or over-the-road. Long-haul freight in North America is transported in intermodal trailers, domestic containers, international ("marine") containers and over-the-road trailers. The percentage of all domestic intermodal freight transported has been gradually increasing with the percentage moved in domestic containers increasing at a slightly higher rate than intermodal trailers.
Intermodal Trailers
Intermodal trailers are designed to be carried on rail flatcars, pulled by a tractor over the highway and, to a lesser extent, transported by watercarriers on ships and barges. The Company's intermodal trailer fleet of 33,900 units consists primarily of units 45' and 48' long by 102" wide.
The Company's intermodal trailers are leased primarily to North American railroads and watercarriers. Approximately 39% of the intermodal trailer fleet was leased on a term basis (primarily open-term) at the end of 1994. The remainder of the fleet is available for lease on a per diem basis. Under per diem leases, the customer is generally responsible for damage to equipment, except for ordinary maintenance. The customers may terminate the per diem charge by transferring possession to another user or by removing the trailer from service at an authorized location.
Under term leases, the lessee is responsible for rental fees during the term of the lease even if the trailer is physically transferred to another carrier. The lessee is responsible for damage to equipment and repair and maintenance, normal wear excepted and, if necessary, pays certain costs for reconditioning upon its return to XTRA locations.
The Company believes the North American fleet of intermodal trailers had declined from approximately 121,000 in 1989 to 95,000 at the end of 1992 due to increased use of marine containers, domestic containers and over-the-road trailers to transport intermodal freight as well as increased efficiency in the use of intermodal trailers by the railroads.
XTRA believes the North American fleet of intermodal trailers has grown to 100,000 by the end of fiscal 1994 as a result of an improving economy, better service provided by the railroads and increased use of intermodal transportation by long-haul truckers. As a result of these factors, demand for intermodal trailers increased in fiscal 1993 and 1994, although the Company is unable to predict whether the demand for intermodal trailers will continue to grow in the future. The Company monitors the size of the North American fleet relative to current and expected future demand and bases its trailer acquisition and disposition decisions, in part, on these factors.
Chassis
Domestic chassis are wheeled rectangular steel frames generally 40' to 53' in length. Marine chassis are generally 20' or 40' in length to accommodate marine containers. XTRA's domestic and marine chassis are used as transport vehicles for domestic and marine containers which are then loaded or unloaded at shippers, rail terminals or consignees.
The Company's chassis fleet, consisting of 16,500 units, is leased to water and motor carriers and railroads. Approximately 87% of the chassis fleet was leased on a term basis at the end of 1994, with the balance available for per diem use. Under term leases, lessees are generally responsible for damage to equipment and repair and maintenance, normal wear excepted. Under per diem leases, the customer is responsible for damage to equipment, except for ordinary maintenance.
Domestic Containers
Domestic containerization is the transportation of freight domestically in containers through a combination of rail, including "double stack" service (stacked two high on rail well cars), and over the road on chassis. Domestic containers are used as a substitute for intermodal and over-the-road trailers, particularly on long-haul, heavy volume routes. XTRA's fleet of approximately 7,800 units consists primarily of 48' long by 102'' wide steel-constructed units. Domestic containers are larger than marine containers, which are typically 20' or 40' long by 96'' wide.
The Company's domestic containers are leased to North American railroads and domestic transportation segments of shipping lines. At September 30, 1994, substantially all of the Company's domestic containers were working under term lease agreements.The lessee is responsible for damage to equipment and repair and maintenance, normal wear excepted.
Competition
Leasing transportation equipment is highly competitive and is affected by factors related to the general freight transportation market. Lease terms and lease rates, as well as location, availability, condition and size of equipment are each important to the lessee. In addition, competition exists among the various types of transportation equipment. Over-the-road trailers, intermodal trailers, marine and domestic containers, and railroad rolling stock are all potential vehicles for the domestic movement of freight.
Recent estimates place the number of over-the-road trailers available for lease in North America in excess of 250,000 of which approximately 116,000 are owned by two operating lessors. The Company believes it is the second largest North American lessor of over-the-road trailers with its principal competitor having a slightly larger fleet.
In the operating lease market for intermodal trailers, the Company competes principally with one other leasing company. It is estimated that there are approximately 100,000 intermodal trailers in North America. XTRA believes it owns approximately 34% of the North American fleet with its principal competitor having a slightly larger sized fleet. The balance is owned by other leasing companies and railroads.
The use of domestic containers and chassis is a growing part of the intermodal business. As the domestic container leasing market develops, the Company will compete with other transportation equipment lessors entering this market. The Company believes it is the third largest lessor of domestic containers and its fleet represents approximately 16% of the fleet controlled by intermodal carriers. There is also competition for the intermodal movement of domestic freight from marine containers. Some portion of the nation-wide marine chassis fleet of approximately 180,000 units is used to handle domestic containers and hence competes with domestic chassis.
Locations and Operations
XTRA Lease equipment is leased from equipment pools operated by Company employees at 87 locations in North America. The operations of the XTRA Intermodal fleet are primarily domestic and are coordinated by 5 regional offices located at key points of railroad activity.
Significant Customers
The Atchison, Topeka and Santa Fe Railway accounted for 11% of the Company's consolidated revenues in 1992. No other customer accounted for 10% or more of revenues in any of the last three fiscal years. See Note 8 of the Notes to Consolidated Financial Statements.
Employees
The Company had 798 employees at September 30, 1994.
Item 2.
Item 2. Properties
The Company maintains 92 facilities for the storage and distribution of its equipment throughout North America, occupying 633 acres, of which 368 are owned. Except for installations in Chicago and the St. Louis area, consisting of 35 and 148 acres, respectively, these facilities are generally located on lots ranging from 11 to 30 acres.
Item 3.
Item 3. Legal Proceedings
There are no material pending legal proceedings in which the Company is named as a defendant.
A subsidiary of the Company has joined a group of other parties working with the Wisconsin Department of Natural Resources ("WDNR") on the remediation of environmental problems at the Edgerton Sand and Gravel Landfill site in Edgerton, Wisconsin and provision of an alternative water supply to affected residences in the area of the site. The subsidiary has also joined another group of parties working with the WDNR with regard to an adjacent manufacturing facility owned by the subsidiary prior to 1978. The Company is unable at this time to predict with any certainty the ultimate remediation costs associated with these sites or with provision of an alternative water supply, or the Company's share of any such costs. Based on preliminary estimates received from technical consultants for the Company and other similarly situated parties, the Company believes that its share of any future costs for remediation of both sites and provision of an alternative water supply will not be material to the results of operations, the financial condition or the liquidity of the Company, without consideration of any potential insurance recoveries or recoveries from the prior owner of the manufacturing facility or the owner/operator of the Edgerton Sand and Gravel Landfill site.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to stockholders of the Company during the fourth quarter of 1994.
Item 4A. Executive Officers of the Registrant
The executive officers of the Company, the age of each, and the period during which each has served in his present office are as follows:
Lewis Rubin (56) - President and Chief Executive Officer. Mr. Rubin was President and Chief Executive Officer of Flexi-Van Corporation, a Company engaged in the leasing of intermodal transportation equipment, from 1981 to 1983. He served as President and Chief Executive Officer of Gelco CTI Container Services, a subsidiary of Gelco Corporation, and as an Executive Vice President of Gelco Corporation from 1984 to 1988. Mr. Rubin was elected President and Chief Operating Officer in 1990. He was elected to his present position in 1990.
Robert B. Blakeley (34) - Controller. Mr. Blakeley joined the Company in 1984, was promoted to Assistant Controller in 1987 and was elected to his present position in 1991.
Michael K. Fox (48) - Vice President, XTRA Intermodal. Mr. Fox joined the Company in 1981 and has held several managerial positions. He was elected Executive Vice President, XTRA Intermodal in 1993. He was elected to his present position in 1994.
William H. Franz (43) - Vice President, XTRA Lease. Mr. Franz was previously employed by two large over-the-road lessors, Transport International Pool and Strick Lease. He joined the Company in 1992 and held the position of Executive Vice President, XTRA Lease in 1993. He was elected to his present position in 1993.
Christopher P. Joyce (33) - Treasurer. Mr. Joyce joined the Company in 1985. He was promoted to Assistant Treasurer in 1991 and was elected to his present position in 1993.
James R. Lajoie (54) - Vice President, General Counsel and Secretary. Mr. Lajoie joined the Company as General Counsel in 1981. He was elected Vice President and General Counsel in 1987 and was elected to his present position in 1990.
Michael J. Soja (45) - Vice President and Chief Financial Officer. Mr. Soja joined the Company as Assistant Controller in 1974, was elected Controller in 1978, and elected Vice President in 1979. He was elected Vice President, Finance and Administration in 1981 and was elected Vice President, Finance and Treasurer in 1990. Mr. Soja was elected to his present position in 1990.
Charles D. Willmott (42) - Vice President, Marketing and Planning. Mr. Willmott was President of Distribution International Corporation, the holding company for the Strick Companies, prior to joining the Company in 1992. Mr. Willmott was elected to his present position in 1993.
All terms of office expire as of the date of the Board of Directors' meeting following the next Annual Meeting of Stockholders and until their respective successors are elected and qualified.
PART II.
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
XTRA Corporation Common Stock is listed on the New York Stock Exchange and trades under the symbol "XTR". The approximate number of record holders as of November 17, 1994 was 1,037. The following table sets forth the range of high and low sale prices of the Company's Common Stock on the New York Stock Exchange Composite Tape and dividends declared during fiscal years ended September 30, 1993 and 1994. All references to stock prices and dividends declared reflect the two-for-one stock split paid in May 1993.
The Company has paid quarterly cash dividends on its Common Stock since January 1977. Future dividends will be determined by the Board of Directors and will be dependent upon the earnings, financial condition and cash requirements of the Company and other relevant factors existing at the time.
The Company's source of funds for the payment of dividends on its capital stock is advances and dividends from its direct and indirect wholly-owned subsidiaries, including XTRA, Inc. Several of the Company's loan agreements contain covenants that restrict the payment of cash dividends by the Company. In addition, certain loan agreements contain covenants that restrict advances to and the payment of dividends to the Company by its subsidiaries, including XTRA Missouri, Inc. and XTRA, Inc. Under the most restrictive provisions of the Company's loan agreements, the amount of cash dividends which could be paid on the Company's capital stock was limited to $127 million at September 30, 1994.
Item 6.
Item 6. Selected Financial Data
This information is set forth in the table appearing on page 1 of the Company's 1994 Annual Report, which table is incorporated by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information required by this item appears in the Company's 1994 Annual Report beginning at page 21 and is incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable
Part III.
Item 10. Directors and Executive Officers of the Registrant
(a) Directors - Information with respect to all directors may be found in the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders under the caption "Information with Respect to Director Nominees," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated by reference.
(b) Executive Officers - Information with respect to executive officers of the registrant appears under the caption "Executive Officers of the Registrant" in Item 4A of this Report on Form 10-K. Information with respect to disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is contained in the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders under the caption "Stock Ownership by Directors and Executive Officers," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated by reference.
Item 11. Executive Compensation
This information is contained in the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders under the captions "Executive Compensation Tables" and "Compensation of Directors," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is contained in the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders under the captions "Stock Ownership by Directors and Executive Officers" and "Beneficial Ownership of More Than Five Percent of Voting Securities," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated by reference.
Item 13. Certain Relationships and Related Transactions
This information is contained in the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders under the captions "Information with Respect to Director Nominees" and "Certain Transactions," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated by reference.
PART IV.
Item 14. Financial Statements, Financial Statement Schedules, Exhibits and Reports on Form 8-K.
(a) 1. Financial Statements - A list of Financial Statements for XTRA Corporation and its Subsidiaries appears at Item 8