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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 THE QUARTERLY PERIOD ENDED JUNE 30, 1998
Commission file number 1-11862
INTERPOOL, INC.
(Exact name of registrant as specified in the charter)
DELAWARE 13-3467669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
211 COLLEGE ROAD EAST, PRINCETON, NEW JERSEY 08540
(Address of principal executive office) (Zip Code)
(609) 452-8900
(Registrant's telephone number including area code)
As of August 10, 1998, 27,566,452 shares of common stock, $.001 par value
were outstanding.
Indicate by check /x/ 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 for the
past 90 days Yes /x/ No / /
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INTERPOOL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION:
Introduction to Financial Statements .......................... 3
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 ........................... 4
Consolidated Statements of Income
For the Three Months and Six Months ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows
For the Six Months ended June 30, 1998 and 1997 ............... 6
Consolidated Statements of Stockholders' Equity
For the Six Months ended June 30, 1998 ........................ 7
Notes to Consolidated Financial Statements .................... 8 - 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations ................. 11 - 14
PART II - OTHER INFORMATION:
Item 6: Exhibits and Reports on Form 8-K ................... 15
Signatures..................................................... 16
Exhibits ...................................................... 17
</TABLE>
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PART I - FINANCIAL INFORMATION
INTERPOOL, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
The condensed financial statements of Interpool, Inc. and Subsidiaries
(the "Company") included herein have been prepared by the registrant, 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, although the Registrant believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K. These condensed financial statements reflect, in the opinion of
management, all adjustments (consisting only of 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 for the full year.
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INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
CASH AND SHORT-TERM INVESTMENTS ............................................. $ 28,942 $ 30,402
MARKETABLE SECURITIES ....................................................... 6,780 12,574
ACCOUNTS AND NOTES RECEIVABLE, less allowance of
$3,888 and $3,633 ......................................................... 29,080 27,448
NET INVESTMENT IN DIRECT FINANCING LEASES ................................... 368,500 363,366
OTHER RECEIVABLES ........................................................... 73,240 35,744
LEASING EQUIPMENT, at cost .................................................. 799,604 745,351
Less--accumulated depreciation and amortization ........................... (155,195) (136,989)
----------- -----------
LEASING EQUIPMENT, net ...................................................... 644,409 608,362
OTHER ASSETS ................................................................ 56,306 36,560
----------- -----------
TOTAL ASSETS ........................................................... $ 1,207,257 $ 1,114,456
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES ....................................... $ 27,361 $ 26,139
INCOME TAXES:
Current ................................................................. 1,000 836
Deferred ................................................................ 17,679 15,269
----------- -----------
18,679 16,105
DEFERRED INCOME ............................................................. 1,537 2,030
DEBT AND CAPITAL LEASE OBLIGATIONS:
Due within one year ..................................................... 92,005 74,830
Due after one year ...................................................... 726,484 669,397
----------- -----------
818,489 744,227
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES IN SUBSIDIARY GRANTOR TRUSTS
(holding solely junior subordinated deferrable interest debentures of the
Company)
(75,000 shares 9 7/8% Capital Securities outstanding, liquidation
preference $75,000) ..................................................... 75,000 75,000
MINORITY INTEREST IN EQUITY OF SUBSIDIARIES ................................. 534 509
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001 per share; 1,000,000 authorized,
none issued ........................................................... -- --
Common stock, par value $.001 per share; 100,000,000 shares
authorized, 27,566,452 outstanding at June 30, 1998 and
27,551,728 outstanding at December 31, 1997 ........................... 28 28
Additional paid-in capital ............................................... 124,046 124,046
Retained earnings ........................................................ 141,075 125,657
Accumulated other comprehensive income ................................... 508 715
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ........................................... 265,657 250,446
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $ 1,207,257 $ 1,114,456
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets
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INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES .................................................. $ 44,506 $ 39,784 $ 87,338 $ 77,960
COSTS AND EXPENSES:
Lease operating and administrative expenses ............... 10,451 9,352 21,370 17,695
Depreciation and amortization of leasing equipment ........ 10,349 8,691 20,076 17,222
Other income, net ......................................... (113) (427) (331) (756)
Interest expense, net ..................................... 12,845 11,666 26,039 22,728
-------- -------- -------- --------
33,532 29,282 67,154 56,889
-------- -------- -------- --------
Income before taxes & extraordinary loss .................. 10,974 10,502 20,184 21,071
Provision for income taxes ................................ 1,600 1,675 2,700 3,150
-------- -------- -------- --------
Income before extraordinary loss .......................... 9,374 8,827 17,484 17,921
Extraordinary loss on retirement of debt, net of applicable
taxes of $225 ........................................... -- -- -- 328
-------- -------- -------- --------
NET INCOME ................................................ $ 9,374 $ 8,827 $ 17,484 $ 17,593
======== ======== ======== ========
Income per share before extraordinary loss and premium paid
on redemption of preferred stock:
Basic .................................................. $0.34 $0.32 $0.63 $0.63
Diluted ................................................ $0.33 $0.31 $0.61 $0.60
Extraordinary loss on retirement of debt:
Basic .................................................. NA NA NA ($0.01)
Diluted ................................................ NA NA NA ($0.01)
Premium paid on redemption of preferred stock:
Basic .................................................. NA NA NA ($0.25)
Diluted ................................................ NA NA NA ($0.22)
NET INCOME PER SHARE:
Basic .................................................. $0.34 $0.32 $0.63 $0.37
Diluted ................................................ $0.33 $0.31 $0.61 $0.36
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (in Thousands):
Basic .................................................. 27,561 27,552 27,556 26,939
Diluted ................................................ 28,629 28,444 28,569 30,109
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 17,484 $ 17,593
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization ..................................... 20,970 18,047
Gain on sale of leasing equipment ................................. (107) (756)
Collections on direct financing leases ............................ 60,689 46,363
Income recognized on direct financing leases ...................... (17,806) (16,767)
Provision for uncollectible accounts .............................. 1,020 763
Changes in assets and liabilities:
Accounts and notes receivable ..................................... (2,471) (6,131)
Other receivables ................................................. 1,852 (612)
Other assets and non-cash transactions ............................ (7,794) (2,378)
Accounts payable and accrued expenses ............................. 1,222 3,703
Income taxes payable .............................................. 2,937 907
Deferred income ................................................... (493) (211)
Minority interest in equity of subsidiaries ....................... 25 30
--------- ---------
Net cash provided by operating activities ........................ 77,528 60,551
--------- ---------
Cash flows from investing activities:
Acquisition of leasing equipment .................................. (56,286) (30,463)
Proceeds from dispositions of leasing equipment ................... 2,472 3,981
Investment in direct financing leases ............................. (49,692) (72,160)
Investment in loan receivables .................................... (5,698) --
Investment in and advances to unconsolidated subsidiary ........... (46,476) --
Changes in marketable securities and other investing activities.... 5,223 (8,624)
--------- ---------
Net cash used for investing activities ......................... (150,457) (107,266)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt .................................... 121,423 7,325
Payments of debt and capital lease obligations .................... (33,402) (60,164)
Net (repayments) borrowings of revolving credit lines ............. (14,486) 73,559
Proceeds from issuance of capital securities ...................... -- 73,300
Redemption of preferred stock ..................................... -- (52,871)
Cash dividends paid ............................................... (2,066) (2,892)
--------- ---------
Net cash provided by financing activities ...................... 71,469 38,257
--------- ---------
Net decrease in cash and short-term investments ................... (1,460) (8,458)
Cash and short-term investments, beginning of period .............. 30,402 45,333
--------- ---------
Cash and short-term investments, end of period .................... $ 28,942 $ 36,875
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Dollars and shares in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Shares of Shares of Additional Other
Preferred Par Common Par Paid-In Retained Comprehensive
Stock Value Stock Value Capital Earnings Income
----- ----- ----- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 .......... 0 $0 27,552 $ 28 $124,046 $ 125,657 $ 715
Net income ...................... 17,484
Accumulated Other
Comprehensive Income ........ (207)
Shares issued on exercise of
stock options ................... 37 363
Shares surrendered in satisfaction
of stock option purchase price .. (23) (363)
Cash Dividends declared:
Common stock ................ (2,066)
- -- ------ ---- -------- --------- --------
Balance, June 30, 1998 .............. - - 27,566 $ 28 $124,046 $ 141,075 $ 508
= == ====== ==== ======== ========= ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
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INTERPOOL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
NOTE 1 -- NATURE OF OPERATIONS AND ACCOUNTING POLICIES:
A.NATURE OF OPERATIONS:
The Company and its subsidiaries conduct business principally in a single
industry segment, the leasing of intermodal dry freight standard containers,
chassis and other transportation related equipment. The Company leases its
containers principally to international container shipping lines located
throughout the world. The customers for the Company's chassis are a large number
of domestic companies, many of which are domestic subsidiaries or branches of
international shipping lines. Equipment is purchased directly or acquired
through conditional sales contracts and lease agreements, many of which qualify
as capital leases.
The Company's accounting records are maintained in United States dollars
and the consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States.
B.BASIS OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and subsidiaries more than 50% owned. All significant intercompany transactions
have been eliminated.
C. NET INCOME PER SHARE:
Basic net income per share is computed by deducting preferred dividends
from net income to arrive at income attributable to common stockholders. This
amount is then divided by the weighted average number of shares outstanding
during the period. Diluted income per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The dilutive effect of stock options
and shares issuable upon the conversion of the 5 3/4% Cumulative Convertible
Preferred Stock and the 5 1/4% Convertible Exchangeable Subordinated Notes have
been added to the weighted shares outstanding and interest expense net of tax
effect on the notes has been added to net income in the diluted earnings per
share computation. Per share amounts and common shares outstanding have been
restated to give effect to the three-for-two stock split effected March 27,
1997.
A reconciliation of weighted average common shares outstanding to weighted
average common shares outstanding assuming dilution follows:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average common shares outstanding ................. 27,561 27,552 27,556 26,939
Common shares issuable (1) ........................ 1,068 892 1,013 3,170
Average common shares outstanding assuming dilution 28,629 28,444 28,569 30,109
</TABLE>
(1) Issuable under stock option plans in 1998 and both stock option plans and
conversion of convertible securities in 1997.
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Stock options outstanding at June 30, 1998 to purchase 1.5 million shares
of common stock were not included in the computation of net income per share
assuming dilution because the options' exercise prices were greater than the
average market price of the common shares.
D.COMPREHENSIVE INCOME:
Effective January 1, 1998, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and displaying comprehensive income
and its components. Upon adoption of this Statement, the accumulated net
unrealized gain on the Company's available-for-sale investments of $715 at
December 31, 1997 was reclassified from Net unrealized gain on marketable
securities to Accumulated other comprehensive income. Adoption of this statement
has no effect on the Company's financial position or operating results.
The following is a reconciliation of net income to comprehensive income:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income ........................................ $ 9,374 $8,827 $ 17,484 $17,593
Net unrealized gain (loss) on marketable securities (829) 397 (207) 352
------- ------ -------- -------
Comprehensive Income .............................. $ 8,545 $9,224 $ 17,277 $17,945
======= ====== ======== =======
</TABLE>
NOTE 2 -- CASH FLOW INFORMATION:
For the six months ended June 30, 1998 and 1997, cash paid for interest
was approximately $29,618 and $22,031, respectively. Cash paid for income taxes
was approximately $823 and $2,957, respectively.
NOTE 3 -- OTHER CONTINGENCIES AND COMMITMENTS:
At June 30, 1998, the Company had outstanding purchase commitments for
equipment of approximately $50,000.
Under certain of the Company's leasing agreements, the Company, as lessee,
may be obligated to indemnify the lessor for loss, recapture or disallowance of
certain tax benefits arising from the lessor's ownership of the equipment.
The Company is engaged in various legal proceedings from time to time
incidental to the conduct of its business. In the opinion of management, the
Company is adequately insured against the claims relating to such proceedings,
and any ultimate liability arising out of such proceedings will not have a
material adverse effect on the financial condition or results of operations of
the Company.
NOTE 4 -- SIGNIFICANT EVENTS:
On February 24, 1998, the Company issued $100,000 principal amount of
6 5/8% Notes due 2003. The net proceeds were used to repay $83,000 in borrowings
under the revolving credit agreement and for other general corporate purposes.
On April 30, 1998, the Company acquired a 50% interest in Container
Applications International, Inc. (CAI), a container leasing company whose
business is primarily in the short term master lease market. CAI would not be
deemed a "significant subsidiary" of the Company for purposes of the Securities
and Exchange Commission
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accounting requirements. The Company also advanced CAI subordinated debt. The
Company's investment in and advances to CAI totaled $46,476.
On June 19, 1998, the Company joined with Apollo Management IV, L.P.
("Apollo") in entering into a definitive merger agreement providing for the
recapitalization of XTRA Corporation ("XTRA"), a leading lessor of freight
transportation equipment, including over-the-road trailers, marine containers,
intermodal trailers, chassis and domestic containers. In connection with the
merger and recapitalization, the Company (through its affiliate Atlas Capital
Partners LLC ("Atlas")) will be investing $73.1 million in new equity of XTRA,
representing a 22.5% interest in XTRA. It is expected that following the merger
and recapitalization, the Company (through Atlas) and Apollo will own
approximately 90% of XTRA and XTRA's existing shareholders will own the
remaining 10%. The merger, which is expected to be consummated later this year,
is subject to customary conditions, including the approval of XTRA stockholders,
the availability of contemplated financing and the expiration of
Hart-Scott-Rodino waiting periods. The Company's equity investment will be
accounted for as a purchase using the equity method of accounting.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates revenues through leasing transportation equipment,
primarily intermodal dry freight standard containers and container chassis. Most
of the Company's revenues are derived from payments under operating leases and
income earned under finance leases, under which the lessee has the right to
purchase the equipment at the end of the lease term. In the six months ended
June 30, 1998 and 1997 revenues from direct financing leases were $17.8 million
(20% of revenues) and $16.8 million (22% of revenues), respectively.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
REVENUES
The Company's revenues increased to $44.5 million for the three months
ended June 30, 1998 from $39.8 million in the three months ended June 30, 1997,
an increase of $4.7 million or 12%. The increase was due to increased leasing
revenues generated by an expanded container and chassis fleet size. Revenues for
the three months ended June 30, 1998 were $22.6 million for the Interpool
Limited international container division and $21.9 million for the domestic
intermodal division. This compared to $21.8 million for the Interpool Limited
international container division and $18.0 million for the domestic intermodal
division for the three months ended June 30, 1997.
LEASE OPERATING AND ADMINISTRATIVE EXPENSES
The Company's lease operating and administrative expenses increased to
$10.5 million for the three months ended June 30, 1998 from $9.4 million in the
three months ended June 30, 1997, an increase of $1.1 million. The increase was
due to higher operating costs of $.4 million resulting from expanded operations
generating increased maintenance and repair and commission expenses. Also an
increase of $.6 million in administrative costs resulting from both increased
operations and inflation contributed to the increase. The increased expenses
were primarily incurred on the domestic intermodal division operations.
DEPRECIATION AND AMORTIZATION OF LEASING EQUIPMENT
The Company's depreciation and amortization expenses increased to $10.3
million in the three months ended June 30, 1998 from $8.7 million in the three
months ended June 30, 1997, an increase of $1.6 million. The increase was due to
an increased fleet size.
OTHER INCOME, NET
The Company's income from unconsolidated subsidiaries net of goodwill
amortization was $.2 million in the three months ended June 30, 1998. The
Company's gain (loss) on sale of leasing equipment decreased to ($.1) million in
the three months ended June 30, 1998 from $.4 million in the three months ended
June 30, 1997.
INTEREST EXPENSE, NET
The Company's net interest expense increased to $12.8 million in the three
months ended June 30, 1998 from $11.7 million in the three months ended June 30,
1997, an increase of $1.1 million. The increase in interest expense was due to
increased financings necessary to fund capital expenditures.
PROVISION FOR INCOME TAXES
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<PAGE> 12
The Company's provision for income taxes decreased to $1.6 million from
$1.7 million due to a lower effective tax rate resulting from greater income
contribution from the Interpool Limited international container division.
NET INCOME
As a result of the factors described above, the Company's net income
increased to $9.4 million in the three months ended June 30, 1998 from $8.8
million in the three months ended June 30, 1997. For the three months ended June
30, 1998 the Interpool Limited international container division contributed $8.2
million to net income while the domestic intermodal division contributed $1.2
million. This compares to the three months ended June 30, 1997 when the
Interpool Limited international container division contributed $7.6 million to
net income while the domestic intermodal division contributed $1.2 million.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
REVENUES
The Company's revenues increased to $87.3 million for the six months ended
June 30, 1998 from $78.0 million in the six months ended June 30, 1997, an
increase of $9.3 million or 12%. The increase was due to increased leasing
revenues generated by an expanded container and chassis fleet size. Revenues for
the six months ended June 30, 1998 were $44.3 million for the Interpool Limited
international container division and $43.0 million for the domestic intermodal
division. This compared to $42.5 million for the Interpool Limited international
container division and $35.5 million for the domestic intermodal division for
the six months ended June 30, 1997.
LEASE OPERATING AND ADMINISTRATIVE EXPENSES
The Company's lease operating and administrative expenses increased to
$21.4 million for the six months ended June 30, 1998 from $17.7 million in the
six months ended June 30, 1997, an increase of $3.7 million. The increase was
due to higher operating costs of $2.5 million resulting from expanded operations
generating increased maintenance and repair, commission and insurance expenses.
Also an increase of $1.2 million in administrative costs resulting from both
increased operations and inflation contributed to the increase. The increased
expenses were primarily incurred on the domestic intermodal division operations.
DEPRECIATION AND AMORTIZATION OF LEASING EQUIPMENT
The Company's depreciation and amortization expenses increased to $20.1
million in the six months ended June 30, 1998 from $17.2 million in the six
months ended June 30, 1997, an increase of $2.9 million. The increase was due to
an increased fleet size.
OTHER INCOME, NET
The Company's income from unconsolidated subsidiaries net of goodwill
amortization was $.2 million in the six months ended June 30, 1998. The
Company's gain on sale of leasing equipment decreased to $.1 million in the six
months ended June 30, 1998 from $.8 million in the six months ended June 30,
1997.
INTEREST EXPENSE, NET
The Company's net interest expense increased to $26.0 million in the six
months ended June 30, 1998 from $22.7 million in the six months ended June 30,
1997, an increase of $3.3 million. The issuance of capital securities in late
January 1997 increased interest expense by $.6 million in the 1998 period versus
the 1997 period. The remaining increase in interest expense was due to increased
financings necessary to fund capital expenditures.
PROVISION FOR INCOME TAXES
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<PAGE> 13
The Company's provision for income taxes decreased to $2.7 million from
$3.2 million due to a lower effective tax rate resulting from greater income
contribution from the Interpool Limited international container division.
NET INCOME
As a result of the factors described above, the Company's net income was
$17.5 million in the six months ended June 30, 1998 versus income before
extraordinary loss of $17.9 million in the six months ended June 30, 1997. For
the six months ended June 30, 1998 the Interpool Limited international container
division contributed $15.8 million to net income loss while the domestic
intermodal division contributed $1.7 million. This compares to the six months
ended June 30, 1997 where the Interpool Limited international container division
contributed $15.1 million to income before extraordinary loss while the domestic
intermodal division contributed $2.8 million. An extraordinary loss of $.3
million, net of tax benefit, was recorded in the six months ended June 30, 1997.
This loss resulted from the retirement of debt replaced with the proceeds of
other financings.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses funds from various sources to finance the acquisition of
equipment for lease to customers. The primary funding sources are cash provided
by operations, borrowings, generally from banks, the issuance of capital lease
obligations and the sale of debt securities. In addition, the Company generates
cash from the sale of equipment being retired from the Company's fleet. In
general, the Company seeks to meet debt service requirements from the leasing
revenue generated by its equipment.
The Company generated cash flow from operations of $77.5 million and $60.6
million in the first six months of 1998 and 1997, respectively, and net cash
provided by financing activities was $71.5 million and $38.3 million for the
first six months of 1998 and 1997, respectively. The Company has purchased the
following amounts of equipment: $106.0 million for the six months ended June 30,
1998 and $102.6 million for the six months ended June 30, 1997.
In February 1998, the Company issued $100 million principal amount of
6 5/8% Notes due 2003. The net proceeds were used to repay $83 million in
borrowings under the revolving credit agreement and for other general corporate
purposes.
The Company has a $200.0 million revolving credit facility with a group of
commercial banks; on June 30, 1998, $77.5 million was outstanding. The term of
this facility extends until May 31, 1999 (unless the lender elects to renew the
facility) at which time a maximum of 10% of the amount then outstanding becomes
due, with the remainder becoming payable in equal monthly installments over a
five year period. In addition, as of June 30, 1998, the Company had available
lines of credit of $98.0 million under various facilities, under which $50.4
million was outstanding. Interest rates under these facilities ranged from 6.2%
to 7.5%. At June 30, 1998, the Company had total debt outstanding of $818.5
million. Subsequent to June 30, 1998 the Company has continued to incur and
repay debt obligations in connection with financing its equipment leasing
activities.
As of June 30, 1998, commitments for capital expenditures totaled
approximately $50.0 million. The Company expects to fund such capital
expenditures, as well as its investment in XTRA Corporation ("XTRA") described
below, through some combination of cash flow from the Company's operations,
borrowings under its available credit facilities and additional funds raised
through the sale of its debt and/or equity securities in the private and/or
public markets.
The Company believes that cash generated by continuing operations,
together with amounts available to be borrowed under existing credit facilities
and the issuance of debt and/or equity securities in the appropriate markets
will be sufficient to finance the Company's working capital needs for its
existing business, planned capital expenditures, investments and expected debt
repayments over the next twelve months. The Company anticipates that long-term
financing will continue to be available for the purchase of equipment to expand
its business in the future. In addition, from time to time, the Company explores
new sources of capital both at the parent and subsidiary levels.
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<PAGE> 14
On April 30, 1998, the Company acquired a 50% interest in Container
Applications International, Inc. (CAI), a container leasing company whose
business is primarily in the short term master lease market. CAI would not be
deemed a "significant subsidiary" of the Company for purposes of the Securities
and Exchange Commission accounting requirements.
On June 19, 1998, the Company joined with Apollo Management IV, L.P.
("Apollo") in entering into a definitive merger agreement providing for the
recapitalization of XTRA, a leading lessor of freight transportation equipment,
including over-the-road trailers, marine containers, intermodal trailers,
chassis and domestic containers. In connection with the merger and
recapitalization, the Company (through its affiliate Atlas Capital Partners LLC
("Atlas")) will be investing $73.1 million in new equity of XTRA, representing a
22.5% interest in XTRA. It is expected that following the merger and
recapitalization, the Company (through Atlas) and Apollo will own approximately
90% of XTRA and XTRA's existing shareholders will own the remaining 10%. The
merger, which is expected to be consummated later this year, is subject to
customary conditions, including the approval of XTRA stockholders, the
availability of contemplated financing and the expiration of Hart-Scott-Rodino
waiting periods.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedge item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
We have not yet quantified the impacts of adopting Statement 133 on our
financial statements and have not determined the timing of or method of our
adoption of Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.
-14-
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On July 21, 1998, the Company filed a Registration Statement on Form S-4
with the Securities and Exchange Commission to register the exchange of
its outstanding 6 5/8% Notes due 2003, of which $100,000,000 aggregate
principal amount was issued and sold on February 24, 1998 in a
transaction exempt from registration under the Securities Act of 1933
and is outstanding on the date hereof. The Exchange offer commenced on
July 31, 1998 and will expire on September 10, 1998 at 5:00 PM Eastern
Daylight Time, unless extended by the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10.33: Consulting Agreement between Interpool, Inc. and
Atlas Capital Partners, L.L.C. dated February
28, 1998.
Exhibit 99: (1) Press Release dated May 4, 1998 (incorporated by
reference to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1998).
(2) Press Release dated May 5, 1998 (incorporated by
reference to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1998).
(3) Press Release dated June 19, 1998.
(4) Press Release dated June 23, 1998.
(5) Press Release dated July 28, 1998.
(b) Reports on Form 8-K:
None
-15-
<PAGE> 16
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.
INTERPOOL, INC.
Dated: August 10, 1998 \s\Martin Tuchman
------------------------------------
Martin Tuchman
Chief Executive Officer
Dated: August 10, 1998 \s\William Geoghan
------------------------------------
William Geoghan
Controller
-16-
<PAGE> 17
INDEX TO EXHIBIT
FILED WITH INTERPOOL, INC.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
EXHIBIT NO.
10.33 Consulting Agreement between Interpool, Inc. and Atlas Capital
Partners, L.L.C. dated February 28, 1998.
99 (1) Press Release dated May 4, 1998 (incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1998).
(2) Press Release dated May 5, 1998 (incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1998).
(3) Press Release dated June 19, 1998.
(4) Press Release dated June 23, 1998.
(5) Press Release dated July 28, 1998.
-17-
<PAGE> 1
EXHIBIT 10.33
February 28, 1998
CONSULTING AGREEMENT
This Agreement ("Agreement") is entered into this date by and
between INTERPOOL, INC., a Delaware corporation ("Interpool"), and ATLAS CAPITAL
PARTNERS, L.L.C., a Delaware limited liability corporation ("Atlas").
In consideration of the mutual promises of the parties and
other good and valuable consideration, the parties hereby agree:
Section 1. Services. Interpool hereby engages Atlas to provide
merger and acquisition consulting services (the "Services"), as more fully
described herein below, and Atlas hereby accepts such engagement with Interpool.
The Services shall include seeking out, identifying and bringing to Interpool's
attention merger and acquisition and other investment opportunities
(collectively, "investment opportunities"), whether such investment
opportunities arise in the container or chassis leasing business or otherwise;
analyzing and evaluating investment opportunities; preparing business plans and
credit analyses; devising acquisition strategies; and providing such other
services with respect to investment opportunities as would normally be expected
of an individual employed by Interpool as its investment banker.
Section 2. Term.
(a) Atlas shall provide such services for a period beginning
this date and terminating two years hereafter. Interpool shall have the right to
terminate this Agreement at any time for "cause". For the purposes of this
Agreement, termination for "cause" shall mean (i) the material breach by Atlas
of any material term or provision of this Agreement; (ii) the commission by
Atlas of any act of fraud or willful misconduct in connection with performance
of Services hereunder; (iii) the bankruptcy or insolvency of Atlas; or (iv) the
termination of Mitchell I. Gordon's ("Gordon") employment with Atlas or his
ceasing to provide or to manage the providing of Services, as more fully
described in sub-paragraph (b), below; (v) the conviction of Atlas, Gordon or
any other of Atlas' officers or
<PAGE> 2
employees of a crime involving moral turpitude. Prior to any termination for
"cause" as defined in the preceding clauses (i) or (ii), Interpool shall provide
to Atlas not less than 30 days notice and an opportunity to cure any such breach
or to contest the basis for determination of "cause".
(b) All Services shall be provided directly by Gordon or
employees of Atlas under the direct management of Gordon; accordingly, unless
Atlas has made available a substitute for Gordon acceptable to Interpool in
Interpool's sole discretion, it shall constitute "cause" if Gordon shall no
longer be an employee of Atlas or continue to provide or manage the providing of
Services.
Services 3. Compensation.
A. During the term of this Agreement, Interpool shall, in
return for the Services referred to herein,
(i) pay Atlas a fee of $20,000.00 per month,
(ii) provide Gordon with the same medical, dental and
life insurance benefits that employees of Interpool receive;
(iii) reimburse Atlas for its reasonable,
out-of-pocket business travel and entertainment expenses incurred in
connection with performing Services hereunder, provided that Interpool
approves any such expenses in advance that are reasonably estimated to
exceed $5,000,
(iv) pay Atlas an annual incentive fee in an amount
which is usual and customary in the investment banking business.
No incentive fee shall be earned by Atlas pursuant
hereto unless and until the closing by Interpool (a "Closing") of a
purchase, disposition or financing of an investment opportunity
developed by Atlas. Atlas shall have no claim for the payment of an
incentive fee with respect to any services provided by it to Interpool
hereunder if a Closing shall fail to take place for any reason
whatsoever,
2
<PAGE> 3
including without limitation (i) the inability of Interpool and the
third party to the transaction to agree upon a contract for any reason,
including without limitation Interpool's arbitrary termination of
negotiations with respect to such transaction; (ii) the termination of
a contract with respect to such transaction by Interpool during any
inspection or due diligence period provided for in the contract; (iii)
the failure or inability of the third party to consummate the Closing
in accordance with the contract with respect to such transaction or any
other default by such party under such contract; or (iv) the failure or
inability of Interpool to consummate the Closing for any reason,
including without limitation the failure of any condition precedent to
the Closing or the willful or other default by Interpool under the
contract with respect thereto.
(v) In addition to the compensation set out in items
(i) through (iv), above, during the term of this Agreement Interpool
agrees to pay Atlas on an annual basis on each anniversary hereof, an
amount equal to $560,000 less the amount of the annual incentive fee
actually paid to Atlas pursuant to sub-paragraph (iv), above, in such
year (the "incentive fee differential"). It being further understood
and agreed that should Interpool lawfully terminate this Agreement for
cause, it shall not be required to pay Atlas said incentive fee
differential in the year in which such termination takes effect.
B. In addition to the compensation set out in Section 3.A.,
should Interpool, alone or with others, at any time during the term of this
Agreement form or participate in an equity capital fund (the "Capital Fund")
with Interpool as the initial investor and with general partners (or other
managers) responsible for the management of the entity, the purpose of which is
to acquire, develop and dispose of investment opportunities, it shall offer
Gordon a general partnership interest (or other equivalent) in said entity, as
well as the appointment of Gordon as the president of the Capital Fund (or its
management company), at no charge to Gordon. Interpool contemplates such
general partnership or equivalent interest will include an interest in the
investment opportunities acquired by the Capital Fund, to be shared by and
among the general partners (or managers) upon the sale or disposition of assets
of the Capital Fund after the investors' and general partners' (or managers')
cumulative return as set forth hereinafter is distributed. Interpool also
contemplates that the general partners (or managers) will share on a 20/80
basis with the investors in any profit realized by the Capital Fund upon such
sale or other disposition, including without limitation, recapitalization and
initial public offering, after both the investors and the general partners (or
managers) shall have first received an amount equal to an 8% per annum return
calculated on the basis of the initial investment in such asset. Furthermore,
Interpool contemplates that there will be three general partners (or managers),
in total, who will share equally in the general partners' (or managers')
interest, except with respect to the initial $75,000,000 invested by Interpool
in the Capital Fund, with respect to which Gordon's share of the general
partners' (or managers) interest will be 20%. Furthermore, Interpool
contemplates that the Capital Fund will seek to assume Interpool's rights and
obligations under this Agreement and thereby seek to retain Gordon as a merger
and acquisition consultant pursuant to the terms and conditions hereof, with
appropriate modifications to this Agreement to reflect the structure and
operation of the Capital Fund.
3
<PAGE> 4
Nothing contained herein shall be construed to require
Interpool to form or participate in the Capital Fund or said limited or general
partnerships (or equivalent entities), either during the term hereof or
otherwise, or to structure it as outlined above, and Interpool shall have no
liability to Gordon should it decide in its sole commercial discretion not to do
so.
C. In addition to the compensation set out in Section 3.A.,
Gordon shall receive an interest in investments which Interpool acquires through
Services performed by Gordon hereunder, which shall entitle Gordon to 4% of the
amount by which each such investment appreciates over Interpool's acquisition
cost thereof, after taking into account an 8% per annum return to Interpool on
such investment, determined upon the sale or other disposition, in whole or in
part, including without limitation, recapitalization and initial public
offering, of such investment. Any such interest earned by Gordon hereunder shall
survive the expiration or termination of this Agreement. If the Capital Fund is
formed and Gordon becomes entitled to receive a general partnership (or
equivalent) interest in Capital Fund investments pursuant to Section 3.B., it
shall no longer be entitled to earn an interest pursuant to this Section 3.C.
in investments acquired thereafter, and the provisions of Section 3.B. will
replace and supersede the provisions of this Section 3.C., as of and from the
date Gordon becomes so entitled under Section 3.B., except that Gordon shall be
entitled to receive a 4% equity interest in any investments acquired by
Interpool through its Services prior to such date.
4
<PAGE> 5
Section 4. Relationship of the Parties. The parties intend
that the relationship between them created under this Agreement is that of an
independent contractor only, and Atlas shall maintain complete control of and
responsibility for any of its employees, agents, sub-contractors, methods and
operations. Atlas shall undertake no formal agreement or exercise any
contracting power, nor make commitments on behalf of Interpool. Notwithstanding
the foregoing, Atlas may conduct negotiations leading to agreements, contracts
and commitments, and advise Interpool as to the reasonableness of entering into
such contracts; provided that nothing in this Agreement shall authorize Atlas,
or any employees, agents or sub-contractors of Atlas, to act as agents of
Interpool or as its affiliates or to execute any contract or other document on
their behalf or to bind or obligate them in any manner. Atlas shall be
responsible for all state, federal, and local taxes, including estimated taxes,
and employment reporting for Atlas and any employees, agents and sub-contractors
of Atlas.
Section 5. Proprietary Rights.
A. Atlas agrees that all Work Product (defined below) created
solely or jointly by Atlas, its employees, agents or subcontractors, arising
from work performed hereunder, or previously conceived in anticipation of
consulting work to be performed in regard to Interpool's engagement of Atlas,
shall be deemed "work made for hire" and shall be the exclusive property of
Interpool and Atlas shall relinquish all right, title and interest in and to
such Work Product. Atlas shall cause any of its employees, agents, or
subcontractors assisting in creating the Work Product to execute a similar
acknowledgment that the Work Product is a "work made for hire." Atlas and any of
its employees, agents or subcontractors assisting in creating the Work Product
shall execute all such assignments, oaths, declarations, and other documents as
may be prepared by Interpool to effect the foregoing.
5
<PAGE> 6
B. "Work Product" shall mean all documentation, manuals,
teaching materials, creative works, know-how, and information created on behalf
of Interpool, in whole or in part, by Atlas and any of its employees, agents or
subcontractors assisting in creating the Work Product within the scope of this
Agreement, whether or not copyrightable or otherwise protectable.
C. Atlas shall make prompt and full disclosure of such Work
Product to Interpool and, at Interpool 's expense, shall assist in every lawful
way in obtaining for Interpool patents, copyrights or trademarks for any or all
of such Work Product, in perfecting in Interpool all right, title, and interest
in and to such Work Product, in protecting or enforcing Interpool's rights
therein, and in prosecuting and defending appeals, interferences, infringement
suits, and controversies relating thereto. Atlas shall do all other things
necessary to effectuate the foregoing, including but not limited to executing
and delivering assignments, oaths, and disclaimers as needed.
Section 6. Confidentiality.
A. Atlas' employees, agents and sub-contractors shall maintain
in confidence (i) the names of investment opportunities and related information
thereof as defined in this Agreement, (ii) the consulting work carried out
hereunder, (iii) any Work Product conceived hereunder, and (iv) any business or
technical information of Interpool acquired by Atlas as a result of the
consulting work carried out pursuant to this Agreement ("Confidential
Information"), and Atlas shall not, without Interpool's prior authorization,
directly or indirectly use, publish, or disclose to others any Confidential
Information resulting from the consulting work carried out pursuant to this
Agreement. These obligations of secrecy shall continue throughout the duration
of this Agreement and for one (1) year thereafter.
B. Notwithstanding anything hereinabove to the contrary,
Interpool authorizes Atlas and the aforementioned persons to make disclosure of
Confidential Information (i) pursuant to a court order by a court of competent
jurisdiction, (ii) to any authority exercising executive, legislative,
regulatory or administrative functions of or pertaining to a government having
jurisdiction with respect to
6
<PAGE> 7
Interpool, Atlas or any of the aforementioned persons, or (iii) to a third
party, on a "need-to-know" basis, arising from or in connection with the
performance by Atlas of the Services, provided such third party first in writing
agrees to keep Confidential Information confidential in accordance with the
terms and conditions hereof.
C. Interpool shall be entitled, in addition to any other right
and remedy it may have, at law or in equity, to an injunction, without the
posting of any bond or other security, enjoining or restraining Atlas or its
employees, agents or sub-contractors from any material violation or threatened
material violation of Sections 5 or 6 hereof, and Atlas for itself and on behalf
of its employees, agents and sub-contractors, hereby consents to the issuance of
such injunction. If any of the restrictions contained herein shall be deemed to
be unenforceable by reason of the extent, duration or geographical scope thereof
or otherwise, then the parties hereto contemplate that the court shall reduce
such extent, duration, geographical scope, or other provision hereof, and
enforce this Section 6. C. in its reduced form for all purposes in the manner
contemplated hereby.
Section 7. Conflict of Interest. This Agreement is intended to
secure to Interpool Gordon's assistance and cooperation and shall operate to
preclude Atlas from performing services comparable or identical to the Services
performed hereunder for others during the term of this Agreement. Atlas shall
perform the Services to the highest level of business and professional ethics.
Atlas shall not make or receive any payments, gifts, favors, entertainment,
secret commissions or hidden gratuities for the purpose of securing preferential
treatment or action from or to any party. Certain gratuities may be given or
accepted if there is no violation of any law or generally accepted ethical
standards; the gratuity is given as a courtesy for a courtesy received and does
not result in any preferential treatment or action; the gratuity is of limited
value and could not be construed as a bribe, payoff or deal; and public
disclosure would not embarrass Interpool.
Section 8. Non-Exclusive. It is expressly understood that this
Agreement does not grant Atlas an exclusive privilege to furnish Interpool any
or all of the Services which are the subject of this Agreement which Interpool
may require, and
7
<PAGE> 8
Interpool expressly reserves the right to contract with others for the purchase
of services comparable or identical to the Services which are the subject of
this Agreement.
Section 9. Records. Atlas shall keep full and accurate
records of all consulting work performed under this Agreement. All records,
sketches, drawings, prints, computations, charts, reports, and other
documentation made in the course of the consulting work performed hereunder, or
in anticipation of the consulting work to be performed in regard to this
Agreement, shall at all times be and remain the sole property of Interpool.
Atlas shall turn over to Interpool all copies of such documentation on request
by Interpool.
Section 10. Indemnity. Interpool shall indemnify Atlas on the
same basis as officers, directors and employees of Interpool, provided that such
indemnity of Atlas is covered by Interpool's insurance.
Section 11. Non-assignability. This Agreement and the benefits
hereunder are personal to the parties hereto and are not assignable or
transferable by either party without the prior written consent of the other
party, except that Interpool may assign this Agreement to any subsidiary of
Interpool, without the consent of Atlas, In the event of any assignment by
Interpool of its rights under this Agreement to a subsidiary, Interpool shall
give notice thereof to Atlas and Interpool shall remain liable hereunder
notwithstanding such assignment. Interpool may assign this Agreement to the
Capital Fund, provided that the Capital Fund has sufficient capital to commence
operation and that the parties negotiate in good faith appropriate modifications
of this Agreement to reflect the structure and operation of the Capital Fund.
Section 12. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto and supersedes all prior agreements
written or verbal, between Interpool and Atlas with respect to the subject
matter hereof and shall not be modified except in writing executed by the
parties hereto.
Section 13. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
8
<PAGE> 9
Section 14. Captions. All captions and heading herein are for
convenience of reference only and shall not be deemed to affect the meaning of
this Agreement.
Section 15. Survival. The terms and conditions contained in
this Agreement that by their sense and context are intended to survive the
performance hereof by either or both parties hereunder shall so survive the
termination, cancellation or completion of performance of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
INTERPOOL, INC.
By: \s\ Raoul J. Witteveen
----------------------
ATLAS CAPITAL PARTNERS, L.L.C.
By: \s\ Mitchell I. Gordon
----------------------
9
<PAGE> 1
Exhibit 99(3)
Interpool, Inc. Contact: RAOUL J. WITTEVEEN, PRESIDENT
(212) 916-3264
Atlas Capital Partners LLC Contact: MITCHELL I. GORDON, PRESIDENT
(212) 916-3284
NEWS FOR IMMEDIATE RELEASE
INTERPOOL, INC. ANNOUNCES PARTICIPATION IN MERGER AND
RECAPITALIZATION OF XTRA CORPORATION FOR $1.9 BILLION
NEW YORK, NY, June 19, 1998 -- Interpool, Inc. ("Interpool") (NYSE: IPX)
announced today that it has joined with Apollo Management IV, L.P. ("Apollo") in
entering into a definitive merger agreement providing for the recapitalization
of XTRA Corporation (NYSE: XTR) ("XTRA"). The recapitalization will be effected
by a merger of XTRA with a newly formed limited liability company that is wholly
owned by Interpool and Apollo. Interpool will make its investment through its
affiliate, Atlas Capital Partners LLC ("Atlas").
Under the terms of the agreement, at the effective time of the merger, each
share of XTRA may, at the election of its holder, be exchanged for either $65.00
in cash or a retained interest in XTRA equal to one share for every share
elected, subject to proration, so that no more than 500,000 shares of common
stock of XTRA are retained by existing holders.
The total value of the transaction, including equity and debt, is approximately
$1.9 billion. After the merger, XTRA will be capitalized with $325 million in
equity, of which $73.1 million will be provided by Interpool, representing a
22.5% interest in XTRA. Apollo will invest $219.4 million, representing a 67.5%
interest in the Company. The retained interest held by existing shareholders of
XTRA will represent $32.5 million. Chase Manhattan Corporation and Credit Suisse
First Boston have signed commitment letters to provide the debt financing
necessary for the recapitalization.
<PAGE> 2
INTERPOOL, INC. 6/19/98 PAGE 2
It is expected that following the merger and recapitalization, Interpool
(through Atlas) and Apollo will own approximately 90% of XTRA and the existing
shareholders will own the remaining 10%. The merger, which is expected to be
consummated later this year, is subject to customary conditions including the
approval of XTRA stockholders, the availability of the contemplated financing
and the expiration of Hart-Scott-Rodino waiting periods.
Stockholders owning approximately 44% of the outstanding shares of XTRA have
agreed to vote in favor of the merger and recapitalization.
Interpool is one of the world's leading lessors of cargo containers used in
international trade and is the second largest lessor of intermodal container
chassis in the United States. Founded in 1968, Interpool leases its containers
and chassis to over 200 customers on a worldwide basis. Interpool recently
acquired a 50% interest in Container Applications International, Inc. ("CAI").
CAI is one of the world's leading managers of container assets.
XTRA is a leading lessor, primarily on an operating basis, of freight
transportation equipment, including over-the-road trailers, marine containers,
intermodal trailers, chassis and domestic containers. XTRA leases over-the-road
and intermodal equipment throughout North America, predominantly within the
United States, to contract and common carriers, railroads and private fleet
owners. In addition, XTRA leases marine containers worldwide to steamship lines
and is a major lessor of intermodal containers and chassis.
Martin Tuchman, Chairman of Interpool, remarked: "XTRA is one of the
best-positioned transportation equipment leasing companies in the United States.
We are extremely pleased to have the opportunity to invest in XTRA. Interpool's
and Apollo's successful track records, coupled with XTRA's superb market
position, add up to a winning combination. We look forward to growing our
businesses and continuing to be a leading force in the transportation equipment
leasing industry."
# # #
<PAGE> 1
Exhibit 99(4)
CONTACT: RAOUL J. WITTEVEEN
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL, INC. TO PAY CASH DIVIDEND ON COMMON STOCK
PRINCETON, NJ, June 23, 1998 - Interpool, Inc. (NYSE: IPX) announced today that
it will pay a cash dividend of 3.75 cents per share for the second quarter of
1998. The dividend will be payable on July 15, 1998 to shareholders of record on
July 1, 1998. The aggregate amount of the dividend is expected to be
approximately $1,033,000.00. The amount of the quarterly dividend is based on a
1998 annualized dividend rate of 15 cents per share.
Interpool, originally founded in 1968, is one of the world's leading lessors of
cargo containers used in international trade and is the second largest lessor of
intermodal container chassis in the United States. Interpool leases its
containers and chassis to over 200 customers, including nearly all of the
world's 20 largest international container shipping lines.
# # #
<PAGE> 1
Exhibit 99(5)
Contact: RAOUL J. WITTEVEEN
(212) 916-3261
NEWS FOR IMMEDIATE RELEASE
INTERPOOL, INC. REPORTS RECORD 2ND QUARTER INCOME PER
SHARE OF $0.33 AS COMPARED WITH $0.31 FOR PRIOR YEAR
PRINCETON, NJ, JULY 28, 1998 -- Interpool, Inc. (NYSE: IPX) reported today that
its 1998 second quarter net income per share (on a diluted basis) was a record
33 cents, as compared with 31 cents for the same period in 1997. Revenues during
the second quarter of 1998 were $44,506,000 up 12% from $39,784,000 in the
second quarter of 1997.
For the first half of 1998, Interpool's net income per share was 61 cents (on a
diluted basis), as compared with income per share before extraordinary loss and
premium paid on redemption of preferred stock of 60 cents, for the same period
in 1997. Revenues during the first half of 1998 were $87,338,000, up 12% from
$77,960,000 in the first half of 1997.
Martin Tuchman, Chairman and Chief Executive Officer, commented that the second
quarter results were encouraging and reflected the soundness of the Company's
business strategy.
At the end of the second quarter, the Company's container fleet has grown to
approximately 445,000 container TEUs (twenty-foot-equivalent units) with
utilization at 99%, while the chassis fleet has grown to approximately 69,000
units, with utilization at 96%.
Interpool conducts its international container leasing business through its
subsidiary Interpool Limited, while the domestic intermodal equipment leasing
business is conducted by Interpool, Inc. and its other subsidiaries. During the
second quarter of 1998, the Interpool Limited international container division's
contribution to consolidated income increased to $8,189,000 from $7,636,000 for
the second quarter of 1997. The domestic intermodal division's contribution to
consolidated income was $1,185,000 during the second quarter of 1998, versus
$1,191,000 for the prior year. Revenues for the second quarter of 1998 from the
Interpool Limited international container division increased to $22,590,000
while revenues from the domestic intermodal division rose to $21,916,000.
<PAGE> 2
INTERPOOL 2Q98 7/28/98 PAGE 2
During the six months ended June 30, 1998, the Interpool Limited international
container division's contribution to consolidated income rose to $15,803,000
from $15,097,000 in 1997, while the domestic intermodal division's contribution
decreased to $1,681,000 from $2,824,000. Revenues for the first half of 1998
from Interpool Limited international container division increased to $44,368,000
from $42,498,000 in 1997, while revenues from the domestic intermodal division
rose to $42,970,000 from $35,462,000.
As previously announced, Interpool joined with Apollo Management IV, L.P.
("Apollo") in entering into a definitive merger agreement providing for the
recapitalization of XTRA Corporation ("XTRA"), a leading lessor of freight
transportation equipment, including over-the-road trailers, marine containers,
intermodal trailers, chassis and domestic containers. In connection with the
merger and recapitalization, the Company (through its affiliate Atlas Capital
Partners LLC ("Atlas") will be investing $73.1 million in new equity of XTRA,
representing a 22.5% interest in XTRA. It is expected that following the merger
and recapitalization, the Company (through Atlas) and Apollo will own
approximately 90% of XTRA and XTRA's existing shareholders will own the
remaining 10%. The merger, which is expected to be consummated later this year,
is subject to customary conditions, including the approval of XTRA stockholders,
the availability of contemplated financing and the expiration of
Hart-Scott-Rodino waiting periods.
Interpool, originally founded in 1968, is one of the world's leading lessors of
cargo containers used in international trade and is the second largest lessor of
intermodal container chassis in the United States. Interpool leases its
containers and chassis to over 200 customers, including nearly all of the
world's 20 largest international container shipping lines.
This Press Release contains certain forward-looking statements
regarding future circumstances. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to
differ materially from those contemplated in such forward-looking
statements, including in particular the risks and uncertainties
described in the company's SEC filings. The company undertakes no
obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof.
***TABLE FOLLOWS***
<PAGE> 3
INTERPOOL, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 44,506 $ 39,784 $ 87,338 $ 77,960
LEASE OPERATING AND ADMINISTRATIVE EXPENSES 10,451 9,352 21,370 17,695
DEPRECIATION AND AMORTIZATION OF LEASING EQUIPMENT 10,349 8,691 20,076 17,222
OTHER INCOME (113) (427) (331) (756)
-------- -------- -------- --------
EARNINGS BEFORE INTEREST AND TAXES 23,819 22,168 46,223 43,799
INTEREST EXPENSE, NET 12,845 11,666 26,039 22,728
-------- -------- -------- --------
INCOME BEFORE TAXES AND EXTRAORDINARY LOSS 10,974 10,502 20,184 21,071
PROVISION FOR INCOME TAXES 1,600 1,675 2,700 3,150
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS 9,374 8,827 17,484 17,921
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT, NET OF
APPLICABLE TAXES OF $225 -- -- -- 328
-------- -------- -------- --------
NET INCOME $ 9,374 $ 8,827 $ 17,484 $ 17,593
======== ======== ======== ========
INCOME PER SHARE BEFORE EXTRAORDINARY LOSS AND
PREMIUM PAID ON REDEMPTION OF PREFERRED STOCK:
BASIC $0.34 $0.32 $0.63 $0.63
DILUTED $0.33 $0.31 $0.61 $0.60
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT:
BASIC NA NA NA ($0.01)
DILUTED NA NA NA ($0.01)
PREMIUM PAID ON REDEMPTION OF PREFERRED STOCK (1):
BASIC NA NA NA ($0.25)
DILUTED NA NA NA ($0.22)
NET INCOME PER SHARE:
BASIC $0.34 $0.32 $0.63 $0.37
DILUTED $0.33 $0.31 $0.61 $0.36
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 27,561 27,552 27,556 26,939
DILUTED 28,629 28,444 28,569 30,109
</TABLE>
(1) Represents a non-recurring charge of $6,716 to retained earnings for the
excess of the redemption price of 5 -3/4% Cumulative Convertible Preferred
Stock over the carrying amount expressed as amount per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 28,942
<SECURITIES> 6,780
<RECEIVABLES> 32,968
<ALLOWANCES> 3,888
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 799,604
<DEPRECIATION> 155,195
<TOTAL-ASSETS> 1,207,257
<CURRENT-LIABILITIES> 121,903
<BONDS> 726,484
0
0
<COMMON> 28
<OTHER-SE> 265,629
<TOTAL-LIABILITY-AND-EQUITY> 1,207,257
<SALES> 87,338
<TOTAL-REVENUES> 87,338
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 41,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,039
<INCOME-PRETAX> 20,184
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 17,484
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,484
<EPS-PRIMARY> .63
<EPS-DILUTED> .61
</TABLE>
