<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
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 May 12, 1999, 27,579,952 shares of common stock, $.001 par value were
outstanding.
Indicate by check [CHECKMARK] 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 [CHECKMARK] No
<PAGE>
INTERPOOL, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Introduction to Financial Statements 3
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 4
Condensed Consolidated Statements of Income
For the Three Months ended March 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
For the Three Months ended March 31, 1999 and 1998 6
Condensed Consolidated Statements of Stockholders' Equity
For the Year Ended December 31, 1998 and the
Three Months ended March 31, 1999 7
Notes to Condensed Consolidated Financial Statements 8 - 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 14
Part II - Other Information:
Item 6: Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibits 17
-2-
<PAGE>
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.
-3-
<PAGE>
INTERPOOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
ASSETS 1999 1998
---------- ----------
<S> <C> <C>
CASH AND SHORT-TERM INVESTMENTS $183,601 $107,226
MARKETABLE SECURITIES 1,337 5,072
ACCOUNTS AND NOTES RECEIVABLE, less allowance of $8,248 and
$4,632, respectively 32,859 32,746
NET INVESTMENT IN DIRECT FINANCING LEASES 104,872 356,369
OTHER RECEIVABLES 52,246 56,758
LEASING EQUIPMENT, at cost 943,028 905,173
Less - Accumulated depreciation and amortization (185,505) (169,079)
---------- ----------
LEASING EQUIPMENT, net 757,523 736,094
---------- ----------
OTHER ASSETS 117,914 67,969
---------- ----------
TOTAL ASSETS $1,250,352 $1,362,234
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $27,365 $50,098
INCOME TAXES 20,100 19,609
DEFERRED INCOME 1,521 1,531
DEBT AND CAPITAL LEASE OBLIGATIONS:
Due within one year 82,353 77,776
Due after one year 752,039 854,381
---------- ----------
834,392 932,157
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 660 624
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 March 31, 1999 and December 31, 1998 28 28
Additional paid-in capital 124,046 124,046
Retained earnings 167,360 159,138
Accumulated other comprehensive income (loss) (120) 3
---------- ----------
Total stockholders' equity 291,314 283,215
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,250,352 $1,362,234
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
-4-
<PAGE>
INTERPOOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
REVENUES $56,571 $42,832
COST AND EXPENSES:
Lease operating and administrative expenses 18,889 10,919
Depreciation and amortization of leasing equipment 12,679 9,727
Other (income)/expense, net 396 (218)
Interest expense, net 14,851 13,194
------- -------
46,815 33,622
------- -------
Income before provision for income taxes 9,756 9,210
Provision for income taxes 500 1,100
------ ------
NET INCOME $9,256 $8,110
====== ======
Net income per share:
Basic $0.34 $0.29
===== =====
Diluted $0.32 $0.28
===== =====
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands):
Basic 27,566 27,552
====== ======
Diluted 28,853 28,510
====== ======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-5-
<PAGE>
INTERPOOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $9,256 $8,110
Adjustments to reconcile net income to net cash provided by operating activities --
Depreciation and amortization 13,068 10,148
Gain on sale of leasing equipment (100) (218)
Collections on net investment in direct financing leases 39,373 27,710
Income recognized on direct financing leases (8,064) (8,986)
Provision for uncollectible accounts 4,617 470
Gain on securitized lease receivables (7,942) --
Changes in assets and liabilities -
Accounts and notes receivable (12,660) (1,437)
Other receivables 4,512 826
Other assets and non-cash transactions (3,397) (2,629)
Accounts payable and accrued expenses (5,885) (6,428)
Income taxes payable 574 1,309
Deferred income 607 (231)
Minority interest in equity of subsidiaries 35 11
-- --
Net cash provided by operating activities 33,994 28,655
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of leasing equipment (26,486) (16,521)
Proceeds from dispositions of leasing equipment 3,504 1,453
Investment in loan receivable -- (5,698)
Investment in direct financing leases (11,732) (36,990)
Changes in marketable securities and other investing activities 3,538 77
Reduction in accrued equipment purchases (16,856) --
-------- -------
Net cash used for investing activities (48,032) (57,679)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 20,548 112,773
Payment of long-term debt and capital lease obligations (29,034) (20,614)
Borrowings of revolving credit lines 27,141 40,164
Repayment of revolving credit lines (116,420) (121,060)
Proceeds from securitized lease receivables 189,212 --
Dividends paid (1,034) (1,033)
-------- -------
Net cash provided by financing activities 90,413 10,230
-------- -------
Net increase (decrease) in cash and short-term investments 76,375 (18,794)
CASH AND SHORT-TERM INVESTMENTS, beginning of period 107,226 30,402
-------- -------
CASH AND SHORT-TERM INVESTMENTS, end of period $183,601 $11,608
======== =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-6-
<PAGE>
INTERPOOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THREE MONTHS ENDED MARCH 31, 1999
(Dollars and shares in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Accumulated
--------------- ---------------- Additional Other
Par Par Paid-in Retained Comprehensive Comprehensive
Shares Value Shares Value Capital Earnings Income (Loss) Income
------ ------ ------ ------ ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 0 $0 27,552 $28 $124,046 $125,657 $715
Net income -- -- -- -- -- 37,614 -- 37,614
Other comprehensive income -- -- -- -- -- -- (712) (712)
-------
Comprehensive Income $36,902
=======
Shares issued on exercise of
Stock option -- -- 37 -- 363 -- --
Shares surrendered in
Satisfaction of stock option
Purchase price -- -- (23) -- (363) -- --
Cash dividends declared:
Common stock -- -- -- -- -- (4,133) --
-- -- ------ --- -------- -------- ------
Balance, December 31, 1998 0 $0 27,566 $28 $124,046 $159,138 $3
Net income 9,256 $ 9,256
Other comprehensive income (123) (123)
-------
Comprehensive Income $ 9,133
=======
Cash dividends declared:
Common stock (1,034)
-- -- ------ --- -------- ------- ------
Balance, March 31, 1999 0 $0 27,566 $28 $124,046 $167,360 ($120)
== == ====== === ======== ======== ======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-7-
<PAGE>
INTERPOOL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED 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, the leasing of intermodal dry freight standard containers, chassis and
other transportation related equipment. Within this single industry, the Company
has two reportable segments: container leasing and domestic intermodal
equipment. The container leasing segment specializes in the leasing of
intermodal dry freight standard containers, while the domestic intermodal
equipment segment specializes in the leasing of intermodal container chassis and
other equipment, namely freight rail cars and intermodal trailers. 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 the 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
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.
A reconciliation of weighted average common shares outstanding to weighted
average common shares outstanding assuming dilution follows:
(in thousands)
Three Months Ended
March 31,
1999 1998
------ ------
Average common shares outstanding 27,566 27,552
Common shares issuable (1) 1,287 958
Average common shares outstanding assuming dilution 28,853 28,510
(1) Issuable under stock option plans.
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 restated as accumulated other comprehensive income.
Adoption of this statement has no effect on the Company's financial position or
operating results.
-8-
<PAGE>
(Dollars in thousands, except per share amounts)
The tax effect of comprehensive income is as follows:
Before-Tax Tax Net of
Amount Effect Tax Amount
----------- ------ ----------
Three Months Ended March 31, 1999
Unrealized gains (losses) on securities-
Unrealized holding gains (losses)
arising during period $(103) $ 36 $ (67)
Less: Reclassification adjustments for
gains (losses) realized in net income 86 (30) 56
Unrealized gain (loss) on marketable
securities $(189) $ 66 $(123)
Three Months Ended March 31, 1998
Unrealized gains (losses) on securities-
Unrealized holding gains (losses)
arising during period $ 953 $(286) $ 667
Less: Reclassification adjustments for
gains (losses) realized in net income 64 (19) 45
Unrealized gain (loss) on marketable
securities $ 889 $(267) $ 622
Note 2 -- Cash flow information:
For the three months ended March 31, 1999 and 1998, cash paid for interest
was approximately $25,154 and $21,122, respectively. Cash paid for income taxes
was approximately $1,048 and $451, respectively.
Note 3 -- Segment and geographic data:
At year-end 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 that requires additional disclosures regarding segments of an
enterprise and related information.
The Company has two reportable segments: container leasing and domestic
intermodal equipment. The container leasing segment specializes in the leasing
of intermodal dry freight standard containers, while the domestic intermodal
equipment segment specializes in the leasing of intermodal container chassis and
other equipment, namely freight rail cars and intermodal trailers. Segments
below the quantitative threshold are included in other and specialize in the
leasing of microcomputers and other related equipment.
The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates performance based on profit or loss from
operations before income taxes and extraordinary items. The Company's reportable
segments are strategic business units that offer different products and
services.
Segment Information:
<TABLE>
<CAPTION>
Domestic
Container Intermodal
1999: Leasing Equipment Other Totals
----- --------- ---------- ----- ------
<S> <C> <C> <C> <C>
Revenues from external customers $32,024 $22,243 $2,304 $56,571
Lease operating and administrative expenses 6,754 11,546 589 18,889
Depreciation and amortization 6,299 5,313 1,067 12,679
Other income/(expense), net (206) (207) 17 (396)
Interest income 887 1,521 -- 2,408
Interest expense 7,473 9,404 382 17,259
Income before taxes and extraordinary item $12,179 $(2,706) $283 $9,756
Net investment in DFL's $55,292 $29,297 $20,283 $104,872
Leasing equipment, net 367,477 383,934 6,112 757,523
Equipment purchases 12,535 21,320 4,363 38,218
Total segment assets $655,036 $568,062 $27,254 $1,250,352
</TABLE>
-9-
<PAGE>
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Domestic
Container Intermodal
1998: Leasing Equipment Other Totals
----- --------- ---------- ----- ------
<S> <C> <C> <C> <C>
Revenues from external customers $21,778 $19,448 $1,606 $42,832
Lease operating and administrative expenses 2,377 8,104 438 10,919
Depreciation and amortization 4,918 3,966 843 9,727
Other income/(expense), net 28 156 34 218
Interest income 1,138 818 -- 1,956
Interest expense 7,684 7,169 297 15,150
Income before taxes and extraordinary item $7,965 $1,183 $62 $9,210
Net investment in DFL's $332,513 $32,563 $12,417 $377,493
Leasing equipment, net 296,675 313,972 7,642 618,289
Equipment purchases 28,549 19,707 5,255 53,511
Total segment assets $657,611 $452,920 $20,413 $1,130,944
</TABLE>
The Company's shipping line customers utilize international containers in world
trade over many varied and changing trade routes. In addition, most large
shipping lines have many offices in various countries involved in container
operations. The Company's revenue from international containers is earned while
the containers are used in service carrying cargo around the world, while
certain other equipment is utilized in the United States. Accordingly, the
information about the business of the Company by geographic area is derived from
either international sources or from United States sources. Such presentation is
consistent with industry practice.
Geographic Information:
1999 1998
---- ----
REVENUES:
United States $ 32,513 $ 21,897
International 24,058 20,935
---------- ----------
$ 56,571 $ 42,832
========== ==========
ASSETS:
United States $ 595,316 $ 473,333
International 655,036 657,611
---------- ----------
$1,250,352 $1,130,944
========== ==========
Note 4 -- Other contingencies and commitments:
At March 31, 1999, the Company had outstanding purchase commitments for
equipment of approximately $70.0 million.
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.
-10-
<PAGE>
Note 5 -- Significant events:
On March 30, 1999, the Company established a securitization facility of
$250.0 million. This program provides the Company with a lower cost of capital
for its finance lease business and access to an additional source of funding. On
March 31, 1999, the Company securitized approximately $235.5 million of lease
receivables through utilization of $190.0 million of this facility and recorded
a pre-tax gain of $7.9 million which is included in revenues; other costs and
associated tax effect brought the net gain to $5.5 million. A portion of the
gain has been deferred to record an estimate of the losses under recourse
provisions for the lease receivables securitized.
Included in other assets at March 31, 1999, is approximately $47.7 million
of retained interests in the securitized lease receivables.
-11-
<PAGE>
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 three months ended
March 31, 1999 and 1998 revenues from direct financing leases were $8.1 million
(17% of leasing revenues) and $9.0 million (21% of leasing revenues),
respectively.
Three Months Ended March 31, 1999 compared to Three Months Ended March 31, 1998
Revenues
The Company's revenues increased to $56.6 million for the three months
ended March 31, 1999, from $42.8 million in the three months ended March 31,
1998, an increase of $13.8 million or 32%. The increase was due to increased
leasing revenues generated by an expanded container and chassis fleet size, as
well as a gain of $7.9 million recognized from the recently completed
securitization.
Lease Operating and Administrative Expenses
The Company's lease operating and administrative expenses increased to
$18.9 million for the three months ended March 31, 1999 from $10.9 million in
the three months ended March 31, 1998, an increase of $8.0 million. The increase
was due to additional bad debt reserves for specific losses incurred during the
current quarter, incremental administrative costs as a result of the recently
completed securitization and higher operating costs resulting from increased
operations.
Depreciation and Amortization of Leasing Equipment
The Company's depreciation and amortization expenses increased to $12.7
million in the three months ended March 31, 1999 from $9.7 million in the three
months ended March 31, 1998, an increase of $3.0 million. The increase was due
to an increased fleet size.
Other (Income)/Expense, Net
The decrease in other (income)/expense, net was due to a decrease in the
Company's income from unconsolidated subsidiaries of $.5 million, which included
a $1.0 million write down of an investment in an unconsolidated subsidiary of
the Company. The Company's gain on sale of leasing equipment decreased $.1
million in the three months ended March 31, 1999.
Interest Expense, Net
The Company's net interest expense increased to $14.9 million in the three
months ended March 31, 1999 from $13.2 million in the three months ended March
31, 1998, an increase of $1.7 million. The increase in net interest expense was
due to increased interest expense of $2.1 million due to financings necessary to
fund capital expenditures, which was partially offset by increased investment
income of $.4 million.
Provision for Income Taxes
The Company's provision for income taxes decreased to $.5 million from $1.1
million primarily due to a lower effective tax rate resulting from greater
income contribution from the international container division.
Net Income
As a result of the factors described above, the Company's net income was
$9.3 million in the three months ended March 31, 1999 versus net income of $8.1
million in the three months ended March 31, 1998.
-12-
<PAGE>
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 the Company's 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 $34.0 million and $28.7
million in the first three months of 1999 and 1998, respectively, and net cash
provided by financing activities was $90.4 million and $10.2 million for the
first three months of 1999 and 1998, respectively. The Company has purchased the
following amounts of equipment: $38.2 million for the three months ended March
31, 1999 and $53.5 million for the three months ended March 31, 1998.
On March 30, 1999, the Company established a securitization facility of
$250.0 million. This program provides the Company with a lower cost of capital
for its finance lease business and access to an additional source of funding. At
March 31, 1999, $190.0 million of this facility was utilized.
The Company has a $215.0 million revolving credit facility with a group of
commercial banks; on March 31, 1999, $44.0 million was outstanding. The term of
this facility extends until May 31, 2000 (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 March 31, 1999, the Company had available
lines of credit of $78.0 million under various facilities, under which $42.6
million was outstanding. Interest rates under these facilities ranged from 6.0%
to 6.3%. At March 31, 1999, the Company had total debt outstanding of $834.4
million. Subsequent to March 31, 1999 the Company has continued to incur and
repay debt obligations in connection with financing its equipment leasing
activities.
As of March 31, 1999, commitments for capital expenditures totaled
approximately $70.0 million. The Company expects to fund such capital
expenditures 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 securities in the private and/or
public markets.
The Company believes that cash generated by continuing operations, together
with existing short-term credit facilities, the issuance of debt securities in
the appropriate markets and the portion of the proceeds remaining from recent
debt security sales 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.
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 gain 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). The Company has not yet quantified the impacts of adopting Statement
133 on its financial statements and has not determined the timing or method of
our adoption of Statement 133. However, the Statement could increase volatility
in earnings and other comprehensive income.
-13-
<PAGE>
Year 2000
The Company has undertaken a program to address the issues associated with the
onset of the calendar year 2000 ("Y2K"). During 1998, a working group comprised
of senior management and members from potentially affected departments formed to
determine the full scope and related costs of Y2K issues to insure that the
Company's systems continue to meet its internal needs and those of its
customers. The Y2K Working Group meets periodically and reports its findings and
plans to the Company's Board of Directors.
The assessment phase of the Y2K project was completed on August 31, 1998. All
internal systems, hardware, software, and embedded clocks and calendars were
evaluated for Y2K compliance. Software source code for in-house developed
systems was analyzed to determine program cognizance of Y2K. The analysis
resulted in the need to upgrade or replace three of the Company's four software
systems: the fleet management system, the accounting system for accounts payable
and general ledger, and the overseas data input program. The accounting system
for accounts payable and general ledger has since been updated and is now Y2K
compliant. The fourth program, PoolStattm, has been developed over the past two
years using Y2K coding practices. Testing of PoolStattm was carried out against
software developed in-house, resulting in demonstrated compliance. Further
testing resulted in demonstrated compliance of all data servers, and the need to
replace a specified number of personal computers of a specific age and model.
Testing was also carried out on internal systems with embedded clocks and
calendars, including the telephone PBX systems. The result indicated that the
PBX in both headquarters needed replacing. The New York office PBX was replaced
on December 18, 1998 and the Princeton office PBX is currently undergoing
replacement.
The budget for the Y2K project is $210,000. The 1998 allocation of $75,000 was
associated with time and tools associated with the assessment, and the purchase
of a replacement accounting system. The 1999 budget of $125,000 is primarily
associated with the purchase of new desktop computer systems, the new telephone
PBX system for the Company's Princeton office, and the cost of in-house labor
for modification of date portions of internal software. While most of the
Company's desktop computers were slated for replacement regardless of Y2K
concerns, the presence of Y2K compliance problems have accelerated this effort.
The budget for the project in the year 2000 is $10,000 and covers additional
documentation work and cosmetic work for display of dates as either "2000" or
"00" as users request. The Company's expenditures to date have been
significantly less than budgeted for hardware, due to industry wide price
reductions. Expenditures for labor to date have been less than budgeted as the
completion of other projects has pushed back the Y2K remediation timeline. The
Company is now fully engaged in remediation efforts and will be on or below
budget for the entire project. The original timeframe, developed in August of
1998, has also been revised. Full Y2K compliance is now expected by June 30,
1999.
The Company recognizes that there are additional Y2K factors related to its
dependence on other business partners, including customers, suppliers, and
service providers. Because our business partners' Y2K projects are beyond the
Company's control, it is necessary to determine the level of risk currently
posed by these dependencies. The Company developed a questionnaire requesting
Y2K project information, which has been sent to over 400 business partners,
including approximately 95% of all customers and all key suppliers and service
providers. Many of the questionnaires have been returned and are being reviewed.
Potential risk from Y2K failures by outside companies can be categorized by type
of business partner. Risk from customer failure is two fold: potential inability
to pay invoices in a timely manner, and potential loss of effective tracking of
the Company's assets on lease and in their possession. There is some concern
that Asian headquartered shipping lines have been focussing on the effects of
the "Asian crisis" and therefore may not be giving the Y2K problem sufficient
attention. The potential inability of customers to pay invoices may cause the
Company to seek alternate financing to meet its obligations. The Y2K Working
Group will be paying special attention to the questionnaire responses from this
customer segment. Key suppliers are those which would require significant effort
to replace if the flow of goods were affected. Particular companies of concern
are manufacturers and re-manufacturers of chassis, and manufacturers of
containers. Two container manufacturers account for over 40% of new container
purchases. Alternate sources will be examined as part of a contingency plan.
Service providers of primary concern are banks and financial institutions with
which the Company has lines of credit.
The responses to the questionnaire will help determine the extent to which
contingency plans must be made for the Company to continue with uninterrupted
business. This contingency plan is being developed to deal with interruptions in
the flow of goods, services, and/or funds which could be deemed possible based
on the responses to the questionnaires. The contingency plan is expected to be
completed by May 31, 1999. Updates to the questionnaire will be requested
periodically during the last half of 1999 from companies who have disclosed a
high degree of risk, and who could significantly impact the Company's business.
At that time, the Company, if necessary, would begin implementation of its
contingency plan.
-14-
<PAGE>
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
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 99: (1) Press Release dated February 17, 1999
(incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1998).
(2) Press Release dated March 23, 1999.
(3) Press Release dated May 12, 1999.
(b) Reports on Form 8-K:
None
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERPOOL, INC.
Dated: May 14, 1999 \s\ Martin Tuchman
-----------------------
Martin Tuchman
Chief Executive Officer
Dated: May 14, 1999 \s\ William Geoghan
---------------------
William Geoghan
Senior Vice President
-16-
<PAGE>
INDEX TO EXHIBITS
Filed with Interpool, Inc.
Report on Form 10-Q for the Quarter Ended March 31, 1999
Exhibit No.
99: (1) Press Release dated February 17, 1999 (incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998).
(2) Press Release dated March 23, 1999.
(3) Press Release dated May 12, 1999.
-17-
<PAGE>
CONTACT: Raoul J. Witteveen
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL, INC. TO PAY CASH DIVIDEND ON COMMON STOCK
PRINCETON, N.J., March 23, 1999 - Interpool, Inc. (NYSE: IPX) announced today
that it will pay a cash dividend of 3.75 cents per share for the first quarter
of 1999. The dividend will be payable on April 15, 1999 to shareholders of
record on April 1, 1999. The aggregate amount of the dividend is expected to be
approximately $1,034,000.00. The amount of the quarterly dividend is based on a
1999 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.
###
-18-
<PAGE>
FOR: INTERPOOL, INC.
FOR IMMEDIATE RELEASE
CONTACT: Raoul J. Witteveen
President, Chief Operating Officer
and Chief Financial Officer
(212) 916-3261
Morgen-Walke Associates
Gordon McCoun, Jennifer Angell
Media contact: Merridith Ingram
(212) 850-5600
INTERPOOL, INC. REPORTS 1ST QUARTER INCOME PER DILUTED SHARE OF
$0.32 AS COMPARED WITH $0.28 FOR PRIOR YEAR
PRINCETON, NJ, MAY 12, 1999 -- Interpool, Inc. (NYSE:IPX) reported today that
its 1999 first quarter net income was $9,256,000, or $0.32 per diluted share, as
compared with net income of $8,110,000, or $0.28 per diluted share, for the same
period in 1998. Revenues during the first quarter of 1999 were $56,571,000, up
32% from $42,832,000 in the first quarter of 1998.
At the end of the first quarter, the company's container fleet was approximately
500,000 TEUs (twenty-foot-equivalent units), with container utilization at 98%,
while the chassis fleet has grown to approximately 78,000 units, with chassis
utilization at 92%.
Martin Tuchman, Chairman and Chief Executive Officer, commented: "Our first
quarter results reflect the Company's focus on the expansion of our intermodal
equipment fleet, and our container and chassis leasing businesses are operating
at close to full capacity. We continue to place substantial emphasis on our
chassis management segment; and while still performing below expectations, we
expect to begin to see incremental revenue growth from this business during the
second half of 1999."
Mr. Tuchman continued: "We recently completed a securitization facility of $250
million with First Union Capital Markets and BancBoston Robertson Stephens. This
type of program not only provides Interpool with a lower cost of capital for its
finance lease business and access to an additional source of funding, but also
allows for the most efficient use of the Company's equity."
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.
Note: This press release and other press releases and information can be viewed
at the Company's website at www.interpool.com.
- TABLE FOLLOWS -
-19-
<PAGE>
INTERPOOL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except amounts per share)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
---- ----
<S> <C> <C>
REVENUES $56,571 $42,832
LEASE OPERATING AND ADMINISTRATIVE EXPENSES 18,889 10,919
DEPRECIATION AND AMORTIZATION OF LEASING EQUIPMENT 12,679 9,727
OTHER (INCOME)/EXPENSE, NET 396 (218)
------- -------
EARNINGS BEFORE INTEREST AND TAXES 24,607 22,404
INTEREST EXPENSE, NET 14,851 13,194
------- -------
INCOME BEFORE TAXES 9,756 9,210
PROVISION FOR INCOME TAXES 500 1,100
------- -------
NET INCOME $9,256 $8,110
====== ======
NET INCOME PER SHARE:
BASIC $0.34 $0.29
DILUTED $0.32 $0.28
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 27,566 27,552
DILUTED 28,853 28,510
</TABLE>
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 183,601
<SECURITIES> 1,337
<RECEIVABLES> 41,107
<ALLOWANCES> 8,248
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 943,028
<DEPRECIATION> 185,505
<TOTAL-ASSETS> 1,250,352
<CURRENT-LIABILITIES> 112,239
<BONDS> 752,039
0
0
<COMMON> 28
<OTHER-SE> 291,314
<TOTAL-LIABILITY-AND-EQUITY> 1,250,352
<SALES> 56,571
<TOTAL-REVENUES> 56,571
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 31,964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,851
<INCOME-PRETAX> 9,756
<INCOME-TAX> 500
<INCOME-CONTINUING> 9,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,256
<EPS-PRIMARY> .34
<EPS-DILUTED> .32
</TABLE>
