SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2000
_______________
IFCO SYSTEMS N.V.
(Translation of registrant's name into English)
"Rivierstaete" Amsteldijk 166
1079 LH Amsterdam, The Netherlands
(Address of principal executive offices)
______________
(Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F _________
---------
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes _________ No X
---------
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A.)
Quarterly Report
The registrant's Second Quarterly Report 2000 filed with the Frankfurt
Stock Exchange on August 31, 2000, with respect to the first six months of 2000,
is attached to this report as Appendix A.
Ad Hoc Disclosures
Ad hoc disclosures filed by the registrant with the Frankfurt Stock
Exchange are attached to this report as follows:
1. Ad hoc disclosure filed August 7, 2000, regarding new member of
management of registrant is attached to this report as Appendix
B.
2. Ad hoc disclosure filed August 9, 2000, regarding registrant's
acquisitions in the United States is attached to this report as
Appendix C.
3. Ad hoc disclosure filed August 18, 2000, regarding registrant's
pallet pooling system in Canada is attached to this report as
Appendix D.
4. Ad hoc disclosure filed August 30, 2000, regarding registrant's
acquisition of Bromley Pallet Recyclers is attached to this
report as Appendix E.
5. Ad hoc disclosure filed August 30, 2000, regarding registrant's
results of operations for first six months of 2000 is attached to
this report as Appendix F.
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.
IFCO SYSTEMS N.V.
(Registrant)
Date: August 31, 2000 By: /s/ Edward E. Rhyne
----------------------
Edward E. Rhyne
Executive Vice President and General
Counsel
Appendix A
[LOGO] IFCO
SYSTEMS
Second Quarterly Report
2000
IFCO SYSTEMS N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 2000
INDEX
Page
----
General Information........................................................................................................ 2
Condensed Consolidated Balance Sheets as of December 31, 1999 and June 30, 2000............................................ 3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1999 and 2000.................. 4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended
June 30, 1999 and 2000................................................................................................ 5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 2000............................ 6
Notes to the Condensed Consolidated Financial Statements................................................................... 7
Management's Discussion and Analysis of Financial Condition, Results of Operations and Business Outlook.................... 15
1
GENERAL INFORMATION
IFCO Systems N.V. ("IFCO" or the "Company") was founded for the purpose of
merging the IFCO Companies, which consist of IFCO Europe Beteiligungs GmbH, MTS
Okologistik GmbH, and IFCO International Network Beteiligungsgesellschaft mbH,
and their subsidiaries, with PalEx, Inc. and its subsidiaries ("PalEx").
With the completion of the merger on March 8, 2000, the IFCO Companies'
round-trip container ("RTC") systems have been combined with PalEx's pallet and
industrial container operations. Round trip means that a container is used for
the flow of products through one whole distribution cycle and then is reused
multiple times. The Company's RTC operations are primarily in Europe and its
pallet and industrial container operations are in North America.
The Company is a leading provider of round-trip systems internationally,
serving over 9,000 customers in 17 countries. IFCO believes it owns the largest
pool of RTCs in Europe and it owns and manages a rental pool of over 1.5 million
pallets in Canada, making it the second largest pallet rental pool owner and
manager in North America. In addition, the Company is the largest provider of
new and recycled pallets in North America and is the largest provider of
industrial container services in North America.
Operating results for interim periods are not necessarily indicative of the
results for full years. The financial statements included herein should be read
in conjunction with the related notes thereto and management's discussion and
analysis and the audited Combined and Consolidated Financial Statements of IFCO
Systems N.V. and Subsidiaries for each of the three years ended December 31,
1999, and as of December 31, 1998 and 1999, and related notes thereto, as filed
with the Frankfurt Stock Exchange on May 31, 2000, in the Company's 1999 Annual
Report (the "Audited Financial Statements").
2
IFCO SYSTEMS N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
December 31, June 30,
1999 2000
----- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................................ $ 12,240 $ 24,651
Accounts receivable...................................................................... 64,809 96,922
Inventories.............................................................................. -- 14,503
Net current assets of discontinued operations............................................ -- 24,077
Other current assets..................................................................... 4,591 21,161
-------- --------
Total current assets.............................................................. 81,640 181,314
PROPERTY, PLANT AND EQUIPMENT, net.......................................................... 167,678 234,764
GOODWILL AND OTHER INTANGIBLE ASSETS........................................................ -- 228,132
NET NONCURRENT ASSETS OF DISCONTINUED OPERATIONS............................................ -- 88,686
OTHER ASSETS................................................................................ 17,303 5,447
-------- --------
Total assets...................................................................... $266,621 $738,343
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term loans......................................................................... $ 795 $ --
Current maturities of long-term debt..................................................... 72,318 846
Current maturities of capital lease obligations.......................................... 10,329 9,473
Refundable deposits...................................................................... 66,436 66,226
Accounts payable, accrued expenses and other current liabilities......................... 96,586 101,664
-------- --------
Total current liabilities......................................................... 246,464 178,209
ACCUMULATED LOSSES IN EXCESS OF INVESTMENT IN EQUITY ENTITIES............................... 5,623 --
LONG-TERM DEBT, net of current maturities................................................... -- 215,633
CAPITAL LEASE OBLIGATIONS, net of current maturities........................................ 24,198 21,676
MINORITY INTEREST, PARTICIPATING AND REDEEMABLE PARTICIPATING RIGHTS........................ 30,008 --
OTHER LONG-TERM LIABILITIES................................................................. -- 18,866
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Ordinary shares, (EURO)2 nominal value, 25,000,000 and 100,000,000 authorized
shares, respectively; 25,000 and 42,769,801 issued and outstanding, respectively........ 54 87,519
Additional paid-in capital............................................................... 10,339 270,385
Accumulated other comprehensive income:
Foreign currency translation adjustment........................................... 2,672 4,813
Accumulated deficit...................................................................... (52,737) (58,758)
-------- --------
Total stockholders' equity.................................................................. (39,672) 303,959
-------- --------
Total liabilities and stockholders' equity........................................ $266,621 $738,343
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
IFCO SYSTEMS N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
-------------------------- ----------------------------
June 30, June 30, June 30, June 30,
-------- -------- -------- --------
1999 2000 1999 2000
---- ---- ---- ----
REVENUES $ 34,934 $ 97,139 $ 73,733 $ 145,688
COST OF GOODS SOLD, excluding depreciation............... 16,198 72,090 37,427 103,827
DEPRECIATION............................................. 8,880 4,858 18,940 12,125
----------- ----------- ----------- -----------
TOTAL COST OF GOODS SOLD.............................. 25,078 76,948 56,367 115,952
----------- ----------- ----------- -----------
Gross profit................................. 9,856 20,191 17,366 29,736
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............. 8,755 10,692 14,892 15,750
MERGER TRANSACTION EXPENSES.............................. 663 - 1,245 1,283
GOODWILL AMORTIZATION.................................... 75 2,122 147 2,656
OTHER OPERATING INCOME, NET.............................. (917) (56) (1,151) (294)
----------- ----------- ----------- -----------
Income from operations....................... 1,280 7,433 2,233 10,341
INTEREST EXPENSE, NET.................................... (3,643) (6,499) (6,724) (10,434)
FOREIGN CURRENCY LOSSES, NET............................. (152) (365) (337) (517)
LOSS FROM EQUITY ENTITY.................................. (358) - (879) (417)
OTHER EXPENSE, NET....................................... (425) (613) (829) (823)
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST........... (3,298) (44) (6,536) (1,850)
INCOME TAX PROVISION (BENEFIT)........................... (16) 103 18 (604)
MINORITY INTEREST........................................ (124) - (59) -
----------- ----------- ----------- -----------
Loss from continuing operations before extraordinary
loss and cumulative effect of change in accounting
principle............................................... (3,158) (147) (6,495) (1,246)
INCOME FROM DISCONTINUED OPERATIONS...................... - 1,930 - 55
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT....... - - - (5,600)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...... - - - 770
----------- ----------- ----------- -----------
Net (loss) income........................................ $ (3,158) $ 1,783 $ (6,495) $ (6,021)
=========== =========== =========== ===========
LOSS PER SHARE FROM CONTINUING OPERATIONS --basic (and
diluted for the three months ended June 30, 2000),
before extraordinary item and cumulative effect of
change in accounting principle.......................... $ (.16) - $ (.32) $ (.04)
Income from discontinued operations...................... - .04 - -
Extraordinary item--loss on early extinguishments of
debt.................................................... - - - (.16)
Cumulative effect of change in accounting principle...... - - - .02
----------- ----------- ----------- -----------
NET (LOSS) INCOME PER SHARE --basic (and diluted for
the three months ended June 30, 2000)................... $ (.16) $ .04 $ (.32) $ (.18)
=========== =========== =========== ===========
Weighted average shares used in computing net (loss)
income per share - basic................................ 20,000,000 42,652,967 20,000,000 34,127,992
Weighted average shares used in computing net (loss)
income per share - diluted.............................. 20,000,000 44,323,067 20,000,000 34,127,992
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
IFCO SYSTEMS N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- -------------
Net (loss) income.......................... $(3,158) $1,783 $(6,495) $(6,021)
Other comprehensive income (loss):.........
Foreign currency translation adjustment... 1,079 (859) 3,737 2,141
------- ------ ------- -------
Comprehensive (loss) income................ $(2,079) $ 924 $(2,758) $(3,880)
======= ====== ======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
IFCO SYSTEMS N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
----------------
June 30, June 30,
-------- -------
1999 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................... $ (6,495) $ (6,021)
Adjustments to reconcile net income to net cash provided by (used in) operating
activities--
Depreciation and amortization......................................................... 19,833 19,172
Foreign currency exchange loss........................................................ 337 517
Gain on sale of assets................................................................ - (65)
Net proceeds from factoring........................................................... 37,200 25,581
Losses from equity entities........................................................... 646 97
Loss from extinguishment of debt...................................................... - 5,600
Changes in operating assets and liabilities--
Accounts receivable............................................................... (44,158) (43,073)
Inventories....................................................................... (1,320) 4,639
Other current assets.............................................................. 1,890 2,976
Accounts payable and accrued expenses............................................. 9,432 (22,671)
Other assets and liabilities...................................................... (940) 197
-------- ---------
Net cash provided by (used in) operating activities................................... 16,425 (13,051)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of RTCs.......................................................................... (21,821) (17,417)
Purchases of property, plant and equipment................................................. (2,592) (11,195)
Proceeds from sale of equipment............................................................ - 366
Investment in equity entities.............................................................. 879 -
Purchase of intangible assets.............................................................. (343) (36,974)
Purchase of investments carried at cost.................................................... (1,390) (431)
Cash paid for business acquisitions, net of cash acquired.................................. - (94,583)
-------- ---------
Net cash used in investing activities................................................. (25,267) (160,234)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt and related party loans....................................... 11,657 280,175
Payments on long-term debt and related party loans......................................... (9,032) (280,458)
Payments of indebtedness of purchased companies............................................ - (15,196)
Payments on capital lease obligations...................................................... (3,783) (4,190)
Payments for termination of participating rights........................................... - (3,206)
Net proceeds from issuance of common stock................................................. - 205,787
Net proceeds from exercise of stock options................................................ - 5,016
Distributions to stockholders.............................................................. - (1,433)
-------- ---------
Net cash (used in) provided by financing activities................................... (1,158) 186,495
-------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.................................. (2,730) (799)
-------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.......................................... (12,730) 12,411
CASH AND CASH EQUIVALENTS--beginning of period............................................. 23,642 12,240
-------- ---------
CASH AND CASH EQUIVALENTS--end of period................................................... $ 10,912 $ 24,651
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for--
Interest.............................................................................. $ 6,724 $ 7,537
======== =========
Income taxes.......................................................................... $ 18 $ 229
======== =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
IFCO Systems N.V. (the "Company" or "IFCO"), which was incorporated
under the laws of the Netherlands on March 31, 1999, is a holding company for
IFCO Europe Beteiligungs GmbH ("IFCO Europe"), MTS Okologistik GmbH ("MTS"),
IFCO International Network Beteiligungsgesellschaft mbH (formerly known as
Schoeller International Logistics Beteiligungsgesellschaft mbH) ("IFCO
International", and together with IFCO Europe and MTS, the "IFCO Companies"),
and PalEx, Inc. and its subsidiaries ("PalEx"), which was acquired by merger
(the "Merger") and accounted for as a purchase on March 8, 2000 concurrently
with the Company's initial public offering and related transactions. As such,
PalEx's results of operations for the period from March 8, 2000 are included in
the accompanying condensed consolidated financial statements.
The accompanying financial statements have been prepared in accordance with
U.S. generally accepted accounting principles. Unless otherwise noted, all
amounts are shown in U.S. dollars, which IFCO has elected as its reporting
currency. The Company's assets, liabilities, revenues, and expenses are subject
to exchange rate fluctuations between the U.S. dollar and the Deutsch mark,
since the Deutsch mark is the functional currency of the Company's European
operations.
The IFCO Companies have been identified as the accounting acquiror for
financial reporting purposes.
The Company
IFCO Europe, a German company that is 100% owned by the Company, is
involved in the organization and administration of the purchase, distribution
and leasing of round-trip container ("RTC") systems in Germany and other
European countries. The RTCs are leased primarily to producers of fresh fruit
and vegetables in exchange for a one-time usage fee. The producers' goods are
transported in the RTCs to various intermediaries and ultimately retailers for
sale to consumers. IFCO Europe delivers the empty RTCs to customers' bulk
warehouses and collects the empty RTCs from regional service points, where the
RTCs are transported to the Company's depots and cleaned for reuse.
MTS, a German company that is 100% owned by the Company, was established in
1992 and offers a reusable packing system for dry goods sold primarily by
retailers. MTS's business processes are generally similar to those of IFCO
Europe.
IFCO International, a German company that is 100% owned by the Company, was
established in 1994 to hold ownership interests in RTC systems in the United
States, Argentina and Japan. The operation in Argentina is wholly owned and is
consolidated within IFCO International. IFCO International owns a 33% ownership
investment in the Japanese operations. The operation in Japan is accounted for
under the equity method. The Company's share of losses in the Japanese operation
has exceeded its initial capital investment. The Company has not recorded its
proportionate shares of the Japanese operation's losses as the Company is under
no obligation to fund the Japanese operation's losses. Effective with the date
of the Merger, the Company now owns 100% of IFCO-U.S. L.L.C. ("IFCO-U.S"),
which operates the Company's RTC system in the United States. IFCO
International's business processes are generally similar to those of IFCO
Europe.
PalEx, a U.S. company that is 100% owned by the Company, was founded in
January 1996 to create a nationwide provider of pallet products and related
services. Between the time of its founding and October, 1998, PalEx acquired,
either directly or through other subsidiaries, 27 companies, three of which were
its founding companies and eight of which are engaged in the reconditioning and
rebuilding of industrial steel containers. One is engaged in the rental of
pallets in Canada.
7
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's headquarters are located in Amsterdam, the Netherlands. Its
European operations headquarters are in Pullach, Germany, and its North American
operations headquarters are in Houston, Texas. There are operations in
approximately 60 locations in Europe, 11 locations in Japan, 6 locations in
Argentina and approximately 80 locations in North America.
The accompanying unaudited condensed consolidated financial statements are
prepared pursuant to the rules and regulations for reporting interim results for
companies listed on the SMAX segment of the Frankfurt Stock Exchange.
Accordingly, certain information and footnotes required by United States
generally accepted accounting principles for complete financial statements are
not included herein. The Company believes all adjustments necessary for a fair
presentation of these interim statements have been included. The interim
statements should be read in conjunction with the Audited Financial Statements.
The Merger and Initial Public Offering
In March 2000, IFCO completed the merger of PalEx with and into Silver Oak
Acquisition Corp., IFCO's newly formed, wholly owned subsidiary, which changed
its name to "PalEx, Inc." As a result of the merger and related transactions,
IFCO owns all of the stock of the IFCO Companies and PalEx. In the merger, PalEx
stockholders received merger consideration with a total value of $9.00 per share
consisting of cash and/or the Company's ordinary shares for each share of PalEx
common stock. The total merger consideration for all the shares of PalEx common
stock was $71.4 million in cash and 7.4 million of IFCO's ordinary shares based
on elections by PalEx stockholders and adjustments pursuant to the merger
agreement. The total consideration for the merger was $184.5 million for the
PalEx common stock plus the assumption of debt of PalEx, which was $153.5
million as of March 8, 2000.
In connection with the merger, IFCO also completed an initial public
offering of 13.0 million ordinary shares in March 2000 and subsequently issued
an additional 1.95 million ordinary shares upon the underwriters' exercise of
their overallotment option (collectively, the "IPO"). The total net proceeds
to the Company from the IPO, including the exercise of the overallotment option,
were $205.8 million. Effective March 8, 2000, the Company issued 10 5/8% Senior
Subordinated Notes Due 2010 ("Senior Subordinated Notes") in the principal
amount of [_]200.0 million ($178.5 million, based on current exchange rates).
The net proceeds from the IPO, the net proceeds from the Senior Subordinated
Notes, borrowings from the Company's new senior credit facility, along with cash
on hand, were used to repay a substantial portion of the debt of the IFCO
Companies and PalEx, to pay the cash portion of the merger consideration to
PalEx stockholders in the amount of $71.4 million, to fund the cash payment due
to GE Capital Corporation ("GE Capital") described below, and to fund IFCO's
purchase of the remaining joint venture interest in IFCO-U.S.
In addition, IFCO, together with Schoeller Logistics Industries GmbH
("Schoeller Industries"), the shareholders of Schoeller Industries, Schoeller
Plast Industries GmbH, and Gebruder Schoeller Beteiligungsverwaltungs GmbH, each
of which are related parties by common ownership entered into the Option Release
and IPO-Facilitation Agreement with GE Capital and General Electric Erste
Beteiligungs GmbH ("GE Erste"), in connection with the merger and the IPO.
Pursuant to that agreement, Schoeller Logistic Technologies Holding GmbH
("SLT") issued a DM45.0 million, or approximately $20.5 million (based on
current exchange rates), convertible debenture to GE Erste in exchange for the
contribution of the preferential share of IFCO Europe owned by GE Erste. SLT
then contributed this preferred share to the Company and the Company has
recorded this contribution as an addition to paid in capital.
The Company also paid GE Capital DM43.0 million (as of March 8, 2000), or
approximately $21.0 million, out of the net proceeds of the IPO, the offering of
the Senior Subordinated Notes, and the initial borrowings under the new senior
credit facility in consideration of the release of GE Capital's and GE Erste's
options and other rights to purchase shares of the IFCO Companies.
8
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Effective March 1, 2000, the Company issued a total of 3,995,000
(19,975,000 split effected) common shares in connection with the contribution of
IFCO Europe, MTS, and IFCO International to IFCO.
On March 8, 2000, the Company repaid the remaining outstanding balance
under its previous senior facility agreement in the amount of DM119 million
($58.4 million) and repaid the remaining balance under the previous senior
subordinated agreement in the amount of DM35 million ($17.2 million).
On March 8, 2000, in connection with the IPO and the refinancing of IFCO,
the Company made a payment of DM8.0 million ($3.2 million) to Schoeller Plast
Industries GmbH for the termination of participating rights. This payment was an
estimate of the amount required to terminate the participating rights. The
Company will be reimbursed by the participating rights holder for an overpayment
of approximately DM1.7 million ($0.8 million).
On March 8, 2000, the Company paid DM2.8 million ($1.4 million) to
terminate the redeemable participating rights held in IFCO International.
On March 8, 2000, the Company repaid all short-term related party loans.
Prior to the merger, during the three months ended March 31, 2000, the
Company declared a five-for-one ordinary share split. Ordinary shares
authorized, issued and outstanding have been restated on the accompanying
condensed consolidated balance sheets to reflect the split. Nominal value was
changed from 10 to 2.
Discontinued Operations
Upon acquisition of PalEx, the Company continued its assessment of the
alignment of PalEx's site infrastructure and operations with IFCO's logistics
systems and services businesses. The Company's core systems and services
businesses are largely dependent upon plant site locations rather than pallet
manufacturing activity, which is not logistics systems and services and, in
management's opinion is not a growth business. The Company's strategic goals
include the growth and development of its systems and services businesses. The
Company has determined that its management efforts and available capital will be
more profitably applied to its systems and services segment, and, accordingly,
management has committed to a plan to divest substantially all of its pallet
manufacturing operation.
Revenues relating to discontinued operations were $46.3 million and $55.0
million for the three and six months ended June 30, 2000, respectively. The
income from discontinued operations includes an allocation of interest expense
of $1.8 million for the six months ended June 30, 2000. This allocation was
calculated based upon the percentage of net assets of the discontinued
operations in relation to net assets of the total Company and then applied to
consolidated debt.
The Company's remaining underlying businesses will consist of RTC
distribution, leasing and management, drum reconditioning, pallet services,
pallet distribution for national customers and pallet leasing and systems. The
Company will endeavor to maintain a close strategic relationship with the
prospective buyers of the manufacturing segment, which could serve as a source
of pallets for the Company's pallet leasing and distribution activities.
The Company has retained Batchelder & Partners, Inc. to assist in the
divestiture. Negotiations with a limited number of buyers will commence in the
third quarter of 2000, with the intent of completing the divestiture in the
first half of 2001. The proceeds of the sale of the manufacturing segment will
be reinvested into the systems and services segment.
The accompanying Unaudited Condensed Consolidated Financial Statements as
of June 30, 2000 have been prepared to reflect the divestiture of the Company's
pallet manufacturing operation which are shown as Net Current and Net Noncurrent
Assets of Discontinued Operations in the Condensed Consolidated Balance Sheet
and Income Loss from Discontinued Operations in the Condensed Consolidated
Statements of Operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company maintains its accounting records using a calendar year, except
for PalEx, which uses a 52/53 week year ending on the last Sunday in December.
9
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Except as discussed in the following paragraphs, there has been no
significant change in the accounting policies of the Company during the periods
presented. For a description of these policies, refer to Note 2 of Notes to the
Audited Financial Statements.
The Company undertook a comprehensive review of its RTC refurbishment cost
capitalization policies during the first quarter of 2000. The results of this
review led the Company to conclude that it should adopt the accounting method
that it believes most fairly matches the cost of refurbishing RTCs with the
revenue cycle of RTCs. Previously, the Company charged cost of sales for
refurbishing costs at the end of the RTC trip cycle. The Company now charges
costs of sales for refurbishing expenses when the RTC begins the trip cycle. The
reasoning underlying this change in accounting policy is that refurbishing the
RTC prepares it for the next trip cycle. While the accounting policy for
refurbishing costs previously followed by the Company was in accordance with
generally accepted accounting principles, the changed policy is preferable.
Accordingly, this has been presented as a change in cumulative change in
accounting principle in the accompanying statement of operations as a credit of
$0.8 million ($.03 per share).
In the second quarter, the Company undertook a comprehensive review of its
accounting practices for RTC depreciation and breakage. The Company has
historically recorded RTC depreciation based on an estimate of useful crate
lives ranging from 8 to 15 years with periodic adjustments for actual crate
breakage. As the Company developed historical information to support the
existing estimates of crate life and breakage, it was determined that RTCs break
and are replaced, on average, every six years. Therefore, management of the
Company believes that the cost of the entire RTC pool is estimated to be better
allocated systematically over a six-year period. Accordingly, the Company has
elected to affect a change in estimate of useful lives beginning April 1, 2000.
The effect of the change in estimate is accounted for prospectively and resulted
in a reduction of depreciation expense of $1.7 million for the three and six
months ended June 30, 2000.
3. GOODWILL RELATED TO THE MERGER
The acquisition of PalEx and the remaining interest in IFCO-U.S were
accounted for as purchases and have been reflected in the Company's financial
statements as of March 8, 2000. The aggregate consideration paid in these
transactions was $94.6 million in cash and 7.4 million of the Company's ordinary
shares with a fair value of approximately $110.7 million based on the initial
public offering price of the ordinary shares. The accompanying balance sheet as
of June 30, 2000 includes preliminary allocations of the purchase price. The
allocations resulted in approximately $244.6 million in goodwill. The goodwill
from the purchase of PalEx and remaining interest in IFCO-U.S. is being
amortized over 30 years.
4. LONG-TERM DEBT
On the closing date of the IPO and the merger, IFCO and PalEx entered into
a new syndicated, secured senior credit facility, which was amended and restated
on March 31, 2000, to complete the syndication. The syndicate of banks,
financial institutions, and other entities includes Canadian Imperial Bank of
Commerce and Bank One, Texas, NA. PalEx is the borrower, and IFCO and IFCO's
other subsidiaries are guarantors. CIBC World Markets Corp. and Bank One Capital
Markets, Inc., are the co-arrangers, and Bank One, Texas, NA is also the
administrative agent. The new senior credit facility replaced the former credit
facilities of IFCO Europe discussed below and PalEx's senior credit facility,
the outstanding balances of all of which were repaid in March 2000 with cash on
hand, the net proceeds of the IPO and the offering of the Senior Subordinated
Notes discussed below, and initial borrowings under the new senior credit
facility.
The results of operations for the six months ended June 30, 2000 include an
extraordinary loss on the extinguishment of debt of $5.6 million. The loss
occurred as a result of the write-off of unamortized portions of deferred bank
fees and other charges related to credit facilities that were paid off in
conjunction with the merger and related transactions.
The new senior credit facility provides for borrowings of up to $235.0
million and consists of (1) a multi-draw term loan facility in an aggregate
principal amount of up to $108.75 million and (2) a revolving credit facility
providing for revolving loans to PalEx of up to $126.25 million. The term loan
may be borrowed in up to 20 drawings commencing on the closing date of the IPO
and the merger and ending on the third anniversary of the closing date. The term
loan facility may be used only to finance permitted acquisitions. Permitted
acquisitions include any acquisition in which the total consideration paid does
not exceed $25.0 million. The new senior credit facility was amended as of July
31, 2000, so that the aggregate amount of consideration IFCO or its subsidiaries
pay in connection with permitted acquisitions during any consecutive 12-month
10
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
period may not exceed $50.0 million. This $50.0 million limitation does not
include three acquisitions with an aggregate purchase price of $106.8 million
for which the Company obtained consent under the amendment. Two of these
acquisitions have been complete since June 30, 2000, and the third acquisition
is pending pursuant to a letter of intent.
There was $24.7 million outstanding under the new senior credit facility as
of June 30, 2000.
PalEx is able to draw on the revolving credit facility from the closing
date of the IPO and the Merger through the third anniversary of the closing
date. The revolving credit facility matures on the sixth anniversary of the
closing date. The revolving credit facility may be utilized to make capital
expenditures and to finance the working capital needs of IFCO and its
subsidiaries in the ordinary course of business and to pay fees and expenses
related to the transactions. The borrowing base under the revolving credit
facility is based on a percentage of IFCO's eligible accounts receivable,
eligible inventory, and eligible RTCs. Eligible inventory includes RTCs and
pallets that IFCO and its subsidiaries own for lease to third parties, and
eligible RTCs are those owned by IFCO-U.S.
The outstanding amounts under the term loan and the revolving credit
facility, as well as the swingline facility described below, bear interest at
interest rates determined based upon the Company's consolidated total leverage
ratio, which is defined in the new senior credit facility, and changes quarterly
commencing with September 30, 2000. The rates range from a high of 300 basis
points over LIBOR and 200 basis points over prime rate, if the Company's
consolidated total leverage ratio is greater than 3.25, to a low of 200 basis
points over LIBOR and 100 basis points over prime rate, if the Company's
consolidated total leverage ratio is less than 1.75. The new senior credit
facility establishes a 25 basis point increase if the consolidated total
leverage ratio is 1.75 to less than 2.25 and a similar increase for each .50
increase in the consolidated total leverage ratio. Generally the Company may
elect one-, two-, three- and six-month LIBOR. As of June 30, 2000 the
outstanding debt under the term loan and revolving credit facility of $24.7
million had a weighted average interest rate of 7.3%.
The outstanding amounts under the term loan and the revolving credit
facility are repayable in 12 consecutive quarterly installments commencing 39
months after the closing date in an aggregate amount for each 12-month period
equal to 20% in the first period, 30% in the second period, and 50% in the third
period.
PalEx has available to it a multi-currency swingline facility for short-
term borrowings denominated in certain readily available and freely tradable
currencies in an amount not to exceed $50.0 million and a dollar swingline
facility in an amount not to exceed $25.0 million. Any multi-currency swingline
loan or dollar swingline loan reduces availability under the revolving facility
on a dollar-for-dollar basis. PalEx may obtain letters of credit, in an
aggregate amount not in excess of $25.0 million of the revolving facility,
issued by Canadian Imperial Bank of Commerce and Bank One, NA. Drawings under
any letter of credit will be reimbursed by PalEx on the same business day.
PalEx's obligations under the new senior credit facility are guaranteed by
IFCO and each of its existing and future direct and indirect subsidiaries, other
than subsidiaries deemed immaterial by the administrative agent. The new senior
credit facility and the guarantees are secured by a perfected first priority
security interest in all of the loan parties' substantial tangible and
intangible assets, except for those assets the co-lead arrangers determine in
their sole discretion that the cost of obtaining the security interest are
excessive in relation to the value of the security.
The new senior credit facility contains a number of covenants that, among
other things, limit IFCO's and its subsidiaries' ability to dispose of assets,
incur additional debt, merge or consolidate, pay dividends, create liens on
assets, enter into sale and leaseback transactions, make investments, loans, or
advances, make acquisitions, make capital expenditures, prepay debt, or engage
in certain transactions with affiliates, and otherwise restricts certain
corporate activities. In addition, the new senior credit facility requires that
IFCO and its subsidiaries comply with specified ratios and tests, including a
minimum net worth test, a fixed charge coverage ratio, an interest coverage
ratio, a leverage ratio, and a minimum EBITDA requirement. At June 30, 2000, the
Company was in compliance with all covenants of the new senior credit facility.
The new senior credit facility contains customary events of default,
including non-payment of principal, interest, or fees, material inaccuracy of
representations and warranties, violation of covenants, cross-default to certain
other debt, certain events of bankruptcy and insolvency, certain events under
ERISA, material judgments, actual or asserted invalidity of any guarantee,
security document, subordination provision, or security interest, and a change
of control in certain circumstances.
11
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On March 8, 2000, IFCO issued 200.0 million principal amount of Senior
Subordinated Notes, which translates to approximately $180.1 million, based on
current exchange rates, in a private placement. The total net proceeds to the
Company from the issuance of the Senior Subordinated Notes were $184.7 million.
The Senior Subordinated Notes mature on March 15, 2010. Interest at the rate of
10 5/8% per year from the date of issuance is payable semiannually in arrears on
each March 15 and September 15 commencing September 15, 2000. The Senior
Subordinated Notes are not secured, but are guaranteed by the Company's material
subsidiaries. The notes and the guarantees rank behind all of IFCO's existing
and future senior debt, including IFCO's obligations under the new senior credit
facility. The indenture governing the Senior Subordinated Notes contains a
number of significant covenants, which restrict IFCO's corporate and business
activities, including its ability to dispose of assets, incur additional debt,
prepay other debt, pay dividends, repurchase or redeem capital stock, enter into
specified investments or create new subsidiaries, enter in to sale and lease-
back transactions, make specific types of acquisitions, engage in mergers or
consolidations, create liens, or engage in certain transactions with affiliates.
The new senior credit facility permits specified levels of receivable
factoring. During 1994, IFCO Europe had entered into a factoring agreement under
which IFCO Europe could offer all of its trade receivables to a factoring agent.
Under the factoring agreement, the sales price is the nominal value of the
receivable less a factoring fee of 0.6% of the nominal value of the factored
receivables. The factoring agent has the right to collect the receivables and
bears the collection risk. The factoring agent is required to remit 75% of the
factored receivables to IFCO Europe. The remainder, less the factoring charge,
is held in an escrow account and is remitted to IFCO Europe following
collection. The interest rate on cash advances relating to factored receivables
is based on the three-month EURIBOR rate plus 1.25%, or 5.8% as of June 30,
2000. IFCO Europe factored approximately 47% of its revenues and incurred
factoring and interest charges of $0.8 million and $1.8 million for the three
and six months ended June 30, 2000.
At June 30, 2000, IFCO had entered into several capital lease agreements
resulting in total capital lease obligations of $31.1 million.
5. NET INCOME (LOSS) PER SHARE
Net income (loss) per share--basic and dilutive for the three months ended
June 30, 2000 and basic for the six months ended June 30, 2000 were computed
using weighted average shares (the shares attributable to the IPO, the shares
issued to the stockholders of PalEx, the shares allocated for future transfers
to shareholders of the Company's Canadian subsidiary, the shares issued to the
former shareholders of IFCO Europe, MTS and IFCO International, and the shares
issued through June 30, 2000 pursuant to the exercise of stock options). Net
loss per share--basic for the three and six months ended June 30 1999 was
computed using the 20,000,000 outstanding ordinary shares, which were issued to
the existing IFCO Companies' shareholders prior to the merger and reflects the
five-for-one ordinary share split. The effect of unexercised stock options
determined under the treasury method was anti-dilutive and therefore excluded
for the three and six months ended June 30, 1999. The effect of unexercised
stock options determined under the treasury method resulted in a 1,670,100
weighted average share dilutive effect for the three months ended June 30, 2000.
In conjunction with the merger, each option to purchase PalEx common stock
that was outstanding on the date of the merger was converted into an option to
purchase a certain number of ordinary shares of IFCO, as determined by the
merger agreement. The PalEx options became immediately vested upon completion of
the merger and conversion to IFCO options.
6. COMMITMENTS AND CONTINGENCIES
Litigation
In 1998, one of the Company's subsidiaries was assessed a charge related to
value added tax by the Swiss government in the amount of approximately $1.6
million, resulting from differing interpretations of the Company's RTC activity
in Switzerland. The Company objects to the charge and is currently negotiating
with the tax authorities. The Company accrued an amount during 1999 that it
believes to be a probable liability.
12
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Potential Environmental Liabilities
In February 1998, PalEx acquired Drum Service of Florida ("DSF"), a steel
drum reconditioning company with a facility in Zellwood, Florida. DSF is a
wholly-owned subsidiary of PalEx Container Systems, Inc., a wholly owned
subsidiary of PalEx ("PCS"). In 1982, DSF was notified by the U.S.
Environmental Protection Agency (the "EPA") and the Florida Department of
Environmental Regulation (the "DER") that they believed that DSF might be a
potentially responsible party ("PRP") regarding the Zellwood Groundwater
Contamination Site in Orange County, Florida (the "Zellwood Site"). The
Zellwood Site was designated a "Superfund" environmental clean-up site after
the DER discovered arsenic contamination in a shallow monitoring well adjacent
to it. The DSF facility is a portion of the 57 acres constituting the Zellwood
Site. The Company believes that DSF and its former shareholders were among
approximately 25 entities and individuals identified as PRPs by the EPA.
Between March 1990 and July 1996, the EPA issued various unilateral
administrative orders and notices to DSF and various other PRPs. Those orders
and notices demanded reimbursement from PRPs of approximately $2 million of the
EPA's costs regarding the Zellwood Site and requested the PRPs to accept
financial responsibility for additional clean-up efforts. During that time, the
EPA estimated that the cost of the selected remedy for soil at the Zellwood Site
would be approximately $1 million and the cost of the selected remedy for
groundwater at the Zellwood Site would be approximately $5.1 million. DSF and
the other PRPs did not agree to the EPA's demands or agree to fund any
additional clean-up. In April 1997, the EPA issued an order unilaterally
withdrawing its previous orders.
On June 12, 1998 a suit was filed in the United States District Court for
the Middle District of Florida (Orlando Division) against DSF and certain other
PRPs with respect to the Zellwood Site (United States of America v. Drum Service
Co. of Florida, John Michael Murphy, Douglass Fertilizer & Chemical, Inc., et,
al., Civil No. 98-687-Civ-Orl-22C) (the "Zellwood Suit"). In this lawsuit, the
EPA is seeking reimbursement of costs incurred at the Zellwood Site during the
past 17 years and a declaratory judgment for future response costs.
DSF has maintained comprehensive general liability insurance coverage for
over 25 years, and a number of the policies providing such coverage did not
contain exclusions for environmental contamination. DSF has notified the
insurers that issued such policies of the EPA's claims regarding the Zellwood
Site and the commencement of the Zellwood Suit. The insurer has now agreed to
pay DSF's legal fees and expenses in defending the EPA lawsuit and to reimburse
DSF for past legal fees and expenses. In addition, the former shareholders of
DSF have agreed with DSF and PalEx to bear liabilities and expenses with respect
to the Zellwood Site, to the extent such liabilities exceed DSF's and PalEx's
insurance recoveries.
DSF and several other PRPs are currently negotiating with the EPA to settle
the Zellwood Suit. DSF intends to vigorously defend the Zellwood Suit and pursue
its insurance coverage with respect to losses and expenses incurred in
connection with the Zellwood Site. Although there can be no assurance as to any
ultimate liability of DSF under the Zellwood Suit, the amount of recoveries from
other PRPs or the insurance coverage, or the amount of insurance recoveries, the
Company's management believes that DSF's insurance coverage, recoveries from
other PRPs and the obligations of DSF's former shareholders will be adequate to
cover any liability or expenses of DSF arising from the Zellwood Suit. The
accompanying consolidated balance sheet as of June 30, 2000 includes a $2.0
million receivable from a former shareholder of DSF and a corresponding amount
in other long-term liabilities.
7. RELATED PARTY TRANSACTIONS
At the time of the Merger, the Company entered into an agreement with
Schoeller Plast AG in which Schoeller Plast AG agreed to share in the costs
related to the strategic growth of the RTC leasing and supply business in North
America after the date of the Merger. Accordingly, the results of operations
for the three and six month periods ended June 30, 2000 include a reduction of
selling, general and administrative expenses of $2.0 million to reflect a
reimbursement by Schoeller Plast AG of marketing and promotional costs and
expenses incurred by the Company in North America for its efforts in expanding
the RTC leasing and supply business. The Company was a party to a similar
agreement with Schoeller Plast AG during 1999, during which the Company received
approximately $3.3 million for reimbursement of costs and expenses.
13
IFCO SYSTEMS N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. SUBSEQUENT EVENTS
Trade credit terms
IFCO has historically purchased the majority of its RTCs through single-
year contracts with Schoeller Plast Industries GmbH. During 1997, the Company
entered into a ten-year supply agreement with Schoeller Plast Industries GmbH
(which was subsequently assigned to Schoeller Plast AG) to provide substantially
all of the Company's plastic RTCs. Schoeller Plast AG's unit prices are a
function of their weight, the price for granulate and the actual quantity
purchased by IFCO. There is not a minimum purchase requirement. Changes in
pricing may occur when Schoeller Plast AG's production costs vary by more than
15%, as defined in the agreement. This supply agreement also states that the
Company is to receive a fixed price per kilogram for broken RTCs that are
recollected from the Company by Schoeller Plast AG. Subsequent to June 30, 2000,
the Company and Schoeller Plast AG renegotiated the terms upon which the Company
would pay Schoeller Plast AG for RTCs in connection with Schoeller Plast AG's
agreement to undertake additional RTC production and service
responsibilities for the Company. The Company now pays for RTCs within 15 days
after their manufacture by Schoeller Plast AG. Previously the Company was
required to pay for RTCs within 30 to 60 days after receipt of the RTCs.
Acquisitions
Since June 30, 2000, the Company has acquired two pallet recycling
companies and has entered into a letter of intent to acquire an additional
pallet recycling company. These acquisitions will be accounted for as purchases
and were or will be acquired using a combination of cash, the Company's ordinary
shares, and subordinated promissory notes, with a total value of approximately
$100.0 million. Annual combined revenues for the year ended December 31, 1999
totaled $48.0 million for the two acquired companies and $38.4 for the
acquisition subject to a letter of intent. There can be no assurance when or if
the acquisition subject to letter of intent will be completed.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,
RESULTS OF OPERATIONS, AND BUSINESS OUTLOOK
Introduction
The following discussion should be read in conjunction with the Audited
Financial Statements of IFCO.
IFCO, which was incorporated under the laws of the Netherlands on March 31,
1999, is a holding company for IFCO Europe, MTS, IFCO International, and PalEx
and their subsidiaries. PalEx and its subsidiaries were acquired by the Merger
on March 8, 2000 concurrently with the Company's IPO and related transactions.
Results Of Operations
The results of operations for the periods presented in the accompanying
financial statements include IFCO and its wholly owned subsidiaries, IFCO
Europe, IFCO International, and MTS, and the results of operations of PalEx,
Inc. and IFCO U.S. from the date of their acquisitions effective March 8, 2000,
as prepared in accordance with U.S. generally accepted accounting principles.
Results may be materially affected by the timing and magnitude of
acquisitions, assimilation of costs, costs of opening new facilities, gain or
loss of a material customer, variation in product mix, and weather conditions.
Accordingly, the operating results for any interim period are not necessarily
indicative of the results that may be achieved for any subsequent period or for
a full fiscal year.
The functional currency is the local currency of each subsidiary. The
Company has selected the U.S. dollar as its reporting currency. The financial
statement of the Company's operations that are not denominated in U.S. dollars
are translated using the exchange rate as of the balance sheet date for assets
and liabilities and a weighted average exchange rate for the reported amounts of
revenues, expenses, gains, and losses during the reporting period.
Results of Operations - Historical
The table below sets forth selected historical financial data in U. S.
dollars and as a percentage of revenues for the periods indicated:
Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1999 % 2000 % 1999 % 2000 %
Revenues......... $34,934 100.0 $97,139 100.0 $73,733 100.0 $145,688 100.0
------- ----- ------- ----- ------- ----- -------- -----
Gross profit..... $ 9,856 28.2 $20,191 20.8 $17,366 23.6 $ 29,736 20.4
------- ----- ------- ----- ------- ----- -------- -----
Income from
operations... $ 1,280 3.7 $ 7,433 7.7 $ 2,233 3.0 $ 10,341 7.1
------- ----- ------- ----- ------- ----- -------- -----
The changes in revenues, gross profit, and income from operations from the
1999 periods to the 2000 periods reflect the impact of the addition of the PalEx
operations after March 8, 2000. The reduction in gross profit margins reflects
the impact of the lower gross margins associated with the PalEx operations. The
increase in goodwill amortization reflects the goodwill recorded in the Merger.
The increase in interest expense, net, reflects the additional debt incurred
concurrent with the Merger. Also concurrent with the Merger, the Company
acquired the remaining interest in IFCO U.S., and thus there are no losses from
equity investment after March 8, 2000.
In addition, as discussed in the Notes to the Condensed Consolidated
Financial Statements, the Company took the following actions, which have
affected the results of operations for the three months and six months ended
June 30, 2000:
. changed the method of accounting for RTC refurbishment costs, resulting in
a cumulative effect from this change in accounting principle of $0.8
million during the six months ended June 30, 2000;
15
. entered into a new senior credit facility that replaced the existing
facility and recorded a loss on early extinguishment of debt of $5.6 million in
the six months ended June 30, 2000; and
. committed to a plan to divest substantially all of the pallet manufacturing
operations, resulting in the presentation of the results of operations of these
pallet manufacturing operations as discontinued operations for the period after
March 8, 2000.
As a result of all of the above factors, net income for the three months
ended June 30, 2000 increased to $1.8 million from a net loss of $3.2 million
for the same period in 1999. The net loss for the six months ended June 30, 2000
decreased to $6.0 million from a net loss of $6.5 million for the same period in
1999.
Results of Operations - Adjusted Continuing Operations
A more detailed comparison of results of operations on a historical basis
between periods is, however, not meaningful when a significant purchase
accounting acquisition has occurred in the current year, as in the case of the
Company's acquisition of PalEx on March 8, 2000. Accordingly, management has
elected to provide a comparison and discussion of selected results of operations
based on the results of the Company's adjusted continuing operations which
includes the Company's systems and services operations and which, as discussed
in the Notes to the Condensed Consolidated Financial Statements, excludes the
results of operations of the Company's manufacturing segment, and reflects
adjustments to eliminate the effect of nonrecurring items. These results are
herein referred to as the "Adjusted Continuing Operations". This method of
presentation treats PalEx and its subsidiaries and IFCO-U.S. as being part of
the Company since the beginning of the reporting period.
The results of Adjusted Continuing Operations do not represent what the
Company's results of continuing operations would actually have been if PalEx and
its subsidiaries and IFCO-U.S in fact had become part of the Company at the
beginning of the reporting period and are not necessarily representative of the
Company's results of continuing operations for any future periods.
The following table reflects selected results of operations of the Adjusted
Continuing Operations of the Company:
Six Months Ended
----------------
June 30, June 30,
1999 2000
-------- --------
Revenues........... $180,351 $188,232
======== ========
$ 10,842 $ 16,969
EBITA.............. ======== ========
EBIT............... $ 7,671 $ 13,887
======== ========
Except as otherwise indicated, the following period-to-period comparisons
are based on functional currency comparisons, rather than reporting currency
comparisons. This means that exchange rates are held constant for the
comparative periods, based on the exchange rates for the first six months of
2000. The Company believes that such a comparison is more meaningful, because
(1) of the significant decline in the Deutsch mark and euro against the U.S.
dollar during the comparative periods and (2) the fact that the Company is
exposed to little cross currency exchange risk or effect.
The U.S. dollar generally strengthened against the Deutsch mark and the
euro during the first half of 2000 and strengthened between 2000 and 1999.
During the six months ended June 30, 1999, the period average rate of Deutsch
marks per U.S dollar was DM1.79659 and the period average rate of euros per U.S.
dollar was 1.08961. During the six months ended June 30, 2000, the period
average rate of Deutsch marks per U.S. dollar was DM2.03684 and the period
average rate of euros per U.S. dollar was .96099, resulting in a period
average increase of 13.0%.
Revenues for the six months ended June 30, 2000, as adjusted for changes in
the functional currency exchange rates, increased 9.5% to $188.2 million from
$171.8 million for the six months ended June 30, 1999. Pallet services and
systems revenues increased 14.7% to $60.2 million from $52.5 million in the
prior period, RTC systems revenues increased 10.9% to $74.5 million from $67.2
million in the prior period, and industrial container services grew 2.7% to
$53.5 million from $52.1 million in the prior period.
16
Total reporting currency revenues in dollars decreased by 5.1% as a result
of the decline of the Deutsch mark and euro against the U.S. dollar from the
first half of 1999 to the first half of 2000.
Earnings before interest, taxes and amortization and non-recurring items
("EBITA"), as adjusted for changes in the functional currency exchange rates,
grew 65.0% to $17.0 million in the first half of 2000, an increase of $6.7
million from $10.3 million in the first half of 1999. Approximately $2.6
million of the increase is due to (1) changes in the estimates of useful lives
of RTCs and (2) the assessment of the remaining useful lives of assets acquired
in the purchase of PalEx. Thus, "comparative" functional EBITA was $14.4
million in 2000, compared to $10.3 million, an increase of $4.1 million, or
39.8%. Much of this increase came from reduced breakage of RTCs in the
Company's European RTC pool, due to operational and logistics improvements.
EBITA was reduced in the first half of 2000 by approximately $4.0 million of
development expenses for e-logistics and North American pallet pooling. Similar
development expenses were not incurred in the first half of 1999.
Total reporting currency EBITA in U.S. dollars decreased by 8.5% as a
result of the decline of the Deutsch mark and euro against the U.S. dollar from
the first half of 1999 to the first half of 2000.
Acquisitions
Since June 30, 2000, the Company has acquired two pallet recycling
companies and has entered into a letter of intent to acquire an additional
pallet recycling company. These acquisitions will be accounted for as purchases
and were or will be acquired using a combination of cash, the Company's ordinary
shares, and subordinated promissory notes, with a total value of approximately
$100.0 million. Annual combined revenues for the year ended Decemeber 31, 1999
totaled $48.0 million for the two acquired companies and $38.4 for the
acquisition subject to a letter of intent. There can be no assurance when or if
the acquisition subject to letter of intent will be completed.
The following table sets forth the combined revenues, net income and EBITA
of these companies for the year ended December 31, 1999 and for the six months
ended June 30, 2000:
For the year ended For the six months ended
December 31, 1999 June 30, 2000
------------------ -------------
Revenues $86.7 $59.1
===== =====
Earnings before interest, taxes,
and amortization $13.0 $ 8.1
===== =====
These results could change significantly should the acquisition under
letter of intent fail to be completed. Revenues and earnings before interest,
taxes and amortization for the acquisition under letter of intent were $38.4
million and $8.5 million, respectively, for the year ended December 31, 1999.
Revenues and earnings before interest, taxes and amortization for the
acquisition under letter of intent were $24.7 million and $5.1 million,
respectively, for the six months ended June 30, 2000.
Liquidity and Capital Resources
In March 2000, IFCO completed the Merger of PalEx with and into Silver Oak
Acquisition Corp., IFCO's newly formed, wholly owned subsidiary, which changed
its name to ``PalEx, Inc.'' As a result of the Merger and related transactions,
IFCO owns all of the stock of the IFCO Companies and PalEx. In the Merger,
PalEx's stockholders received merger consideration with a total value of $9.00
per share consisting of cash and/or the Company's ordinary shares for each share
of PalEx common stock. The total merger consideration for all the shares of
PalEx common stock was $71.4 million in cash and 7.4 million of IFCO's ordinary
shares based on elections by PalEx stockholders and adjustments pursuant to the
merger agreement. The total consideration for the Merger was $184.5 million for
the PalEx common stock plus the assumption of $153.5 million, as of March 8,
2000, of PalEx's debt.
In connection with the Merger, in March 2000 IFCO completed an IPO of 13.0
million ordinary shares and subsequently issued an additional 1.95 million
ordinary shares upon the underwriters' exercise of their overallotment option.
The total net proceeds to the Company from the IPO, including the exercise of
the overallotment option, were $210.0 million. The net proceeds from the IPO
were used, along with cash on hand, the net proceeds from of the offering of the
Senior Subordinated Notes, and borrowings from the Company's new senior credit
facility, to repay a substantial portion of the debt of the IFCO Companies and
PalEx, to pay the cash portion of the merger consideration to PalEx
stockholders, to fund the cash payment due to GE Capital discussed above and to
fund IFCO's purchase of the remaining joint venture interest in IFCO-U.S.
17
On the closing date of the IPO and the Merger, IFCO and PalEx entered into
a new syndicated, secured senior credit facility, which was amended and restated
on March 31, 2000, to complete the syndication. The syndicate of banks,
financial institutions, and other entities includes Canadian Imperial Bank of
Commerce and Bank One, Texas, NA. PalEx is the borrower, and IFCO and IFCO's
other subsidiaries are guarantors. CIBC World Markets Corp. and Bank One Capital
Markets, Inc., are the co-arrangers, and Bank One, Texas, NA is also the
administrative agent. The new senior credit facility replaced the former credit
facilities of IFCO Europe and PalEx's former senior credit facility, the
outstanding balances of all of which were repaid in March 2000 with cash on
hand, the net proceeds of the Offering and the offering of the Senior
Subordinated Notes discussed below, and initial borrowings under the new senior
credit facility.
The new senior credit facility provides for borrowings of up to $235.0
million and consists of (1) a multi-draw term loan facility in an aggregate
principal amount of up to $108.75 million and (2) a revolving credit facility
providing for revolving loans to PalEx of up to $126.25 million. The term loan
may be borrowed in up to 20 drawings commencing on the closing date of the IPO
and the merger and ending on the third anniversary of the closing date. The term
loan facility may be used only to finance permitted acquisitions. Permitted
acquisitions include any acquisition in which the total consideration paid does
not exceed $25.0 million. The new senior credit facility was amended as of July
31, 2000, so that the aggregate amount of consideration IFCO or its subsidiaries
pay in connection with permitted acquisitions during any consecutive 12-month
period may not exceed $50.0 million. This $50.0 million limitation does not
include three acquisitions with an aggregate purchase price of $106.8 million
for which the Company obtained consent under the amendment. Two of these
acquisitions have been complete since June 30, 2000, and the third acquisition
is pending pursuant to a letter of intent.
IFCO is able to draw on the revolving credit facility from the closing date
of the IPO and the Merger through the third anniversary of the closing date. The
revolving credit facility matures on the sixth anniversary of the closing date.
The revolving credit facility may be utilized to make capital expenditures and
to finance the working capital needs of IFCO and its subsidiaries in the
ordinary course of business and to pay fees and expenses related to the
transactions. The borrowing base under the revolving credit facility is based on
a percentage of IFCO's eligible accounts receivable, eligible inventory, and
eligible RTCs. Eligible inventory includes RTCs and pallets that IFCO and its
subsidiaries own for lease to third parties, and eligible RTCs are those owned
by IFCO-U.S.
The outstanding amounts under the term loan and the revolving credit
facility, as well as the swingline facility described below, bear interest at
interest rates determined based upon the Company's consolidated total leverage
ratio, which is defined in the new senior credit facility, and changes quarterly
commencing with September 30, 2000. The rates range from a high of 300 basis
points over LIBOR and 200 basis points over prime rate, if the Company's
consolidated total leverage ratio is greater than 3.25, to a low of 200 basis
points over LIBOR and 100 basis points over prime rate, if the Company's
consolidated total leverage ratio is less than 1.75. The new senior credit
facility establishes a 25 basis point increase if the consolidated total
leverage ratio is 1.75 to less than 2.25 and a similar increase for each .50
increase in the consolidated total leverage ratio. Generally the Company may
elect one-, two-, three- and six-month LIBOR.
The outstanding amounts under the term loan and the revolving credit
facility are repayable in 12 consecutive quarterly installments commencing 39
months after the closing date in an aggregate amount for each 12-month period
equal to 20% in the first period, 30% in the second period, and 50% in the third
period.
PalEx has available to it a multi-currency swingline facility for short-
term borrowings denominated in certain readily available and freely tradable
currencies in an amount not to exceed $50.0 million and a dollar swingline
facility in an amount not to exceed $25.0 million. Any multi-currency swingline
loan or dollar swingline loan reduces availability under the revolving facility
on a dollar-for-dollar basis. PalEx may obtain letters of credit, in an
aggregate amount not in excess of $25.0 million of the revolving facility,
issued by Canadian Imperial Bank of Commerce and Bank One, NA. Drawings under
any letter of credit will be reimbursed by PalEx on the same business day.
PalEx's obligations under the new senior credit facility are guaranteed by
IFCO and each of its existing and future direct and indirect subsidiaries, other
than subsidiaries deemed immaterial by the administrative agent. The new senior
credit facility and the guarantees are secured by a perfected first priority
security interest in all of the loan parties' substantial tangible and
intangible assets, except for those assets the co-lead arrangers determine in
their sole discretion that the cost of obtaining the security interest are
excessive in relation to the value of the security.
The new senior credit facility contains a number of covenants that, among
other things, limit IFCO's and its subsidiaries' ability to dispose of assets,
incur additional debt, merge or consolidate, pay dividends, create liens on
assets, enter into sale and leaseback transactions, make investments, loans, or
advances, make acquisitions, make capital expenditures, prepay debt, or engage
in certain transactions with affiliates, and otherwise restricts certain
corporate activities. In addition, the new senior credit facility requires that
IFCO and its subsidiaries comply with specified ratios and tests,
18
including a minimum net worth test, a fixed charge coverage ratio, an interest
coverage ratio, a leverage ratio, and a minimum EBITDA requirement.
The new senior credit facility contains customary events of default,
including non-payment of principal, interest, or fees, material inaccuracy of
representations and warranties, violation of covenants, cross-default to certain
other debt, certain events of bankruptcy and insolvency, certain events under
ERISA, material judgments, actual or asserted invalidity of any guarantee,
security document, subordination provision, or security interest, and a change
of control in certain circumstances.
As of June 30, 2000, the outstanding balance under the new senior credit
facility was $24.7 million. As of August 30, 2000, the outstanding balance
under the new senior credit facility was $74.0 million.
The Company expects that cash generated from operations combined with
available borrowings under the senior credit facility will be sufficient to meet
its total cash requirements.
On March 8, 2000, IFCO issued 200.0 million principal amount of Senior
Subordinated Notes, which translates to approximately $180.1 million, based on
current exchange rates, in a private placement. The total net proceeds to the
Company from the issuance of the Senior Subordinated Notes were $184.7 million.
The Senior Subordinated Notes mature on March 15, 2010. Interest at the rate of
10 5/8% per year from the date of issuance is payable semiannually in arrears on
each March 15 and September 15 commencing September 15, 2000. The Senior
Subordinated Notes are not secured, but are guaranteed by the Company's material
subsidiaries. The notes and the guarantees rank behind all of IFCO's existing
and future senior debt, including IFCO's obligations under the new senior credit
facility. The indenture governing the Senior Subordinated Notes contains a
number of significant covenants, which restrict IFCO's corporate and business
activities, including its ability to dispose of assets, incur additional debt,
prepay other debt, pay dividends, repurchase or redeem capital stock, enter into
specified investments or create new subsidiaries, enter in to sale and lease-
back transactions, make specific types of acquisitions, engage in mergers or
consolidations, create liens, or engage in certain transactions with affiliates.
The Company intends to pursue additional acquisitions. The Company is, from
time to time, engaged in ongoing discussion with respect to selected
acquisitions and other strategic opportunities, and expects to continue to
assess these and other opportunities. The timing, size or success of any
acquisitions or other strategic opportunities and the resulting additional
capital commitments are unpredictable. IFCO expects to fund future acquisitions
primarily through a combination of issuances of additional equity, working
capital, cash flow from operations, and borrowings under the new senior credit
facility. The Company may also require additional financing. To the extent new
sources of financing are necessary to fund future acquisitions, the Company
cannot assure that it can secure the additional financing if and when it is
needed or on terms deemed acceptable to IFCO.
Business Outlook
IFCO Systems operates round-trip systems in Europe, the United States,
South America, and Japan and conducts North American pallet and industrial
container service operations. IFCO Systems owns and manages the leading rental
pool of RTCs in Europe and the second largest rental pallet pool in North
America. PalEx, a wholly owned subsidiary of IFCO Systems, is the largest
provider of new and recycled pallets and industrial container reconditioning
services in North America.
The completion of the IPO and the Merger, the sale of the Senior
Subordinates Notes, and the securing of a new senior credit facility positions
the Company to invest in the expansion of existing markets, the entry into new
markets, new and improved products, maintenance of existing facilities, and
strategic expansion of profitable business segments. The Company believes the
divestiture of the pallet manufacturing business will allow it to focus on its
systems and services businesses and also provide capital for future growth.
The Company's results of operations as prepared in accordance with U.S.
generally accepted accounting principles reflect the current cost structures for
the Company. The Company continues to focus on economies of scale and network
economics. The Company also will seek additional efficiencies in its U.S.
operations, as it is able to integrate the new acquisitions completed since June
30, 2000. Although the Company expects to incur relatively large development
expenses for its e-logistics and pallet pooling businesses in future periods, it
anticipates that such expenses should decline as a percentage of sales as
revenues increase.
19
Research and Development Activities
Research and development at the Company is not a concept created by the
Merger. The growth of the IFCO Companies reflects a history of devotion to
innovation and creativity, which has been adopted as a core value of IFCO. The
Company will continue to develop innovations in its products and in the way it
serves its customers. In doing so, the Company expects to see the same success
and growth as the IFCO Companies.
The Company views research and development activities as three-dimensional:
(1) new products and services for its current and prospective customers; (2)
expansion into new regions with its existing products and services; and (3)
addition of new services to its existing service offerings.
IFCO is focused on the creation, development and implementation of e-
logistics, a concept designed to promote the paperless flow of goods throughout
the distribution chain. E-logistics uses IFCO's RTC systems to combine
information flow, to a great extent facilitated by the Internet, with the
physical flow of goods. The Company believes e-logistics enables customers and
retailers to achieve additional efficiencies throughout the distribution chain.
IFCO expended approximately $4.0 million on e-logistics and advanced pallet
services in the six months ended June 30, 2000.
IFCO is also developing its business through geographic expansion of its
RTC system for European produce, primarily incurring developing expenses in
North America and, to a lesser extent, South America. In addition, the Company
is leveraging off of its expertise to develop new systems and services
offerings. IFCO is expending significant development efforts in this manner,
primarily in the area of pallet systems and services in North America and dry
goods systems in Europe.
IFCO regularly engages in research and development activities in all of its
existing lines of businesses with respect to product, service, and system
innovation.
Employment Information
As of June 30, 2000 and 1999, IFCO employed approximately 4,000 and 700
people, respectively. The increase was primarily due to the merger with PalEx in
March 2000.
Seasonality
IFCO's RTC revenues vary depending on the fruit and vegetable-harvesting
season in different countries. Historically, a higher portion of its sales and
operating income has been recognized in the fourth quarter than in the first
quarter, which has historically been its weakest quarter. Revenues in Germany
and France, for example, are highest in summer and fall, whereas revenues in
Southern Europe reach a peak late in fall and throughout winter. Seasonality
also has an influence on pricing, as transportation costs incurred during the
winter to transport IFCO's RTCs from warmer countries in Southern Europe are
higher than the costs to transport the RTCs from closer locations in Central
Europe. IFCO accordingly charges customers in these Southern European countries
higher usage fees.
The pallet manufacturing, recycling, and crating businesses in North
America are subject to seasonal variations in operations and demand. The third
quarter is traditionally the quarter with the lowest demand for these
businesses. IFCO has a significant number of agricultural customers for these
businesses and typically experiences the greatest demand for new pallets from
these customers during the citrus and produce harvesting seasons, generally
October through May. Yearly results can fluctuate significantly in this region
depending on the size of the citrus and produce harvests, which, in turn,
largely depend on the occurrence and severity of freezing weather and changes in
rainfall. Adverse weather conditions may also affect IFCO's North American
locations serving predominantly manufacturing and industrial customers
experience less seasonality. IFCO's drum reconditioning segment is seasonally
impacted in the Southeastern and Western United States by the agricultural
industries. Reconditioned drum sales are strongest during a period generally
beginning in April and extending through September, with preseason production
for this period running from January through March.
Year 2000 Issues
The Company is unaware of any material impact resulting from or that could
result from the year 2000 issue.
20
Forward-looking Disclaimer
Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or financial
condition of IFCO, or state other forward-looking information. These statements
may include financial information and/or statements for periods following the
period covered by this report. You can find many of these statements by looking
for words like believes, expects, anticipates, estimates, or similar expressions
used in this report.
These forward-looking statements may be affected by known and unknown
risks, uncertainties, and other factors that could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions that we believe to be reasonable. Risks and uncertainties include
the following: (1) IFCO's ability to effectively integrate its operations and
achieve its operational and growth objectives; (2) the competitive nature of the
container businesses, including RTCs, pallets, and industrial containers; (3)
customer demand and business and economic cycles; (4) the ability to finance
capital expenditures and growth; (5) conditions in lumber markets, (6)
seasonality, (7) weather conditions; (8) changes in national or international
politics and economics; (9) currency exchange rate fluctuations; and (10)
changes in capital and financial markets, including the performance of companies
listed on the Frankfurt Stock Exchange or the Nasdaq National Market.
Important factors that could cause IFCO's actual results to be materially
different from the forward-looking statements are also disclosed throughout this
report.
21
SIGNATURE
The Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 30, 2000.
IFCO SYSTEMS N.V.
By: /s/ M. Ted Grubbs
-----------------------------------
M. Ted Grubbs
Corporate Controller
By: /s/ Vance K. Maultsby, Jr.
-----------------------------------
Vance K. Maultsby, Jr.
Executive Vice President, Strategy and
Finance and Chief Financial Officer
22
APPENDIX B
KARL POHLER NEW MEMBER OF BOARD OF MANAGEMENT FOR IFCO SYSTEMS N.V.
Ex-Sony Deutschland and European boss of Computer 2000 now responsible for the
further expansion of IFCO Systems to an e-logistics and systems provider
Effective immediately, Karl Pohler (46) has been named to the Board of
Management of the IFCO Systems N.V., Amsterdam, the world's leading provider of
round trip systems and logistics systems services. Pohler will assume
responsibility for all e-logistics activities and stands for the concern's
continued expansion drive to an e-logistics provider.
Pohler brings to the position more than 20 years of management experience in the
IT industry, having held functions in sales, marketing, and logistics. In his
last position, Pohler was the chairperson of the Board of Management of Computer
2000 AG, Munich and at the same lime European president of Computer 2000/Tech
Data Corp. Between 1993 and 1996, he was as CEO responsible for Computer 2000
Deutschland GmbH. From 1997 to 1999, he was also the CEO of Sony Deutschland
GmbH, Cologne. From 1980 to 1992, he was active in executive management
functions for Digital Equipment GmbH, Munich.
"We have succeeded in acquiring the services of one of the most experienced and
successful IT and logistics managers around, who can implement our core plan,
namely making the flow of goods more intelligent with the aid of the Internet,"
says IFCO Systems CEO Martin Schoeller. "Mr. Pohler moves into this position of
responsibility for the e-logistics initiatives, which have been launched with
the goal of making IFCO Systems into a leading provider on a fast-growing
logistics market."
Munich/Houston, August 7, 2000 The Board of Management
If you have any questions, please contact:
german communications dbk AG
Jorg Bretschneider
Holzdamm 28-32, 20099 Hamburg,
Tel.: +49 (0) 40/46 88 33-0, Fax: +49 (0) 40/47 81 80
APPENDIX C
IFCO SYSTEMS WITH BIG ACQUISITIONS IN THE US
. acquisition of four companies of pallet services
. *additional revenue of DM125m
. *network in the Us becomes denser
IFCO Systems N.V., worldwide leading round trip systems and logistics services
provider, extends its network in the US through until now largest acquisition.
IFCO Systems, or rather the US subsidiary PalEx Inc., Houston/Texas, takes over
four companies in the pallet services business, with a total annual turnover of
125m DM. The companies own services sites for the pallet distribution in the
Rocky Mountain States (Arizona, California, Colorado, New Mexico and Nevada) as
well as in Texas Oklahoma, Mississippi, Louisiana, Tennessee, Alabama and Ohio.
The largest company is Texas Pallet, Inc., Houston and disposes of 11 sites and
was able to increase its revenues by more than 50% over the last three years. In
the current business year 2000, Texas Pallet expects a turnover of ca. U$ 50m.
Texas Pallet is therefore one of the fastest growing pallet systems and
logistics services provider in North America. Simultaneously, the Arizona Pallet
Exchange, Phoenix/Arizona, the Pallet Exchange, Las Vegas/Nevada and the
PalWest, Inc. Commerce City Colorado, were taken over, those companies have a
combined revenue of 9.7m U$.
The four companies have a combined network of 25 services sites in strategically
important areas where pallets are recycled and repaired and which can be used
for RTC services as well. "We are aiming to be close to the storage houses of
our clients in the US in order to minimize and optimize storage and transport
costs.." says Martin Schoeller, CEO of IFCO Systems.
The acquired companies have a strong market position. They are strong companies
with an EBITDA between 10 and 20%. "We immediately own an excellent network in a
number of big States in the US", continues Schoeller. IFCO's goal is to close
the network of service stations for the RTC system in North America shortly. In
March, IFCO Systems, via the acquisition of PalEx, opened the doors for the
broad and gap-less RTC Systems network in North America. The breakthrough for
the RTCs already happened last year, when the US retailer WalMart decided to use
RTCs.
APPENDIX D
LEADING CANADIAN RETAIL TRADE CORPORATIONS CHOOSE IFCO SYSTEMS
- - Introduction of the pallet pooling system in Canada
- - Yet another significant step in the direction of market
leadership in North America
- - Trade finds savings effects convincing
IFCO Systems N.V., leading supplier worldwide of round trip systems and
logistics systems services, is now expanding its network in Canada and will
start by introducing its system for the distribution of pallets. A number of
important retail trade corporations, including Safeway, Federated Co-op, Longos
Supermarket, TDL Group, and Northern Distribution, have decided to introduce the
IFCO FLEX(TM) System. The first pilot project has been brought to a successful
conclusion so that the next step for the introduction in Canada can begin in
September.
The IFCO FLEX(TM) System consists of a seamless round trip system for the
pallets which are used by shippers to distribute goods to intermediate storage
facilities or to the stores of the retail traders. IFCO Systems handles the
sorting and distribution, takes the pallets back, repairs or even recycles them
if necessary, and restores them to the delivery cycle. IFCO has set up a
network of depot and service stations for this purpose and has linked the
systems for sorting the pallets with an electronic management and information
system. Following the tests, the Canadian retail traders were convinced that
there was considerable potential in the system for saving money. Distribution
costs are reduced and environmental protection expenditures (processing fees and
costs) are virtually eliminated.
The IFCO FLEX(TM) System makes use of the best opportunities offered by the
existing Canadian pallet program. Customers can maintain their pallets in
optimal condition or have the maintenance work done for them; at the same time,
they can hire additional pallets during times of high demand. The result: a rise
in the quality and transport safety, while at the same time the costs per round
trip sink.
Houston/Munich, August 18, 2000
The Board of Management
About IFCO Systems;
IFCO Systems is a global logistics system provider with sales
of approximately DM 1 billion and 4,000 employees. By combining
transport equipment pooling and management, IFCO Systems
creates an operating system for the flow of goods. The basis is
formed by so-called round trip systems into which additional
logistics and information services are continually being
integrated. In the course of operations, IFCO Systems develops
standards generally applicable in many industries which can be
used by everyone involved in the supply chain.
IFCO Systems is listed in the SMAX segment of the Official
Trade of the Frankfurt Stock Exchange under the symbol "IFE"
and on the NASDAQ New York under the symbol "IFCO".
If you have any questions, please contact:
Press Relations:
german communications dbk AG IFCO Systems
Jorg Bretschneider Sibille Kohler
Holzdamm 28-32,20099 Hamburg, Zugspitzstr. 15, 82049
Pullach
Tel.: 040/46 88 33-0, Tel.: 089/74491-201.
Fax: 040/47 81 80 Fax: 089/74491-299
Investor Relations
IFCO Systems
Catja Collen
Zugspitzstr. 15, 82049 Pullach
Tel. 089-74491-222, Fax - 299
APPENDIX E
IFCO SYSTEMS enhances market leading position in the US
. Further acquisition of a pallet service provider
. Additional Revenue of ca. 100 Mio. DM
. Network in North America becomes even denser
The IFCO Systems N.V., worldwide leading round trip system provider and
logistics services provider enhances their position in the US as a market leader
in the pallet logisitcs and services business. In a further step, IFCO Systems
takes Bromley Pallet Recyclers, Tampa/ Florida, the fifth company in due course.
For the current year, Bromley expects a turnover of 46 Mio. USD, converted into
ca. 100 Mio. DM. After the acquisition of Texas Pallet, Inc., Houston/Texas,
IFCO Systems manages the foremost thirdlargest enterprise in the pallet services
business in the US. Since the beginning of August, the total revenue of acquired
logistics services companies is about 225 Mio. DM.
Bromley has more than 15 services sites in Florida, Georgia, South Carolina,
North Carolina, Arkansas. Indiana, Kentucky, Illinois and Ohio. All five
acquired companies operate together with 40 sites where pallets are recycled and
re-used for the round trip system. The sites can also be used for servicing
round trip carriers.
The acquisition of Bromley is a further step towards IFCO Systems becoming a
pure logistics services play, also in North America. "we are consequently
following our strategy, creating opportunities to grab the enormous growth
opportunities and grow simultaneously." Says the CEO Martin Schoeller.
Houston/Munchen, 30. August 2000
Bei Ruckfragen wenden Sie sich bitte an:
Press Relations: Investor Relations:
german communications dbk AG IFCO Systems
Jorg Bretschneider Catja Collen
Holzdamm 28-32, 20099 Hamburg, Zugspitzstr. 15, 82049 Pullach
Tel.: 040/46 88 33-0, Fax: 040/47 81 80 Tel.: 089/74491-222, Fax: -209
APPENDIX F
IFCO Systems becomes pure logistics services play - already profitable in the
first quarter
. EBITA increases in H1 2000 by 40% to 14,4 Mio. US-Dollar
. Pallet systems and services increase by 15%
. Revenue according to US-GAAP increases to 146,2 (73,7) Mio. USD
. Disposal of Pallet-Production in North America decided
. Expansion of the logistics network through acquisition of pallet Service-
centers with additional yearly revenue of more than 100 Mio. USD
. Pro forma revenue of pure Logistics services will increase by more than 30%
in the whole year of 2000
. New retail system partners and further acquisitions in H2
Thee IFCO Systems N.V., worldwide leading pallet and RTC systems provider in
connection with logistics services, develops towards a pure logistics services
provider. IFCO Systems will therefore divest of their less margin intensive
pallet production in North America and expand the logistics network especially
in North America. Additional growth potentials will be used through the
implementation of the e-logistics strategy.
After the successful integration and transformation of Palex Inc. Houston/Texas,
taken over in March 2000, already in the first full quarter - which is the
second quarter of the current business year 2000 - a profit after tax of 1.8m U$
was achieved. The operative result before tax, interest and amortization (EBITA)
increased - compared to the pro forma numbers of the previous year - to
U$ 16.969m (10.3m). EBITA adjusted for the new depreciation method, shows an
increase of 40% to U$ 14.4m. The significant improvement of the result is due to
revenue growth, improved rationality and less breakage of the crate pool.
Revenue increased currency adjusted by 10% to U$ 188.2m. This revenue is only
comparable to a limited extend with the previous year's pro forma reported
earnings, as PalEx was only under IFCO Management since March 8th, 2000 and the
new company started its business as such. In comparison to the U$ the 13% weaker
Deutsche Mark in the first half of 1999 reduced the total revenue by 5%. The
already introduced Round Trip Carrier System and pallet logistics services
achieved significant growth. In the first half, pallet logistics services of
IFCO - again on a pro forma basis - increased by 15% to a total revenue of U$
60.2m. The RTC System, which main growth period is historically in the second
half of the year, grew by 11% to U$ 74.5m.
Not included in the reported revenue of U$ 188.2m is the pallet production, of
which IFCO Systems will dispose of, and which has an annual revenue of roughly
U$175m. While the pallet production business shows a cash flow margin between 8
and 10%, serve and logistics activities achieve significantly higher margins. As
reported, IFCO bought pallet service centers in the US with a total revenue of
more than U$ 100m in the third quarter.
Together with further acquisitions, additional system partners from their tail
business and strong organic growth, we expect a more than 30% pro forma total
revenue increase in the logistics area for the current year 2000. Further growth
should be achieved through the implementation of e-logistics.
In order to bundle all activities in connection with the creation of an
e-logistics business area IFCO Online AG was founded in Munich/Pullach as a
subsidiary of IFCO Systems. Karl Pohler, previously CEO of Computer 200 Europe,
and before that Head of Sony Germany, is now responsible for the implementation
of an interactive navigation system for the supply chain and the development of
intelligent logistics services. IFCO's own round trip systems, connected t with
a new information management system should represent and open interface for the
different supply chains. Therefore it is of predominant importance to create
industry standards which can be used by all participants of the supply chain,
such as senders, logistic businesses and receiving entities.
Houston/Munich, 31st August 2000
Executive Management
For any further questions please contact::
Press Relations: Investor Relations:
german communications dbk AG IFCO Systems
Jorg Bretschneider Catja Collen
Holzdamm 28-32, 20099 Hamburg Zugspitzstr. 15, 82049 Pullach
Tel.: 040/46 88 33-0, Fax: 040/47 81 80 Tel.: 089/74491-201, Fax: - 299