SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
Commission file number 1-11862
INTERPOOL, INC.
(Exact name of registrant as specified in the charter)
DELAWARE 13-3467669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
211 COLLEGE ROAD EAST, PRINCETON, NEW JERSEY 08540
(Address of principal executive office) (Zip Code)
(609) 452-8900
(Registrant's telephone number including area code)
As of August 12, 1997, 27,551,728 shares of common stock, $.001 par value were
outstanding.
Indicate by check X whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing for the
past 90 days Yes X No
INTERPOOL, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Introduction to Financial Statements ............... 3
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 ................ 4
Consolidated Statements of Income
For the Three Months and Six Months ended
June 30, 1997 and 1996 ............................. 5
Consolidated Statements of Cash Flows
For the Six Months ended June 30, 1997 and 1996 .... 6
Consolidated Statements of Stockholders' Equity
For the Six Months ended June 30, 1997 ............. 7
Notes to Consolidated Financial Statements ......... 8-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations ...... 10-13
Part II - Other Information:
Item 6: Exhibits and Reports on Form 8-K ....... 14
Signatures......................................... 15
Exhibits .......................................... 16
PART I - FINANCIAL INFORMATION
INTERPOOL, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
The condensed financial statements of Interpool, Inc. and Subsidiaries (the
"Company") included herein have been prepared by the registrant, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Registrant believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest Annual Report on Form 10-K.
These condensed financial statements reflect, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the results for the interim periods. The results of operations
for such interim periods are not necessarily indicative of the results for the
full year.
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
June 30, December 31,
1997 1996
ASSETS
CASH AND SHORT-TERM INVESTMENTS ........................................... $ 36,875 $ 45,333
MARKETABLE SECURITIES ..................................................... 12,296 24,722
ACCOUNTS AND NOTES RECEIVABLE, less allowance of
$2,665 and $2,506 ......................................................... 34,264 28,818
NET INVESTMENT IN DIRECT FINANCING LEASES ................................. 308,841 264,955
OTHER RECEIVABLES.......................................................... 14,793 14,721
LEASING EQUIPMENT, at cost ................................................ 675,821 650,734
Less--accumulated depreciation and amortization (123,649) (109,363)
---------- ---------
LEASING EQUIPMENT, net..................................................... 552,172 541,371
OTHER ASSETS............................................................... 21,106 19,498
-------- -------
TOTAL ASSETS........................................................... $980,347 $939,418
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES...................................... $ 20,677 $ 38,338
INCOME TAXES
Current ............................................................... 1,000 978
Deferred............................................................... 15,368 14,353
------- --------
16,368 15,331
DEFERRED INCOME ........................................................... 1,759 1,970
DEBT AND CAPITAL LEASE OBLIGATIONS:
Due within one year ................................................... 99,308 80,831
Due after one year..................................................... 524,086 521,873
------- -------
623,394 602,704
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES IN SUBSIDIARY GRANTOR TRUSTS
(holding solely junior subordinated deferrable interest
debentures of the Company) (75,000 shares 9 7/8% Capital Securities
outstanding, liquidation preference $75,000)........................... 75,000 -
MINORITY INTEREST IN EQUITY OF SUBSIDIARIES 559 529
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001 per share; 1,000,000 authorized,
none issued at June 30, 1997........................................... - -
5 3/4% Cumulative Convertible Preferred stock, par value $.001 per share;
760,054 shares authorized, 758,694 outstanding, liquidation
preference $75,869 at December 31, 1996, none at June 30, 1997 ..... - 1
Common stock, par value $.001 per share; 100,000,000 shares
authorized, 27,551,728 outstanding at June 30, 1997 and
25,953,345 at December 31, 1996...................................... 28 26
Additional paid-in capital ............................................. 124,046 170,172
Retained earnings....................................................... 117,654 109,837
Net unrealized gain on marketable securities............................ 862 510
-------- -------
Total stockholders' equity........................................... 242,590 280,546
-------- --------
Total liabilities and stockholders' equity $980,347 $939,418
======== =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
REVENUES.................................................... $39,784 $36,431 $77,960 $71,610
COSTS AND EXPENSES:
Lease operating and administrative expenses................. 9,352 6,957 17,695 14,519
Depreciation and amortization of leasing equipment.......... 8,691 8,048 17,222 15,985
Gain on sale of leasing equipment........................... (427) (173) (756) (444)
Interest expense, net....................................... 11,666 10,228 22,728 20,081
Non-recurring charge........................................ - - - 2,392
--------- ---------- --------- -------
29,282 25,060 56,889 52,533
------ --------- --------- ------
Income before provision for income taxes & extraordinary loss 10,502 11,371 21,071 19,077
Provision for income taxes.................................. 1,675 1,900 3,150 3,550
------ ------- ----- -----
Income before extraordinary loss............................. 8,827 9,471 17,921 15,527
Extraordinary item - loss on early retirement of debt, net of
tax benefit of $225....................................... - - 328 -
--------- ---------- --------- ----------
NET INCOME.................................................. $8,827 $9,471 $17,593 $15,527
====== ====== ======= =======
Income per share before extraordinary loss and premium paid
on redemption of preferred stock:
Primary.................................................. $0.31 $0.32 $0.61 $0.60
Fully diluted............................................ NA $0.30 NA $0.57
Extraordinary loss on retirement of debt:
Primary.................................................. - - ($0.01) -
Fully diluted............................................ - - - -
Premium paid on redemption of preferred stock (per share):
Primary.................................................. - - ($0.24) -
Fully diluted............................................ - - - -
NET INCOME PER SHARE:
Primary.................................................. $0.31 $0.32 $0.36 $0.60
Fully diluted............................................ NA $0.30 NA $0.57
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (in Thousands):
Primary.................................................. 28,444 26,592 27,968 26,468
Fully diluted............................................ NA 31,472 NA 31,209
The accompanying notes to consolidated financial statements are
an integral part of these statements.
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
---- ----
Cash flows from operating activities:
Net income ................................................. $17,593 $15,527
Adjustments to reconcile net income to net cash provided by
Operating activities:
Non-recurring charge ................................... - 2,392
Depreciation and amortization .......................... 18,047 16,318
Gain on sale of leasing equipment ...................... (756) (444)
Collections on direct financing leases.................. 46,363 37,142
Income recognized on direct financing leases........... (16,767) (14,229)
Provision for uncollectible accounts.................... 763 378
Changes in assets and liabilities:
Accounts and notes receivable ...................... (6,131) (1,917)
Other receivables .................................. (612) (907)
Other assets and non-cash transactions.............. (2,378) (293)
Accounts payable and accrued expenses............... 3,703 2,175
Income taxes payable ............................... 907 2,370
Deferred income .................................... (211) 152
Minority interest in equity of subsidiaries......... 30 34
--------- ---------
Net cash provided by operating activities........ 60,551 58,698
Cash flows from investing activities:
Acquisition of leasing equipment ............................ (30,463) (25,551)
Proceeds from dispositions of leasing equipment.............. 3,981 4,331
Investment in direct financing leases ....................... (72,160) (55,204)
Proceeds from (purchase of) marketable securities and other
investing activities.................................... (8,624) 14,218
--------- -------
Net cash used for investing activities........... (107,266) (62,206)
Cash flows from financing activities:
Proceeds from issuance of debt .............................. 80,884 59,034
Payments of debt and capital lease obligations............... (60,164) (43,421)
Proceeds from issuance of capital securities................. 73,300 -
Redemption of preferred stock................................ (52,871) -
Cash dividends paid.......................................... (2,892) (6,039)
-------- -------
Net cash provided by financing activities.................. 38,257 9,574
------- -------
Net increase (decrease) in cash and short-term investments (8,458) 6,066
Cash and short-term investments, beginning of period............ 45,333 40,208
-------- --------
Cash and short-term investments, end of period.................. $36,875 $46,274
========= =========
Supplemental schedule of non-cash financing activities:
Acquisition of subsidiary common and preferred stock in exchange for
Company's 5 3/4% Cumulative Convertible Preferred Stock..... - $6,892
The accompanying notes to consolidated financial statements are an
integral part of these statements.
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Dollars and shares in thousands)
(Unaudited)
Shares Shares
of Par of Par Paid-In Retained Net Unrealized
Preferred Value Capital Value Capital Earnings Gain on Marketable
Stock Stock Securities
Balance, December 31, 1996............ 759 $1 25,953 $26 $170,172 $109,837 $510
Net income......................... 17,593
Net unrealized gain on
Marketable Securities.......... 352
Redemption of preferred stock...... (510) (1) (46,154) (6,716)
Conversion of preferred stock...... (249) 1,597 2 (2)
Conversion of subordinated notes... 2 30
Cash Dividends declared:
Preferred stock................ (994)
Common stock................... (2,066)
Balance, June 30, 1997............... -- -- 27,552 $28 $124,046 $117,654 $862
The accompanying notes to consolidated financial statements are an integral part of these statements.
INTERPOOL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
NOTE 1 -- NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION:
A. Nature of Operations:
The Company and its subsidiaries conduct business principally in a single
industry segment, the leasing of intermodal dry freight standard containers,
chassis and other transportation related equipment. The Company leases its
containers principally to international container shipping lines located
throughout the world. The customers for the Company's chassis are a large number
of domestic companies, many of which are domestic subsidiaries or branches of
international shipping lines. Equipment is purchased directly or acquired
through conditional sales contracts and lease agreements, many of which qualify
as capital leases.
The Company's accounting records are maintained in United States dollars
and the consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States.
B. Basis of consolidation:
The consolidated financial statements include the accounts of the Company
and subsidiaries more than 50% owned. All significant intercompany transactions
have been eliminated.
C. Income per share:
Primary income per share before extraordinary loss and premium paid on
redemption of preferred stock is computed by deducting preferred dividends (and
in 1996, adding the non-recurring charge for cumulative dividends) from income
to arrive at income attributable to common stockholders before extraordinary
loss and premium paid on redemption of preferred stock. This amount is then
divided by the weighted average number of shares outstanding during the period
adjusted for the dilutive effect of stock options. In 1997, the extraordinary
loss on early retirement of debt, net of tax, and the premium paid on redemption
of the 5 3/4% Cumulative Convertible Preferred Stock have been deducted to
arrive at primary net income per share. Shares issuable upon the conversion of
the 5 3/4% Cumulative Convertible Preferred Stock and the 5 1/4% Convertible
Exchangeable Subordinated Notes have been added to the weighted shares
outstanding and interest expense net of tax effect on the notes has been added
to net income in the fully diluted earnings per share computation for 1996.
These items do not have a significant dilutive effect for 1997. Per share
amounts and common shares outstanding have been restated to give effect to the
three-for-two stock split effected March 27, 1997 described in Note 4.
NOTE 2 -- CASH FLOW INFORMATION:
For the six months ended June 30, 1997 and 1996, cash paid for interest was
approximately $22,031 and $21,269, respectively. Cash paid for income taxes was
approximately $2,957 and $1,253, respectively.
NOTE 3 -- OTHER CONTINGENCIES AND COMMITMENTS:
At June 30, 1997, the Company had outstanding purchase commitments for
equipment of approximately $50,000.
Under certain of the Company's leasing agreements, the Company, as lessee,
may be obligated to indemnify the lessor for loss, recapture or disallowance of
certain tax benefits arising from the lessor's ownership of the equipment.
In the second quarter of 1997 the Company recognized a successful legal
claim recovery of approximately $1,500 which is included in revenues.
The Company is engaged in various legal proceedings from time to time
incidental to the conduct of its business. In the opinion of management, the
Company is adequately insured against the claims relating to such proceedings,
and any ultimate liability arising out of such proceedings will not have a
material adverse effect on the financial condition or results of operations of
the Company.
NOTE 4 -- SIGNIFICANT EVENTS:
On January 27, 1997, Interpool Capital Trust, a Delaware business trust and
special purpose entity (the "Trust"), issued in a private placement 75,000
shares of 9 7/8% Company-Obligated Mandatory Redeemable Capital Securities with
an aggregate liquidation preference of $75,000 (the "Capital Securities") for
proceeds of $75,000. Costs associated with the transaction amounted to
approximately $1,700 and were borne by the Company. Interpool owns all the
common securities of the Trust. The proceeds received by the trust from the sale
of the Capital Securities were used by the Trust to acquire $75,000 of 9 7/8 %
Junior Subordinated Debentures due February 15, 2027 of the Company (the
"Debentures"). The Debentures are the sole assets of the Trust. The Capital
Securities represent preferred beneficial interests in the Trust's assets.
Distributions on the Capital Securities are cumulative and payable at the annual
rate of 9 7/8% of the liquidation amount, quarterly in arrears, commencing
February 15, 1997. The Company has the option to defer payment of distributions
for an extension period of up to five years if it is in compliance with the
terms of the Capital Securities. Interest at 9 7/8% will accrue on such deferred
distributions throughout the extension period. The Capital Securities will be
subject to mandatory redemption upon repayment of the Debentures to the Trust.
The redemption price decreases from 104.975% of the liquidation preference in
2007 to 100% in 2017 and thereafter. Under certain limited circumstances, the
Company may, at its option, prepay the Debentures and redeem the Capital
Securities prior to 2007 at a prepayment price specified in the governing
instruments.
The Company used $52,871 of net proceeds from the sale of the Debentures to
the Trust to redeem 509,964 shares of the Company's 5 3/4% Cumulative
Convertible Preferred Stock (the "Preferred Stock") on March 10, 1997 at a
redemption price of 103.675% per share of the liquidation value.
On March 10, 1997 a total of 248,730 shares, or $24,873 in aggregate
liquidation value of the Company's 5 3/4% Cumulative Convertible Preferred Stock
(representing 32.78% of the outstanding shares of Preferred Stock) were
converted into a total of 1,596,446 shares (after stock split basis) of Common
Stock.
As a result of the redemption of shares of Preferred Stock, the Company
recorded a one-time charge to retained earnings of $6,716 or 24 cents per share
on a primary basis.
On March 12, 1997 the Company's Board of Directors announced a
three-for-two stock split, which was effective on March 27, 1997. No fractional
shares were issued in connection with the stock split. Instead, under the terms
of the stock split, the Company rounded any fractional shares to which any
stockholder was entitled as a result of the stock split up to the nearest whole
share.
On March 27, 1997, options for the purchase of 1,498,500 shares of common
stock were granted under the Stock Option Plan at an exercise price of $15.58
per share (the fair value of the Company's common stock on the date of the
grant). These options vest six months from the date of the grant and expire in
ten years from the date of the grant.
NOTE 5 -- SUBSEQUENT EVENTS
In July and August 1997 the Company issued $225,000 of ten year notes,
comprised of $150,000 of 7.35% Notes due 2007 and $75,000 of 7.20% Notes due
2007. These Notes represent the Company's first issues of senior unsecured debt.
The net proceeds from these offerings are being used for general corporate
purposes, including repayment of secured indebtedness, the purchase of equipment
and working capital.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates revenues through leasing transportation equipment,
primarily intermodal dry freight standard containers and container chassis. Most
of the Company's revenues are derived from payments under operating leases and
income earned under finance leases, under which the lessee has the right to
purchase the equipment at the end of the lease term. In the six months ended
June 30, 1997 and 1996 revenues from direct financing leases were $16.8 million
(22% of revenues) and $14.2 million (20% of revenues), respectively.
In March 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" which is effective for fiscal 1997. This
statement establishes accounting standards for computing and presenting earnings
per share (EPS). It replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic EPS and diluted EPS
for companies with complex capital structures. For the three months ended June
30, 1997 and 1996, on a pro forma basis, under the new standard basic net income
per share would have been $0.32 and $0.32, respectively and diluted net income
per share would have been $0.31 and $0.30, respectively. For the six months
ended June 30, 1997, on a pro forma basis, under the new standard basic income
per share before extraordinary loss and premium paid on redemption of preferred
stock would have been $0.63 and diluted income per share before extraordinary
loss and premium paid on redemption of preferred stock would have been $0.60. On
a pro forma basis, under the new standard basic net income per share would have
been $0.37 and $0.61, and diluted net income per share would have been $0.36 and
$0.57 for the six months ended June 30, 1997 and 1996, respectively.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
REVENUES
The Company's revenues increased to $39.8 million for the three months
ended June 30, 1997 from $36.4 million in the three months ended June 30, 1996,
an increase of $3.4 million or 9%. The increase is due to increased leasing
revenues generated by an expanded container and chassis fleet size and a
successful legal claim recovery of $1.5 million. Revenues for the three months
ended June 30, 1997 were $21.8 million for the Interpool Limited international
container division and $18.0 million for the domestic intermodal division. This
compared to $20.0 million for the Interpool Limited international container
division and $16.4 million for the domestic intermodal division for the three
months ended June 30, 1996.
LEASE OPERATING AND ADMINISTRATIVE EXPENSES
The Company's lease operating and administrative expenses increased to $9.4
million for the three months ended June 30, 1997 from $7.0 million in the three
months ended June 30, 1996, an increase of $2.4 million. The increase was
primarily due to higher operating costs of $1.8 million resulting from expanded
operations generating increased maintenance and repair, positioning, commission
and insurance expenses. Also an increase of $.6 million in administrative costs
resulting from both increased operations and inflation contributed to the
increase.
DEPRECIATION AND AMORTIZATION OF LEASING EQUIPMENT
The Company's depreciation and amortization expenses increased to $8.7
million in the three months ended June 30, 1997 from $8.0 million in the three
months ended June 30, 1996, an increase of $.7 million. The increase was due to
an increased fleet size.
GAIN ON SALE OF LEASING EQUIPMENT
The Company's gain on sale of leasing equipment increased to $.4 million in
the three months ended June 30, 1997 compared to $.2 million in the three months
ended June 30, 1996.
INTEREST EXPENSE, NET
The Company's net interest expense increased to $11.7 million in the three
months ended June 30, 1997 from $10.2 million in the three months ended June 30,
1996, an increase of $1.5 million. The issuance of capital securities increased
interest expense by $1.9 million. Partially offsetting the increased expenses
was higher interest income of $.5 million resulting from higher cash balances in
1997.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes decreased to $1.7 million from
$1.9 million due to a lower taxable income and a lower effective tax rate
resulting from the deductible interest expense on subordinated debentures in
1997.
NET INCOME
As a result of the factors described above, the Company's net income
decreased to $8.8 million in the three months ended June 30, 1997 from $9.5
million in the three months ended June 30, 1996. For the three months ended June
30, 1997 the Interpool Limited international container division contributed $7.6
million to net income while the domestic intermodal division contributed $1.2
million. The domestic intermodal division's second quarter contribution was
reduced by $1.1 million of interest expense, net of taxes, attributable to the
$75 million of 9 7/8% Capital Securities sold by the Company in January, 1997.
This compares to the three months ended June 30, 1996 where the Interpool
Limited international container division contributed $7.3 million to net income
while the domestic intermodal division contributed $2.2 million.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
REVENUES
The Company's revenues increased to $78.0 million for the six months ended
June 30, 1997 from $71.6 million in the six months ended June 30, 1996, an
increase of $6.4 million or 9%. The increase is primarily due to increased
leasing revenues generated by an expanded container and chassis fleet size. Also
contributing to the increase was a $1.5 million successful legal claim recovery.
Revenues for the six months ended June 30, 1997 were $42.5 million for the
Interpool Limited international container division and $35.5 million for the
domestic intermodal division. This compared to $38.9 million for the Interpool
Limited international container division and $32.7 million for the domestic
intermodal division for the six months ended June 30, 1996.
LEASE OPERATING AND ADMINISTRATIVE EXPENSES
The Company's lease operating and administrative expenses increased to
$17.7 million for the six months ended June 30, 1997 from $14.5 million in the
six months ended June 30, 1996, an increase of $3.2 million. The increase was
due to higher lease operating expenses of $2.6 million resulting from expanded
operations generating increased maintenance and repair, positioning, commission
and insurance expenses. Also, due to expanded operations and inflation, higher
administrative costs of $.6 million were incurred.
DEPRECIATION AND AMORTIZATION
The Company's depreciation and amortization expenses increased to $17.2
million in the six months ended June 30, 1997 from $16.0 million in the six
months ended June 30, 1996, an increase of $1.2 million. The increase was due to
an increased fleet size.
GAIN ON SALE OF LEASING EQUIPMENT
The Company's gain on sale of leasing equipment increased to $.8 million in
the six months ended June 30, 1997 from $.4 million in the six months ended June
30, 1996.
INTEREST EXPENSE, NET
The Company's net interest expense increased to $22.7 million in the six
months ended June 30, 1997 from $20.1 million in the six months ended June 30,
1996, an increase of $2.6 million. The issuance of capital securities increased
interest expense by $3.1 million which was partially offset by increased
interest income of $.5 million due to the higher cash balances in 1997.
NON-RECURRING CHARGE
During the first quarter of 1996, Interpool, Inc. acquired the minority
interest in the common stock of its subsidiary, Trac Lease, Inc., and the
outstanding shares of preferred stock of Trac Lease, in exchange for preferred
stock of Interpool. Interpool now owns 100% of the equity of Trac Lease. The
acquisition of Trac Lease preferred stock and its related accrued, cumulative
dividends resulted in a non-recurring, non-cash charge in the amount of $2.4
million. Such charge has no impact on net income per share because the effect of
unpaid dividends was included in the computation of net income per share in
prior periods.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes decreased to $3.2 million from
$3.6 million due to lower taxable income.
NET INCOME
As a result of the factors described above, the Company's net income
increased to $17.6 million in the six months ended June 30, 1997 from $15.5
million in the six months ended June 30, 1996. For the six months ended June 30,
1997 the Interpool Limited international container division contributed $15.1
million to net income while the domestic intermodal division contributed $2.8
million excluding the extraordinary charge of $.3 million on retirement of debt.
The domestic intermodal division's six month contribution was reduced by $1.9
million of interest expense, net of taxes, attributable to the $75 million of 9
7/8% Capital Securities sold by the Company in January, 1997. This compares to
the six months ended June 30, 1996 where the Interpool Limited international
container division contributed $13.8 million to net income while the domestic
intermodal division contributed $4.1 million excluding the non-recurring charge
of $2.4 million mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses funds from various sources to finance the acquisition of
equipment for lease to customers. The primary funding sources are cash provided
by operations, borrowings, generally from banks, the issuance of capital lease
obligations and the sale of debt securities. In addition, the Company generates
cash from the sale of equipment being retired from the Company's fleet. In
general, the Company seeks to meet debt service requirements from the leasing
revenue generated by its equipment.
The Company generated cash flow from operations of $60.6 million and $58.7
million in the first six months of 1997 and 1996, respectively, and net cash
provided by financing activities was $38.3 million and $9.6 million for the
first six months of 1997 and 1996, respectively. The Company has purchased the
following amounts of equipment: $102.6 million for the six months ended June 30,
1997 and $80.8 million for the six months ended June 30, 1996.
The Company has a $150.0 million revolving credit facility with a group of
commercial banks; on June 30, 1997, $60.0 million was outstanding. The term of
this facility extends until May 31, 1998 (unless the lender elects to renew the
facility) at which time a maximum of 10% of the amount then outstanding becomes
due, with the remainder becoming payable in equal monthly installments over a
five year period. In addition, as of June 30, 1997, the Company had available
lines of credit of $63.0 million under various facilities, under which $33.5
million was outstanding. Interest rates under these facilities ranged from 6.4%
to 7.5%. At June 30, 1997, the Company had total debt outstanding of $623.4
million. Subsequent to June 30, 1997 the Company has continued to incur and
repay debt obligations in connection with financing its equipment leasing
activities. In July and August 1997 the Company issued $225,000 of ten year
notes, comprised of $150,000 of 7.35% Notes due 2007 and $75,000 of 7.20% Notes
due 2007. These Notes represent the Company's first issues of senior unsecured
debt. The net proceeds from these offerings are being used for general corporate
purposes, including repayment of secured indebtedness, the purchase of equipment
and working capital.
As of June 30, 1997, commitments for capital expenditures totaled
approximately $50.0 million. The Company expects to fund such capital
expenditures from the Company's operations, borrowings under its available
credit facilities and additional funds raised through the sale of its debt
securities in the private and/or public markets.
The Company believes that cash generated by continuing operations, together
with amounts available to be borrowed under existing credit facilities and the
issuance of debt securities in the appropriate markets will be sufficient to
finance the Company's working capital needs for its existing business, planned
capital expenditures and expected debt repayments over the next twelve months.
The Company anticipates that long-term financing will continue to be available
for the purchase of equipment to expand its business in the future. In addition,
from time to time, the Company explores new sources of capital both at the
parent and subsidiary levels.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On May 28, 1997, Interpool Capital Trust (the "Trust") filed with the
Securities and Exchange Commission a Registration Statement on Form S-4 to
register the exchange (the "Exchange Offer") of $1,000 liquidation amount of its
9 7/8% Series B Capital Securities for each $1,000 liquidation amount of its
outstanding 9 7/8% Series A Capital Securities, of which $75,000,000 was issued
and sold on January 27, 1997 in a transaction exempt from registration under the
Securities Act of 1933 and is outstanding on the date hereof. Pursuant to the
Exchange Offer, the Company is also offering to exchange (i) its guarantee of
payments of cash distributions and payments on liquidation of the Trust or
redemption of the Series A Capital Securities for a like guarantee in respect of
the Series B Capital Securities and (ii) all of its 9 7/8% Series B Junior
Subordinated Deferrable Interest Debentures for a like principal amount of its 9
7/8% Series A Junior Subordinated Deferrable Interest Debentures. The Exchange
offer commenced on August 4, 1997. The Company expects the Exchange Offer to
close in early September 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 99: (1) Press Release dated April 14, 1997
(2) Press Release dated May 1, 1997 (incorporated by
reference to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1997)
(3) Press Release dated June 19, 1997
(4) Press Release dated July 25, 1997 (incorporated by
reference to the Company's Current Report on Form
8-K dated July 30, 1997)
(5) Press Release dated August 1, 1997 (incorporated by
reference to the Company's Current Report on Form
8-K dated August 4, 1997)
(6) Press Release dated August 7, 1997
(b) Reports on Form 8-K: No reports on Form 8-K were filed for
events occurring during the reporting period; however,
on July 31, 1997 and on August 4, 1997, the Company filed
reports on Form 8-K reporting the sale of the Company's
$150,000,000 7.35% Notes Due 2007 and $75,000,000
7.20% Notes Due 2007, respectively.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERPOOL, INC.
Dated: August 14, 1997 \S\MARTIN TUCHMAN
Martin Tuchman
Chief Executive Officer
Dated: August 14, 1997 \S\WILLIAM GEOGHAN
William Geoghan
Controller
INDEX TO EXHIBITS
Filed with Interpool, Inc.
Report on Form 10-Q for the Quarter Ended June 30, 1997
EXHIBIT NO.
99: (1) Press Release dated April 14, 1997
(2) Press Release dated May 1, 1997 (incorporated by
reference to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1997)
(3) Press Release dated June 19, 1997
(4) Press Release dated July 25, 1997 (incorporated by
reference to the Company's Current Report on Form
8-K dated July 30, 1997)
(5) Press Release dated August 1, 1997 (incorporated by
reference to the Company's Current Report on Form
8-K dated August 4, 1997)
(6) Press Release dated August 7, 1997