Although Q1 2007 earnings are significantly lower than those of Q1 2006, the business development was in line with management's expectations. RPC-Management-Services delivered another quarter of good top-line and bottom-line growth, while Pallet-Management-Services' operating margins continued to improve following the effects of the investigation by U.S. Immigration and Customs Enforcement (ICE).

 

As a result, group revenues decreased by 1.1% to US $160.7 million in Q1 2007. RPC-Management-Services revenues increased well by 22.1% in Q1 2007 compared to Q1 2006, whereas Pallet-Management-Services revenues declined by 14.4% on a year-over-year basis. The Pallet-Management-Services business segment continues to recover from the effects of the ICE investigation. It should be noted that the comparable quarter Q1 2006 was unaffected by the ICE investigation, which commenced on April 19, 2006.

 

Gross profit margin declined in Q1 2007 by 4.5 percentage points to 14.9%. The gross profit margin decline is largely due to the operational effects of the ICE investigation in the Pallet-Management-Services segment. Although the gross profit margin of the Pallet-Management-Services business segment has improved to 11.7% in Q1 2007 after 8.4% in Q4 2006 and 5.8% in Q3 2006, the segment's gross profit margin has not yet fully rebounded to the pre-ICE levels of Q1 2006. The Company continues to focus on improving labor productivity, raw material utilization, transportation efficiencies and other operational matters.

 

Due to higher depreciation levels and per trip operating costs in our US RPC business following the acquisition of the CHEP USA RPC pool, gross profit margin in RPC-Management-Services decreased to 18.8% in Q1 2007 from 20.8% in Q1 2006. However, gross profit margin in the European RPC business improved compared to Q1 2006.

 

EBITDA declined by 23.0% to US $19.7 million in Q1 2007 and LTM EBITDA reached a level of US $90.4 million. As described above, this EBITDA reduction is largely due to the effects of the ICE investigation on the Pallet-Management-Services business segment. EBITDA margin in this business segment partially recovered to 5.0% in Q1 2007 relative to 1.8% in Q4 2006 and negative 0.5% in Q3 2006. RPC-Management-Services' EBITDA grew significantly by 17.0% to a level of US $16.7 million in Q1 2007.

 

Operating cash flows from continuing operations before income tax payments improved by US $12.2 million, or 71.6%, in Q1 2007, largely due to improved working capital management in Q1 2007 compared to Q1 2006.

 

Capital expenditures decreased by 75.2% to US $9.6 million, largely as a result of the acquisition of the CHEP USA RPC assets in Q1 2006. Excluding this acquisition, capital expenditures decreased by 32.4%, or US $4.6 million, to US $9.6 million in Q1 2007.

 

ROCE, on an LTM basis, from continuing operations decreased to 15.5% as of March 31, 2007, compared to 28.4% as of March 31, 2006.

 

 

 

 

 

IFCO SYSTEMS expects that the economy in Europe will slightly improve, while the company is seeing indications that economic growth in the United States is slowing moderately. IFCO SYSTEMS continues to estimate good market conditions for both of its business segments.

 

IFCO SYSTEMS expects that the disruption in its US Pallet-Management-Services segment resulting from the investigation by U.S. Immigration and Customs Enforcement (ICE) will continue to have a lessening effect on these operations in future periods. The Company anticipates that the recovery in the productivity and profitability of the Pallet-Management-Services segment will continue, that legal costs related to the ICE investigation will decline in future periods, and therefore anticipates an improved result for fiscal 2007 as compared to fiscal 2006 in this segment.

 

The company believes that the market development referred to above, together with its operational business development, will result in increased operating income during fiscal 2007 as compared to 2006.

 

For further explanations please see IFCO SYSTEMS' quarterly report, which will be filed with the Deutsche Börse AG on or about May 10, 2007, and will be available on the company's website www.ifcosystems.com or www.ifcosystems.de.

 

This release contains forward-looking statements that reflect Management's current view with respect to future events. All statements contained in this release that are not clearly historical in nature or necessarily depend on future events are forward-looking. The words "anticipate", "believe", "expect", "estimate", "planned" and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections of the Management on currently available information. Many factors could cause the actual results, performance or achievements to be materially different from those that may be expressed or implied by such statements. We do not assume any obligation to update the forward-looking statements contained in this release.