Interpool: 35 Years

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This article by Barbara Fox was prepared for the September 17, 2003 edition of U.S. 1 Newspaper. All rights reserved.

From the Ashes, Happy Ending

On Monday Greg Lazzaro and Stephen Cooper had good

jobs with six figure salaries. On Tuesday, without warning, the company

closed.

This frightening and too-familiar story has an upbeat ending, because

on the very day the two men were laid off from PCR, they launched

their own firm. Six months later their equipment rental business,

Technology Resource Corporation, is profitable. Lazzaro and Cooper

say they are happy, much happier than they were before they were fired.

"It was scary for us, and for our top managers who made good money,

instantly to be without an income and no severance," says Lazzaro,

32. His wife was pregnant with their second child when the company

closed. Cooper, 33, is the father of two children under three. "We

all liked what our families had been accustomed to. All of us had

at least an eight-year tenure. We had been doing this for forever,

so long that we couldn’t let it go. We saw the opportunity, and it

was a no brainer. The second day after we launched Technology Resource

Corporation, we knew we would be successful."

Technology Resource Corporation (TRC) was born when PCR (Personal

Computer Rentals) closed on March 4, 2003. At one point in its history,

PCR had been a profitable division of Interpool, the public company

on College Road East. But in 2003 PCR was a separate company, and

Interpool was PCR’s bank and lender of last resort. When Interpool

pulled PCR’s line of credit, PCR could not continue.

That first week after PCR closed, Cooper stayed in the College Road

offices working with one foot in each camp. On the first day he persuaded

the technicians not to put down the tools but to stay on and fulfill

the old contracts. "I was the one who had to pull the trigger

on a lot of people, but I told the workers, `PCR can’t pay you, we

will pay you. You need to take care of those customers first and foremost,’"

says Cooper. He also hired the new executive team. " We took the

top sales people and top project managers, saving some big jobs.

"We made a pretty seamless transition," claims Cooper, who

says the new firm fulfilled every contract and paid every person.

"We had a lot of balls in the air, a lot of contracts to be fulfilled,

and we scrambled. We were salvaging the customers they were going

to try to collect from."

For PCR, Cooper says he had to empty out the offices, liquidate some

equipment, and marshal the rest into a few warehouses. For TRC, he

encouraged former employees to go into business: "I told the managers,

`If you want to continue in the business, buy yourself some equipment

and open up your shop, and we will be happy to use you as a vendor.’

We told our former competitors, here are the names of the good people

we know, and you can buy up the inventory."

The pair also went looking for money, space, and health insurance.

Within three days they had financing from Roma Savings Bank (though

they have never tapped the loan). Lazzaro can’t say enough good things

about Roma: "Everyone from the bank listened to our story. They

capitalized the company to support us through the growth period, and

we will be a longstanding customer there."

Within a week they had opened their office at Princeton

Commerce Center on Emmons Drive, and before the month was out they

had signed up for a full, company-funded healthcare program.

"PCR’s closing left me and everyone in this company far better

off than they were before," says Cooper. A native of Hamilton,

Cooper’s father had worked for General Motors. At Rider, majoring

in business administration and marketing, he learned formal business

planning, but he says that it was even more valuable to learn how

to juggle multiple tasks.

Before Cooper graduated from Rider in 1992, he had been recruited

to Microtech Leasing by Allen M. Olinger. Olinger was president of

Microtech Leasing, a long-term leasing company, and Gregg Carpene

was general counsel. The related company, PCR, did short leases for

workshops and conventions.

"We were leasing to venture capital backed companies that wanted

to conserve cash, so financing the equipment still made sense,"

says Carpene.

The majority owner of Microtech was Interpool, the public company

whose core business is truck chassis and shipping containers. "The

computer leasing business was different then," explains Cooper.

"The technology jumps were more exponential, and the computers

cost 10 times the money, so leasing was a big deal, like cars are

now. A lot of Microtech’s clients were PCR rental franchises who were

leasing the equipment for the long term and renting it short term.

They made the money, paid it off, and kept the gear."

Cooper’s first Microtech job was to repossess equipment from a defaulted

account in Philadelphia. He started a branch in Philadelphia, and

in the 10 years that followed, he had his hands in every facet of

the business, which he now says was equivalent to an MBA. As a regional

manager, Cooper moved to Florida. Ironically, his wife’s parents had

just moved from South Brunswick to be with their grandchildren when

PCR closed, so he is commuting, going home two weekends a month, to

keep the family with the grandparents through the holidays.

Lazzaro had been hired by Cooper to start the Pittsburgh franchise

in 1992. Lazzaro had grown up in Pittsburgh, where his father worked

two blue collar jobs, and he lives with his family in Princeton.

Around 1996, according to Carpene, the franchisees of PCR rolled up

the business, bought the franchiser, and made a single entity of PCR.

Microtech (and its investor, Interpool) wound up with an equity interest

in PCR.

In 1999 Interpool bought a 51 percent interest from the former franchisees

of PCR, provided some financing, and PCR became a subsidiary of Interpool,

says Carpene. A Metuchen native, Carpene graduated from Dickinson

College in 1985 and studied law at Rutgers. In 1997 he left a Philadelphia

law firm, Cozen O’Connor, to be corporate counsel at Microtech. (Carpene

is now corporate counsel for Interpool, and Olinger is a consultant

to Interpool).

In its heyday, PCR had 30 offices, 325 people, and 2,000 clients.

Then came a decline in both businesses. The basic price of computers

dropped, more convention exhibitors used laptops instead of hard-to-manage

monitors and hard drives, and the venture capital market softened.

PCR tightened its belt. "The amount of money being thrown at the

companies was less. Around 2000 a decision was made that we would

focus all of our efforts on PCR and wind down the leasing business,"

says Carpene.

Carpene says that PCR really began to feel the downturn

in February, 2001, but both businesses were still solvent. In 2000

PCR had netted $700,000, and Microtech showed profit of $500,000,

according to Interpool’s SEC filings.

Anticipating that the rental business would not grow, the officers

at PCR decided to diversify. "We started a services division to

provide technical services in the form of local area networking, wide

area networking, and cabling. We were utilizing the people who were

setting up the rental equipment to bring in a new revenue stream for

pure services," says Carpene.

Lazzaro and Cooper now say that moving into the computer services

business was PCR’s downfall. "It took a tremendous amount of capital

on the front end," says Cooper.

"At the end of the day, this is a blue collar business, and the

company was run with far too much overhead," says Lazzaro. "Better

than 50 percent of the technicians were on staff to ramp up the services

business that never came. The PCR staff lost faith in the management."

But Carpene says the plan could have worked: "Our plan had been

to maintain the rental business to help fund the services business."

Then came September 11, and the fallout from that devastated PCR’s

bread and butter business, conventions. September and October are

the biggest months for conventions and trade shows. "We had significant

contracts with national companies, but when 9/11 happened, it caused

a deceleration in our rental revenue and we needed to accelerate the

growth of our services business," says Carpene.

That year PCR lost $1.7 million, according to the SEC filings, and

Olinger and Carpene mustered their resources to try to save the business.

On December 31, 2001, together with some other investors, they bought

PCR for just over $3 million, including $640,000 in cash, and the

rest in a loan. Interpool held the nine-year note and provided a credit

line. Interpool also paid PCR $792,000 for 100 percent ownership of

Microtech, which had lost $200,000 in 2001. As Interpool continued

closing down Microtech in 2002 it wrote off losses of $12.5 million,

according to the filings. Meanwhile Interpool was involved in some

very complex audits (see story below). That may have influenced its

decision to completely rid itself of the exposure to computer leasing,

a business that it saw as nonstrategic, risky, and unprofitable.

The PCR board met Monday night, March 3, and the company closed on

Tuesday, March 4. Though it did not declare bankruptcy, it liquidated

all its assets.

"Interpool was supportive toward PCR and had assisted the company

greatly," says Carpene, speaking of the painful business decision:

"As a public company, Interpool was growing and wanted to focus

on its core business, leasing containers and chassis. PCR was losing

money. Interpool stopped financing PCR. Without the financing, PCR

was unable to sustain the business."

Cooper believes the closing of PCR could have been prevented: "We

did not adjust fast enough, either scaling back or dumping one of

those businesses. Interpool eventually realized it was throwing good

money after bad. It had a lien on everything and wanted to sell it

all."

Criticizing the sudden closing, Cooper says, "If they had shut

it down a month later and done it with precision, they would have

lost less money. They would have been able to get some debt back."

But now that things are settled down, and as they look back, Lazzaro

and Cooper realize the mistakes they believe PCR made helped to jumpstart

their new business. "I’m certainly not upset that decision was

made," says Lazzaro, "because we have made a success. I’m

happy they did it."

Whereas PCR had 30 offices all over the country, TRC has one office

in Princeton plus a satellite in New York. PCR had 325 employees,

and TRC has 14, including 10 in Princeton, six men and four women.

"We took it on at a sales level so we don’t carry the massive

overhead," explains Cooper. In an average month TRC serves 25

to 30 conventions (50 in the busy month of September) and writes 600

to 700 rental contracts for audiovisual equipment or PCs.

In spite of all their stated objections to PCR’s going into the services

business, TRC is making the very same move, but they say they have

lower overhead. "We are still very much interested in the services

business and are selling large deployment deals to the pharmaceutical

companies," says Cooper. "When pharmaceutical sales reps get

brought on in large numbers, they need laptops and Palms. Dell will

ship 500 computers to a dock, but somebody has to get them set up

and on desks. We’re the feet on the street. We will work with a help

desk provider."

Cooper emphasizes that the TRC success story depended on its business

partners and employees. "Our staff did an incredible job of taking

care of our customers in a short amount of time." All had competitive

offers. "All of them took a great leap of faith. They said, we

think this will work. We can make it happen."

"We have taken the same business and made it into a fun, casual

business," says Cooper, pointing to the reception area’s 40-inch

screen cable TV that employees can watch during lunch. "We have

a group of people who don’t need to be babysat. We don’t have them

filling out forms and counting the days they take off. If you need

to be out, somebody covers for you, but you don’t take advantage of

it. It’s 150 percent different. We’re doing good business. We’re making

money. We’re having fun."

"Something wonderful came out of something horrible," says

Lazzaro of his new status as entrepreneur. He and Cooper each own

50 percent of the firm. "We sit back in disbelief. We are cash

positive and profitable. We haven’t used a penny of financing —

we made more money in six months than PCR made in two years. We feel

we are running the company instead of the other company running us."

Technology Resource Corporation, 29 Emmons Drive,

Suite E-10, Princeton 08540. 609-720-1885; fax, 609-720-1701. E-mail:

glazzaro@trcrent.com Home page: www.trcrent.com

Top Of Page
Interpool: 35 Years

Interpool (IPX), 211 College Road East, Princeton

08540. Martin Tuchman, chairman and CEO. 609-452-8900; fax, 609-452-8211.

Home page: www.interpool.com

A supplier to the transportation industry, Interpool

is the largest lessor of intermodal container chassis and one of the

largest lessors of containers used in international trade. Founded

in 1968, it has 240 global locations and 100 employees in Princeton.

Listed by Forbes magazine as one of the 200 best small companies in

America, it celebrated 10 years on the New York Stock Exchange last

May.

Interpool has nevertheless gotten involved with some very complex

audit moves. In the post-Enron turmoil, it replaced Arthur Andersen

and hired KPMG as its independent auditors. So many complications

ensued that Interpool still has not issued a final, audited, annual

report for 2002.The company says it is cash flow positive, has $150

million in cash, and expects to report $320 million in revenues for

2002.


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