UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 333-188177

TRAC Intermodal LLC

(Exact name of registrant as specified in the charter)

Delaware		46-0648957
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

750 College Road East, Princeton, New Jersey		08540
(Address of principal executive office)		(Zip Code)

(609) 452-8900
(Registrant’s telephone number including area code)

Indicate by check üwhether 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 requirement for the past 90 days. Yes x No o

Indicate by check ü whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such file). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerate filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

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TRAC Intermodal LLC and Subsidiaries

Form 10-Q

Index

		Page No.

FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)

	Consolidated Balance Sheets at September 30, 2016 and December 31, 2015	6

	Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2016 and 2015	7

	Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2016 and 2015	8

	Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2016 and 2015	9

	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68

Item 4.	Disclosure Controls and Procedures	68

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	69

Item 1A.	Risk Factors	69

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70

Item 3.	Defaults Upon Senior Securities	70

Item 4.	Mine Safety Disclosures	70

Item 5.	Other Information	70

Item 6.	Exhibits	71

SIGNATURES		72

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Forward-looking statements

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. Forward looking statements may be identified by the use of words like “expect,” “anticipate,” “intend,” “forecast,” “outlook,” “will,” “may,” “might,” “potential,” “likely,” “target,” “plan,” “contemplate,” “seek,” “attempt,” “should,” “could,” “would” or expressions of similar meaning. Forward-looking statements reflect management’s good faith evaluation of information currently available and are based on its current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. TRAC Intermodal LLC’s (the “Company,” “we” or “TRAC”) actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. We caution you therefore against relying on any of these forward-looking statements.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include economic, business, competitive, market and regulatory conditions and the following:

· the volume of world trade due to economic, political, or other factors;

· the demand for chassis;

· operating costs, including the cost of maintaining and repairing chassis, the cost of labor rates, the cost of parts and materials and the imposition of fees and other charges by the host locations at which the Company operates its chassis pools;

· increased regulatory costs;

· defaults by customers, which would decrease revenues and increase storage, collection, and recovery expenses and require payment to lenders sooner than anticipated;

· the inability of one or more customers to meet their obligations or decreased customer creditworthiness;

· the ability to mitigate any risk associated with efforts to enable shipping line customers to transition to the motor carrier model;

· the Company’s ability to be profitable;

· expansion of the Company’s business to provide logistics services and repair services through its service centers and mobile service units;

· the ability to mitigate any risk associated with the Company’s providing logistics services related to drayage;

· the decision by potential and existing customers to buy rather than lease chassis;

· the effect of the Company’s customers’ decision to shift to short-term leasing and transition to the motor carrier model on long-term leasing and direct finance leasing products;

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· the impact of consolidation within the container shipping industry;

· the Company’s ability to compete successfully in the chassis leasing industry;

· the impact on the Company’s business of losing exclusive rights to operate domestic chassis pools at certain railroad ramps;

· the impact of the credit markets on the worldwide demand for goods and, in turn, on the demand for chassis;

· the Company’s substantial amount of indebtedness;

· the Company’s ability to incur additional debt;

· the limitation on flexibility in operating the business arising from restrictions from debt agreements;

· the Company’s ability to service its debt or to obtain additional financing;

· the Company’s ability to re-lease chassis after their initial long-term lease;

· the impact of liens on equipment;

· changes in market price, availability, or transportation costs of equipment manufactured in China or Mexico;

· the Company’s ability to integrate acquisitions and to realize the anticipated benefits of any such potential future acquisitions;

· a decrease in the availability of storage space for chassis and a resulting increase in depot costs;

· the Company’s ability to maintain qualified personnel;

· strikes, work stoppages or slowdowns by draymen, truckers, longshoremen and railroad workers;

· the Company’s ability to maintain its relationship with employees, and thereby avoid unionization efforts, labor shortages, disruptions or stoppages;

· the Company’s ability or the ability of the Company’s lessees to maintain sufficient insurance to cover losses that may occur to chassis;

· the Company’s ability to estimate and maintain sufficient self-insurance for employee health care benefits;

· the extent of any payments under the Company’s indemnification agreements;

· the impact of accidents or incidents or mismanagement of its fleet on the Company’s reputation and financial results;

· the impact of recalls and other investigations;

· the impact of federal roadability rules and regulations for intermodal equipment providers (“IEP”);

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· the impact of environmental liability;

· the impact of litigation that is not covered by insurance;

· the failure or operational interruption of information technology systems required to conduct its business;

· the failure to adequately protect the Company’s intellectual property rights;

· the willingness and ability of manufacturers or remanufacturers of the Company’s equipment to honor warranties covering defects;

· the disclosure requirement exemptions we utilize based on the Company’s status as an “emerging growth company” under the JOBS Act

· the impact of inherent, potential, or perceived conflicts of interest created by relationships and transactions with members of management, members or shareholders and their respective affiliates;

· risks inherent in international operations, including uncertainty about the jurisdictions in which enforcement might be sought and the political, environmental, and economic stability of particular countries or regions;

· the impact on the Company’s earnings of increases in prevailing interest rates;

· counterparty risk arising in the Company’s hedging strategies;

· the impact of a new standard for lease accounting;

· adverse changes in U.S. tax rules;

· terrorist attacks, wars, uprisings or hostilities; and

· other risks described in the “Risk Factors” section of this report.

Please also refer to Item 1A. Risk Factors to Part II of this report. All of the above factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond the Company’s control. New factors emerge from time to time and it is not possible for management to predict all such factors or to assess the effect of each such new factor on its business. Except to fulfill the Company’s obligations under the U.S. securities laws, we undertake no obligation to update any such statement to reflect events or circumstances after the date on which it is made.

Although the Company believes that assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements included herein may prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or objectives and plans will be achieved.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRAC Intermodal LLC and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(Dollars in Thousands)

	September 30,			December 31,
	2016			2015
Assets
Cash and cash equivalents	$	7,537		$	3,161
Accounts receivable, net of allowance of $14,841 and $12,454, respectively	101,092			110,662
Net investment in direct finance leases	11,956			12,797
Leasing equipment, net of accumulated depreciation of $477,323 and $452,962, respectively	1,407,119			1,435,978
Goodwill	256,815			251,907
Other assets	46,604			32,991
Total assets	$	1,831,123		$	1,847,496

Liabilities and member’s interest
Liabilities
Accounts payable	$	17,512		$	13,593
Accrued expenses and other liabilities	50,028			75,340
Deferred income taxes, net	137,891			127,580
Debt and capital lease obligations:
Due within one year	32,825			41,396
Due after one year	1,074,026			1,039,283
Total debt and capital lease obligations	1,106,851			1,080,679
Less unamortized debt issuance costs	14,466			18,350
Total debt and capital lease obligations less debt issuance costs	1,092,385			1,062,329
Total liabilities	1,297,816			1,278,842

Redeemable indirect parent shares held by management	2,423			—
Commitments and contingencies (Note 7)	—			—

Member’s interest
Member’s interest	543,902			586,757
Accumulated other comprehensive loss	(13,018		)	(18,103		)
Total member’s interest	530,884			568,654
Total liabilities and member’s interest	$	1,831,123		$	1,847,496

See accompanying notes.

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TRAC Intermodal LLC and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(Dollars in Thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Revenues
Equipment leasing revenue	$	156,883		$	170,015		$	470,258		$	500,142
Finance revenue	354			404			1,054			1,199
Other revenue	13,613			6,780			31,556			22,226
Total revenues	170,850			177,199			502,868			523,567

Expenses
Direct operating expenses	95,399			98,679			284,408			283,599
Selling, general and administrative expenses	21,746			23,741			72,263			68,029
Depreciation expense	18,508			18,017			56,118			53,832
Provision (recovery) for doubtful accounts	7,522			(28		)	7,049			2,143
Impairment of leasing equipment	2,007			1,693			9,980			5,695
Restructuring expense	—			—			1,404			—
Loss on modification and extinguishment of debt and capital lease obligations	5,655			16,173			5,655			16,212
Interest expense	15,424			19,715			48,642			63,318
Interest income	—			—			(100		)	(1		)
Other income, net	(518		)	(290		)	(1,386		)	(1,065		)
Total expenses	165,743			177,700			484,033			491,762

Income (loss) before provision for income taxes	5,107			(501		)	18,835			31,805
Provision for income taxes	1,666			737			7,149			13,171
Net income (loss)	$	3,441		$	(1,238	)	$	11,686		$	18,634

See accompanying notes.

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TRAC Intermodal LLC and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in Thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015

Net income (loss)	$	3,441		$	(1,238	)	$	11,686		$	18,634
Unrealized gain (loss) on derivative instruments, net of tax of ($1,064) and $341 and $1,715 and $1,053, respectively	1,644			(528		)	(2,655		)	(1,623		)
Derivative loss reclassified into earnings, net of tax of ($1,569) and ($1,956) and ($4,935) and ($6,086), respectively	2,429			3,025			7,629			9,421
Foreign currency translation, net of tax of $18 and $235 and ($191) and $440, respectively	(25		)	(362		)	111			(719		)
Total other comprehensive income, net of tax	4,048			2,135			5,085			7,079
Total comprehensive income	$	7,489		$	897		$	16,771		$	25,713

See accompanying notes.

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TRAC Intermodal LLC and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in Thousands)

	Nine Months Ended September 30,
	2016			2015
Cash flows from operating activities
Net income	$	11,686		$	18,634
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	56,170			53,911
Provision for doubtful accounts	7,049			2,143
Amortization of deferred financing fees	2,984			5,315
Loss on modification and extinguishment of debt and capital lease obligations	5,655			16,212
Derivative loss reclassified into earnings	12,564			15,507
Ineffective portion of cash flow hedges	251			166
Impairment of leasing equipment	9,980			5,695
Share-based compensation	1,264			466
Deferred income taxes, net	6,869			14,306
Other, net	(697		)	(991		)
Changes in assets and liabilities:
Accounts receivable	4,181			10,405
Other assets	(3,030		)	(1,537		)
Accounts payable	1,732			(137		)
Accrued expenses and other liabilities	(12,086		)	(13,043		)
Net cash provided by operating activities	104,572			127,052

Cash flows from investing activities
Proceeds from sale of leasing equipment	3,545			9,530
Collections on net investment in direct finance leases, net of interest earned	2,206			2,771
Business acquisition	(4,791		)	—
Proceeds from sale of other assets	—			2,300
Investment in direct finance leases	(1,234		)	—
Purchase of leasing equipment	(56,138		)	(38,386		)
Purchase of fixed assets	(12,522		)	(12,799		)
Other investing activity	—			(244		)
Net cash used in investing activities	(68,934		)	(36,828		)

Cash flows from financing activities
Proceeds from long-term debt	243,000			256,250
Repayments of long-term debt	(217,111		)	(334,622		)
Premium paid for redemption of notes	(4,400		)	(12,375		)
Cash paid for debt issuance fees	(306		)	(748		)
Repurchase of indirect parent shares from employees	(1,366		)	—
Dividend paid, net of dividend received	(51,145		)	—
Net cash used in financing activities	(31,328		)	(91,495		)

Effect of changes in exchange rates on cash and cash equivalents	66			(686		)
Net increase (decrease) in cash and cash equivalents	4,376			(1,957		)
Cash and cash equivalents, beginning of year	3,161			4,256
Cash and cash equivalents, end of period	$	7,537		$	2,299
Supplemental disclosures of cash flow information
Cash paid for interest	$	38,105		$	52,513
Cash paid (refunded) for taxes, net	$	227		$	(801	)

See accompanying notes

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TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

1. Description of the Business and Basis of Presentation

The accompanying Consolidated Financial Statements of TRAC Intermodal LLC (the “Company,” “we,” “our” or “TRAC”) and its subsidiaries are unaudited and have been prepared pursuant to U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, in our opinion, reflect all adjustments, including normal recurring items, which are necessary to present fairly the results for interim periods. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC; however, we believe that the disclosures are adequate to make the information presented not misleading. These interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015 and with the information contained in other publicly-available filings with the SEC.

TRAC is an intermodal chassis solutions provider for domestic and international transportation companies in North America. Its principal business is providing marine and domestic chassis on both long and short-term leases or rental agreements to a diversified customer base including the world’s leading shipping lines, Class I railroads, major U.S. intermodal transportation companies and motor carriers. The Company and its subsidiaries conduct business principally in one industry, the leasing of intermodal transportation equipment. The Company has two reportable segments, the Marine Market segment and the Domestic Market segment. The Company purchases equipment directly from manufacturers and shipping lines as well as through lease agreements, some of which qualify as capital leases. Primarily all of the Company’s revenues and long-lived assets are attributable to the United States.

TRAC is a Delaware limited liability company that was formed on July 12, 2012 to facilitate the issuance of $300,000 aggregate principal amount of 11% Senior Secured Notes (the “Notes”). The Company conducts its business through its 100% owned subsidiary, Interpool, Inc. (“Interpool”) and its consolidated subsidiaries. TRAC is ultimately owned by Seacastle Inc. (“Seacastle”). Seacastle is owned by private equity funds that are managed by an affiliate of Fortress Investment Group LLC (“Fortress”) and by employees of affiliates of Seacastle. Interpool was founded in 1968 as an operating lessor servicing the intermodal transportation equipment industry. Interpool was listed on The New York Stock Exchange as a public company in 1993 and was acquired and taken private by Seacastle in July 2007.

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TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

1. Description of the Business and Basis of Presentation (continued)

Interstar Acquisition

On February 29, 2016, TRAC Interstar LLC (“TRAC Interstar”), a newly formed, indirect wholly owned subsidiary of the Company, acquired certain assets and assumed certain liabilities of the emergency road service business of Interstar Mobile, LLC and Interstar North America, Inc. (collectively “Interstar”) for a purchase price of $5,943 which includes a $1,000 earn-out provision based on future operating performance. The Company recorded $4,908 of goodwill related to the acquisition. The allocation of the purchase price accounting is preliminary as the Company has not yet completed its analysis of estimating the fair value of the assets and liabilities acquired. Interstar, located in Kentucky, is a leading provider of road service repair solutions for both the intermodal and commercial trucking industries. The new entity, TRAC Interstar, combines a dispatch center and one of the country’s largest managed vendor networks and will provide roadside repair services covering chassis, truck and trailer breakdowns 24 hours a day, 7 days a week, 365 days a year.

New Accounting Standards

Pending Adoption

In May 2014, the FASB issued authoritative guidance on accounting for Revenue from Contracts with Customers (Topic 606): (“ASU 2014-09”). This update supersedes most of the current revenue recognition requirements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. This guidance was effective for fiscal years and interim periods beginning after December 15, 2016 and early application was not permitted. However on July 9, 2015, the FASB decided to delay the effective date by one year. The deferral results in the new revenue standard being effective for fiscal years and interim periods beginning after December 15, 2017. The FASB also decided to allow early adoption but no earlier than the original effective date of December 15, 2016. Entities must adopt the new guidance using one of two retrospective application methods. The Company is currently evaluating the standard to determine the impact of its adoption on the Consolidated Financial Statements.

On February 25, 2016, the FASB issued authoritative guidance on accounting for Leases (Topic 842): (“ASU 2016-02”). The FASB is issuing this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Entities are required to adopt this guidance using a modified retrospective approach. The Company is currently evaluating the standard to determine the impact of its adoption on the Consolidated Financial Statements.

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TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

1. Description of the Business and Basis of Presentation (continued)

In March 2016, the FASB issued authoritative guidance on accounting for Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting: (“ASU 2016-09”). The amendments in this Update affect all entities that issue share-based payment awards to their employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows entities to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the cash flow statement, and provides an accounting policy election to account for forfeitures as they occur. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the standard to determine the impact of its adoption on the Consolidated Financial Statements.

In August 2016, the FASB issued authoritative guidance on accounting for Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments: (“ASU 2016-15”). The standard provides guidance on eight specific cash flow items and their classifications in the statement of cash flows thereby reducing the current and potential future diversity in practice. The amendments in this Update are effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The Company is currently evaluating the standard to determine the impact of its adoption on the Consolidated Financial Statements.

No other new accounting pronouncements issued or effective during 2016 had or are expected to have a material impact on the Company’s Consolidated Financial Statements.

2. Leasing Activity

Equipment Leasing Revenue

The Company has non-cancelable operating leases for certain of its leasing equipment. At September 30, 2016, future minimum lease revenue under these agreements is estimated as follows:

2016	$	17,923
2017	47,289
2018	12,548
2019	9,443
2020	4,408
Thereafter	984
	$	92,595

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TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

2. Leasing Activity (continued)

Finance Revenue

At September 30, 2016, receivables under direct finance leases are collectible through 2022 as follows:

	Total Lease Receivables		Unearned Lease Income		Net Lease Receivables
2016	$	1,068	$	335	$	733
2017	10,926		674		10,252
2018	672		182		490
2019	290		64		226
2020	216		27		189
Thereafter	70		4		66
	$	13,242	$	1,286	$	11,956

As of December 31, 2015, the Company had total lease receivables, unearned lease income and net lease receivables of $14,330, $1,533 and $12,797, respectively. As of September 30, 2016 and December 31, 2015, the Company had guaranteed and unguaranteed residual values for leasing equipment on direct finance leases of $8,656 and $8,673, respectively. The unguaranteed residual values are reflected in “Total Lease Receivables” above.

Historically, the Company has not experienced losses related to direct finance leases and does not project future uncollectible amounts related to the principal balances receivable. If customers were to default, the Company would seek to recover the equipment securing the lease, often at fair market values in excess of the remaining receivable.

3. Leasing Equipment

The following is a summary of leasing equipment recorded on the Consolidated Balance Sheets:

	September 30,			December 31,
	2016			2015
Total leasing equipment	$	1,884,442		$	1,888,940
Less accumulated depreciation	(477,323		)	(452,962		)
Leasing equipment, net of accumulated depreciation	$	1,407,119		$	1,435,978

Leasing equipment includes assets recorded under capital leases of $82,195 and $121,817 with accumulated depreciation of $31,730 and $46,304 at September 30, 2016 and December 31, 2015, respectively.

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TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

3. Leasing Equipment (continued)

Impairment of Leasing Equipment

Impairment of leasing equipment amounted to $2,007 and $9,980 for the three and nine months ended September 30, 2016, respectively. This compares to $1,693 and $5,695 for the three and nine months ended September 30, 2015, respectively. The increase in impairment charges reflected during 2016 was primarily due to a greater number of end-of-life chassis impaired in 2016 versus 2015 and an increase in write-downs associated with axle sets determined to be unsuitable for the remanufacturing program. The above impairment charges are recorded in Impairment of leasing equipment in the Consolidated Statements of Operations.

4. Capitalized Software Development Costs

In 2014, the Company’s Investment Committee approved the proposal to replace its principal operating and financial reporting systems, named “Project Helix” to provide more functional capabilities necessitated by new business requirements emerging from the industry shift to the motor carrier model. In accordance with ASC 350-40, Internal-Use Software, the Company is capitalizing costs during the application development stage of the project. At September 30, 2016 and December 31, 2015, capitalized software development costs totaled $20,461 and $9,675, respectively. These costs are included in Other assets in the Consolidated Balance Sheet. Once the software is substantially complete and ready for its intended use, capitalization will cease. Capitalized software costs will be amortized on a straight-line basis over seven years, the estimated useful life of the software.

5. Borrowings

The following is a summary of the Company’s borrowings:

	September 30,					December 31,
	2016					2015
	Debt Instrument			Debt Issuance Cost		Debt Instrument			Debt Issuance Costs
Senior Secured 11% Notes	$	70,000		$	1,011	$	150,000		$	2,746
ABL Facility	994,000			13,438		867,000			15,585
Loans Payable CIMC	12,636			15		14,519			16
Capital lease obligations	30,215			2		49,160			3
Total debt	1,106,851			$	14,466	1,080,679			$	18,350
Less current maturities	(32,825		)			(41,396		)
Long-term debt, less current maturities	$	1,074,026				$	1,039,283

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TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

5. Borrowings (continued)

The Company’s debt consisted of notes, loans and capital lease obligations payable in varying amounts through 2021. On a consolidated basis, the weighted-average interest rate was 5.37% for the year ended December 31, 2015. For the nine months ended September 30, 2016 and 2015, the weighted-average interest rate was 4.20% and 5.58%, respectively. The weighted-average interest rates disclosed are calculated as “all-in” rates which include cash interest expense and amortization of agents’ fees and deferred financing fees.

On January 14, 2016, the Company borrowed $51,000 (the “Repurchase Amount”) under the revolving credit facility of the ABL Facility to finance the repurchase and retirement of 62 shares, par value $0.01 per share, of the common stock of Interpool held by the Company, the sole stockholder of Interpool Through a successive chain of dividends, the Repurchase Amount was received pro rata by the Company’s indirect shareholders of record, including certain private equity funds that are managed by an affiliate of Fortress Investment Group LLC, employees of affiliates of Seacastle Inc. (the Company’s indirect parent) and members of the Company’s management.

In February 2016, the Company executed three interest rate swap agreements to convert variable rate debt based on LIBOR into a fixed rate per annum. See Note 6.

On March 7, 2016, the Company announced its proposed offering of $485,000 aggregate principal amount of senior secured notes due 2021. Subsequently on March 22, 2016, the Company decided that due to current market conditions, it would not proceed with its proposed offering. As a result, during the nine months ended September 30, 2016, the Company expensed approximately $1,603 of accumulated costs related to the offering. These costs are included in Selling, general and administrative expenses in the Consolidated Statement of Operations.

Redemption of Senior Secured 11% Notes

On August 15, 2016, the Company borrowed $80,000 under its ABL Facility which carries an interest rate of one-month LIBOR + 2.00% and matures on December 10, 2020, which is the maturity date of the ABL Facility. The funds were used to finance the redemption of $80,000 in aggregate principal amount of its outstanding Senior Secured 11% Notes at a redemption price equal to 105.500 percent of such aggregate principal amount. Approximately $84,400 was paid to redeem the Notes, $80,000 aggregate principal amount and a premium of $4,400. Additionally, $1,206 of deferred financing fees related to the Notes were expensed upon redemption. As of September 30, 2016, $70,000 aggregate principal amount of the Notes remains outstanding.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

6. Derivatives and Hedging Activities

In the normal course of business, the Company utilizes interest rate derivatives to manage its exposure to interest rate risks. Through the utilization of interest rate derivatives, the Company receives floating rate payments in exchange for fixed rate payments, effectively converting its floating rate debt to a fixed rate. If certain conditions are met, an interest rate derivative may be specifically designated as a cash flow hedge. The Company’s interest rate derivatives qualify and have been designated as cash flow hedges. For the effective portion of the derivative gain or loss, changes in fair value are recorded in Accumulated other comprehensive loss and subsequently reclassified into earnings when the interest payments on the debt are recorded in earnings. The ineffective portion of the derivative gain or loss is recorded in Interest expense in the Consolidated Statements of Operations.

On January 10, 2013, the Company entered into an interest rate swap transaction with Deutsche Bank AG effectively converting $300,000 of variable rate debt based upon LIBOR into a fixed rate instrument. The Company receives one-month LIBOR with interest payable at a rate of 0.756% on the notional amount. At September 30, 2016, one-month LIBOR was 0.5311%. The agreement terminates on August 9, 2017.

On February 4, 2016, the Company executed two interest rate swap agreements with Deutsche Bank. One agreement effectively converts $50,000 of variable rate debt based upon LIBOR into a fixed rate of 1.063% per annum. This agreement will terminate on December 10, 2020 at the same time the Company’s ABL Facility terminates. Additionally, the Company executed a $300,000 forward interest rate swap agreement. This agreement begins on August 9, 2017 when the Company’s existing $300,000 swap agreement ends. At that time, the Company will effectively convert $300,000 of variable rate debt based upon LIBOR into a fixed rate of 1.2985%.

On February 5, 2016, the Company executed an interest rate swap with PNC Bank effectively converting $100,000 of variable rate debt based upon LIBOR into a fixed rate of 1.1175%. The agreement will terminate December 10, 2020 at the same time the Company’s ABL Facility terminates.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

6. Derivative and Hedging Activities (continued)

The Company’s interest rate derivatives involve counterparty credit risk. As of September 30, 2016, the Company does not anticipate its counterparties will fail to meet their obligations. As of September 30, 2016, there were no credit risk related contingent features in the Company’s derivative agreements. For additional disclosures related to derivative instruments see Notes 9 and 15.

The Company held the following interest rate derivative as of September 30, 2016:

	Notional		Effective	Maturity	Floating	Fixed Leg		Fair
Hedged Item	Amount		Date	Date	Rate	Interest Rate		Value (a)
ABL Facility	$	300,000	Jan-2013	Aug-2017	1M LIBOR	0.756	%	$	(236	)
ABL Facility	$	50,000	Feb-2016	Dec-2020	1M LIBOR	1.063	%	$	(297	)
ABL Facility	$	100,000	Feb-2016	Dec-2020	1M LIBOR	1.1175	%	$	(808	)
ABL Facility	$	300,000	Aug-2017	Dec-2020	1M LIBOR	1.2985	%	$	(2,704	)

(a) These interest rate derivatives are recorded in Accrued expenses and other liabilities in the Consolidated Balance Sheets.

At the dates indicated, the Company had in place total interest rate derivatives to fix floating interest rates on a portion of the borrowings under its debt facilities as summarized below:

	Total Current Notional Amount		Weighted-Average Fixed Leg Interest Rate		Weighted-Average Remaining Term
September 30, 2016	$	450,000	0.8704	%	1.97 years
December 31, 2015	$	300,000	0.7560	%	1.53 years

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

6. Derivative and Hedging Activities (continued)

The following table sets forth the net of tax effect of the Company’s cash flow hedge derivative instruments on the Consolidated Financial Statements for the periods indicated:

		Effective Portion						Ineffective Portion
	Derivative Instruments	Change in Unrealized Loss Recognized in OCI on Derivatives (a)			Classification of Loss Reclassified from OCI into Income	Loss Reclassified from OCI into Income (b)		Classification of Loss Recognized Directly in Income on Derivative	(Gain) Loss Recognized Directly in Income on Derivative (c)

Three Months ended September 30, 2016	Interest rate derivatives	$	1,364		Interest expense	$	2,709	Interest expense	$	—

Nine Months ended September 30, 2016	Interest rate derivatives	$	(3,463	)	Interest expense	$	8,437	Interest expense	$	251

Three Months ended September 30, 2015	Interest rate derivatives	$	(792	)	Interest expense	$	3,289	Interest expense	$	208

Nine Months ended September 30, 2015	Interest rate derivatives	$	(2,425	)	Interest expense	$	10,223	Interest expense	$	166

(a) This represents the change in the fair market value of the Company’s interest rate derivatives, net of tax, offset by the amount of actual cash paid related to the net settlements of the interest rate derivatives, net of tax.

(b) This represents the amount of actual cash paid, net of tax, related to the net settlements of the interest rate derivatives plus any effective amortization of deferred losses on the Company’s terminated derivative, net of tax.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015

Net settlements of interest rate derivative, net of tax of ($180), ($171), ($522) and ($519), respectively	$	280	$	264	$	808	$	802
Amortization of terminated derivatives, net of tax of ($1,569), ($1,956), ($4,935) and ($6,086), respectively	2,429		3,025		7,629		9,421
	$	2,709	$	3,289	$	8,437	$	10,223

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

6. Derivatives and Hedging Activities (continued)

The following table summarizes the deferred (gains) and losses for the terminated interest rate derivatives and the related amortization into interest expense for the three and nine months ended September 30, 2016 and 2015:

	Original Maximum Notional		Effective	Maturity	Fixed		Termination De-designation	Deferred Loss Upon		Un- amortized Deferred (Gain) Loss at Sept 30,			Amount of Deferred (Gain) Loss Amortized (including Accelerated Amortization) Into Interest Expense for the Three Months Ended Sept 30,						Amount of Deferred (Gain)Loss Amortized (including Accelerated Amortization) Into Interest Expense for the Nine Months Ended Sept 30,						Amount of Deferred (Gain) Loss Expected to be Amortized Over the Next Twelve
Item	Amount		Date	Date	Rate %		Date	Termination		2016			2016			2015			2016			2015			Months

(a)	$	60,852	Jul-2007	Oct-2017	5.299	%	Dec-2007	$	1,853	$	(1	)	$	(2	)	$	(1	)	$	(5	)	$	(1	)	$	(1	)
(a)	200,000		Jul-2007	Jul-2017	5.307	%	Dec-2007	6,412		(6		)	(4		)	(2		)	(11		)	(2		)	(6		)
(b)	480,088		Oct-2014	Oct-2017	5.436	%	Jul-2008	1,711		506			136			167			398			508			467
(b)	480,088		Oct-2014	Oct-2017	5.436	%	Jul-2008	1,526		305			112			188			377			530			291
(a)	58,238		Nov-2007	Oct-2017	4.305	%	Jul-2008	862		(8		)	(12		)	(14		)	(37		)	(44		)	(8		)
(a)	193,333		Nov-2007	Jul-2017	4.365	%	Jul-2008	3,265		(38		)	(25		)	(49		)	(96		)	(163		)	(38		)
(c)	53,286		Jul-2008	Oct-2017	3.989	%	Aug-2012	2,048		32			51			80			171			259			32
(c)	181,667		Jul-2008	Jul-2017	4.033	%	Aug-2012	8,538		175			125			306			491			1,069			175
(c)	427,407		Oct-2014	Oct-2017	5.174	%	Aug-2012	46,372		14,370			3,617			4,306			11,276			13,351			13,262
Total								$	72,587	$	15,335		$	3,998		$	4,981		$	12,564		$	15,507		$	14,174

(a) This hedged item is referred to as Chassis Funding II Floating Rate Asset-Backed Notes, Series 2007-1

(b) This hedged item is referred to as Chassis Funding Floating Rate Asset-Backed Notes, Series 2007-1

The amount of loss expected to be reclassified from AOCI into interest expense over the next 12 months consists of net interest settlements on active interest rate derivatives in the amount of $645 (which is net of tax of $417) and amortization of deferred losses on the Company’s terminated derivatives of $8,609 (which is net of tax of $5,565).

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

7. Commitments and Contingencies

Chassis Purchase Commitments

The Company’s chassis purchase commitments are related to commitments to refurbish chassis, remanufacture chassis and to exercise purchase options related to maturing capital leases. At September 30, 2016, the Company had non-cancellable commitments totaling approximately $33,860 with commitments totaling $16,806, $8,565, $6,563 and $1,926 for 2016, 2017, 2018 and 2019, respectively. During the third quarter of 2016, the Company entered into a purchase order for the refurbishment of chassis which allows either party to cancel with 90 days’ notice. If the Company were to cancel, it would be required to fulfill refurbishments committed aggregating approximately $3,355 which is included in the 2016 commitment number above.

Tire Purchase Commitments

Contemporaneous with the Interstar acquisition, the Company committed to purchase from an affiliate of the acquired company 45,000 tires annually for a period of five years. Initial prices for tire types were agreed upon but are subject to purchase price adjustments based on certain changes in the cost of raw materials used in the manufacturing process as well as the mix of tires to be purchased over the commitment period. At September 30, 2016, the tire purchase commitments are estimated to be $24,292 with $1,783 committed for the remainder of 2016, $5,919 committed for 2017 and $5,530 committed for 2018, 2019 and 2020, respectively. See Note 12.

Lease Commitments

The Company is party to various operating leases relating to office facilities and certain other equipment with various expiration dates through 2026. All leasing arrangements contain normal leasing terms without unusual purchase options or escalation clauses. As of September 30, 2016, the aggregate minimum rental commitment under operating leases having initial or remaining non-cancelable lease terms in excess of one year was $43,467.

Stock Buyback Program

On April 13, 2016, Interpool instituted a stock buyback program (the “Stock Buyback Program”) whereby employees who hold vested shares of SCT Chassis, Inc. (“SCT Chassis”), an indirect parent of the Company, pursuant to Management Shareholder Agreements executed prior to January 1, 2016, will be eligible to elect, on an annual basis, to sell up to 25% of such shares to Interpool. Under the Stock Buyback Program, participants will elect annually whether to participate in the Stock Buyback Program and the number of eligible shares they wish to sell. Elections will generally be made on or about April 30 of each year, and the Stock Buyback Program will expire in 2019 after all completed share repurchase elections are fulfilled for that year. The fair market value price, at which SCT Chassis shares will be repurchased, will be determined each year by the Board of Directors of SCT Chassis. At September 30, 2016, the estimated repurchase amount based on the current fair market value of $10.72 per share is $3,294. See Note 10.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

7. Commitments and Contingencies (continued)

ILWU Roadability Program — Inspection Fees

An agreement reached in March 2015 between the Pacific Maritime Association (“PMA”) and the International Longshore and Warehouse Union (“ILWU”) provides for mandatory roadability inspections (subject to limited exceptions) of all chassis before they leave any of the West Coast terminals where the ILWU has jurisdiction (the “ILWU Roadability Program”). In connection with this program, the Company has received invoices and payment demands from certain host locations. The Company is currently disputing such fees because, among other reasons, it believes there is no legal basis for them to be imposed and the ILWU Roadability Program provides for inspections beyond those required by applicable law. Since the Company believes that any amounts it may be required to pay are not probable, it is not currently accruing such expenses in its financial statements. As of September 30, 2016, the Company has received invoices aggregating approximately $5,000.

8. Income Taxes

The consolidated income tax provisions for the three and nine months ended September, 30, 2016 and 2015 were determined based upon estimates of the Company’s consolidated forecasted effective income tax rates for the years ended December 31, 2016 and 2015, respectively.

For the three months ended September 30, 2016, the Company recorded a tax provision of $1,666, reflecting a 32.6% effective tax rate. This compares to a tax provision of $737, on a net loss of $501, reflecting a 147% effective tax rate for the three months ended September 30, 2015. In both periods, the effective tax rate was adversely impacted by Canadian and Mexican tax provisions. In addition, the effective tax rate for the three months ended September 30, 2016 was favorably impacted by a lower state effective tax rate and the recognition of a Research and Development tax credit on the Project Helix costs. The effective tax rate for the three months ended September 30, 2015 was adversely affected due to discreet items recorded pertaining to changes in certain states’ effective tax rates.

For the nine months ended September 30, 2016, the Company recorded a tax provision of $7,149, reflecting a 38.0% effective tax rate. This compares to a tax provision of $13,171, reflecting a 41.4% effective tax rate for the nine months ended September 30, 2015. In both periods, the effective tax rate was adversely impacted by Canadian and Mexican tax provisions. In addition, the effective tax rate for the nine months ended September 30, 2016 was favorably impacted by a lower state effective tax rate and the recognition of a Research and Development tax credit on the Project Helix costs.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

9. Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss (“AOCI”) includes the changes in the fair value of derivative instruments, reclassification into earnings of amounts previously deferred relating to derivative instruments and foreign currency translation gains and losses primarily relating to the Company’s Canadian operation.

For the nine months ended September 30, 2016, the components of AOCI, net of tax, are as follows:

	Unrealized Gain (Loss) on Derivative Instruments			Net Derivative Loss to be Reclassified into Earnings			Foreign Currency Translation			Total Accumulated Other Comprehensive Loss
Balance, December 31, 2015	$	198		$	(16,944	)	$	(1,357	)	$	(18,103	)
Current-period other comprehensive (loss) income	(2,655		)	7,629			111			5,085
Balance, September 30, 2016	$	(2,457	)	$	(9,315	)	$	(1,246	)	$	(13,018	)

The following table presents the effects of reclassifications out of AOCI and into the Consolidated Statement of Operations for the periods indicated:

	Income Statement Line Item	Three Months Ended Sept 30, 2016			Nine Months Ended Sept 30, 2016
Total loss in AOCI reclassifications for previously unrealized net losses on terminated derivatives	Interest Expense	$	3,998		$	12,564
Related income tax benefit	Benefit for income taxes	(1,569		)	(4,935		)
Net loss reclassified out of AOCI		$	2,429		$	7,629

	Income Statement Line Item	Three Months Ended Sept 30, 2015			Nine Months Ended Sept 30, 2015
Total loss in AOCI reclassifications for previously unrealized net losses on terminated derivatives	Interest Expense	$	4,981		$	15,507
Related income tax benefit	Benefit for income taxes	(1,956		)	(6,086		)
Net loss reclassified out of AOCI		$	3,025		$	9,421

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

10. Share-Based Payment

A summary of the restricted shares of SCT Chassis under the Company’s share-based compensation plan is as follows. All amounts are in thousands except share and per share amounts.

Non-vested Shares	Shares		Weighted- Average Grant Date Fair Value per share		Fair Value of Shares at Grant Date
Non-vested at January 1, 2016	102,170		$	8.79	$	898
Granted	35,682		11.21		400
Forfeited	—		—		—
Vested	(52,724	)	7.97		(420		)
Non-vested at September 30, 2016	85,128		$	10.31	$	878

New Grants

On June 1, 2016, 35,682 restricted shares of SCT Chassis were granted to a key employee at a fair value of $11.21 per share for a total fair value of $400. These shares vest in equal increments on January 1, 2017, 2018, 2019 and 2020. Additionally on June 1, 2016, the Company advised the employee that he would be permitted to participate in the Stock Buyback Program (as defined below) instituted by the Company in April 2016. See description of program following.

Stock Buyback Program

On April 13, 2016, Interpool instituted a stock buyback program (the “Stock Buyback Program”) whereby employees who hold vested shares of SCT Chassis, an indirect parent of the Company, pursuant to Management Shareholder Agreements executed prior to January 1, 2016, will be eligible to elect, on an annual basis, to sell up to 25% of such shares to Interpool. Under the Stock Buyback Program, participants will elect annually whether to participate in the Stock Buyback Program and the number of eligible shares they wish to sell. Elections will generally be made on or about April 30 of each year, and the Stock Buyback Program will expire in 2019 after all completed share repurchase elections are fulfilled for that year. The fair market value price, at which SCT Chassis shares will be repurchased, will be determined each year by the Board of Directors of SCT Chassis. For the 2016 repurchase, Interpool offered a purchase price of $11.21 per share, and such offer expired on May 13, 2016.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

10. Share-Based Payment (continued)

The Company accounted for the repurchase feature which provides for a cash settlement option for eligible shares in accordance with the Compensation — Stock Compensation Topic of the FASB ASC. Provisions of the Program require certain equity awards to be accounted for under liability accounting; hence such awards have been reclassified and will be re-measured at each reporting date. The Company recognized $312 of additional compensation expense with regard to these awards due to the Program modification and reclassified $641 from Member’s interest to a share repurchase liability account. At inception the Share repurchase liability was $953 and is recorded in Accrued expenses and other liabilities in the Consolidated Balance Sheet. Additionally, the guidance in Accounting Series Release No. 268 (“ASR 268”) requires equity awards, which are now redeemable under the Program to be classified as temporary equity on the balance sheet and re-measured to the estimated redemption value at each reporting period. The Company recognized $744 of additional compensation expense due to the Program modification and reclassified $1,859 from Member’s interest to Redeemable indirect parent shares held by management associated with such awards. Additionally, $775 was recorded to Redeemable indirect parent shares held by management with the offset to Member’s interest to reflect the estimated redemption value for these shares. At inception the balance in this account was $3,378.

On May 13, 2016, the Company repurchased 94,527 shares for $1,060 in accordance with the Stock Buyback Program discussed above. Accordingly, the Company reduced Redeemable indirect parent shares held by management by $845 on the Consolidated Balance Sheet and also reduced the Share repurchase liability by $215.

At September 30, 2016, the Share repurchase liability was $871 and is recorded in Accrued expenses and other liabilities in the Consolidated Balance Sheet. Additionally, the balance in Redeemable indirect parent shares held by management was $2,423 and is presented as temporary equity in the Consolidated Balance Sheet. Both accounts were revalued to fair value and estimated redemption value, respectively, at September 30, 2016.

The Company recorded share-based compensation expense for the three and nine months ended September 30, 2016 of $95 and $1,264, respectively which includes the amounts discussed above. This compares to compensation expense of $117 and $466 for the three and nine months ended September 30, 2015. Compensation expense is recorded as a component of Selling, general and administrative expense in the Company’s Consolidated Statements of Operations and is recognized on a straight-line basis with the compensation expense recognized as of any date being at least equal to the portion of the grant-date fair value that is vested at that date. Total unrecognized compensation expense was approximately $658 at September 30, 2016, which is expected to be recognized over the remaining weighted-average vesting period of 2.4 years.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

10. Share-Based Payment (continued)

Share Repurchases

In addition to the share repurchase discussed above under the Stock Buyback Program, during the nine months ended September 30, 2016, Interpool purchased 32,547 shares of SCT Chassis common stock from employees to meet their minimum statutory withholding requirements upon share vesting and to repurchase shares from an employee upon termination. The cost of these shares was $306 and is included in Member’s interest in the Consolidated Balance Sheet.

11. Segment and Geographic Information

The Company’s principal business is providing marine and domestic chassis on both long and short-term leases or rental agreements to a diversified customer base including the world’s leading shipping lines, Class I railroads, major U.S. intermodal transportation companies and motor carriers. The Company provides such services to its customers through two operating and reportable segments, the Marine Market segment and the Domestic Market segment. The reportable segments are based on the chassis markets that are served by the Company.

The Company evaluates current and future projected segment performance and allocates resources to them primarily based upon Adjusted EBITDA. The Company defines Adjusted EBITDA as income (loss) before income taxes, interest expense, depreciation and amortization expense, impairment of assets and leasing equipment, loss on modification and extinguishment of debt and capital lease obligations, other expense (income), interest income, share-based compensation, principal collections on direct finance leases and other non-routine or non-cash items as determined by management. Adjusted EBITDA is not a measure recognized under U.S. GAAP and does not have a standardized meaning prescribed by U.S. GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. Adjusted EBITDA helps management identify controllable expenses and make decisions designed to help the Company meet its current financial goals and optimize its financial performance. Accordingly, the Company believes this metric measures its financial performance based on operational factors that management can impact in the short-term, namely the cost structure and expenses of the organization.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

11. Segment and Geographic Information (continued)

The following tables show segment information for the three months ended September 30, 2016 and 2015.

Three Months ended September 30, 2016	Marine Market segment		Domestic Market segment		Other			Total
Term revenue	$	8,604	$	3,512	$	—		$	12,116
Pool revenue	102,181		42,586		—			144,767
All other revenue	2,865		1,999		9,103			13,967
Total revenue	$	113,650	$	48,097	$	9,103		$	170,850
Adjusted EBITDA	24,578		25,058		(2,504		)	47,132
Depreciation expense	9,261		6,941		2,306			18,508
Net investment in direct finance leases	11,900		56		—			11,956
Leasing equipment	726,442		492,650		188,027			1,407,119
Capital expenditures for long-lived assets	7,453		1,511		3,821			12,785

Three Months ended September 30, 2015	Marine Market segment		Domestic Market segment		Other			Total
Term revenue	$	9,656	$	4,028	$	—		$	13,684
Pool revenue	114,915		41,416		—			156,331
All other revenue	3,173		2,053		1,958			7,184
Total revenue	$	127,744	$	47,497	$	1,958		$	177,199
Adjusted EBITDA	36,949		26,191		(7,351		)	55,789
Depreciation expense	9,509		6,805		1,703			18,017
Net investment in direct finance leases	13,526		163		—			13,689
Leasing equipment	775,401		493,208		141,523			1,410,132
Capital expenditures for long-lived assets	16,355		5,303		2,616			24,274

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

11. Segment and Geographic Information (continued)

The following tables show segment information for the nine months ended September 30, 2016 and 2015:

Nine Months ended September 30, 2016	Marine Market segment		Domestic Market segment		Other			Total
Term revenue	$	26,609	$	11,589	$	—		$	38,198
Pool revenue	307,238		124,822		—			432,060
All other revenue	9,956		4,665		17,989			32,610
Total revenue	$	343,803	$	141,076	$	17,989		$	502,868
Adjusted EBITDA	80,858		76,712		(13,349		)	144,221
Depreciation expense	28,071		21,412		6,635			56,118
Net investment in direct finance leases	11,900		56		—			11,956
Leasing equipment	726,442		492,650		188,027			1,407,119
Capital expenditures for long-lived assets	38,735		18,637		12,522			69,894

Nine Months ended September 30, 2015	Marine Market segment		Domestic Market segment		Other			Total
Term revenue	$	28,121	$	11,951	$	—		$	40,072
Pool revenue	340,351		119,719		—			460,070
All other revenue	11,601		6,295		5,529			23,425
Total revenue	$	380,073	$	137,965	$	5,529		$	523,567
Adjusted EBITDA	117,794		78,707		(23,364		)	173,137
Depreciation expense	28,746		20,391		4,695			53,832
Net investment in direct finance leases	13,526		163		—			13,689
Leasing equipment	775,401		493,208		141,523			1,410,132
Capital expenditures for long-lived assets	21,793		16,593		12,799			51,185

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

11. Segment and Geographic Information (continued)

The following table shows the reconciliation of net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the three months ended September 30, 2016 and 2015.

	Three Months Ended September 30,
(dollars in thousands)	2016			2015
Net income (loss)	$	3,441		$	(1,238	)
Income tax provision	1,666			737
Interest expense	15,424			19,715
Depreciation expense	18,508			18,017
Impairment of leasing equipment	2,007			1,693
Loss on modification and extinguishment of debt and capital lease obligations	5,655			16,173
Other income, net	(518		)	(186		)
Principal collections on direct finance leases, net of interest earned	736			761
Share-based compensation	95			117
Non-recurring professional fees primarily associated with termination of bond offering	118			—
Adjusted EBITDA	$	47,132		$	55,789

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

11. Segment and Geographic Information (continued)

The following table shows the reconciliation of net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the nine months ended September 30, 2016 and 2015.

	Nine Months Ended September 30,
(dollars in thousands)	2016			2015
Net income	$	11,686		$	18,634
Income tax provision	7,149			13,171
Interest expense	48,642			63,318
Depreciation expense	56,118			53,832
Impairment of leasing equipment	9,980			5,695
Loss on modification and extinguishment of debt and capital lease obligations	5,655			16,212
Other income, net	(1,386		)	(961		)
Interest income	(100		)	(1		)
Principal collections on direct finance leases, net of interest earned	2,206			2,771
Share-based compensation	1,264			466
Non-recurring professional fees primarily associated with termination of bond offering	1,603			—
Restructuring expense	1,404			—
Adjusted EBITDA	$	144,221		$	173,137

Geographic Information

Primarily all of the Company’s revenues and long lived assets are attributable to the United States, the Company’s country of domicile.

12. Related Party Transactions

Management, Facility Fees and Chassis Leasing

The Company charges management fees to a subsidiary of Seacastle for expenses incurred and services performed on its behalf. For the three and nine months ended September 30, 2016, this resulted in income for the Company of $23 and $67, respectively. This compares to $31 and $93, respectively, for the three and nine months ended September 30, 2015. These amounts are included in Selling, general and administrative expenses on the Consolidated Statements of Operations. The Company had a net payable to affiliates of $22 at September 30, 2016 compared to a net receivable from affiliates of $584 at December 31, 2015. These balances are included in Other assets on the Consolidated Balance Sheets.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

12. Related Party Transactions (continued)

The Company also leases chassis to the Florida East Coast Railway (“FEC”) under term lease and pool arrangements. The parent company to the FEC is Florida East Coast Industries, Inc., which is owned by private equity funds managed by affiliates of Fortress. For the three and nine months ended September 30, 2016, the Company recorded chassis leasing revenue from FEC of $591 and $1,702, respectively. This compares to chassis leasing revenue of $589 and $1,662, respectively, for the three and nine months ended September 30, 2015. These amounts are recorded in Equipment leasing revenue on the Consolidated Statements of Operations.

The Company is committed to purchasing 45,000 tires annually for a period of five years from a tire supplier that is co-owned by a member of the senior management team at TRAC Interstar. At September 30, 2016, the tire purchase commitments are estimated to be $24,292 with $1,783 committed for 2016, $5,919 committed for 2017 and $5,530 committed for 2018, 2019 and 2020, respectively. See Note 7.

13. Restructuring Charge

During June 2016, in response to changing market conditions, the Company initiated a reduction in certain staffing levels. In accordance with the Compensation — Non-Retirement Post-Employment Benefits Topic of the FASB ASC, the Company recorded a restructuring charge of $1,404 related to employee severance and termination benefits. This charge is recorded in Restructuring expense in the Consolidated Statements of Operations. At September 30, 2016, the balance in Accrued restructuring is $364 which is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. The decrease in the liability balance from $1,404 at June 30, 2016 to $364 at September 30, 2016 is due entirely to payments made.

14. Grow New Jersey Tax Credit

On June 10, 2014, the Company was approved to receive a Grow NJ Tax Credit in the amount not to exceed $9,800 subject to the terms and conditions of the Grow New Jersey Assistance Act, P.L. 2011, c. 149, as amended; the Grow NJ Program regulations, N.J.A.C. 19:31-18.1 et seq. subject to final amendments to the regulations; and the terms and conditions set forth in the Approval Letter and in the Incentive Agreement.

During 2015, the Company satisfied all the terms and conditions necessary to obtain the Grow NJ Tax Credit and in January 2016, the New Jersey Division of Taxation approved and issued the overall tax credit certificate for $8,800. Since the grant is payable in yearly increments over a ten year period commencing in 2016, the year the first tax credit certificate is issued, the Company received credits amounting to $880 during the first quarter of 2016. It is anticipated that upon continued compliance with the terms and conditions of the grant, the Company will receive an annual grant of $880 each year from 2017 to 2025.

Additionally, as provided for in the statutes governing the grant, the Company sold the tax credits it received to a third party. The third party agreed to purchase, over the ten year period, all credits not used by the Company at 92.5% of the face value of the credits. On February 25, 2016, the third party purchased tax credits totaling $880 and paid the Company $814. There was also a $4 transfer fee related to this transaction.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

14. Grow New Jersey Tax Credit (continued)

Based on the above transaction, the Company recognized Grant income of $136 and $403 for the three and nine months ended September 30, 2016. This is recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. At September 30, 2016, the amount in deferred income was $407 which is recorded in Accrued expenses and other liabilities in the Consolidated Balance Sheets.

15. Fair Value of Financial Instruments

The following table sets forth the valuation of the Company’s financial assets and liabilities measured at fair value on a recurring basis by the input levels (as defined) at the dates indicated:

	Fair Value as of September 30,		Fair Value Measurement as of September 30, 2016 using Fair Value Hierarchy
	2016		Level 1		Level 2		Level 3
Asset:
Cash and cash equivalents	$	7,537	$	7,537	$	—	$	—
Liability:
Derivative instruments	4,045		—		4,045		—
Share repurchase liability	871		—		—		871
Redeemable indirect parent shares held by management	2,423		—		—		2,423

	Fair Value as of December 31,		Fair Value Measurement as of December 31, 2015 using Fair Value Hierarchy
	2015		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	3,161	$	3,161	$	—	$	—
Derivative instruments	576		—		576		—

Cash and cash equivalents: Cash and cash equivalents include all cash balances and highly liquid investments. These instruments are stated at cost, which approximates market value because of the short-term nature of the instruments.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

15. Fair Value of Financial Instruments (continued)

Derivative instruments: The Company’s interest rate derivatives were recorded at fair value on the Company’s Consolidated Balance Sheets and consist of United States dollar denominated LIBOR-based interest rate swaps. Their fair values were determined using cash flows discounted at relevant market interest rates in effect at the period close. The fair value generally reflected the estimated amounts that the Company would receive or pay to transfer the contracts at the reporting date and therefore reflected the Company’s or counterparty’s non-performance risk. Additionally, the Company has analyzed each of the redemption features included in the notes to determine whether any of these embedded features should be bifurcated in accordance with the Derivatives and Hedging Topic of the FASB ASC (ASC 815). The Company has concluded that the redemption feature which offers optional redemption by the Company of up to 35% of the aggregate principal amount of the notes at a redemption price of 111% of the aggregate principal amount of the notes using the cash proceeds of an equity offering qualifies as a feature that should be bifurcated under ASC 815. The Company has determined that the resulting measurement of the fair value of this embedded derivative is immaterial to the Consolidated Financial Statements, and will continue to reassess the fair value of this derivative prospectively with any changes recorded in earnings.

Share repurchase liability and Redeemable indirect parent shares held by management: The Share repurchase liability account and the Redeemable indirect parent shares held by management were recorded at fair value and estimated redemption value on the Company’s Balance Sheet. The fair value and estimated redemption value of these shares at September 30, 2016 was determined to be $10.72 per share. The value per share was determined by a valuation by the Board of Directors of SCT Chassis. In determining fair market value, the Board of Directors relies on a number of valuation approaches including the market-based approach using current market multiples as well as the income approach utilizing a discounted cash flow analysis.

Leasing equipment that is deemed to be impaired is measured at fair value on a non-recurring basis. The fair value is calculated using the income approach based on inputs classified as Level 2 in the fair value hierarchy.

The Company believes the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities approximates the fair value of these financial instruments because of their short-term nature.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

15. Fair Value of Financial Instruments (continued)

Debt: The Company’s debt consists of fixed and floating rate instruments. Variable interest rate debt was $559,142 as of September 30, 2016 and $584,401 as of December 31, 2015. Accordingly, the Company’s variable rate debt approximates market value for similar instruments at the respective dates. The Company had fixed rate debt of $547,709 as of September 30, 2016 and $496,278 as of December 31, 2015. Fair value was calculated based on inputs classified as Level 2 in the fair value hierarchy.

The carrying amounts and fair values of the Company’s financial instruments are as follows:

	September 30, 2016						December 31, 2015
	Carrying Amount of Asset (Liability)			Fair Value of Asset (Liability)			Carrying Amount of Asset (Liability)			Fair Value of Asset (Liability)
Derivative Instrument	$	(4,045	)	$	(4,045	)	$	576		$	576
Total debt and capital lease obligations	$	(1,106,851	)	$	(1,118,425	)	$	(1,080,679	)	$	(1,094,088	)

16. Guarantor Financial Information

On August 9, 2012, TRAC Intermodal LLC along with TRAC Intermodal Corp., entered into a purchase agreement pursuant to which it sold $300,000 aggregate principal amount of the Senior Secured 11% Notes (the “Notes”). Concurrent with the offering of the Notes, the Company entered into a registration rights agreement with investors which required the Company to file a registration statement with the SEC to offer exchange notes with terms substantially identical to the Notes. The exchange offer to exchange the Notes for notes which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), commenced on June 6, 2013, expired on July 5, 2013 and closed on July 10, 2013. Based on information provided by Wells Fargo Bank, N.A., the exchange agent for the exchange offer, as of the expiration date 100% of the Notes were validly tendered for exchange. The Notes are jointly and severally guaranteed unconditionally on a senior secured basis by all of the Company’s existing and future wholly-owned domestic subsidiaries, with certain exceptions. All guarantor subsidiaries are 100% owned by the Company. On August 17, 2015, the Issuers redeemed $150,000 aggregate principal amount of the Notes. Additionally on August 15, 2016, the Issuer redeemed $80,000 aggregate principal amount of the Notes. As of September 30, 2016, $70,000 aggregate principal amount of the Notes remains outstanding.

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Balance Sheet

September 30, 2016

	Company Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	3,138	$	4,399	$	—		$	7,537
Accounts receivable, net	—		100,474		618		—			101,092
Net investment in direct finance leases	—		18,639		—		(6,683		)	11,956
Leasing equipment, net of accumulated depreciation	—		1,395,356		11,763		—			1,407,119
Goodwill	—		256,815		—		—			256,815
Affiliate and intercompany receivable	—		474		—		(496		)	(22		)
Intercompany interest receivable	963		—		—		(963		)	—
Intercompany note receivable	70,000		—		—		(70,000		)	—
Investment in subsidiary	530,884		7,592		—		(538,167		)	309
Other assets	—		46,061		256		—			46,317
Total assets	$	601,847	$	1,828,549	$	17,036	$	(616,309	)	$	1,831,123
Liabilities and member’s interest
Accounts payable, accrued expenses and other liabilities	$	963	$	66,417	$	160	$	—		$	67,540
Intercompany payable	—		—		496		(496		)	—
Intercompany note payable	—		70,000		—		(70,000		)	—
Intercompany interest payable	—		963		—		(963		)	—
Intercompany lease payable	—		—		6,683		(6,683		)	—
Deferred income taxes, net	—		135,477		2,414		—			137,891
Debt and capital lease obligations less debt issuance costs	70,000		1,022,385		—		—			1,092,385
Total liabilities	70,963		1,295,242		9,753		(78,142		)	1,297,816
Redeemable indirect parent shares held by management	—		2,423		—		—			2,423
Total member’s interest	530,884		530,884		7,283		(538,167		)	530,884
Total liabilities and member’s interest	$	601,847	$	1,828,549	$	17,036	$	(616,309	)	$	1,831,123

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Statements of Operations

and Comprehensive Income

For The Three Months Ended September 30, 2016

	Company Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Total revenue	$	—		$	170,089		$	809	$	(48	)	$	170,850
Direct operating expenses	—			95,388			11		—			95,399
Selling, general and administrative expenses	—			21,614			132		—			21,746
Depreciation expense	—			18,366			142		—			18,508
Provision for doubtful accounts	—			7,522			—		—			7,522
Impairment of leasing equipment	—			2,007			—		—			2,007
Loss on modification and extinguishment of debt and capital lease obligations	—			5,655			—		—			5,655
Interest expense	3,025			15,423			49		(3,073		)	15,424
Interest income	(3,025		)	—			—		3,025			—
Equity in earnings of subsidiary	(3,441		)	(331		)	—		3,772			—
Other income, net	—			(518		)	—		—			(518		)
Total (income) expense	(3,441		)	165,126			334		3,724			165,743
Income before provision for income taxes	3,441			4,963			475		(3,772		)	5,107
Provision for income taxes	—			1,522			144		—			1,666
Net income	3,441			3,441			331		(3,772		)	3,441
Unrealized gain on derivative instruments, net of tax of ($1,064)	—			1,644			—		—			1,644
Derivative loss reclassified into earnings, net of tax of ($1,569)	—			2,429			—		—			2,429
Foreign currency translation loss, net of tax of $18	—			(25		)	—		—			(25		)
Total other comprehensive income	—			4,048			—		—			4,048
Total comprehensive income	$	3,441		$	7,489		$	331	$	(3,772	)	$	7,489

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Statements of Operations

and Comprehensive Income

For The Nine Months Ended September 30, 2016

	Company Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Total revenue	$	—		$	500,619		$	2,401	$	(152	)	$	502,868
Direct operating expenses	—			284,375			33		—			284,408
Selling, general and administrative expenses	—			71,852			411		—			72,263
Depreciation expense	—			55,691			427		—			56,118
Provision for doubtful accounts	—			7,049			—		—			7,049
Impairment of leasing equipment	—			9,980			—		—			9,980
Restructuring expense	—			1,404			—		—			1,404
Loss on modification and extinguishment of debt and capital lease obligations	—			5,655			—		—			5,655
Interest expense	11,275			48,640			154		(11,427		)	48,642
Interest income	(11,275			(100		)	—		11,275			(100		)
Equity in earnings of subsidiary	(11,686		)	(944		)	—		12,630			—
Other income, net	—			(1,386		)	—		—			(1,386		)
Total (income) expense	(11,686		)	482,216			1,025		12,478			484,033
Income before provision for income taxes	11,686			18,403			1,376		(12,630		)	18,835
Provision for income taxes	—			6,717			432		—			7,149
Net income	11,686			11,686			944		(12,630		)	11,686
Unrealized loss on derivative instruments, net of tax of $1,715	—			(2,655		)	—		—			(2,655		)
Derivative loss reclassified into earnings, net of tax of ($4,935)	—			7,629			—		—			7,629
Foreign currency translation gain, net of tax of ($191)	—			111			—		—			111
Total other comprehensive income	—			5,085			—		—			5,085
Total comprehensive income	$	11,686		$	16,771		$	944	$	(12,630	)	$	16,771

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Statement of Cash Flows

For The Nine Months Ended September 30, 2016

	Company Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net cash provided by operating activities	$	—		$	102,107		$	1,329	$	1,136		$	104,572
Investing activities:
Proceeds from sale of leasing equipment	—			3,545			—		—			3,545
Collections on net investment in direct finance leases, net of interest earned	—			3,342			—		(1,136		)	2,206
Business acquisition	—			(4,791		)	—		—			(4,791		)
Sales of Interpool shares	51,185			—			—		(51,185		)	—
Investment in direct finance leases	—			(1,234		)	—		—			(1,234		)
Purchase of leasing equipment	—			(56,138		)	—		—			(56,138		)
Purchase of fixed assets	—			(12,522		)	—		—			(12,522		)
Net cash used in investing activities	51,185			(67,798		)	—		(52,321		)	(68,934		)
Financing activities:
Proceeds from long-term debt	80,000			243,000			—		(80,000		)	243,000
Repayments of long-term debt	(80,000		)	(217,111		)	—		80,000			(217,111		)
Cash paid for debt issuance fees	—			(306		)	—		—			(306		)
Premium paid for redemption of Notes	—			(4,400		)	—		—			(4,400		)
Repurchase of indirect parent shares from employees				(1,366		)	—		—			(1,366		)
Dividend paid, net of dividend received	(51,185		)	40			—		—			(51,145		)
Repurchase of Interpool shares	—			(51,185		)	—		51,185			—
Net cash used in financing activities	(51,185		)	(31,328		)	—		51,185			(31,328		)
Effect of changes in exchange rates on cash and cash equivalents	—			66			—		—			66
Net increase in cash and cash equivalents	—			3,047			1,329		—			4,376
Cash and cash equivalents, beginning of period	—			91			3,070		—			3,161
Cash and cash equivalents, end of period	$	—		$	3,138		$	4,399	$	—		$	7,537

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Balance Sheet

December 31, 2015

	Issuer Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	91	$	3,070	$	—		$	3,161
Accounts receivable, net	—		110,039		623		—			110,662
Net investment in direct finance leases	—		20,464		—		(7,667		)	12,797
Leasing equipment, net of accumulated depreciation	—		1,423,788		12,190		—			1,435,978
Goodwill	—		251,907		—		—			251,907
Affiliate and intercompany receivable	—		590		—		(6		)	584
Intercompany interest receivable	6,188		—		—		(6,188		)	—
Intercompany note receivable	150,000		—		—		(150,000		)	—
Investment in subsidiary	568,654		6,575		—		(574,992		)	237
Other assets	—		31,911		259		—			32,170
Total assets	$	724,842	$	1,845,365	$	16,142	$	(738,853	)	$	1,847,496
Liabilities member’s interest
Accounts payable, accrued expenses and other liabilities	$	6,188	$	82,598	$	147	$	—		$	88,933
Intercompany payable	—		—		6		(6		)	—
Intercompany note payable	—		150,000		—		(150,000		)	—
Intercompany interest payable	—		6,188		—		(6,188		)	—
Intercompany lease payable	—		—		7,667		(7,667		)	—
Deferred income taxes, net	—		125,596		1,984		—			127,580
Debt and capital lease obligations less debt issuance costs	150,000		912,329		—		—			1,062,329
Total liabilities	156,188		1,276,711		9,804		(163,861		)	1,278,842
Total member’s interest	568,654		568,654		6,338		(574,992		)	568,654
Total liabilities and member’s interest	$	724,842	$	1,845,365	$	16,142	$	(738,853	)	$	1,847,496

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Statements of Operations

and Comprehensive Income

For The Three Months Ended September 30, 2015

	Company Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenue	$	—		$	176,450		$	807		$	(58	)	$	177,199
Direct operating expenses	—			98,668			11			—			98,679
Selling, general and administrative expenses	—			23,559			182			—			23,741
Depreciation expense	—			17,874			143			—			18,017
Provision for doubtful accounts	—			(28		)	—			—			(28		)
Impairment of leasing equipment	—			1,693			—			—			1,693
Loss on modification and extinguishment of debt and capital lease obligations	—			16,173			—			—			16,173
Interest expense	6,142			19,714			59			(6,200		)	19,715
Interest income	(6,142		)	—			—			6,142			—
Equity in earnings of subsidiary	1,238			(288		)	—			(950		)	—
Other income, net	—			(289		)	(1		)	—			(290		)
Total expense	1,238			177,076			394			(1,008		)	177,700
(Loss) income before provision for income taxes	(1,238		)	(626		)	413			950			(501		)
Provision for income taxes	—			612			125			—			737
Net (loss) income	(1,238		)	(1,238		)	288			950			(1,238		)
Unrealized loss on derivative instruments, net of tax of $341	—			(528		)	—			—			(528		)
Derivative loss reclassified into earnings, net of tax of ($1,956)	—			3,025			—			—			3,025
Foreign currency translation loss, net of tax of $235	—			(362		)	—			—			(362		)
Total other comprehensive income	—			2,135			—			—			2,135
Total comprehensive (loss) income	$	(1,238	)	$	897		$	288		$	950		$	897

Table of Contents

TRAC Intermodal LLC and Subsidiaries

Notes to Consolidated Financial Statements — Unaudited (continued)

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollars in Thousands, Except for Share Amounts)

16. Guarantor Financial Information (continued)

TRAC Intermodal LLC

Condensed Consolidating Statements of Operations

and Comprehensive Income

For The Nine Months Ended September 30, 2015

	Company Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Total revenue	$	—		$	521,354		$	2,395		$	(182	)	$	523,567
Direct operating expenses	—			283,567			32			—			283,599
Selling, general and administrative expenses	—			67,562			467			—			68,029
Depreciation expense	—			53,403			429			—			53,832
Provision for doubtful accounts	—			2,143			—			—			2,143
Impairment of leasing equipment	—			5,695			—			—			5,695
Loss on modification and extinguishment of debt and capital lease obligations	—			16,212			—			—			16,212
Interest expense	22,642			63,316			184			(22,824		)	63,318
Interest income	(22,642		)	(1		)	—			22,642			(1		)
Equity in earnings of subsidiary	(18,634		)	(914		)	—			19,548			—
Other income, net	—			(1,058		)	(7		)	—			(1,065		)
Total (income) expense	(18,634		)	489,925

TRAC Intermodal LLC 10-Q