Itel Corp., the leasing company whose stock soared to 37 1/2 in 1979, actually had a net loss of $433 million that year, according to a delayed 1979 10K financial report made public today.
In the report filed with the Securities and Exchange Commission, the company estimated losses of $35 million from shrunken operations in the first six months of 1980. Losses are continuing, the report said.
With the company's dept pegged at about $1.2 billion as of Dec. 31, 1979, and growing, Itel's top executive said today that a restructuring of the company's obligations to major lending sources is "critical."
James H. Maloon, who became chairman, president, and chief executive officer last March, said: "We either see it coming together in the next few months, or it is unlikely to come together."
But Maloon added that there is no guarantee that the company can stay out of bankruptcy even if the creditors agree to restructure its dept.
He noted that Itel's only ongoing operations are the leasing of containers and rail cars. "These two businesses must carry all of the costs of the depts. The depts exceed the assets of the corporation by $200 million," said Maloon.
In the 10K, the company also restated its already reported 1978 net income figure, reducing it from $47.2 million to $21.5 million. Peat, Marwick, Mitchell & Co., which has been Itel's auditor since 1971, said in a letter included with the 10K that it refused to certify the 1978 financial statement because they might "require further adjustments."
Maloon said that the original higher figure may have been the result of "employe misconduct."
Looking weary, Maloon said that he and other executives worked late into last night completing the report. "The condition of the company is even worse than we thought even a month ago," said Maloon.
Maloon met with reporters at Itel's plush executive offices at Embarcadero Center here, which not long ago were the envy of the city's corporate community.
Describing the sudden collapse of Itel as "one of the real tragedies in the American corporate experience," Maloon said: "Here, a company perceived to be successful collapsed. And it didn't go to zero; it went below zero."
The SEC is conducting a civil investigation to determine whether Itel kept fraudulent books and records. There are also numerous private lawsuits against the company and others.
The Justice Department reportedly iis investigating Itel for possible criminal violations, but Maloon refused to comment when asked if there is also a criminal investigation under way.
The major part of Itel's business was leasing computers, which it bought with borrowed funds. In 1974, Lloyds underwriters in London issued an insurance policy to Itel and some other leasing companies. It provided that if leases were canceled, Lloyds would pay lost revenues after taking into account any proceeds gained from placing the computers with new users.
In 1979, IBM came out with its new 4300 series of computers that were faster, more powerful and up to 30 percent cheaper than anything on the market. fAs a result, many of Itel's customers canceled their leases, and Itel turned to the Lloyds policy for compensation.
According to the 10K, Itel as of Dec. 31, 1979, estimated that its maximum claim against Lloyds would be $310.3 million. It also estimated that it could recover about $60 million of that amount by placing the used computers with new customers.
The 10K report said that Jan. 15 the company had submitted claims to Lloyds of $11.4 million. The insurer had paid only $1.4 million of those claims.
The report said that Lloyds and Itel had agreed "in principle to resolve all differences regarding the computer-leasing indemnity policies."
But the company added that negotiations have progressed very slowly and have been marked by pronounced and varied disagreements. Maloon said that, if settlement is not reached soon, Itel would sue Lloyds.
The 10K revealed for the first time that two former and two current Itel directors are members of insurance underwriting syndicates at Lloyds. But the report said, "Lloyds' internal policies" prevented the company from learning whether the directors are members of syndicates involved in Itel-related underwriting losses.
10K report also showed that Itel's cofounders, former president Peter S. Redfield and vice chairman Gary B. Friedman, received settlement packages of $21.1 million and $1.7 million, respectively, when they resigned in August 1979. The payments, which run through 1981, include Itel stock, unpaid salaries, directors' fees, bonuses and consulting fees.
But, said Maloon, "I haven't had anything to consult them about."