IPX Interpool

Interpool, Inc. (NYSE: IPX) announced that it will be amending its Annual Report on Form 10-K for 2004 and its quarterly reports on Form 10-Q for the first and second quarters of 2005. The amendments are required to correct an accounting error relating to a modification in October 2003 of a stock option grant held by a former executive officer. The correction of this error will have the effect of reducing reported net income for the year ended December 31, 2003 by $4.3 million but will have no effect on Interpool's cash flows for any period and will increase stockholders' equity by $2.8 million. When originally preparing its 2003 consolidated financial statements, the Company recorded compensation expense related to the cash separation payments the Company agreed to make to Raoul Witteveen, the Company's former president, in connection with Mr. Witteveen's resignation in October 2003. However, the separation agreement between the Company and Mr. Witteveen also contained a provision under which Mr. Witteveen's fully vested stock options, which had a five-year remaining term at the time of his resignation, would instead expire two years after his resignation and therefore would not be subject to a provision of the Company's 1993 Stock Option Plan under which vested options terminate if not exercised within ten business days after resignation. In its 2003 consolidated financial statements, the Company should have re-measured the intrinsic value of the options (the difference between the market price of the underlying common stock and the exercise price of the options) at the date of the modification and recorded the intrinsic value of the options at the modification date as additional compensation expense (non-cash) in the fourth quarter of 2003. Mr. Witteveen subsequently exercised all of his stock options during September and October 2005. As a result of the correction, the Company will record additional compensation expense and additional paid-in capital of $7.1 million for the year ended December 31, 2003 resulting from the option modification. In addition, the Company will record a deferred tax asset of $2.8 million for the tax benefit to be derived in the future related to the additional compensation expense. These changes will have the effect of increasing stockholders' equity by $2.8 million. The adjustments will reduce net income for the year ended December 31, 2003 by approximately $4.3 million, or 10 percent, but will not affect net income or results of operations for any period after December 31, 2003. Because the Company has concluded that its previously filed consolidated financial statements should be revised to correct the accounting error relating to Mr. Witteveen's stock options, investors should no longer rely upon the Company's consolidated financial statements for the years ended December 31, 2003 and 2004, the quarterly periods ended March 31, June 30 and September 30, 2004, and the quarterly periods ended March 31 and June 30, 2005. In connection with its decision to correct its consolidated financial statements for the option modification discussed above, the Company will also be correcting its 2003 and 2004 consolidated financial statements for an accounting error previously disclosed in the Company's 2004 Form 10-K relating to hedge accounting that affected the Company's 2003 financial results. Because the hedge accounting error had not been considered sufficiently material to require a modification of the 2003 consolidated financial statements, the Company recorded a non-cash adjustment to correct this error during the fourth quarter of 2004. This non-cash adjustment increased the Company's net income for 2004 by $0.6 million. In light of the decision to correct its 2003 consolidated financial statements for the option modification, the Company will also be adjusting its 2003 and 2004 consolidated financial statements to reflect the correction for the hedge accounting error. The Company will prepare and file with the Securities and Exchange Commission an amendment no. 2 to its Annual Report on Form 10-K for the year ended December 31, 2004 to correct its 2003 and 2004 consolidated financial statements. In addition, the Company will prepare and file amendments to its quarterly reports on Form 10-Q for the quarters ended March 31, 2005 and June 30, 2005 to correct its consolidated balance sheets as of March 31, 2005 and June 30, 2005 and its statements of changes in stockholders' equity for the periods ended March 31, 2005 and June 30, 2005. The Company will complete and file these amendments as expeditiously as possible. Attached to this release are summary financial tables for 2003 and 2004 showing the effect of these changes. In a separate press release dated today, the Company announced that it will be paying a special cash dividend of $1.00 per share to holders of its common stock. The Company will hold a conference call on Monday, October 17, 2005 at 11:30 a.m. Eastern Daylight Time. Interested investors should call 1-888-694-4769 ten minutes prior to the time of the conference call. Callers from outside North America please call 1-973-582-2757 and hold for an operator. Identify yourself and your company and inform the operator that you are participating in the Interpool conference call. If you are unable to access the conference call at 11:30 a.m. Eastern Daylight Time, please call 1-877-519-4471 to access the taped digital replay. To access the replay, please call and enter the digital pin 6610505. This replay will first be available at 2 p.m. Eastern Daylight Time on October 17, 2005 and will be available until November 17, 2005 at 2 p.m. Eastern Daylight Time. Investors will also have the opportunity to listen to the conference call live at the Company's web site www.interpool.com. To listen to the live call via the Internet, please go to the web site at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live web cast, a replay will be available two hours after the call is completed and will remain available for thirty days. Interpool is one of the world's leading suppliers of equipment and services to the transportation industry. The Company is the world's largest lessor of intermodal container chassis and a world-leading lessor of cargo containers used in international trade. This Press Release contains certain forward-looking statements regarding future circumstances. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements, including in particular the risks and uncertainties described in the company's SEC filings. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof. -0- *T INTERPOOL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2003 (dollars and shares in thousands) (unaudited) As Previously As Reported Restated 2003 Change 2003 ----------------------------- REVENUES: Equipment leasing revenue $374,287 - $374,287 Other revenue 27,825 - 27,825 ----------------------------- TOTAL REVENUES 402,112 - 402,112 ----------------------------- COSTS AND EXPENSES: Lease operating expenses 106,692 1,773 108,465 Administrative expenses 49,734 5,318 55,052 Provision for doubtful accounts 4,248 - 4,248 Fair value adjustment for derivative instruments (837) (919) (1,756) Depreciation and amortization of leasing equipment 87,498 - 87,498 Impairment of leasing equipment 9,049 - 9,049 Loss for investments accounted for under the equity method 1,698 - 1,698 Other income, net (5,079) - (5,079) Interest expense 106,688 - 106,688 Interest income (3,960) - (3,960) ----------------------------- TOTAL COSTS AND EXPENSES 355,731 6,172 361,903 ----------------------------- Income before minority interest expense and provision/(benefit) for income taxes 46,381 (6,172) 40,209 MINORITY INTEREST EXPENSE (1,910) - (1,910) ----------------------------- Income before provision/(benefit) for income taxes 44,471 (6,172) 38,299 PROVISION/(BENEFIT) FOR INCOME TAXES 3,281 (2,478) 803 ----------------------------- NET INCOME $41,190 $(3,694) $37,496 ============================= NET INCOME PER SHARE: Basic $1.51 $(0.14) $1.37 ============================= Diluted $1.42 $(0.12) $1.30 ============================= WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands): Basic 27,365 27,365 =========== ========= Diluted 30,396 28,935 =========== ========= INTERPOOL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2004 (dollars and shares in thousands) (unaudited) As Previously As Reported Restated 2004 Change 2004 --------------------------- REVENUES: Equipment leasing revenue $388,183 - $388,183 Other revenue 16,204 - 16,204 --------------------------- TOTAL REVENUES 404,387 - 404,387 --------------------------- COSTS AND EXPENSES: Lease operating expenses 95,332 - 95,332 Administrative expenses 49,943 - 49,943 Provision for doubtful accounts 1,476 - 1,476 Fair value adjustment for derivative instruments (2,430) 919 (1,511) Fair value adjustment for warrants 49,222 - 49,222 Depreciation and amortization of leasing equipment 89,458 - 89,458 Impairment of leasing equipment 4,610 - 4,610 Loss for investments accounted for under the equity method (416) - (416) Other income, net (15,686) - (15,686) Gain on insurance settlement (6,267) - (6,267) Interest expense 112,013 - 112,013 Interest income (3,390) - (3,390) --------------------------- TOTAL COSTS AND EXPENSES 373,865 919 374,784 --------------------------- Income before minority interest expense and provision/(benefit) for income taxes 30,522 (919) 29,603 MINORITY INTEREST EXPENSE (8,372) - (8,372) --------------------------- Income before provision/(benefit) for income taxes 22,150 (919) 21,231 PROVISION/(BENEFIT) FOR INCOME TAXES 13,721 (359) 13,362 --------------------------- NET INCOME $8,429 $(560) $7,869 =========================== NET INCOME PER SHARE: Basic $0.31 $(0.02) $0.29 =========================== Diluted $0.29 $(0.02) $0.27 =========================== WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands): Basic 27,380 27,380 =========== ========= Diluted 28,960 28,960 =========== ========= INTERPOOL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 2003 (dollars in thousands) (unaudited) As Previously Reported As Restated 2003 Change 2003 ------------------------------- ASSETS Cash and cash equivalents $141,019 - $141,019 Marketable securities 24 - 24 Accounts receivable, net 69,055 - 69,055 Net investment in direct financing leases 426,815 - 426,815 Other receivables, net 25,485 - 25,485 Leasing equipment, net 1,636,716 - 1,636,716 Other assets 73,922 - 73,922 ------------------------------- TOTAL ASSETS $2,373,036 - $2,373,036 =============================== LIABILITES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $198,062 - $198,062 Income taxes: Current 367 - 367 Deferred 37,392 (2,837) 34,555 ------------------------------- Total taxes 37,759 (2,837) 34,922 Deferred income 2,704 - 2,704 Total debt and capital lease obligations 1,715,687 - 1,715,687 Minority interest in equity of subsidiaries 35,184 - 35,184 Preferred stock - - - Common stock 28 - 28 Additional paid-in-capital 128,538 7,091 135,629 Unamortized deferred compensation (1,184) - (1,184) Treasury stock (2,229) - (2,229) Retained earnings 272,815 (3,694) 269,121 Accumulated other comprehensive loss (14,328) (560) (14,888) ------------------------------- Total stockholders' equity 383,640 2,837 386,477 ------------------------------- TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $2,373,036 - $2,373,036 =============================== INTERPOOL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 2004 (dollars in thousands) (unaudited) As Previously Reported As Restated 2004 Change 2004 ------------------------------- ASSETS Cash and cash equivalents $309,458 - $309,458 Marketable securities 27 - 27 Accounts receivable, net 72,598 - 72,598 Net investment in direct financing leases 363,445 - 363,445 Other receivables, net 3,602 - 3,602 Leasing equipment, net 1,579,196 - 1,579,196 Other assets 75,760 - 75,760 ------------------------------- TOTAL ASSETS $2,404,086 - $2,404,086 =============================== LIABILITES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $127,057 - $127,057 Warrant liability 71,722 - 71,722 Income taxes: Current 1,915 - 1,915 Deferred 49,204 (2,837) 46,367 ------------------------------- Total taxes 51,119 (2,837) 48,282 Deferred income 2,018 - 2,018 Total debt and capital lease obligations 1,718,198 - 1,718,198 Minority interest in equity of subsidiaries 39,786 - 39,786 Preferred stock - - - Common stock 28 - 28 Additional paid-in-capital 138,021 7,091 145,112 Unamortized deferred compensation (554) - (554) Treasury stock (11,508) - (11,508) Retained earnings 273,948 (4,254) 269,694 Accumulated other comprehensive loss (5,749) - (5,749) ------------------------------- Total stockholders' equity 394,186 2,837 397,023 ------------------------------- TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $2,404,086 - $2,404,086 =============================== *T