PART I

General

(Unless otherwise indicated, all fleet statistics including the size of the fleet, utilization of the leasing equipment or the rental rates per day that are set forth in this Annual Report on Form 10-K exclude the information of our 50%-owned consolidated subsidiary Container Applications International, Inc. (“CAI”). The market share, ranking and other data contained in this Annual Report on Form 10-K are based either on our management’s own estimates, independent industry publications, reports by market research firms or other published independent sources and, in each case, are believed by management to be reasonable estimates. However, market share data is subject to change and cannot always be verified with certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, might not be reliable.)

We believe we are the largest lessor of intermodal chassis in North America and one of the world’s leading lessors of intermodal dry freight standard containers. At December 31, 2003, our chassis fleet totaled approximately 208,000 chassis and our container fleet totaled approximately 870,000 twenty-foot equivalent units (“TEU”). From 1998 to 2003, we increased the size of our chassis fleet at a compound annual rate of 22%, primarily as the result of the chassis fleet acquired during 2000 from the North American Intermodal Division of Transamerica Leasing, Inc. (“TA”), and the purchase and leaseback of approximately 20,000 chassis with a shipping line customer during 2001 and 2002. During the period from 1998 to 2003, we increased our container fleet at a compound annual rate of 12%.

We concentrate on leasing equipment to our customers on a long-term basis (leases for a term greater than one year). Substantially all of our new equipment is initially leased for terms of five to eight years and approximately 79% of our total fleet of chassis and 82% of our total fleet of containers are currently on long-term lease. We believe our focus on long-term leasing has enabled us to:

Approximately 21% of our chassis are currently leased on a short-term basis to satisfy customers’ peak or seasonal requirements, generally at higher rates than under long-term leases. For customers who require daily or weekly chassis rentals, we operate chassis pools at major domestic shipping ports and terminals. These chassis pools consist of our chassis as well as those of our customers.

Approximately 18% of our containers are currently leased on a short-term basis. Our 50%-owned consolidated subsidiary, CAI, markets our containers available for short-term leasing as part of its fleet, facilitating redeployment of our containers at the end of long-term leases. Our relationship with CAI maximizes utilization of our container fleet and increases our influence in the marketplace by giving us one of the world’s largest container lessor fleets on a combined basis. At December 31, 2003, CAI had a container fleet of approximately 535,000 TEU. Approximately 193,000 TEU were owned by CAI with the remaining 342,000 TEU managed for others. CAI’s managed equipment included approximately 155,000 TEU that were managed for us.

We and our predecessors have been involved in the business of leasing transportation equipment since 1968. We lease our chassis and containers to a diversified customer base of over 600 shipping and transportation customers throughout the world, including all of the world’s 30 largest international container shipping lines and major North American railroads. We provide customer service and market to our customers through a worldwide network of offices and agents. We believe one of the key factors in our ability to compete effectively has been the long-standing relationships that we have established with most of the world’s large shipping lines and major North American railroads. As a result of these relationships, 7 of our top 10 customers have been customers for at least 10 years.

Industry Overview

The fundamental components of intermodal transportation are the chassis and the container. When a container vessel arrives in port, each marine container is loaded onto a chassis or rail car. Most containers are constructed of steel in accordance with recommendations of the International Standards Organization (“ISO”). The basic container type is the general-purpose dry freight standard container which measures 20 or 40 feet long, 8 feet wide and 8 1/2 or 9 1/2 feet high. In general, 20-foot containers are used to carry heavy, dense cargo loads (such as industrial parts and certain food products) and operate in areas where transport facilities are less developed, while 40-foot containers are used for lighter weight finished goods (such as apparel, electronic appliances and other consumer goods) in areas with better developed transport facilities. A chassis is a rectangular, wheeled steel frame, generally 23 1/2 or 40 feet in length, built specifically for the purpose of transporting a container. Once mounted, the chassis and container are the functional equivalent of a trailer. When mounted on a chassis, the container may be trucked either to its final destination or to a railroad terminal for loading onto a rail car. Similarly, a container shipped by rail may be transferred to a chassis to travel over-the-road to its final destination. As the use of containers has become a predominant factor in the intermodal movement of cargo, the chassis has become a prerequisite for the domestic segment of the journey. A chassis seldom travels permanently with a single container, but instead serves as a transport vehicle for containers that are loaded or unloaded at ports or railroad terminals. Because of differing international road regulations and non-uniformity of international standards for chassis, chassis used in the United States are seldom used in other countries.

Containers provide a secure and cost-effective method of transporting finished goods and component parts because they are generally freely interchangeable between different modes of transport, making it possible to move cargo from a point of origin to a final destination without the repeated unpacking and repacking of the goods required by traditional shipping methods. The same container may be carried successively on a ship, rail car and chassis and across international borders with minimal customs formalities. Containerization is more efficient, more economical and safer in the transportation of cargo than “break bulk transport” in which the goods are unpacked and repacked at various intermediate points en route to their final destination. By eliminating manual repacking operations when differing modes of transportation are used, containerization reduces freight and labor costs. In addition, automated handling of containers permits faster loading and unloading and more efficient utilization of transportation equipment, thereby reducing transit time. The protection provided by sealed containers also reduces damage to goods and loss and theft of goods during shipment. Containers may also be picked up, dropped off, stored and repaired at independent common user depots located throughout the world.

The adoption of uniform standards for containers in 1968 by the ISO precipitated a rapid growth of the container industry; as shipping companies recognized the advantages of containerization over traditional break bulk transportation of cargo. This growth resulted in substantial investments in containers, container ships, port facilities, chassis, specialized rail cars and handling equipment.

Between 1990 and 2002, worldwide container traffic at the world’s major ports has grown at a compound annual rate of 10.1%, calculated using the Containerization International Yearbook of 1992 and 2004.

The demand for containers is influenced primarily by the volume of international and domestic trade. In recent years, however, the rate of growth in the container industry has exceeded that of world trade as a whole due to several factors, including:

In recent years, domestic railroads and trucking lines have begun actively marketing intermodal services for the domestic transportation of freight. We believe that this trend should serve to accelerate the growth of intermodal transportation resulting in increased chassis and container demand.

The Leasing Market

Leasing companies own a significant portion of North America’s chassis and of the world’s container fleet, with the balance owned predominantly by shipping lines and railroads according to our estimates. Leasing companies have maintained this market position because container shipping lines and railroads receive both financial and operational benefits by leasing a portion of their equipment. The principal benefits of leasing are the following:

Because of these benefits, container shipping lines and railroads generally obtain a significant portion of their container and chassis fleets from leasing companies, either on short-term or long-term leases. Short-term leases provide considerable operational flexibility in allowing a customer to pick up and drop off equipment at various locations at any time. However, customers pay for this flexibility in the form of substantially higher lease rates for short-term leases and drop-off charges for the privilege of returning equipment to certain locations. Many short-term leases are “master leases,” under which a customer reserves the right to lease a certain number of containers or chassis as needed under a general agreement between the lessor and the lessee. Long-term leases provide the lessee with advantageous pricing structures, but usually contain an early termination provision allowing the lessee to return equipment prior to expiration of the lease only upon payment of an early termination fee or a retroactive increase in lease payments.

Business Strategy

Our objective is to continue to expand on our market position as a leading long-term lessor of intermodal transportation equipment. To achieve this objective, we intend to continue to:

Historically, we have regularly entered into new long-term lease transactions with shipping lines and other customers as market conditions warranted. During the second half of 2003, however, notwithstanding strong conditions in the leasing markets, we entered into a limited number of new lease transactions, due to the reduced availability of new financings which resulted from our restatement of our financial results from 2000, 2001 and 2002, the related Audit Committee and Securities and Exchange Commission (the “SEC”) investigations, and the resulting delay in completion of our audited financial statements and filing of our Annual Report on Form 10-K for the year ended December 31, 2002. We successfully completed several financings during late 2003 and the first seven months of 2004, including $44.5 million during December 2003, $81.6 million during March 2004, $14.6 million during May 2004 and $15.0 million during July 2004. In addition, we are currently evaluating a number of secured financing proposals for growth and for re-financing existing facilities.

Operations

We offer our customers both operating leases and direct finance leases to satisfy customer preference and demand. In most cases, a direct finance lease provides the customer the opportunity to acquire ownership of the equipment.

Lease rentals are typically calculated on a per diem basis, regardless of the term of the lease. Our leases generally provide for monthly or quarterly billing and require payment by the lessee within 30 to 60 days after presentation of an invoice. Generally, the lessee is responsible for payment of all taxes and other charges arising out of use of the equipment and must carry specified amounts of insurance to cover physical damage to and loss of equipment, as well as bodily injury and property damage to third parties. In addition, our leases usually require lessees to repair any damage to the chassis and containers. Lessees are also required to indemnify us against our losses arising from accidents or similar occurrences involving the leased equipment. Our leases generally provide for pick-up, drop-off and other charges and set forth a list of locations where lessees may pick-up or return equipment.

Long-term leases provide the lessee with advantageous pricing structures, but usually contain an early termination provision allowing the lessee to return equipment prior to expiration of the lease only upon payment of an early termination fee or a retroactively applied increase in lease payments. We experience minimal early returns of our equipment under our long-term leases, primarily because of the penalties involved. Generally, such customers must return all equipment covered by the particular long-term lease being terminated, usually totaling several hundred units, and bear substantial costs related to their repositioning and repair.

Frequently, a lessee will desire to retain long-term leased equipment well beyond the initial lease term. In these cases, long-term leases will be renewed at the then prevailing market rate, either for one or more additional one-year periods or as part of a short-term agreement. In some cases, the customer has the right to purchase the equipment at the end of a long-term lease.

Chassis Pools. For customers who require daily or weekly chassis rentals, we operate “chassis pools” at most of the major port authorities and terminal operations throughout the United States. These chassis pools consist of our chassis and those of our customers. The principal ports in the United States where we operate chassis pools are Baltimore, Boston, Charleston, Houston, New York, Newark, Norfolk, Long Beach, Oakland, and Savannah. We also operate chassis pools at railroad locations within the United States.

Chassis Equipment Tracking and Billing. We use an internet accessible proprietary computer software system to enable sophisticated equipment tracking and billing and to provide a central operating database that coordinates our chassis leasing and chassis pooling activities. The system processes information received electronically from our regional offices. The system records the movement and status of each chassis and links that information with the complex data comprising the specific lease terms in order to generate billings to lessees. In 2003, more than 163,000 movement transactions per month were processed on average through the system, which is capable of tracking revenue on a chassis by chassis basis. The system also generates a wide range of management reports containing information on all aspects of our leasing activities.

Depots. We and our 50% owned consolidated subsidiary, CAI, operate in all major transportation markets throughout the world. Depots are facilities owned by third parties at which containers, chassis and other items of transportation equipment are stored, maintained and repaired. We retain independent agents at these depots to handle and inspect equipment delivered to or returned by lessees, to store equipment that is not leased and to handle maintenance and repairs of chassis and containers. Some agents are paid a fixed monthly retainer to defray recurring operating expenses and some are guaranteed a minimum level of commission income. In addition, we generally reimburse our agents for incidental expenses.

Logistic Support. Our worldwide network of offices and relationships and our industry experience enables us to provide logistic services in order to facilitate the movement of chassis and containers to meet our customers’ needs.

Repositioning and Related Expenses. If lessees return large numbers of equipment to a location with a larger supply than demand, we may incur expenses in repositioning the equipment to a more favorable location. Repositioning expenses generally range between $25 and $750 per unit, depending on geographic location, distance and other factors, and may not be fully covered by the drop-off charge collected from the lessee. In connection with necessary repositioning, we may also incur storage costs, which generally range between $.20 and $3.10 per unit per day. In addition, we bear certain operating expenses associated with our chassis and containers, such as:

Maintenance, Repairs and Refurbishment. As chassis and containers age, the need for maintenance increases, and they may eventually require extensive maintenance. Our customers are generally responsible for maintenance and repairs of equipment other than normal wear and tear. When normal wear and tear of equipment is extensive, the equipment may have to undergo a major repair including a refurbishment or remanufacture. Refurbishing and remanufacturing of chassis involves substantial cost, but remanufacture or refurbishment costs are substantially less than the cost of purchasing a new chassis. In the past we also refurbished containers, but recently it has not been cost effective to do so.

Disposition of Chassis and Container Residual Values. On an ongoing basis, we sell equipment that was previously leased. The decision whether to sell depends on the equipment’s condition, remaining useful life and suitability for continued leasing or for other uses, as well as prevailing local market resale prices and an assessment of the economic benefits of repairing and continuing to lease the equipment compared to the benefits of selling. Pursuant to our relationship with CAI, containers that have come off long-term lease and have been designated for short-term leasing (not including renewals with existing lessees) are generally provided to CAI for deployment in CAI’s fleet. For such containers, CAI pays us its average total fleet per diem rate (net of operating expenses) less a management fee. This payment may be subject to reduction to the extent the average age of the Interpool containers exceeds the average age of the CAI containers. Containers made available for short-term leasing under our agreement with CAI are reported by us as fully utilized. Containers are also sold to shipping or transportation companies for continued use in the intermodal transportation industry or to secondary market buyers, such as wholesalers, depot operators, mini storage operators, construction companies and others, for use as storage sheds and similar structures. Because old chassis are more easily remanufactured than old containers, chassis are less likely to be sold than containers.

At the time of sale, the residual value of a container or chassis will depend upon, among other factors, mechanical or economic obsolescence, the current newly manufactured equipment price, its physical condition and location. While there have been no major technological advances in the short history of containerization that have made active equipment obsolete, several changes in standards have decreased the demand for older equipment, such as the increase in the standard height of containers from 8 feet to 8 1/2 feet in the early 1970’s.

Sources of Supply. Over 90% of the world’s container production occurs in China. Although, most chassis used in the United States have been manufactured domestically, China began producing ISO standard chassis for the U.S. market in 2003.

When manufacturing is complete, new chassis and containers are inspected to insure that they conform to applicable standards of the International Standards Organization and other international self-regulatory bodies, as well as our internal standards.

PoolStat^TM Chassis Pool Management

Our proprietary internet-based chassis management system is called “PoolStat”^TM. “PoolStat”^TM has enabled us to operate, on a cooperative basis, pools of chassis that are owned by us and by shipping lines. Using this program, shipping lines and railroads can “pool” their chassis at common locations such as marine terminals and railroad depots. Our “PoolStat”^TM software compiles data from each location and reports on levels of chassis contribution as compared to levels of chassis usage by each shipping line in the cooperative pool. In addition, the centralized maintenance and repair feature improves service levels to customers and we receive a management fee.

“PoolStat”^TM provides several benefits to customers, including allowing customers to:

By providing the “PoolStat”^TM service, we are able to forge closer relationships with our customers for both short-term and long-term leasing opportunities. There are now approximately 220,000 chassis under “PoolStat”^TM management and we are continuing to seek opportunities to increase its level of business. We believe that “PoolStat”^TM is the leading provider of chassis management tools in the United States.

Marketing and Customers

We lease our chassis and containers to over 600 shipping and transportation companies throughout the world, including all of the world’s 30 largest international container shipping lines and major North American railroads. The customers for our chassis are a large number of domestic companies, many of which are domestic subsidiaries or branches of international shipping lines to which we also lease containers. With a network of offices and agents covering major ports in the United States, Europe and the Far East, we have been able to supply containers in nearly all locations requested by our customers. As of December 31, 2003, our top 25 customers represented approximately 74% of our consolidated net billing, with no single customer accounting for more than 7.7%.

Credit Process

We perform detailed credit risk analysis on our customers. Our credit policy sets different maximum exposure limits depending on our relationship and previous experience with each customer. Credit criteria may include, but are not limited to, customer trade route, country, social and political climate, assessments of net worth, asset ownership, bank and trade credit references, credit bureau reports, operational history and financial strength.

We have sought to reduce credit risk by maintaining insurance coverage against customer insolvency and related equipment losses. Through January 31, 2002 we maintained contingent physical damage, recovery/repatriation and loss of revenue insurance, which provided coverage in the event of a customer’s insolvency, bankruptcy or default giving rise to our demand for return of all of our equipment. The policy covered the cost of recovering our equipment from the customer, including repositioning cost, damage to the equipment and the value of equipment which could not be located or was uneconomical to recover. It also covered a portion of the lease revenues that we might lose as a result of the customer’s default (i.e., up to 180 days of lease payments following an occurrence under the policy). The premium rates and deductibles for this type of insurance have increased as a result of our higher claim experience and that of the industry. As a result, effective March 1, 2003, we obtained a new policy covering similar occurrences for a twelve-month period. The new coverage decreased the recoverable amount per occurrence to $9 million as compared to $35 million in our previous policy and increased the deductible per occurrence from $0.4 million to $3 million. This coverage has since been extended to March 31, 2005. There can be no assurance that this or similar coverage will be available in the future or that such insurance will cover the entirety of any loss.

Competition

There are many companies leasing intermodal transportation equipment with which we compete. Some of our competitors have greater financial resources than we do, or are subsidiaries or divisions of much larger companies. Historically, there has been consolidation in the container leasing business resulting from several acquisitions. The result of the consolidation has been fewer lessors, a more rational industry and a stabilizing pricing environment.

In addition, the containerized shipping industry, which we service, competes with providers of alternative methods of transporting goods, such as by air, truck and rail. We believe that in most instances these alternative methods are not as cost-effective as the shipping of containerized cargo.

Because rental rates for chassis and containers are not subject to regulation by any government authority but are determined principally by the demand for and supply of equipment in each geographical area, price is one of the principal methods by which we compete. In times of low demand and excess supply, leasing companies tend to grant price concessions, such as free days or pick-up credits, in order to keep their equipment on lease and to avoid storage charges. We attempt to design lease packages tailored to the requirements of individual customers and consider our long-term relationships with customers to be important to our ability to compete effectively. We also compete on the basis of our ability to deliver equipment in a timely manner in accordance with customer requirements.

Relationship with CAI

We own a 50% common equity interest in CAI, which we acquired in April 1998. CAI owns and leases its own fleet of containers and also manages, for a fee, containers owned by us and by third parties. We pay CAI a fee for managing our equipment and leasing it on our behalf based on the net operating income of CAI’s fleet of owned, leased and managed containers and the portion of CAI’s fleet that consists of our equipment. We entered into our operating relationship with CAI primarily to facilitate the leasing in the short-term market of containers coming off long-term lease, to gain access to new companies looking to lease containers on a long term basis and to realize cost efficiencies from the operation of a coordinated container lease marketing group. The marketing group, which is organized as a wholly-owned subsidiary of Interpool, is responsible for soliciting container lease business for both Interpool and CAI, including long-term and direct finance lease business and short-term lease business on master lease agreements. We have a right to purchase all long-term and direct finance lease business generated by the marketing group, subject to offering to CAI, at cost, 10% of this long-term and direct finance lease business. By mutual agreement, CAI has purchased for its own account long-term and direct finance lease business the marketing group has generated in excess of such amount. In addition, on occasion, we have entered into transactions with CAI pursuant to which we have acquired equipment, and the related leases, from CAI on terms that resulted in a profit for CAI.

The 50% equity interest in CAI not held by us is owned by CAI’s chief executive officer. Under the terms of a Shareholder Agreement we entered into in 1998 with CAI’s chief executive officer, because an initial public offering for the registration and sale of CAI’s common stock was not initiated before April 2003, CAI’s chief executive officer has the right to request an independent valuation of CAI. An independent valuation of CAI has not been requested. If such an independent valuation of CAI were to be requested, we would have the right, following the completion of such valuation, to make a written offer to acquire the chief executive officer’s 50% equity interest in CAI for an amount equal to 50% of the fair value of CAI as indicated in the appraisal. If we do not elect to make such an offer, CAI’s chief executive officer would have a right to require CAI to take the necessary steps to effect an initial public offering to sell his equity. All costs associated with any such initial public offering of CAI would be borne by CAI.

In connection with the acquisition of our 50% equity interest in CAI in 1998, we loaned CAI $33.7 million under a subordinated note agreement, which is collateralized by all containers owned by CAI as of April 30, 1998 or thereafter acquired, subject to the priority security interest lien of CAI’s senior credit facility, except for certain excluded collateral. Interest on this subordinated note is payable quarterly at a fixed rate. The original repayment terms required mandatory quarterly principal payments of $1.7 million beginning July 30, 2003 through April 30, 2008. The subordinated note was subject to certain financial covenants and was cross-defaulted with CAI’s senior credit facility, subject to the terms of a subordination agreement.

On June 27, 2002, CAI entered into an amended $110 million senior revolving credit agreement with a group of financial institutions. To facilitate the closing of this new credit facility, we agreed to extend the repayment terms of our subordinated note so as to require mandatory quarterly principal payments of $1.7 million beginning July 30, 2006 through April 30, 2011. We also agreed to modify certain financial covenants in the subordinated note. Interest on the subordinated note continues to accrue at an annual fixed rate of 10.5%, payable quarterly. The subordinated note continues to be cross-defaulted with CAI’s senior credit agreement, subject to the terms of an amended and restated subordination agreement. In connection with these modifications, CAI’s chief executive officer agreed that we would have the right to designate a majority of the members of CAI’s board of directors. As a result of these transactions and gaining a majority position on CAI’s board, our financial statements include CAI as a consolidated subsidiary commencing June 27, 2002.

For additional information about CAI’s indebtedness, see Note 12 to the Consolidated Financial Statements.

Other Business Operations

In addition to our chassis and container leasing operations we also receive revenues from the leasing of approximately 474 freight rail cars to railroad companies through our Illinois based Railpool division. Also, our former computer leasing segment consisted of two majority owned subsidiaries, Microtech Leasing Corporation (“Microtech”) and Personal Computer Rental Corporation (“PCR”), which were substantially liquidated prior to December 31, 2003.

Employees

As of December 31, 2003, we had 213 employees, 188 of whom were based in the United States, excluding CAI’s 56 employees. None of our employees is covered by a collective bargaining agreement. We believe our relationships with our employees are good.

Risk Factors

Investors in Interpool should consider the following risk factors as well as the other information contained herein.

We are subject to the cyclicality of world trade which may impair demand for our chassis and containers.

The demand for our chassis and containers primarily depends upon levels of world trade of finished goods and component parts. Recessionary business cycles, political conditions, the status of trade agreements and international conflicts may have an impact on our operating results. The demand for leased chassis also depends upon domestic economic conditions and volumes of exports to the United States which are likely to be adversely affected if the value of the United States dollar declines. When the volume of world trade decreases, our business of leasing chassis and containers may be adversely affected as the demand for chassis and containers is reduced. A substantial decline in world trade may also adversely affect our customers, leading to possible defaults and the return of equipment prior to the end of a lease term.

We operate in a highly competitive industry, which may adversely affect our results of operations or ability to expand our business.

The transportation equipment leasing industry is highly competitive. We compete with numerous domestic and foreign leasing companies, some of which have greater financial resources and access to capital than we do. From time to time, the industry may have large under utilized inventories of chassis and containers, which could lead to significant downward pressure on pricing and margins. In addition, if the available supply of intermodal transportation equipment were to increase significantly as a result of, among other factors, new companies entering the business of leasing and selling intermodal transportation equipment, our competitive position could be adversely affected.

Potential customers may decide to buy rather than lease chassis and containers.

We, like other suppliers of leased chassis and containers, are dependent upon decisions by shipping lines and other transportation companies to lease rather than buy their equipment. In addition, our ability to achieve our strategy of expanding our business in response to customer demand for long term leasing would be adversely affected if our customers shifted to more short-term leasing over long-term leasing. Most of the factors affecting the decisions of our customers are outside our control. Operating costs such as storage and repair and maintenance costs also increase as utilization decreases.

Pending governmental investigations may adversely affect us.

Following our announcement in July 2003 that our Audit Committee had commissioned an internal investigation by special counsel into our accounting, we were notified that the SEC had opened an informal investigation of Interpool. As we anticipated, this investigation was subsequently converted to a formal investigation and remains pending as of the date of this report. The New York office of the SEC has received a copy of the written report of the internal investigation and has received documents and information from us, our Audit Committee and certain other parties pursuant to SEC subpoenas. We were advised that the United States Attorney’s office for the District of New Jersey received a copy of the written report of the internal investigation and opened a parallel investigation focusing on certain matters described in the report by the Audit Committee’s special counsel. We were informed that Interpool is neither a subject nor a target of the investigation by the U.S. Attorney’s office. We are fully cooperating with both of these investigations. We cannot predict the final outcome of these investigations and accordingly cannot be assured that they will not result in the taking of actions adverse to us.

Stockholder litigation may adversely affect us.

In February and March 2004, several lawsuits were filed in the United States District Court for the District of New Jersey, by purchasers of our common stock naming us and certain of our present and former executive officers and directors as defendants. The complaints alleged violations of the federal securities laws relating to our reported Consolidated Financial Statements for the years ended December 31, 2000 and 2001 and the nine months ended September 30, 2002, which we announced in March 2003 would require restatement. Each of the complaints purported to be a class action brought on behalf of persons who purchased our securities during a specified period. The lawsuits, which seek unspecified amounts of compensatory damages and costs and expenses, including legal fees, have been consolidated in a single action, with lead plaintiffs and lead counsel being appointed. We intend to vigorously defend these lawsuits but are unable at this time to ascertain the impact these lawsuits may have on our financial position or results of operations.

Our limited ability to consummate financings in 2003 slowed our growth.

Historically, we have funded a significant portion of the purchase price for new containers and chassis through borrowings under our revolving credit facility and other lines of credit, or through secured financings with financial institutions. While we successfully completed several financings during 2003 and the first seven months of 2004, including financings of approximately $44.5 million during December 2003 and $111.2 million during March, May and July 2004, our ability to borrow funds on terms as favorable as those available previously has been limited since March 31, 2003, because of the restatement to our historical financial statements for 2000, 2001 and 2002 and the related Audit Committee and SEC investigations, the delay in completing our audited 2002 financial statements and filing our Annual Report on Form 10-K for 2002 with the SEC, and the delay in completing our quarterly and annual financial statements for 2003 and filing our Quarterly and Annual Reports on Forms 10-Q and 10-K for 2003. These factors, coupled with the requirement to maintain certain levels of unrestricted cash until the delayed financial filings are completed, have affected the amount of business we have written with our customers.

We may need to obtain additional waivers from our financial institutions if we cannot complete and file our delinquent SEC reports promptly or if we are unable to file our future SEC reports on a timely basis. In addition, we cannot ensure that the existing waivers we have obtained will remain in effect.

During February 2004, we provided our lenders with a revised schedule for completing and submitting all of our financial statements and periodic SEC filings for the years 2003 and 2004, and requested that the lenders waive any non-compliance with the reporting requirements contained in the loan documents and debt instruments relating to these statements and filings until the respective dates included in the revised schedule. The revised dates provided to, and agreed by our lenders are:

We have received waivers from all of our lenders agreeing to the dates above. Although we hope that we will be able to complete and file all reports by the applicable dates, we cannot provide assurance that we will meet these deadlines. If we were to be unable to meet these deadlines, we would need to request additional waivers from certain of our financial institutions. In the event that any additional waiver is required and cannot be obtained before the applicable deadline, we might be in violation of the terms of the applicable indebtedness, and the lender could exercise its right to declare us in default, accelerate the indebtedness owed to such lender, and take other action against us. Moreover, the taking of any such action, or the possibility that such action could be taken, could cause one or more of our other financial institutions to take action against us.

Several of the waivers we received from our financial institutions during 2003 and 2004 provide by their terms that the waiver is void if certain events occur, such as a declaration of default by one or more of our other lenders, or the commencement of civil or criminal proceedings against us or any adverse action by the SEC or the New York Stock Exchange, if such action has a material adverse effect upon our ability to perform our contractual obligations. Although we do not believe that any of these actions has occurred to date, there can be no assurance that they will not occur in the future. In the event any of our existing waivers ceased to be effective by its terms, we could be deemed to be in violation of the terms of the indebtedness to which the waiver relates. In this event, one or more of our lenders could exercise their right to declare us in default, accelerate the indebtedness owed to such lender, and take other actions against us, such as attempting to exercise rights as a secured creditor with respect to any collateral. If any of these circumstances were to occur, we might not be able to meet our obligations to our lenders and other creditors and might not be able to prevent such parties from taking actions that could jeopardize our ability to continue to operate our business.

Our internal controls and procedures may require further improvements.

As a result of our efforts to evaluate weaknesses in the design and operating effectiveness of our internal controls for the years ended December 31, 2003, 2002 and 2001, we concluded that certain internal control deficiencies which we identified constituted “material weaknesses” or “significant deficiencies” in accordance with the standards established by the Public Company Accounting Oversight Board (United States). These deficiencies fall into eleven categories: deficiencies related to the accounting for direct finance leases, deficiencies related to ineffective policies for complex transactions, deficiencies related to inadequate communication of complex transactions, deficiencies related to the lack of adequate staffing within the accounting department, deficiencies related to accounting for income taxes, deficiencies related to communication of information regarding related-party transactions, deficiencies related to the security of information technology, deficiencies related to accounting for inter-company eliminations, deficiencies related to recordkeeping by various internal departments, deficiencies related to accounting for amounts billed to customers at the end of an operating lease for damaged equipment and deficiencies related to the recognition of impairment charges associated with the chassis remanufacturing program. We have assigned the highest priority to the short and long-term correction of the internal control deficiencies that have been identified. We have taken and are continuing to take remedial measures to strengthen our internal controls and to address their deficiencies. We believe that these efforts are addressing the material weaknesses and significant deficiencies that affected our internal controls for the years ended December 31, 2003, 2002 and 2001. As of the date of this filing, we are satisfied that actions implemented to date and those we expect to implement during 2004 and 2005 will correct the material weaknesses in our internal controls and information systems and that our processes and systems of internal controls will be adequate. However, we cannot give any assurances that all material weaknesses and significant deficiencies have been entirely corrected or that internal control weaknesses will not be identified from time to time in the future. Any material internal control weakness could materially affect our financial results.

Our insurance coverage, which reduces our exposure to credit risk, expires in March 2005. Failure to replace such coverage could increase our costs in the event a customer defaults.

We have in the past sought to reduce our credit risk by maintaining insurance coverage against lessee defaults. Our current insurance policy covering such credit risks will expire on March 31, 2005. We do not know whether replacement coverage can be obtained upon terms acceptable to us. Even if replacement coverage is obtainable we expect that premium rates and deductibles will increase as a result of general rate increases for this type of insurance as well as our historical claim experience and that of our competitors in the industry. If such insurance coverage is not obtained, it could adversely affect our business by increasing our risks and our costs in the event a customer defaults.

Sustained Asian economic instability could reduce demand for leasing.

A number of the shipping lines to which we lease containers are entities domiciled in several Asian countries. In addition, many of our customers are substantially dependent upon shipments of goods exported from Asia. From time to time, there have been economic disruptions, financial turmoil and political instability in this region. If similar events were to occur in the future, they could adversely affect these customers and lead to a reduced demand for leasing of our containers or otherwise adversely affect us.

Defaults by our customers could adversely affect our business by decreasing revenues and increasing storage, collection and recovery expenses.

We are dependent upon our lessees continuing to make lease payments for our equipment. A default by a lessee may cause us to lose revenues for past services and incur expenses for storage, collection and recovery. Repossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same security interests and rights to creditors and lessors as those in the United States and in jurisdictions where recovery of equipment from the defaulting lessees is more cumbersome.

If a long-term lessee defaults, we may be unable to re-lease recovered equipment for comparable rates or terms. Our reserves for anticipated losses may increase over historical levels or not be sufficient to cover actual losses, or our earnings may be adversely affected by customer defaults.

Changes in market price, availability or transportation costs of containers in China could adversely affect our ability to maintain our supply of containers.

Changes in the political, economic or financial condition of China, which would increase the market price, availability or transportation costs of containers, could adversely affect our ability to maintain our supply of containers. China is currently the largest container producing nation in the world and we currently purchase substantially all of our containers from manufacturers in China. In the event that it were to become more expensive for us to procure containers in China or to transport these containers at a low cost from China to the locations where they are needed by customers, because of a shift in U.S. trade policy toward China, increased tariffs imposed by the United States or other governments, a significant downturn in the political, economic or financial condition of China, or for any other reason, we would have to seek alternative sources of supply. We may not be able to make alternative arrangements quickly enough to meet our equipment needs, and the alternative arrangements may increase our costs.

We are controlled by a limited number of stockholders; this concentrated ownership could discourage acquisition bids for us that are not supported by our majority stockholders or limit the price investors will be willing to pay in the future for shares of our common stock.

Approximately 70.1% of our common stock is beneficially owned, directly or indirectly, in the aggregate by Martin Tuchman, Warren L. Serenbetz, Raoul J. Witteveen and Arthur L. Burns, together with certain members of their immediate families and certain related entities. Each of Messrs. Tuchman, Serenbetz and Burns is a member of our Board of Directors and Mr. Tuchman and Mr. Burns are executive officers. Mr. Witteveen is a former director and executive officer. These individuals, either directly or indirectly, have the ability to elect all of the members of our Board of Directors and to control the outcome of all matters submitted to a vote of our stockholders. Our concentrated ownership may discourage acquisition bids for us that are not supported by our majority stockholders. This concentration of ownership could limit the price that investors might be willing to pay in the future for shares of our common stock.

We have relationships with and have entered into transactions with members of our management and affiliated entities that may involve inherent conflicts of interest.

Various relationships exist and various transactions have been entered into between or among us, on the one hand, and members of our management and affiliated entities, on the other hand. Some of these relationships and transactions may involve inherent conflicts of interest. (See Item 13, “Certain Relationships and Related Transactions” for more information.)

We are dependent on the knowledge and experience of members of our senior management; loss of these members could adversely affect our ability to formulate and achieve our strategy and pursue new business initiatives.

Our growth and continued profitability are dependent upon, among other factors, the abilities, experience and continued service of certain members of our senior management, including Martin Tuchman, our Chairman and Chief Executive Officer. Mr. Tuchman holds, either directly or indirectly, a substantial equity interest in Interpool and also is a director of Interpool. Additionally, other members of our senior management possess knowledge of, and extensive experience in, the intermodal transportation industry. We rely on this knowledge and experience in our strategic planning and in our day-to-day business operations. If one or more members of our senior management were to resign or otherwise be unavailable to serve us, the loss could adversely affect our ability to formulate and achieve our strategy and pursue new business initiatives. In addition, we do not currently have employment agreements with several of our executive officers.

The volatility of the residual value of chassis and containers upon expiration of their leases could adversely affect our operating results.

Although our operating results primarily depend upon equipment leasing, our profitability is also affected by the residual values (either for sale or continued operation) of our chassis and containers upon expiration of their leases. These values, which can vary substantially, depend upon, among other factors,

Most of these factors are outside of our control. Operating leases, which represent the predominant form of lease in our portfolio, are subject to greater residual risk than direct finance leases.

Loss of our eligibility for tax benefits under the U.S.-Barbados tax treaty could increase our tax liability.

We currently receive tax benefits under an income tax convention between the United States and Barbados, the jurisdiction in which our subsidiary Interpool Limited which operates our container business, is incorporated. Specifically, under that income tax convention, any profits of Interpool Limited from leasing of containers used in international trade generally are taxable only in Barbados and not in the United States. At some future date the tax convention could be modified in a manner adverse to us or repealed in its entirety, or we might not continue to be eligible for these tax benefits.

As a company resident in Barbados, Interpool Limited is required to file tax returns in Barbados and pay any tax liability to Barbados. However, no Barbados tax returns have been prepared or filed for Interpool Limited for any period subsequent to its 1997 tax year, because such tax returns are required to be accompanied by audited financial statements for Interpool Limited, which are not available. We believe that the failure to file these returns has not resulted in any underpayment of taxes, interest or penalties (other than a nominal late filing penalty recently enacted in Barbados), because we believe that no Barbados taxes would have been due for the years for which returns have not been filed. We further believe that Interpool Limited’s failure to file these returns would not present any other material risk to Interpool. Nonetheless, we intend to have the necessary Interpool Limited financial statements prepared and audited as promptly as practicable so that Interpool Limited’s Barbados tax returns can be filed as required. We cannot be assured that our failure to file these returns would not adversely affect us.

Interpool Limited currently claims treaty benefits under the United States and Barbados income tax treaty (“Treaty”). The Treaty contains a limitation on benefits provision which denies treaty benefits under certain circumstances. However, Interpool Limited currently does not fall within the Treaty’s limitation on benefits provision.

On July 14, 2004, the United States and Barbados signed a protocol to the Treaty (“Protocol”) that contains a more restrictive limitation on benefits provision than the current Treaty does. If ratified, the Protocol might result in Interpool Limited losing its ability to rely on the Treaty to eliminate current U.S. income tax on its container rental and container sales income. This Protocol will not take effect until it is ratified by the United States Senate and the government of Barbados. It is currently uncertain whether the Senate will take action before it adjourns later in 2004. The Protocol is generally effective for taxable years commencing on or after the first of January in the year following the year the Protocol is ratified. Under the Protocol, Interpool Limited would only be eligible for Treaty benefits with respect to its container rental and sales income if, among other things, Interpool, Inc., is listed on a “recognized stock exchange” (generally, the NASDAQ system or an SEC registered exchange such as the New York Stock Exchange), and Interpool, Inc.’s stock is “primarily” and “regularly” traded on such exchange.

As described elsewhere in this report, our common stock is currently not listed on a “recognized stock exchange” within the meaning of the Protocol. Management anticipates that we will examine all of our options with regard to listing on a “recognized stock exchange” and anticipates applying for a listing once we are current with our SEC filings. However, even if we were to become listed on a “recognized stock exchange” as of the date the Protocol comes into effect, it is not clear whether we would satisfy the “primarily” and “regularly” traded requirement as defined within the Protocol. If we do not believe that we can satisfy this requirement, we will investigate alternatives to Interpool Limited being a resident in Barbados that will still entitle Interpool Limited to treaty benefits under another tax treaty with the U.S. Any such alternative would likely result in Interpool Limited being subject to a higher non-U.S. tax than the approximate 3% tax rate it currently enjoys in Barbados.

A substantial portion of our future cash flows will be needed to service our indebtedness. Also, because our debt has been downgraded recently, our cost of borrowing has increased and our access to future financing may be more limited.

Historically, we have made, and continue to make, use of indebtedness to finance our equipment leasing activities and for other general corporate purposes. As of December 31, 2003, our total outstanding indebtedness was approximately $1.6 billion. We anticipate that we will incur additional indebtedness in the future. We are required to dedicate a substantial portion of our cash flow to payments on our indebtedness, thereby reducing the amount of cash flow available to fund working capital, capital expenditures, including fleet growth, and other corporate requirements. Should our cash flow be insufficient to service our debt obligations, we would be required to seek additional funds to meet our obligations. Additional funds, if needed, might not be available to us or, if available, might not be made available on terms acceptable to us.

Our business is highly dependent upon the availability of capital. In particular, the growth of our fleet through new equipment purchases or acquisitions, as well as the refinancing of our existing debt, will require further debt or equity financings. There is no assurance that interest rates and advance rates on any future financings will be as attractive as those experienced in the past. If we raise additional funds by issuing equity securities, further dilution to the existing stockholders may result.

During October and November 2003, the ratings on our debt securities were downgraded by three major rating agencies, Standard & Poor’s, Fitch, and Moody’s, citing the resignation of our former President, continued delay in issuing audited restated financial statements for 2000 and 2001 and our audited financial statements for 2002 to be included in our 2002 Annual Report on Form 10-K, and the need to obtain waivers from our lenders to avoid technical defaults under our loan agreements associated with the financial statement delays. Our debt securities were again downgraded by all three rating agencies following our press release on December 29, 2003, that indicated that release of our 2000, 2001 and 2002 financial statements and the filing of our 2002 Annual Report on Form 10-K would again be delayed. Our Annual Report was subsequently filed on January 9, 2004. On January 27, 2004, Moody’s again downgraded our debt securities citing continued uncertainty associated with the delayed release of our financial information for 2003. We have been advised that Moody’s also reduced the “shadow rating” of our chassis securitization. We have been advised by the participants in this securitization that they will waive any early amortization event or default associated with the downgrade of the “shadow ratings” on a periodic basis, and such participants have given such a waiver through January 1, 2005. We have been advised by the provider of the insurance “wrap” portion of the chassis securitization that, as a result of the downgrade of the shadow rating, we are liable to indemnify it for certain of its increased capital charge costs, which it has estimated at approximately $0.6 million per month beginning June 20, 2004 and continuing until we are notified by the wrap provider that our “shadow rating” has improved sufficiently. The additional cost per month will be reduced on a pro-rata basis as the outstanding obligations are repaid. We have disputed whether any such indemnification obligation exists under the terms of our agreement with the “wrap” provider. This matter is currently under negotiation. There can be no assurance that we will prevail in this matter, nor can we estimate the likelihood or timing of any potential future shadow rating upgrade. There also can be no assurance that the waiver described above will continue to be granted or extended. Should such waiver not be granted or extended beyond January 1, 2005, the unfavorable impact on our near-term liquidity would likely be significant. Such downgrades may also have a negative effect on our ability to access the capital markets in the future as well as on our interest cost.

Increases in interest rates may increase our debt service obligations and adversely affect our liquidity.

A substantial portion of our borrowings are at variable rates of interest and expose us to interest rate risk. If interest rates rise, our debt service obligations would increase. A significant rise in interest rates could have a material adverse effect on our liquidity in future periods. For further discussion on interest rate risk see Item 7A.

The price of our common stock may fluctuate.

The market price for our common stock has fluctuated in the past, and several factors could cause the price to fluctuate substantially in the future. These factors include:

The current market price of our common stock may not be indicative of future market prices.

Our common stock and other publicly traded securities are not currently listed on any securities exchange.

On December 29, 2003, the New York Stock Exchange (the “Exchange”) suspended trading in our common stock and other listed securities and the staff of the Exchange informed us that they had recommended that delisting procedures be commenced. The Exchange stated that this action was taken because of the overall uncertainty surrounding our previously announced restatement of our 2001 and 2000 results and the continued delay in the completion of our current financial statement filing requirements. Our 2002 Form 10-K, which reflected the restated results, was filed on January 9, 2004. We appealed the decision and recommendation of the staff of the Exchange, and a hearing before a Committee of the Board of Directors of the Exchange was held March 10, 2004. Following this hearing, the Committee determined to affirm the staff’s recommendation and to delist our common stock and other listed securities. The delisting became effective during early April 2004. We intend to examine all of our options with regard to listing, and anticipate re-applying for a listing on the Exchange once we are current with our SEC filings later this year. Since the suspension of trading on the Exchange took effect on December 29, 2003, our common stock has been traded on the over-the-counter market under the symbol IPLI.

Our charter documents and Delaware law may inhibit a takeover and limit our growth opportunities, which could cause the market price of our shares to decline.

Our Restated Certificate of Incorporation and Amended and Restated By-laws, as well as Delaware corporate law, contain provisions that could delay or prevent a change of control or changes in our management that a stockholder might consider favorable. These provisions apply even if the change may be considered beneficial by some stockholders. If a change of control or change in management is delayed or prevented, the market price of our shares could decline. In addition, our Restated Certificate of Incorporation and Amended and Restated By-laws contain provisions that may discourage acquisition bids for Interpool.

Website Access

Our website address is www.interpool.com. You may obtain free electronic copies of our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports under the heading “Financial Information.” These reports are available on our website as soon as reasonably practicable after we electronically file them with the SEC.

We purchased our main office building located at 211 College Road East, Princeton, NJ in 2002. We use approximately 77% of this 39,000 square foot building. The remainder is leased to third parties. We also own approximately 18,000 square feet of condominium office space located on the 27th floor at 633 Third Avenue, New York, NY 10017 that serves as our New York office. All of our other commercial office space is leased.

Following our announcement in July 2003 that our Audit Committee had commissioned an internal investigation by special counsel into our accounting, we were notified that the SEC had opened an informal investigation of Interpool. As we anticipated, this investigation was subsequently converted to a formal investigation and remains pending as of the date this Form 10-K was filed with the SEC. The New York office of the SEC received a copy of the written report of the internal investigation and has received documents and information from us, our Audit Committee and certain other parties pursuant to SEC subpoenas. We were advised that the United States Attorney’s office for the District of New Jersey received a copy of the written report of the internal investigation and opened a parallel investigation focusing on certain matters described in the report by the Audit Committee’s special counsel. We were informed that Interpool is neither a subject nor a target of the investigation by the U.S. Attorney’s office. We are cooperating fully with both of these investigations.

In February and March 2004, several lawsuits were filed in the United States District Court for the District of New Jersey, by purchasers of our common stock naming us and certain of our present and former executive officers and directors as defendants. The complaints alleged violations of the federal securities laws relating to our reported Consolidated Financial Statements for the years ended December 31, 2000 and 2001 and the nine months ended September 30, 2002, which we announced in March 2003 would require restatement. Each of the complaints purported to be a class action brought on behalf of persons who purchased our securities during a specified period. The lawsuits which seek unspecified amounts of compensatory damages and costs and expenses, including legal fees, have been consolidated in a single action, with lead plaintiffs and lead counsel being appointed. We intend to vigorously defend these lawsuits but are unable at this time to ascertain the impact these lawsuits may have on our financial position or results of operations.

We are engaged in various other legal proceedings from time to time incidental to the conduct of our business. Such proceedings may relate to claims arising out of chassis accidents that occur from time to time which involve death and injury to persons and damage to property. Accordingly, we require all of our lessees to indemnify us against any losses arising out of such accidents while the chassis are on-hire to the lessees. In addition, lessees are generally required to maintain a minimum of $2 million in general liability insurance coverage which is standard in the industry. In addition, we maintain a back-up general liability policy of $200 million, in the event that the above lessee coverage is insufficient. While we believe that such coverage should be adequate to cover current claims, there can be no guarantee that future claims will not exceed such amounts. Nevertheless, we believe that no such current asserted or unasserted claims of which we are aware will have a material adverse effect on our financial condition or results of operations and that we are adequately insured against such claims.

Settled insurance litigation

In February 2001, we demanded return of all our equipment on lease to a significant customer based in South Korea. The lessee subsequently commenced insolvency proceedings and did not return our equipment. At the time of this insolvency, we maintained insurance coverage against such lessee defaults, and we submitted a claim to our insurance carriers seeking to recover the value of the receivables owed by the customer (to the extent covered by the insurance policies). Our claim included per diem rental charges for up to one hundred and eighty days after the default date for equipment not returned by the lessee as well as loss, damage and recovery costs relating to the equipment on lease that were also billable to the lessee in accordance with the lease. The maximum insurance coverage related to this claim was $35 million. As of December 31, 2003, the outstanding receivable recorded from the insurance related to this claim was $20.5 million.

On December 26, 2002, our insurance underwriters commenced a declaratory judgment action against us in the United States District Court for the Southern District of New York seeking rescission of our customer default insurance coverage or, in the alternative, a declaration that the premiums paid by us for this insurance were inadequate (the “Default Insurance Litigation”). The insurance underwriters’ primary contention was that we did not fully disclose to them all material information concerning our South Korean lessee. The underwriters also disputed the timing of our notifications to them of this loss and the amount of the loss. We filed a response to this complaint, which included counterclaims for payment of our claim under the policies and defenses to the arguments asserted by the insurance underwriters.

After completing discovery, each side filed a motion for summary judgment with the court and responses to the other side’s motion for summary judgment. In an attempt to avoid the time, expense and uncertainty inherent in continued litigation, the parties agreed to appoint a private mediator to try to negotiate a settlement of the dispute. Mediation began in April 2004, with the court deferring decision on the summary judgment motions pending the outcome of the mediation.

The mediator was successful in his negotiations and on June 17, 2004, we signed an agreement settling the Default Insurance Litigation. Under the terms of the settlement agreement we received total cash payments of $26.4 million in June and July 2004 from the insurance underwriters, and the insurance underwriters’ release from all claims asserted by them in the Default Insurance Litigation. In return, we released the insurance underwriters from all of our counterclaims asserted in that litigation.

None.

PART II

Until December 26, 2003, our common stock was traded on the New York Stock Exchange under the symbol “IPX”. Effective December 29, 2003, due to the delay in filing our 2002 Annual Report on Form 10-K with the Securities and Exchange Commission, our common stock and other listed securities were suspended from trading on the New York Stock Exchange, and delisting proceedings were commenced. Although we filed our 2002 Form 10-K on January 9, 2004 and appealed the suspension, our listed securities were delisted in April 2004. Since this suspension took effect, our common stock has been traded on the over-the-counter market under the symbol IPLI. The following table sets forth for the periods indicated commencing on January 1, 2001, the high and low closing sale prices for our common stock. All share and per share data have been rounded to the nearest cent.

                                                             HIGH          LOW
                                                             ----          ---
   Calendar Year 2001
     First Quarter.....................................      $18.44       $12.56
     Second Quarter....................................       17.00        13.55
     Third Quarter.....................................       19.45        14.60
     Fourth Quarter....................................       19.25        11.65
   Calendar Year 2002
     First Quarter.....................................      $19.90       $14.61
     Second Quarter....................................       24.02        17.26
     Third Quarter.....................................       18.96        12.02
     Fourth Quarter....................................       17.32        11.49
   Calendar Year 2003
     First Quarter.....................................      $16.83       $13.14
     Second Quarter....................................       18.60        13.88
     Third Quarter.....................................       18.55        15.50
     Fourth Quarter....................................       19.40        12.00*

As of July 30, 2004, there were approximately 81 stockholders of record of our common stock. On July 30, 2004, the last reported sale price of our common stock on the over-the-counter market was $18.25 per share.

We paid a quarterly dividend of $0.0625 per share on our common stock in January, April, July and October of 2003 and January, April and July 2004. We paid a quarterly dividend of $0.055 per share on our common stock in January, April, July and October of 2002 and a quarterly dividend in the amount of $0.05 per share on our common stock in July and October 2001. Prior to July 1, 2001, we had paid a quarterly dividend of $0.0375 per share on our common stock for the prior 17 quarters. In connection with our delayed SEC filings and the receipt of waivers from our lenders necessitated by the delayed filings, the members of our Board of Directors and certain of their affiliates who own shares of our common stock have agreed to defer their receipt of any dividend payments, including those we may declare in the future, until we are in compliance with all SEC filing requirements. As of July 15, 2004, recorded dividend payments in the amount of $2,616,206 have been deferred.

The Board of Directors has instituted a dividend reinvestment plan, which went into effect at the end of 2001. The plan is non-dilutive; shares required for the plan are acquired on the open market by an independent third party plan administrator and not through the issuance of additional shares by us.

The following table sets forth our selected historical consolidated financial data, for the periods and at the dates indicated. This information should be read in conjunction with our historical consolidated financial statements included in this Annual Report on Form 10-K and the notes thereto.

                                                                  SELECTED FINANCIAL DATA
                                                          (in thousands, except per share amounts)

                                                                     YEAR ENDED DECEMBER 31, (1)
                                                     2003      2002 (2)(4)       2001        2000 (3)        1999
                                                     ----      ----------        ----        -------         ----
INCOME STATEMENT DATA:

Revenues                                           $375,627       $326,555     $338,718       $287,553      $216,063

Income before cumulative effect of
change in accounting principle                      $41,190         $4,389      $28,104        $44,040       $23,271

Income per share before change
in accounting principle:

Basic                                                 $1.51          $0.16        $1.03          $1.61        $0.84
                                                      =====          =====        =====          =====        =====

Diluted                                               $1.42          $0.15        $0.97          $1.61        $0.82
                                                      =====          =====        =====          =====        =====

Weighted average shares outstanding:

Basic                                                 27,365        27,360        27,417        27,421        27,571

Diluted                                               30,396        29,202        28,973        27,426        28,234

Cash dividends declared per common share:              $0.25       $0.2275       $0.1925         $0.15         $0.15


                                                      2003          2002          2001          2000          1999
                                                      ----          ----          ----          ----          ----
BALANCE SHEET DATA:

Cash and cash equivalents                            $141,019      $170,613      $103,760      $157,224      $207,853

Net investment in direct financing leases            $426,815      $334,129      $275,372      $213,180      $185,350

Leasing equipment, net                             $1,635,893    $1,556,816    $1,334,787    $1,230,214      $846,342

Total assets                                       $2,372,213    $2,241,121    $1,922,229    $2,203,767    $1,442,069

Debt and capital lease obligations                 $1,640,687    $1,597,211    $1,354,680    $1,631,985      $998,228

Stockholders' equity                                 $382,837      $336,193      $351,269      $340,519      $299,411

The following discussion of our historical financial condition and results of operations should be read in conjunction with the historical consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this report. (Unless otherwise indicated, all fleet statistics including the size of the fleet, utilization of the leasing equipment or the rental rates per day that are set forth in this Annual Report on Form 10-K exclude the information of our 50%-owned consolidated subsidiary CAI. This exclusion of information relative to CAI, unless indicated otherwise, provides a focus on the drivers which are critical to our core business.)

The information in this Annual Report on Form 10-K contains certain “forward-looking statements” within the meaning of the securities laws. These forward-looking statements reflect the current view of the Company with respect to future events and financial performance and are subject to a number of risks and uncertainties, many of which are beyond our control. All statements other than statements of historical facts included in this report, including the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding our strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “will,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

All forward-looking statements speak only as of the date of this report. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. Future economic and industry trends that could potentially impact revenues and profitability are difficult to predict.

Restatement of Prior Consolidated Financial Statements

Our Form 10-K for the year ended December 31, 2002 was filed in January 2004 and contained, among other things, restated consolidated financial statements for the years ended December 31, 2001 and 2000 and the first three quarters of 2002. For additional information regarding this restatement, see Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2002 Form 10-K.

In preparation for the 2003 audit, we determined that the previously reported quarterly results for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 required restatement. For additional information regarding this restatement, see Note 19 to the Consolidated Financial Statements.

Reclassifications

Certain reclassifications have been made to the 2002 amounts in order to conform to the 2003 presentation.

General

Interpool is one of the world’s leading suppliers of equipment and services to the transportation industry. We believe we are the world’s largest lessor of intermodal container chassis and a world-leading lessor of international dry freight standard containers used in international trade.

Our primary sources of revenues are rental income derived from operating leases and income earned on direct financing leases. We generate revenues through leasing transportation equipment, primarily intermodal container chassis and intermodal dry freight standard containers. Operating lease equipment (operating leases) and direct financing leases are the two major asset types that generate this revenue. In the case of operating lease equipment, we retain the substantive risks and rewards of equipment ownership. In the case of direct financing leases, the lessee generally has the substantive risks and rewards of equipment ownership and the right to purchase the equipment at the end of the lease term. This revenue is supplemented by other sources of revenue such as fee income earned under equipment management agreements. Revenue derived from an operating lease generally consists of the monthly lease payments from the customer. For direct financing leases, the lessee’s payment is segregated into principal and interest components much like a loan. The interest component, calculated using the effective interest method over the term of the lease, is recognized by us as revenue. The principal component of the direct finance lease payment is reflected as a reduction to the net investment in the direct finance lease.

Our mix of operating and direct finance leases is a function of customer preference and demand and our success in meeting those customer requirements. An operating lease, during its initial lease term, will generally be more profitable than a direct finance lease, primarily due to the return of principal inherent in a direct finance lease. However, after the initial term (and any renewal) of an operating lease expires, the operating lease will have redeployment costs and related risks that are avoided under a direct finance lease. In evaluating the revenue performance of our operating lease portfolio, the primary factors considered are utilization and daily rental rates.

During 2003, our revenues increased due to strong demand for equipment, resulting in a favorable increase in utilization rates for our containers and chassis as compared to the prior year. Our increased fleet size for containers and chassis as compared to the prior year also contributed favorably to revenue. We have continued to experience revenue increases and high utilization of equipment, both in our chassis and container business segments, during the first half of 2004. Utilization of our container fleet was at 99% at both December 31, 2003 and June 30, 2004, and chassis utilization was at 96% at December 31, 2003 and 97% at June 30, 2004.

Although daily rental rates for our operating lease container fleet remained relatively flat during 2003, container daily lease rates have been rising during the first half of 2004 due to the increased demand for equipment as well as the impact of recent steel shortages. The steel shortage in the first half of 2004 has driven the cost of new containers 40% higher than in 2003, with corresponding increases in daily lease rates for newly manufactured containers. In some cases the steel shortages have become so acute that production was slowed. The backlogged demand and higher manufacturing costs have propelled leasing of used containers.

Chassis lease rates have been driven more by the cost of new chassis than by recent increases in demand. There are both positive and negative factors influencing production costs. A recent shift in the manufacturing base, toward more production in China -- which has lower labor and overhead costs (but higher delivery costs) -- has lowered chassis prices. At the same time, the steel shortage has created upward pressure on chassis prices. Overall, production costs have decreased slightly, with a similar decrease in new equipment lease rates. Used chassis lease rates have been heavily competitive during 2003 and early 2004, but as inventories around the country have become depleted, we are now beginning to see upward pressure on chassis lease rates.

We anticipate that our customers’ demand for chassis and containers will continue to be strong well into 2005. This projection is supported by the fact that all major shipyards are reporting full order books through the end of 2006. Even after an allowance of 1% for scrapping, the world container ship fleet is expected to increase by 10.8% in 2004, 11.3% in 2005 and 11.6% in 2006 as reported in the May 2004 edition of Containerisation International. In April 2004 alone, 48 new container ships were ordered with a capacity of 218,000 TEU. As of May 1, 2004, the total order book exceeded 800 ships with a total capacity of 3.2 million TEU, or approximately 47% of the current world fleet.

We believe a number of factors have contributed to the strong demand for equipment we have seen since early 2003. From 2001 to 2002, according to the Container International Yearbook 2004, global containerized traffic increased by over 9%, from 243.8 million TEU in 2001 to 266.3 million TEU in 2002, fueling demand for transportation equipment generally. In addition, as mentioned above, several major shipping lines have announced plans to bring new very large 8,000-9,000 TEU ships to the West Coast of the United States of America in the fall of 2004. When ships of this size are unloaded, they require the use of a large number of chassis to move the containers to local railroad terminals or their final destinations. These chassis, once loaded, may not be able to return to the port before the next ship rotation arrives, thus requiring additional concentrations of chassis at major ports. These larger vessels will also require additional containers to support them. During 2004, we have been supplying chassis and containers to several shipping lines in preparation for the arrival of these ships. Demand for chassis has also been affected by the inability of large, fully loaded ships to pass through the Panama Canal. These ships typically discharge their cargo on the West Coast, with the cargo being moved by “land bridges”, by truck and rail inland and across the country, using chassis at various stages during this process. At the same time, the demand for chassis, along with increased congestion at many of the rail and marine facilities around the country, have fueled an increase in the sharing of chassis (chassis pooling) among shipping lines. Our PoolStat chassis management service has experienced an increased interest in chassis sharing among shipping lines, as well as use of our own Trac Lease chassis pools at railroads and marine terminals. As of June 30, 2004, our chassis pools operating at railroad terminals were at record utilization levels.

Although our chassis and container fleet (including units on hire as direct financing leases) increased in size by 2% and 9%, respectively, from 2002 to 2003, we were not able to take full advantage of the strong customer demand for containers and chassis during 2003 and the first half of 2004, because the restatement of our financial statements for the years ended December 31, 2000 and 2001 and the first three quarters of 2002 and the related investigations by our audit committee and the SEC, and the resulting delays in completion of our financial statements and SEC filings, adversely affected our ability to obtain the financing necessary for us to purchase equipment for lease to customers. We requested and received necessary waivers from our financial institutions with respect to our financial restatement and the delays in completing our financial statements. Since January 9, 2004, the date of our filing with the SEC of our Annual Report on Form 10-K for the year ended December 31, 2002, we have successfully completed over $111.2 million of new financings, the proceeds of which have been used primarily to acquire new equipment and to satisfy payment obligations to manufacturers for equipment delivered and placed into service in our fleet during 2003. However, the reduced availability of financing, combined with the requirement to maintain certain levels of unrestricted cash until the delayed financial filings are completed, have continued to limit the amount of new business we have written with our customers during the first half of 2004. In addition, our cost of financing during 2004 has been higher than we experienced in 2002 and early 2003, due to higher interest rates in general and increased borrowing costs resulting from the lowering of our credit ratings over the past year. For the year ended December 31, 2003, the average interest rate on our outstanding debt (including the outstanding debt of CAI) was 6.0%, lower than the 6.6% for 2002. This decrease is primarily the result of reduced interest rates, as well as a decrease in interest costs related to swaps on our revolving credit facility which matured in October 2002. We are currently in negotiations with a number of potential lenders with regard to additional financings to support business growth and to refinance certain existing debt facilities, and expect that several of these will be completed during the second half of 2004.

As of December 31, 2003, we had a total of $1,864.6 million in contractual obligations and commercial commitments outstanding, primarily for amounts due to equipment manufacturers, debt and capital lease obligations, operating lease obligations, and purchases of leasing equipment. Our obligations to the equipment manufacturers included in accounts payable and accrued expenses were paid in full during the first half of 2004, and we are current with regard to all other payment obligations. Based on our existing cash balances, current negotiations with a number of prospective lenders, and our financial projections of operating cash flow for the future, we believe that we will have sufficient liquidity to grow our portfolio while meeting our obligations and commitments as they become due.

Other than interest expense, our primary expenses are lease operating and administrative expenses, which include operating costs such as maintenance and repair expense, as well as other ownership costs such as storage and positioning expense. Our lessees are generally responsible for lease operating expenses during the term of their lease. Our administrative expenses are primarily employee related costs such as salary expense, costs of employee benefits and travel and entertainment costs, as well as expenses incurred for outside services such as legal, consulting and audit related fees. During 2003, lease operating expenses as a percentage of revenues were 22.7%, down slightly from 23.1% during 2002. Administrative expenses as a percentage of revenues increased from 8.5% during 2002 to 13.1% during 2003, primarily due to $20.2 million in costs associated with our financial restatement and the related investigations as described previously. Without those costs, administrative expenses as a percentage of revenues would have declined to 7.7% during 2003. However, the additional personnel and systems enhancements we are adding to improve our internal controls, as well as additional procedures being implemented to comply with Sarbanes-Oxley requirements, will add incremental administrative expenses in future periods. In addition to lease operating and administrative expenses, we also incur depreciation expense on our operating lease equipment as described in more detail in Note 1 to the Consolidated Financial Statements.

As described above, our lease operating and administrative expenses were negatively impacted during 2003 as a result of costs associated with our financial restatement. During 2003 and continuing for the first seven months of 2004, we incurred significant costs related to the investigations by our audit committee and the SEC, separation agreements with our former Chief Financial Officer and our former President, legal representation for the Company as well as our officers, directors and employees, the payment of fees in order to obtain necessary waivers from our financial institutions and, during 2004, the proceedings before The New York Stock Exchange to delist our securities. We will continue to incur additional costs in the second half of 2004 relating to the formal investigation by the SEC, additional legal representation for the Company and our officers, directors and employees, and possibly for bank fees should additional waivers be required.

Non-performing receivables totaled $12.8 million at the end of 2003 compared with $11.1 million at the end of 2002. Reserves of $11.9 million and $9.5 million, respectively, have been established against these non-performing receivables. During 2003, receivable write-offs net of recoveries totaled $1.9 million as compared with $2.4 million for 2002.

Our net income per share for 2003 was $1.42 on a fully diluted basis. This compared favorably with $0.15 per share during 2002 and $0.97 per share during 2001. Return on average shareholders’ equity was 11.5% during 2003 compared with 1.3% during 2002 and 8.1% during 2001.

We conduct business with shipping line customers throughout the world and are therefore subject to the risks of operating in disparate political and economic conditions. Offsetting this risk is the worldwide nature of the shipping business and the ability of our shipping line customers to shift their operations from areas of unfavorable political and/or economic conditions to more promising areas. Approximately 98% of our revenues are billed and paid in U.S. dollars. We believe these factors substantially mitigate foreign currency rate risks.

Our container leasing operations are conducted through our subsidiary, Interpool Limited, a Barbados corporation. Our effective tax rate benefits substantially from the application of an income tax convention, pursuant to which the profits of Interpool Limited from international container leasing operations are exempt from federal taxation in the United States. As discussed below, these profits are subject to Barbados tax at rates that are significantly lower than the applicable rates in the United States. For further information regarding the United States and Barbados Tax Treaty and the July 2004 Protocol to this Treaty, see Critical Accounting Polices and Estimates section within Item 7.

Since June 27, 2002, our Consolidated Financial Statements include our 50% owned subsidiary, CAI, which concentrates on short term container leasing, as a consolidated subsidiary of Interpool. Previously, CAI was accounted for under the equity method of accounting. Transactions between the Company and CAI have been eliminated in consolidation.

The sections that follow analyze our results of operations by financial statement caption and provide a more detailed discussion of our performance for the years ended December 31, 2003 and 2002 as compared to the prior year period.

Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenues. Our revenues increased to $375.6 million for the year ended December 31, 2003, from $326.6 million in the year ended December 31, 2002, an increase of $49.0 million or 15%. The increase was partially attributable to $17.1 million of incremental leasing revenues as a result of consolidating the activities of CAI for a full year in 2003 as compared to approximately six months in 2002. In addition, container and chassis operating lease revenues increased $22.4 million and finance lease revenues increased $10.1 million, partially offset by reduced operating lease revenues of $0.6 million contributed by Microtech (which is currently being liquidated) as compared to the prior year period. The incremental container and chassis operating lease revenues are primarily due to our container and chassis operating lease fleets which increased in size by 11% and 5%, respectively, and an increase in the utilization rates for our containers and chassis, as compared to the prior year period. The daily rental rates for containers and chassis were relatively flat as compared to the prior year period. Utilization rates of our container fleet have historically been calculated assuming containers managed by CAI were 100% utilized since they were not available to us to put on hire. Under this method, utilization rates of our container fleet and our domestic intermodal chassis operating fleet at December 31, 2003 were 99% and 96%, respectively, as compared to 98% and 93%, respectively, at December 31, 2002. The utilization rates of our container fleet, considering CAI's actual utilization rates for our containers managed by CAI, were 94% and 92% at December 31, 2003 and 2002, respectively.

Lease Operating and Administrative Expenses. Our lease operating and administrative expenses increased to $134.9 million for the year ended December 31, 2003 from $103.4 million in the year ended December 31, 2002, an increase of $31.5 million or 30.5%.

The increase was primarily due to:

We will continue to incur additional costs in 2004 related to the formal investigation of our activities by the SEC, our proceedings before the New York Stock Exchange, additional legal representation for the Company and our officers, directors and employees and for certain bank fees in order to obtain additional waiver extensions related to our delayed filings. The costs incurred during 2003 and the estimated costs incurred in the first quarter of 2004 are as follows:

                                            Three Months
                                               Ended                Year Ended
                                              March 31,            December 31,
(Dollars in millions):                         2004                   2003
---------------------                          ----                   ----
Audit fees for the reaudits
  and restatements                             $0.5                   $3.6
Cost of investigations                          0.1                    5.9
Legal and consulting fees                       1.6                    3.2
Separation agreements                           ---                    5.9
Bank waiver fees                                2.1                    1.6
                                                ---                    ---
Amounts before tax                             $4.3                  $20.2
                                               ====                  =====

Amounts net of tax                             $3.0                  $12.9
                                               ====                  =====

Provision for Doubtful Accounts. Our provision for doubtful accounts decreased to $4.2 million for the year ended December 31, 2003 from $7.8 million for the year ended December 31, 2002. The decrease was primarily attributable to reduced provisions for Microtech ($2.0 million) and additional provisions for specific customers which became part of our non-performing receivables during 2002. During 2003, our non-performing receivables increased $1.7 million ($12.8 million at December 31, 2003 and $11.1 million at December 31, 2002). As of December 31, 2003 and 2002, our non-performing receivables, net of applicable reserves, were 1.27% and 2.54%, respectively, of accounts receivable, net. Our provision for doubtful accounts is provided based upon a quarterly review of the receivables. This review is based on the risk profile of the receivables, credit quality indicators such as the level of past-due amounts and economic conditions, as well as the value of underlying collateral in the case of finance lease receivables. (See Note 3 to the Consolidated Financial Statements.)

Fair Value Adjustment for Derivative Instruments. Our non-cash fair value adjustment for derivative instruments income amounted to $0.8 million for the year ended December 31, 2003 as compared to expense of $5.5 million in the year ended December 31, 2002, a change of $6.3 million. This change is primarily related to the change in the fair market value of interest rate swaps accounted for as free standing derivatives.

Depreciation and Amortization of Leasing Equipment. Our depreciation and amortization expenses decreased to $91.6 million for the year ended December 31, 2003, from $93.5 million for the year ended December 31, 2002, a decrease of $1.9 million or 2%.

While our operating fleet grew, the related increase in depreciation was offset by the following:

Losses for Investments Accounted for Under the Equity Method. The decrease in losses for investments accounted for under the equity method of $4.9 million during the year ended December 31, 2003 as compared to the prior year period resulted primarily from decreased equity method losses of CAI that we recorded through June 26, 2002, at which time CAI became our consolidated subsidiary. For the period from January 1, 2002 through June 26, 2002, our share of the equity losses of CAI was $4.0 million. In addition, for the year ended December 31, 2003, we recorded $1.7 million representing our share of equity losses as a result of certain other investments accounted for under the equity method of accounting, as compared to equity losses of $2.6 million for the year ended December 31, 2002.

Other (Income)/Expense, Net. We had other income of $5.1 million during the year ended December 31, 2003 compared to $1.1 million of other expense for the year ended December 30, 2002. The change of $6.2 million for the year ended December 31, 2003 was primarily due to:

Interest Expense. Our interest expense decreased to $106.7 million in the year ended December 31, 2003 from $108.3 million in the year ended December 31, 2002, a decrease of $1.6 million or 1%. The decrease in interest expense was primarily attributable to reduced interest rates resulting in reduced interest expense of $10.2 million and a reduction in amortization of deferred financing fees of $2.6 million as compared to the prior year period. These decreases to interest expense were partially offset by increased borrowings to fund capital expenditures, resulting in incremental interest expense of $7.7 million, an increase in interest expense of $1.7 million related to CAI for a full year of expense in 2003 compared with approximately six months in 2002 and $1.7 million of bank fees in order to obtain waivers related to our delayed filings.

Interest Income. Our interest income decreased to $4.0 million in the year ended December 31, 2003 from $4.6 million in the year ended December 31, 2002, a decrease of $0.6 million or 13%. The decrease in interest income was primarily due to reduced earnings on invested cash balances due to lower interest rates, as well as a decline in invested cash balances.

Minority Interest Income/(Expense), Net. The change in minority interest income/(expense), net of $0.1 million for the year ended December 31, 2003 as compared to the prior year period resulted primarily from a decrease in minority interest income of $0.1 million as a result of the consolidation of CAI effective June 27, 2002.

Provision/(Benefit) for Income Taxes. We recorded an income tax provision of $3.3 million for the year ended December 31, 2003 as compared to a tax benefit of $1.4 million for the year ended December 31, 2002. This increase in the provision for income taxes was caused by an increase in pre-tax income of $41.5 million and the mix between pre-tax income and losses generated from international sources and United States sources. The international container division that is taxed at lower rates (approximately 3%) based upon the income tax convention between the United States and Barbados, contributed favorably to net income. The domestic intermodal division (including corporate activities) which is taxed at higher United States tax rates, experienced reduced losses during the year ended December 31, 2003, as compared to the prior year. Additionally, other provisions for deferred tax asset valuation allowances increased the tax provision by $1.2 million during the year ended December 31, 2003 while the provisions for deferred tax asset valuation allowances decreased tax benefits by $6.3 million for the year ended December 31, 2002.

Net Income. As a result of the factors described above, our net income increased to $41.2 million in the year ended December 31, 2003 from $4.4 million in the year ended December 31, 2002.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues. Our revenues decreased to $326.6 million for the year ended December 31, 2002, from $338.7 million in the year ended December 31, 2001, a decrease of $12.1 million or 3.6%. The decrease was primarily attributable to our December 31, 2001 sale of PCR that resulted in reduced leasing revenues of $31.0 million, partially offset by $20.2 million of incremental leasing revenues as a result of consolidating CAI. In addition, operating lease revenues decreased $10.7 million, partially offset by increased finance lease revenues of $9.7 million. Although our container and chassis fleets increased in size by 14% and 7%, respectively as compared to the year ended December 31, 2001, the operating lease revenue declined due to reductions in the daily rental rates of 15% for containers and 9% for chassis. The decrease in container rates resulted from the termination of leases with higher rates that were written when the cost of equipment was higher than it is currently. These leases were replaced by leases with lower rates reflecting the current cost of equipment. Our chassis rates declined as a result of the acquisition, in December 2001, of 20,700 used chassis on hire at per diem rates lower than our existing fleet. In addition, a change to California law, which made the lessee of the equipment responsible for the payment of licensing costs, lowered the rates since these costs were previously recovered through per diem rates. Utilization rates of our container fleet have historically been calculated assuming containers managed by CAI were 100% utilized since they were not available to us to put on hire. Under this method, utilization rates of our container fleet and our domestic intermodal chassis operating fleet at December 31, 2002 were 98% and 93%, respectively, as compared to 96% and 93%, respectively, at December 31, 2001. The utilization rates of our container fleet, considering CAI's actual utilization rates for our containers managed by CAI, were 92% and 89% at December 31, 2002 and 2001, respectively.

Lease Operating and Administrative Expenses. Our lease operating and administrative expenses decreased to $103.4 million for the year ended December 31, 2002 from $128.9 million in the year ended December 31, 2001, a decrease of $25.5 million or 19.8%.

The decrease was primarily due to:

Provision for Doubtful Accounts. Our provision for doubtful accounts decreased to $7.8 million for the year ended December 31, 2002 from $9.0 million for the year ended December 31, 2001. The decrease was primarily attributable to $3.1 million of provisions in 2001 related to amounts billed to a lease customer that went into default which were no longer probable of collection from the lessee, partially offset by increased reserves for a specific customer which became part of our non-performing receivables during 2002. During 2002, we experienced an increase in our non-performing receivables of $5.1 million ($11.1 million at December 31, 2002 and $6.0 million at December 31, 2001). As of December 31, 2002 and 2001, our non-performing receivables, net of applicable reserves, were 2.54% and 5.96%, respectively, of accounts receivable, net. Our provision for doubtful accounts is provided based upon a quarterly review of the collectibility of our receivables. This review is based on the risk profile of the receivables, credit quality indicators such as the level of past-due amounts and economic conditions, as well as the value of underlying collateral in the case of finance lease receivables. (See Note 3 to the Consolidated Financial Statements.)

Fair Value Adjustment for Derivative Instruments. Our non-cash market value adjustment for derivative instruments expense decreased to $5.5 million for the year ended December 31, 2002 from $8.2 million in the year ended December 31, 2001, a decrease of $2.7 million. This decrease is comprised of the following items:

Depreciation and Amortization of Leasing Equipment. Our depreciation and amortization expenses increased to $93.5 million for the year ended December 31, 2002, from $79.7 million for the year ended December 31, 2001, an increase of $13.8 million or 17%.

The increase was primarily due to additions to our fleet as well as:

Losses for Investments Accounted for Under the Equity Method. The increase in losses for investments accounted for under the equity method of $5.8 million during the year ended December 31, 2002 as compared to the prior year period resulted primarily from increased equity method losses of CAI that we recorded through June 26, 2002, at which time CAI became our consolidated subsidiary. For the period from January 1, 2002 through June 26, 2002, our share of the equity losses of CAI was $4.0 million, as compared to equity losses of CAI of $.2 million for the year ended December 31, 2001. The increase in losses was primarily the result of CAI recording an impairment loss of $3.5 million related to equipment held for sale that was impaired, as well as a change in the container depreciation policy which resulted in an increase in CAI’s depreciation of $1.3 million. These two items increased losses we recorded by $1.6 million, net of CAI’s tax benefit. The remaining increase in losses resulted from reduced operating performance of the CAI fleet. In addition, for the year ended December 31, 2002, we recorded $2.6 million representing our share of equity losses as a result of certain other investments accounted for under the equity method of accounting, as compared to equity losses of $0.6 million for the year ended December 31, 2001.

Other (Income)/Expense, Net. We had other (income)/expense, net of $1.1 million during the year ended December 31, 2002 compared to $(9.8) million in 2001. The increase of $10.9 million from the year ended December 31, 2001 was due to:

Interest Expense. Our interest expense increased to $108.3 million in the year ended December 31, 2002 from $98.3 million in the year ended December 30, 2001, an increase of $10.0 million or 10%. The increase in interest expense was primarily attributable to $2.3 million of incremental interest expense as a result of consolidating CAI, deferred financing fees of $4.8 million which were written off when we refinanced certain of our debt instruments, and increased borrowings to fund capital expenditures, resulting in incremental interest expense of $10.3 million. These increases to interest expense were partially offset by reduced interest rates resulting in reduced interest expense of $7.3 million.

Interest Income. Our interest income decreased to $4.6 million in the year ended December 31, 2002 from $9.4 million in the year ended December 31, 2001, a decrease of $4.8 million or 51%. The decrease in interest income was primarily due to reduced earnings on invested cash balances due to lower interest rates.

Minority Interest (Income)/Expense, Net. The change in minority interest (income)/expense, net of $2.3 million for the year ended December 31, 2002 as compared to the prior year period resulted primarily from:

(Benefit)/Provision for Income Taxes. We recorded an income tax benefit of $1.4 million for the year ended December 31, 2002 as compared to a tax provision of $5.4 million for the year ended December 31, 2001. This reduction in the provision for income taxes was caused by lower pre-tax income before cumulative effect of change in accounting principle of $30.5 million. The international container division that is taxed at lower rates based upon the income tax convention between the United States and Barbados, contributed favorably to pre tax income. Losses contributed by the domestic intermodal division, which are taxed at higher United States tax rates, provided a tax benefit. These losses include certain expenses related to the liquidation of PCR for which no tax benefit will be realized. The 35% statutory tax rate applied to these losses would have given rise to additional tax benefits of $1.2 million. Additionally, other provisions for deferred tax asset valuation allowances decreased tax benefits by $6.3 million.

Net Income. As a result of the factors described above, our net income decreased to $4.4 million in the year ended December 31, 2002 from $28.1 million in the year ended December 31, 2001.

Liquidity and Capital Resources

Historically, we have used funds from various sources to meet our corporate obligations and to finance the acquisition of equipment for lease to customers. The primary funding sources have been cash provided by operations, borrowings (generally from banks), securitization of lease receivables, the issuance of capital lease obligations and the sale of our securities. In addition, we have generated cash from the sale of equipment being retired from our fleet. In general, we have sought to meet debt service requirements from the leasing revenue generated by our equipment.

We have usually funded a significant portion of the purchase price for new containers and chassis through borrowings under our revolving credit facility and other lines of credit, or through secured financings with financial institutions. While we successfully completed several financings during 2003 and the first seven months of 2004, including financings of approximately $44.5 million during December 2003 and $111.2 million during March, May and July 2004, our ability to borrow funds on terms as favorable as those available previously has been limited since March 31, 2003 because of the restatement to our historical financial statements and the related Audit Committee and SEC investigations, the delay in completing our audited 2002 financial statements and filing our Annual Report on Form 10-K for 2002 with the SEC, and the delay in completing our quarterly and annual financial statements for 2003 and filing our Quarterly and Annual Reports on Forms 10-Q and 10-K for 2003. These factors, coupled with the requirement to maintain certain levels of unrestricted cash until the delayed financial filings are completed, have affected the amount of business we have written with our customers. However, we are currently evaluating a number of secured financing proposals for growth and for refinancing existing facilities.

In addition, although we have in the past paid our equipment manufacturers, most of which are located in China, for our acquisitions of containers and chassis within normal trade terms (generally 60-90 days), we were generally not able to make payments on this schedule during the latter part of 2003 because of the limited availability of new financings. As a result, we negotiated extensions of these trade terms and obtained the approval of our manufacturers to defer our payment obligations to them. As of December 31, 2003, the total amount we owed to these manufacturers for equipment already delivered (most of which had been placed into service in our fleet) or committed to purchase was approximately $120.5 million. Of this amount, $54.6 million of such trade debt was represented by promissory notes we issued to these manufacturers during 2003. As of December 31, 2003, these obligations are included in accounts payable and accrued expenses in the accompanying Consolidated Balance Sheets. All past due obligations to the manufacturers, including the promissory notes, were paid in March and April 2004.

Because our financial restatement and re-audits, as well as the completion of the internal investigations by special counsel to our Audit Committee, prevented the timely completion of our financial statements and Form 10-K for the year ended December 31, 2003 and our financial statements and SEC filings for 2004, we requested and received necessary waivers under our debt agreements. During February 2004, we provided our lenders with a revised schedule for completing and filing our financial statements and periodic SEC filings for 2003 and 2004, and requested that our lenders waive any default resulting from the late preparation and filing of our financial statements and required periodic reports contained in our loan documents and debt instruments until the respective dates set forth in the revised schedule. The revised dates provided to, and agreed by, our lenders are:

While we requested that our lenders and financial institutions waive compliance with the applicable reporting requirements until the respective dates shown in the table, we intend to complete and file our SEC reports earlier than these deadlines. We have received waivers from all of our lenders agreeing to the dates above.

As described below, in connection with the receipt of certain waivers, we agreed to certain modifications to the terms of several of our debt agreements, including in a few cases, the pledging of additional collateral and changes to amortization schedules. Several of the waivers we received from our financial institutions during 2003 and 2004 provide by their terms that the waiver is void if certain events occur, such as a declaration of default by one or more of our other lenders, or the commencement of civil or criminal proceedings against us or any adverse action by the SEC or the New York Stock Exchange, if such action has a material adverse effect upon our ability to perform our contractual obligations. Although we do not believe that any of these actions has occurred to date, there can be no assurance that they will not occur in the future. In the event any of our existing waivers ceased to be effective by its terms, we could be deemed to be in violation of the terms of the indebtedness to which the waiver relates. In this event, one or more of our lenders could exercise their right to declare us in default, accelerate the indebtedness owed to such lender and take other actions against us, such as attempting to exercise rights as a secured creditor with respect to any collateral. If any of these circumstances were to occur, we might not be able to meet our obligations to our lenders and other creditors and might not be able to prevent such parties from taking actions that could jeopardize our ability to continue to operate our business.

In connection with our delayed SEC filings and the receipt of waivers from our lenders necessitated by the delayed filings, beginning in January 2004, the members of our Board of Directors and certain of their affiliates who own shares of our common stock have agreed to defer their receipt of any dividend payments, including those we may declare in the future, until we are in compliance with all SEC filing requirements. As of July 15, 2004, recorded dividend payments in the amount of $2.6 million have been deferred.

Over the years, we have explored from time to time the possibility of raising capital or reducing our leverage through the issuance and sale of our equity securities. Although our financial restatement in 2003 prevented us from considering any such transactions, during 2004 we have had discussions with several parties (including certain holders of our existing debt securities) that have expressed interest in making or arranging investments in our equity securities. As of the date this Form 10-K is being filed, we have not entered into any agreement for any such transaction. There is no assurance that any such transaction will occur or, if a transaction occurs, what the terms thereof would be.

Cash Flow

Net cash provided by operating activities amounted to $145.0 million in 2003, $120.1 million in 2002 and $410.8 million in 2001. The increase in net cash provided by these activities in 2003 as compared to 2002 was primarily due to an increase in net income, as well as changes in operating assets and liabilities in the ordinary course of business. The decrease in net cash provided by operating activities in 2002 as compared to 2001 was primarily due to the cash flows generated during 2001 as a result of the sale of the assets classified as held for sale as of December 31, 2000 without a similar sale during the year ended December 31, 2002 and the decrease in net income.

Net cash used for investing activities amounted to $207.7 million in 2003, $176.4 million in 2002 and $247.7 million in 2001. In each year, investing activities consisted primarily of capital expenditures for leasing equipment, partially offset by cash collections on direct financing leases. The increase in net cash used in these activities in 2003 as compared to 2002 was primarily due to an increase in the acquisition of leasing equipment ($5.8 million) and an increase in the investment in direct financing leases ($45.2 million), partially offset by an increase in cash collections on direct financing leases ($18.1 million). The decrease in net cash used in these activities in 2002 as compared to 2001 was primarily due to a decrease in the acquisition of leasing equipment ($9.5 million) and a decrease in the investment in direct financing leases ($62.7 million).

Net cash provided by (used for) financing activities amounted to $33.0 million in 2003, $123.1 million in 2002 and ($216.5) million in 2001. In each year, financing activities consisted of proceeds from the issuance of debt and borrowings under revolving credit facilities, offset by payments made by the Company under its debt obligations. The decrease in net cash provided by these activities in 2003 as compared to 2002 was primarily due to a decrease in proceeds from the issuance of debt and borrowings under revolving credit facilities ($974.6 million) partially offset by a decrease in repayment of the Company’s debt obligations ($884.8 million). The change in net cash provided by financing activities in 2002 as compared to 2001 was primarily due to an increase in proceeds from the issuance of debt and borrowings under revolving credit facilities ($889.1 million) partially offset by an increase in repayment of the Company’s debt obligations ($549.4 million).

The following table sets forth certain historical cash flow information for the three years ended December 31, 2003.

                                                                              Year Ended December 31,

                                                                             2003         2002         2001
                                                                             ----         ----         ----
                                                                                 (Dollars in millions)
Net cash provided by operating activities                                     $145.0     $120.1       $410.8
Proceeds from disposition of leasing equipment                                  16.8       12.0         15.6
Acquisition of leasing equipment                                              (197.7)    (191.9)      (201.4)
Investment in direct financing leases                                         (109.3)     (64.1)      (126.8)
Net collections on direct finance leases                                        77.8       59.7         65.3
Net (payments) proceeds of issuance of long-term debt and capital lease
obligations in excess of payment of long-term debt and capital lease
obligations                                                                      7.6      203.8        (91.0)

Contractual Obligations and Commercial Commitments

We and our subsidiaries are parties to various operating and capital leases and are obligated to make payments related to our long term borrowings. (See Notes 4 and 9 to the Consolidated Financial Statements.) We are also obligated under various commercial commitments, including obligations to our equipment manufacturers. In the past, our equipment manufacturer obligations have been in the form of conventional accounts payable and have been satisfied within normal trade terms which were satisfied from cash flow from operations and long-term financing. As described above, during the latter part of 2003, we were not able to pay our manufacturers and had a total of $120.5 million payable to them as of December 31, 2003, $54.6 million of which had been converted into promissory notes. As of December 31, 2003, these obligations are included in accounts payable and accrued expenses in the accompanying Consolidated Balance Sheets. All past due obligations, including the promissory notes, to the manufacturers were paid in March and April 2004.

The following tables summarize our contractual obligations and commercial commitments at December 31, 2003.

                                                       Amounts Due by Period
                                                       (Dollars in millions)
                                          Less than 1
Contractual Obligations          Total       year        1-3 years      4-5 years   After 5 years
-----------------------          -----       ----        ---------      ---------   -------------
Long Term Debt                 $  910.8    $  154.2      $  422.4     $  265.8        $   68.4
Capital Lease Obligations         729.9        65.0         132.0        117.8           415.1
Operating Leases                   77.3        20.2          33.9         16.8             6.4
Unconditional Purchase
Obligations                       105.3        42.3          42.0         21.0            ---
Employment Agreements               8.8         2.0           2.1          2.3             2.4
Separation Agreements               4.2         1.6           2.2          0.4            ---
Obligations Related to PCR
Liquidation                         5.5         5.5          ---           ---            ---
                                    ---         ---          ---           ---            ---
Total Contractual Cash
Obligations                    $1,841.8      $290.8        $634.6       $424.1         $492.3
                               ========      ======        ======       ======         ======

                                              Amount of Commitment Expiration Per Period
                                 Total    ---------------------------------------------------
Other Commercial                Amounts    Less than 1
  Commitments                   Committed      year       1-3 years    4-5 years  Over 5 years
  -----------                   ---------      ----       ---------    ---------  ------------
Standby Letters of Credit          $ 6.0      $  ---      $6.0          $---        $---
Guarantees                          16.8         ---       ---           8.0         8.8
                                    ----       -----       ---           ---         ---
Total Commercial Commitments       $22.8      $  ---      $6.0          $8.0        $8.8
                                   =====      =======     ====          ====        ====

Debt and Capital Lease Obligations:

The following table summarizes our debt and capital lease obligations as of December 31, 2003 and 2002:

                                                                                    (Dollars in Millions)

                                                                          December 31, 2003      December 31, 2002
                                                                          -----------------      -----------------
Capital lease obligations payable in varying amounts through 2018              $325.2              $363.7

Chassis Securitization Facility, interest at 5.59% and 5.08% at
  December 31, 2003 and 2002, respectively

      Warehouse facility                                                         25.5               ---

      Debt obligation                                                            86.4               120.2

      Capital lease obligation                                                  404.7               410.5

Revolving credit facility, interest rate at 3.09% and 2.64% at
  December 31, 2003 and 2002, respectively                                      193.5               175.0

Revolving credit facility CAI, interest rate at 3.37% and 3.69% at
  December 31, 2003 and 2002, respectively                                       87.0                74.0

Container securitization facility, interest at 6.5% and 5.85% at
  December 31, 2003 and 2002, respectively                                       76.6                92.0

7.35% Notes due 2007 (unsecured)                                                147.0               147.0

7.20% Notes due 2007 (unsecured)                                                 62.8                62.8

9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022 (unsecured)                                                    37.2                32.1

Notes and loans payable with various rates ranging from 1.89% to 7.90%
  and maturities from 2004 to 2010                                              194.8               119.9
                                                                                -----               -----

Total Debt and Capital Lease Obligations                                      1,640.7             1,597.2
                                                                              -------             -------
   Less Current Maturities                                                      219.2               161.4

Total Non-Current Debt and Capital Lease Obligations                         $1,421.5            $1,435.8
                                                                             ========            ========

Our debt consists of notes and loans and capital lease obligations with installments payable in varying amounts through 2022, with a weighted average interest rate of 6.0% in 2003. The principal amount of debt and capital lease obligations payable under fixed rate contracts is $491.3 million. Remaining debt and capital lease obligations of $1,149.4 million is payable under floating rate arrangements, of which $500.1 million has been converted to fixed rate debt through the use of interest rate swap agreements. At December 31, 2003, most of our debt and capital lease obligations are secured by a substantial portion of our leasing equipment, direct finance leases, and accounts receivable, except for $247.0 million of debt which is unsecured. For further information on the accounting treatment for interest rate swap contracts see Note 5 to the Consolidated Financial Statements.

Effective October 1, 2003, a customer elected to return a portion of the equipment covered by a direct financing lease which had been included in a qualified special purpose entity as part of the lease securitization program. The equipment was subsequently leased to another customer under the terms of an operating lease agreement. As such, the lease could no longer be considered a financial asset and the Securitization Trust entity could no longer be treated as an off-balance sheet qualified special purpose entity for accounting purposes. Therefore, effective October 1, 2003, we consolidated the assets and liabilities of this special purpose entity and recorded the remaining obligation of this special purpose entity amounting to $17.8 million as debt and capital lease obligations on the Consolidated Balance Sheets. At December 31, 2003, $13.3 million of this debt remains outstanding. See Note 8 to the Consolidated Financial Statements for further discussion regarding the change in accounting for this special purpose entity.

Debt Modifications: Throughout 2003, in connection with obtaining necessary waivers from lenders for late filing of our periodic reports with the SEC and the restatement of our past financial statements, we agreed to certain modifications to our existing debt agreements as follows:

New Financings: In July 2002, we commenced a registered subscription rights offering of up to $31.5 million of our 9.25% Convertible Redeemable Subordinated Debentures. The debentures were offered to holders of our common stock pursuant to the exercise of non-transferable subscription rights and were to be convertible into shares of our common stock. We had the right in our discretion to accept offers from other parties to purchase debentures not subscribed for by stockholders. On August 14, 2002, we terminated the subscription rights offering due to a delay in filing our Form 10-Q for the quarter ended June 30, 2002. We re-commenced the offering during November 2002 and accepted subscriptions for $32.1 million of debentures, which were issued in December 2002. We also increased the size of the offering and subsequently accepted $5.1 million of additional subscriptions in January and February 2003, resulting in a total of $37.2 million of debentures being issued. The debentures bear interest at an annual rate of 9.25%. They have a mandatory redemption feature upon the earlier of the occurrence of a change of control or on December 27, 2022. They have an optional redemption feature after the third anniversary at a price of 100% of outstanding principal, plus accrued interest. They have a special redemption feature between December 27, 2006 and December 27, 2007, during which period we may redeem the debentures by issuing common stock at $25.50 per debenture plus accrued interest, if the average closing price of our common stock for five consecutive trading days equals or exceeds $25.50 per share. Lastly, at any time, the holder of the debentures may convert the debentures into our common stock at a per share conversion price of $25 per debenture.

During 2003, in addition to additional financing under our container and chassis securitizations of $51.3 million and $25.5 million, respectively, the additional borrowing of $50.0 million under our revolving credit facility and $38.0 million borrowed by CAI under its revolving credit facility, we entered into new financing arrangements totaling $135.0 million. The new debt and capital leases entered into during 2003 consisted of the following:

                                                                                New Borrowings
Total New Debt and Capital Lease Obligations                                         2003
--------------------------------------------                                         ----

Capital lease obligations payable through 2010 with interest
  imputed at rates from 4.4% to 6.4%                                                 $14.3

9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022                                                                      5.1

Notes and loans repayable with various rates ranging from 3.1%
  to 4.0% and maturities from 2006 to 2009                                           115.6
                                                                                     -----

Total New Debt and Capital Lease Obligations 2003                                   $135.0
                                                                                    ======

Included in the notes and loans are borrowings of $16.0 million and $7.0 million from Yardville National Bank, a subsidiary of an entity in which Martin Tuchman owns approximately five percent of the common stock and serves on the Executive Committee of the Board of Directors. The term of the $16.0 million loan is three years with thirty four fixed monthly principal payments of $0.25 million commencing May 25, 2003 and a final principal payment of $7.5 million due on March 25, 2006. Interest is payable monthly, at an initial rate of 4.25%, and is adjusted monthly to the prime rate as published in the Wall Street Journal subject to a 4% minimum and 5% maximum per annum rate. The term of the $7.0 million loan is five years with fifty-nine fixed monthly principal payments of $.075 million commencing September 7, 2003 and a final principal payment of $2.6 million due on August 7, 2008. Interest is payable monthly, at an initial rate of 4%, and is adjusted monthly to the prime rate as published in the Wall Street Journal subject to a 4% minimum and 6% maximum per annum rate.

Covenants: Under our revolving credit facility and most of our other debt instruments, we are required to maintain covenants (as defined) for a tangible net worth of $125.0 million, a fixed charge coverage ratio of 1.5 to 1 and a funded debt to net worth ratio (as defined in the agreement, which is stockholders’ equity plus company-obligated mandatorily redeemable preferred securities in subsidiary grantor trusts, less goodwill) of 4.0 to 1. A financing facility entered into in March 2004 contains more stringent covenants, including a requirement that we maintain a tangible net worth of at least $300.0 million. We will seek to eliminate these more stringent covenants by refinancing this facility during the second half of 2004. At December 31, 2003, under covenants in our loan agreement approximately $93.9 million of retained earnings were available for dividends. In July 2003 and October 2003, in connection with obtaining necessary waivers under the revolving credit facility due to the late filing of our periodic reports with the SEC and the restatement of our past financial statements, we agreed, among other things, to reduce advance rates under this facility, to define several additional events as events of default, to increase the interest rate margin, and to maintain specified levels of unrestricted cash and cash equivalents until the delinquent SEC filings are made. We also agreed to restrictions on dispositions of collateral and on encumbrances of assets as well as a limitation on concessions that could be made to our other financial institutions in connection with obtaining waivers. The October 2003 amendment also required us to provide additional financial information to the lenders under the facility and to continue the engagement of a financial advisor. At December 31, 2003 we were in compliance with these covenants as amended.

Other: As of December 31, 2003, our commitments for future capital expenditures totaled approximately $105.3 million with approximately $42.3 million committed for 2004. Our available liquidity, including $17.0 million available under CAI’s revolving credit facility, at December 31, 2003 was $65.5 million after adjusting for $25.0 million of cash held within the chassis securitization and $67.5 million required to be maintained as a result of obtaining waivers. Required debt repayments and capital lease payments for 2004 totaled $219.2 million as of December 31, 2003 which we anticipate making through our unrestricted cash balances and cash flow from operations.

In the past, cash on hand, cash flow from operations, borrowings under credit facilities and the net proceeds of the issuance of debt and equity securities has been sufficient to meet our working capital needs, capital expenditures and required debt repayments. Because the availability of financing to us was limited in 2003, due to our financial restatement and the investigations by our Audit Committee’s special counsel and the SEC, and the delay in completing our audited financial statements and filing our Forms 10-K for 2002 and 2003, and because of the waiver-related requirement to maintain significant minimum cash balances, we were not able to fund all of our capital expenditure commitments, specifically our obligations to equipment manufacturers, during the second half of 2003. At year end, we had deferred payments due to our equipment manufacturers totaling $120.5 million. We subsequently paid all past due amounts to the manufacturers in March and April 2004 with proceeds from a new financing. We also expect to continue to rely in substantial part on long-term financing for the purchase of equipment or strategic acquisitions to expand our business in the future. We cannot assure that long-term financing will be available for these purposes on acceptable terms or at all. In addition, from time to time, we may explore new sources of capital both at the parent and subsidiary levels. We successfully completed secured financings of approximately $111.2 million during March, May and July 2004 and are currently evaluating a number of secured financing proposals.

Settled Insurance Litigation

In February 2001, we demanded return of all our equipment on lease to a significant customer based in South Korea. The lessee subsequently commenced insolvency proceedings and did not return our equipment. At the time of this insolvency, we maintained insurance coverage against such lessee defaults, and we submitted a claim to our insurance carriers seeking to recover the value of the receivables owed by the customer (to the extent covered by the insurance policies). Our claim included per diem rental charges for up to one hundred and eighty days after the default date for equipment not returned by the lessee as well as loss, damage and recovery costs relating to the equipment on lease that are also billable to the lessee in accordance with the lease. Our claim was in excess of the policy’s maximum coverage of $35 million. On December 26, 2002, the insurance carriers filed a lawsuit seeking among other things rescission of the policies. We in turn filed an answer and counter-claim for payment of our insurance claim. (See Item 3, Legal Proceedings, above.) On June 17, 2004, in an attempt to avoid the time, expense and uncertainty inherent in continued litigation, we signed an agreement settling this lawsuit and our claim under the policies. Under the terms of the settlement agreement, the insurance carriers paid us a total of $26.4 million in cash in June and July 2004. As of December 31, 2003, the outstanding receivable recorded from the insurance carriers is $20.5 million. The difference between the receivable recorded due from the insurance carriers and the claim submitted primarily relates to per diem revenues, repairs and maintenance and other costs billable to the lessee (and covered by the insurance contract) that are in excess of costs incurred.

Other

CAI

In April 1998, we acquired a 50% common equity interest in CAI. CAI owns and leases its own fleet of containers and manages, for a fee, containers owned by third parties. We entered into an operating relationship with CAI primarily to facilitate the rental in the short-term market of containers coming off long-term lease, to gain access to new companies looking to lease containers on a long term basis and to realize cost efficiencies from the operation of a coordinated container lease marketing group. The marketing group which is organized as our wholly-owned subsidiary, is responsible for soliciting container lease business for both us and for CAI, including long-term and direct finance lease business and short-term lease business on master lease agreements. Our agreement with CAI provides that all long-term and direct finance lease business will be purchased by us, subject to offering to CAI, at cost, 10% of this long-term and direct finance lease business. By mutual agreement, CAI has purchased for its own account long-term and direct finance lease business generated by the marketing group in excess of such amount.

In connection with the acquisition of our equity interest in CAI, we loaned CAI $33.7 million under a Subordinated Note Agreement (Note) that is collateralized by all containers owned by CAI as of April 30, 1998 or thereafter acquired, subject to the priority security interest lien of CAI’s senior credit facility, except for certain excluded collateral. Interest on the Note was calculated at an annual fixed rate of 10.5% payable quarterly. The original repayment terms required mandatory quarterly principal payments of $1.7 million beginning July 30, 2003 through April 30, 2008. The Note was subject to certain financial covenants and was cross-defaulted with CAI’s senior credit facility, subject to the terms of a subordination agreement.

On June 27, 2002, CAI entered into an amended $110.0 million senior revolving credit agreement with a group of financial institutions. To facilitate the closing of this new credit facility, we agreed to extend the repayment terms of our Note so as to require mandatory quarterly principal payments of $1.7 million beginning July 30, 2006 through April 30, 2011 and modified certain financial covenants in the Note. Interest on the Note continues to accrue at an annual fixed rate of 10.5% and is payable quarterly. The Note continues to be cross-defaulted with CAI’s senior credit agreement, subject to the terms of an amended and restated subordination agreement. At the same time, we were provided a majority position on CAI’s board of directors. As a result of these transactions and gaining a majority position on CAI’s board, our financial statements include CAI as a consolidated subsidiary commencing June 27, 2002. Previously, CAI was accounted for under the equity method of accounting. Our share of the equity losses of CAI for the periods from January 1, 2002 through June 26, 2002 have been recorded in losses for investments accounted for under the equity method in the accompanying Consolidated Statements of Income. For the period from June 27, 2002 through December 31, 2003, CAI’s results of operations have been included in the appropriate captions on the accompanying Consolidated Statements of Income. The assets and liabilities of CAI at December 31, 2003 and 2002 have been included on the accompanying Consolidated Balance Sheets.

A total of $87.0 million was outstanding under CAI’s senior revolving credit facility at December 31, 2003. Borrowings under CAI’s senior credit facility are secured by substantially all of CAI’s assets, other than certain excluded assets, and are payable on June 27, 2005. The senior credit facility contains various financial and other covenants. At December 31, 2003, CAI was in compliance with these covenants. The senior credit facility was amended in May 2003 to increase the letter of credit commitment by the lenders’ administrative agent.

In addition, CAI has entered into sale-leaseback transactions with third parties pursuant to which CAI sells maritime shipping containers to such third parties and then leases the shipping containers back from such third parties. In connection with such transactions, CAI has entered into the following lease agreements:

CAI entered into a master lease agreement dated April 30, 1998, as amended, which amends and restates a prior agreement dated July 17, 1996, pursuant to which CAI currently leases shipping containers from a banking corporation. The master lease agreement has an expiration date of July 31, 2008. CAI is required to make regular payments to lessor and, as of December 31, 2003 and 2002, CAI’s total outstanding obligation under this lease agreement was approximately $13.8 million and $23.2 million respectively. CAI has the option to purchase the leased equipment on a date prior to the expiration of the initial term of the lease agreement or at the time of such expiration. In addition, upon the expiration of the initial term of the lease agreement, CAI has the right to extend the lease agreement for one year or return the leased equipment to lessor under the terms and conditions set forth in the lease agreement. This lease agreement was amended in 2002 to include certain additional negative covenants and financial covenants of CAI. The lease agreement was amended in May 2003 to provide for a rent prepayment under the lease agreement in the approximate amount of $3.75 million to the lessor.

CAI entered into a master lease agreement dated April 30, 1998, as amended, which amends and restates a prior agreement dated November 21, 1996, pursuant to which CAI currently leases shipping containers from a banking corporation. The master lease agreement has a term of ten years. CAI is required to make regular payments to lessor and, as of December 31, 2003, CAI’s total outstanding obligation under this lease agreement was approximately $4.7 million. CAI has the option to purchase the leased equipment on a date prior to the expiration of the initial term of the lease agreement or at the time of such expiration. In addition, upon the expiration of the initial term of the lease agreement, CAI has the right to extend the lease agreement for one year or return the leased equipment to lessor under the terms and conditions set forth in the lease agreement. This lease agreement was amended in 2002 to include certain additional negative covenants and financial covenants of CAI.

In April 2004, we reached an agreement with CAI resolving differences in interpretation of certain provisions of the Operating and Administration Agreement (the “CAI Agreement”) governing payment of appropriate remedial compensation when an age disparity develops between our containers managed by CAI and the balance of CAI’s managed fleet. Pursuant to our agreement with CAI, we agreed to pay CAI $2.0 million for resolution of all disputes through February 29, 2004. The impact of this agreement, which will be recorded by us during the three months ended March 31, 2004, will be a reduction in consolidated pre-tax income of $1.0 million ($0.6 million net of tax). We and CAI are currently in discussions to simplify the terms of the portion of the CAI Agreement governing age parity adjustments.

Chassis Holdings I, LLC

For many years, The Ivy Group, a New Jersey general partnership composed directly or indirectly of certain of our current and former directors and executive officers, together with certain of its principals, leased chassis to our wholly owned subsidiary Trac Lease, Inc. (“Trac Lease”) for use in Trac Lease’s business. As of January 1, 2001, Trac Lease leased a total of 6,047 chassis from The Ivy Group and its principals for an aggregate annual lease payment of approximately $2.6 million. On July 1, 2001, we restructured our relationship with The Ivy Group and its principals to provide us with managerial control over the 6,047 chassis previously leased by Trac Lease from The Ivy Group and its principals. As a result of the restructuring, the partners of The Ivy Group contributed these 6,047 chassis and certain other assets and liabilities to a newly formed subsidiary, Chassis Holdings I LLC (“Chassis Holdings”), in exchange for $26.0 million face value of preferred membership units and 10% of the common membership units, and Trac Lease contributed 902 chassis and two thousand dollars in cash to Chassis Holdings in exchange for $3.0 million face value of preferred membership units and 90% of the common membership units. The preferred membership units are entitled to receive a preferred return prior to the receipt of any distributions by the holders of the common membership units. The value of the contributed chassis was determined by taking the arithmetic average of the results of independent appraisals performed by three nationally recognized appraisal firms in connection with our establishment of a chassis securitization facility in July 2000. As the managing member of Chassis Holdings, Trac Lease exercises sole managerial control over the entity’s operations. Chassis Holdings leases all of its chassis to Trac Lease at a rental rate equal to the then current Trac Lease fleet average per diem. Chassis Holdings and the holders of the preferred membership units are party to a Put/Call Agreement providing that the holders of preferred units may put such units to Chassis Holdings under certain circumstances and Chassis Holdings has the right to redeem such units under certain circumstances. Chassis Holdings will be required to make certain option payments to the holders of the preferred membership units in order to preserve its right to redeem such units. Dividends paid on the common units and distributions on the preferred units totaling $2.9 million, $3.1 million and $1.7 million for the years ended December 31, 2003, 2002 and 2001, respectively, are included in minority interest (income)/expense, net in the accompanying Consolidated Statements of Income.

Chassis Distribution Agreement

In April 2003, we agreed to become a 50% owner through an initial investment of $0.5 million of a limited liability company (the “LLC”) formed with a foreign chassis manufacturer. The purpose of the LLC is to be the exclusive worldwide distributor of chassis built by this manufacturer and for us to share in the profits the LLC earns in selling these chassis to third parties. Under the terms of the Distribution agreement for this equipment, we have agreed to purchase approximately 15,000 chassis at preferred pricing over a ten-year period, of which 1,100 chassis were ordered by us during 2003. We may elect to purchase additional equipment during the ten-year period at identical terms. The LLC began operations during the second quarter of 2003. We consolidate the financial statements of the LLC.

Stock Repurchases

During 1999, we authorized the repurchase of up to 1,000,000 shares of our common stock from time to time through open market purchases or privately negotiated transactions. No shares were repurchased during 2003. During 2002, we purchased 9,300 shares for an aggregate price of $0.13 million. During the fourth quarter of 2001, we purchased 58,100 shares for an aggregate purchase price of $0.9 million.

United States Federal Income Tax

We are subject to federal and state income taxes as a Subchapter “C” corporation under the Internal Revenue Code. Interpool, Trac Lease and other United States subsidiaries file a consolidated United States federal income tax return. This consolidated group is liable for federal income taxes on its worldwide income.

Personal Holding Company Issues. The federal income tax laws have two requirements for classifying a company as a personal holding company. We and our subsidiaries currently satisfy the first requirement, the ownership of more than 50% of the value of Interpool’s stock by five or fewer individuals. Whether or not we or any of our subsidiaries satisfy the second requirement (that at least 60% of such corporation’s adjusted ordinary gross income constitutes personal holding company income) will depend upon such corporation’s income mix.

Based upon the operating results for 2003, we will not be considered a personal holding company for federal income tax purposes for 2003 (and possibly in subsequent years). If, we or any of our subsidiaries were classified as a personal holding company for federal income tax purposes, in addition to our regular federal income tax liability, our undistributed personal holding company income (generally taxable income with certain adjustments, including a deduction for federal income taxes and dividends paid) would be subject to a personal holding company tax at the rate of 15%. Management anticipates that for the immediate future, our current level of dividends will be sufficient to avoid having any undistributed personal holding company income, and thus does not anticipate that any personal holding company tax will be imposed. There can be no assurance, however, that we will not at some point in the future become liable for personal holding company tax. Furthermore, we may at some point in the future elect to increase the dividend rate on our common stock in order to avoid personal holding company tax.

We have incurred certain losses from leasing activities that are characterized for tax purposes as “Suspended Passive Losses.” These losses can be carried forward indefinitely to offset income from future leasing activities. As of December 31, 2003, such suspended passive losses totaled approximately $220.7 million.

Trac Lease. Trac Lease has approximately $15.6 million of net operating loss carry-forwards for federal income tax purposes, which may be used only to offset the income of Trac Lease and, if not utilized, will expire between 2005 and 2006. A valuation allowance has been recorded for the full amount of these NOLs because the utilization of these NOLs prior to their expiration is considered unlikely. The use of substantially all these loss carry-forwards is subject to a number of limitations under federal tax laws.

Interpool Limited. Under certain circumstances, Interpool may be liable for United States federal income taxes on earnings of Interpool Limited and any other foreign subsidiaries of ours, whether or not such earnings are distributed to us. This would occur if Interpool Limited realized “Subpart F income” as defined in the Code, if it were deemed to be a foreign personal holding company, or if it were to have an increase in earnings invested in United States property.

Subpart F income includes foreign personal holding company income, such as dividends, interest and rents. Although a substantial portion of Interpool Limited’s income consists of rents from container leasing activities, we believe that such rents are not Subpart F income because they are derived from the active conduct of a trade or business and received from unrelated persons. However, Interpool Limited has received some dividend and interest income in past years, which was taxed as Subpart F income.

If Interpool Limited were treated as a foreign personal holding company for any year, we would be taxed on the amount we would have received if Interpool Limited had distributed all its income to us as a dividend. One of the conditions for treating a foreign subsidiary as a foreign personal holding company is that a minimum of 60% of the foreign subsidiary’s gross income must be foreign personal holding company income. Foreign personal holding company income does not include rental income that constitutes at least 50% of the subsidiary’s gross income. Because we expect that rental income will constitute at least 50% of Interpool Limited’s gross income, we do not anticipate that Interpool Limited will be deemed a foreign personal holding company.

A parent company is also subject to taxation when a foreign subsidiary increases the amount of its earnings invested in United States property during any calendar year. We do not expect that Interpool Limited will invest any earnings in United States property.

At December 31, 2003, unremitted earnings of this subsidiary were approximately $317.0 million. The deferred U.S. Federal Income taxes related to the unremitted earnings of this subsidiary would be approximately $110.9 million, assuming these earnings are taxable at the U.S. statutory rate, net of foreign tax credits.

United States/Barbados income tax convention. Interpool Limited’s business is managed and controlled in Barbados; it also has a permanent establishment in the United States. Under the income tax convention between the United States and Barbados, including any protocols and amendments (the “Tax Convention”), any profits of Interpool Limited from leasing of containers used in international trade generally are taxable only in Barbados and not in the United States. Interpool Limited is entitled to the benefits of the Tax Convention for each year that more than 50% of the shares of Interpool Limited are owned, directly or indirectly, by United States citizens or residents and its income is not used in substantial part, directly or indirectly, to meet liabilities to persons who are not residents or citizens of the United States. We believe that Interpool Limited passes both of these tests and should continue to be eligible for the benefits of the Tax Convention, but there can be no assurance as to this continued eligibility. If Interpool Limited ceased to be eligible for the benefits of the Tax Convention, a substantial portion of its income would become subject to the 35% United States federal income tax and the 30% branch profits tax.

The Tax Convention does not afford Interpool Limited any relief from the personal holding company tax or any other tax that may be imposed on the undistributed earnings of a Barbados corporation. To the extent that Interpool Limited has United States source income that is personal holding company income or is not needed in its business, Interpool Limited could be taxed on this income unless it is distributed to Interpool as a dividend. We expect that Interpool Limited would distribute this income to Interpool.

As a company resident in Barbados, Interpool Limited is required to file tax returns in Barbados and pay any tax liability to Barbados. However, no Barbados tax returns have been prepared or filed for Interpool Limited for any period subsequent to its 1997 tax year, because such tax returns are required to be accompanied by audited financial statements for Interpool Limited, which are not available. We believe that the failure to file these returns has not resulted in any underpayment of taxes, interest or penalties (other than a nominal late filing penalty recently enacted in Barbados), because we believe that no Barbados taxes would have been due for the years for which returns have not been filed. We further believe that Interpool Limited’s failure to file these returns would not present any other material risk to Interpool. Nonetheless, we intend to have the necessary Interpool Limited financial statements prepared and audited as promptly as practicable so that Interpool Limited’s Barbados tax returns can be filed as required.

July 2004 Protocol to the United States and Barbados Tax Treaty

Interpool Limited currently claims treaty benefits under the United States and Barbados income tax treaty (“Treaty”). The Treaty contains a limitation on benefits provision which denies treaty benefits under certain circumstances. However, Interpool Limited currently does not fall within the Treaty’s limitation on benefits provision.

On July 14, 2004, the United States and Barbados signed a protocol to the Treaty (“Protocol”) that contains a more restrictive limitation on benefits provision than the current Treaty does. If ratified, the Protocol might result in Interpool Limited losing its ability to rely on the Treaty to eliminate current U.S. income tax on its container rental and container sales income. This Protocol will not take effect until it is ratified by the United States Senate and the government of Barbados. It is currently uncertain whether the Senate will take action before it adjourns later in 2004. The Protocol is generally effective for taxable years commencing on or after the first of January in the year following the year the Protocol is ratified.

Under the Protocol, Interpool Limited would only be eligible for Treaty benefits with respect to its container rental and sales income if, among other things, Interpool, Inc. is listed on a “recognized stock exchange” (generally, the NASDAQ system or an SEC registered exchange such as the New York Stock Exchange), and Interpool, Inc.’s stock is “primarily” and “regularly” traded on such exchange.

As described elsewhere in this report, our common stock is currently not listed on a “recognized stock exchange” within the meaning of the Protocol. Management anticipates that Interpool, Inc. will examine all of its options with regard to listing on a “recognized stock exchange” and anticipates applying for a listing as soon as it is current with its SEC filings. However, even if Interpool Inc. is listed on a “recognized stock exchange” as of the date the Protocol comes into effect, it is not clear whether Interpool, Inc. would satisfy the “primarily” and “regularly” traded requirement as defined within the Protocol. If Interpool, Inc. does not believe that it can satisfy this requirement, it will investigate alternatives to Interpool Limited being a resident in Barbados that will still entitle Interpool Limited to treaty benefits under another tax treaty with the U.S. Any such alternative would likely result in Interpool Limited being subject to a higher non-U.S. tax than the approximate 3% tax rate it currently enjoys in Barbados.

State and Local Taxes

Income taxes. Interpool and Trac Lease are liable for state and local income taxes on their income, and Interpool Limited is liable for state and local income taxes on its earnings attributable to operations in the United States.

Sales tax. To date, Interpool Limited and Trac Lease generally have not paid sales taxes on their leasing revenues to the states in which they conduct business because management has believed such revenues to be exempt from state sales taxes on several grounds, including a long-standing interpretation of the Commerce Clause of the United States Constitution that would prohibit the imposition of a tax on cargo containers and chassis used primarily for transportation of goods in interstate commerce or international trade. In the early 1990’s, Itel Containers International Corp. (“Itel”), a container leasing company, challenged an attempt by the State of Tennessee to collect sales tax on Itel’s proceeds from the leasing of containers delivered in Tennessee. In a ruling by the United States Supreme Court in February 1993, Itel’s position was rejected and the Court upheld the right of Tennessee to impose sales tax on leasing revenues from containers delivered in Tennessee. We cannot predict the extent to which states other than Tennessee will now attempt to collect sales tax on our equipment leasing revenues based on this Supreme Court decision. Under the terms of our equipment leases, we would generally be entitled to pass any such sales tax on to our lessees.

Inflation

Management believes that inflation has not had a material adverse effect on our results of operations. In the past, the effects of inflation on administrative and operating expenses have been largely offset through economies of scale achieved through expansion of the business.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to use judgment in making estimates and assumptions that affect reported amounts of assets and liabilities, the reported amounts of income and expense during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements. Management has identified the policies and estimates below as critical to our business operations and the understanding of our results of operations. For a detailed discussion on these and other significant accounting policies See Note 1 to the Consolidated Financial Statements. These policies and estimates are considered critical due to the existence of uncertainty at the time the estimate is made, the likelihood of changes in estimates from period to period and the potential impact that these estimates can have on our financial statements. The following accounting policies and estimates include inherent risks and uncertainties related to judgments and assumptions made by management. Management’s estimates are based on the relevant information available at the end of each period.

Allowance for Doubtful Accounts — The allowance for doubtful accounts is set on a quarterly basis and is based on the risk profile of the receivables, credit quality indicators such as the level of past due amounts and non-performing accounts and economic conditions, as well as the value of underlying collateral. Changes in economic conditions or other events may necessitate additions or deductions to the allowance for doubtful accounts. The allowance is intended to provide for losses inherent in the accounts receivable, and requires the application of estimates and judgments as to the outcome of collection efforts and the realization of collateral, among other things.

Accounting for Leasing Equipment — Long lived assets are depreciated on a straight-line basis over their estimated useful lives to residual values that approximate fair value. Equipment useful lives are based upon actual experience in our fleet as well as the useful lives assigned to the equipment by independent appraisers. We continue to review our depreciation policies on a regular basis to evaluate if changes have taken place that would suggest that a change in the depreciation policies is warranted. Periodically a determination is made as to whether the carrying amount of the fleet exceeds its estimated future undiscounted cash flows. In addition, all idle equipment is evaluated to determine whether the units will be repaired and returned to service or sold based upon the best economic alternative. Assets to be disposed are reported at the lower of the carrying amount or fair value.

Lease Residual Values — Operating lease equipment is carried at cost less accumulated depreciation and is depreciated to estimated residual values using the straight-line basis of depreciation over their estimated useful lives. Direct financing leases are recorded at the aggregated future minimum lease payments, including any bargain or economically compelled purchase options granted to the customer, less unearned income. We generally bear greater risk in operating lease transactions (versus finance lease transactions) as the duration of an operating lease is shorter relative to the equipment useful life than a finance lease. Management performs annual reviews of the estimated residual values which can vary depending on a number of factors.

Goodwill — Goodwill, in accordance with SFAS No. 142, is reviewed for possible impairment at least annually during the fourth quarter of each fiscal year. A review of goodwill may be initiated prior to conducting the annual analysis if events or changes in circumstances indicate that the carrying value of goodwill may be impaired. During this review, management relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows and market place data.

Accounting for Customer Defaults — We have sought to reduce credit risk by maintaining insurance against customer insolvency and equipment related losses. We cease the recognition of lease revenues for amounts billable to the lessee after the lease default date at the time we determine that such amounts are not probable of collection from the lessee. In connection with the accounting for the insurance policy, we record a receivable which is limited to the actual costs incurred or losses recognized that would have been billable to the lessee pursuant to the lease contract (which are also covered by the insurance contract). Items that are covered under the insurance contract, for amounts billable to the lessee in accordance with the lease, that are in excess of costs incurred and losses recognized by us, are considered a gain contingency.

Derivative Financial Instruments — We utilize interest rate swaps to hedge against the effects of future interest rate fluctuations. We do not enter into derivative financial instruments for trading or speculative purposes.

On January 1, 2001, we adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”). Derivative instruments are recognized in the Consolidated Balance Sheet at their fair values in accounts payable and accrued expense and changes in fair values are recognized immediately in earnings, unless the derivatives qualify as hedges of future cash flows. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in accumulated other comprehensive loss as a separate component of equity, and contractual cash flows, along with the related impact of the hedged items, continue to be recognized in earnings. Any ineffective portion of a hedge is reported in current earnings. Amounts accumulated in other comprehensive loss are reclassified to earnings in the same period that the hedged transaction impacts earnings.

The net interest differential, including premiums paid or received, if any, on interest rate swaps, is recognized on an accrual basis as an adjustment to interest expense to correspond with the hedged position. We may, at our discretion, terminate or redesignate any interest rate swap agreement prior to maturity. At that time, any gains or losses on termination would continue to amortize into income to correspond to the recognition of interest on the hedged debt. If such debt instrument was also terminated, the gain or loss associated with the terminated derivative included in accumulated other comprehensive loss at the time of termination of the debt would be recognized in the Consolidated Income Statement at that time.

Income Taxes — Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book values and the tax basis of particular assets and liabilities, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset any net deferred tax assets if, based upon the available evidence which may be subject to management estimates, it is more likely than not that some or all of the deferred tax assets will not be realized.

We currently receive tax benefits under an income tax convention between the United States and Barbados, the jurisdiction in which our subsidiary, Interpool Limited, operates our container business, is incorporated. Specifically, under that income tax convention, any profits of Interpool Limited from leasing of containers used in international trade, generally are taxable only in Barbados at an approximate 3% tax rate, and not in the United States. Interpool Limited is entitled to the benefits of the tax convention for each year that more than 50% of the shares of Interpool Limited are owned, directly or indirectly, by United States citizens or residents and its income is not used in substantial part, directly or indirectly, to meet liabilities to persons who are not residents or citizens of the United States. We believe that Interpool Limited passes both of these tests and should continue to be eligible for the benefits of the tax convention, but there can be no assurance as to this continued eligibility. Historically, no deferred U.S. Federal income taxes have been provided on the unremitted earnings of the subsidiary since it is our past practice and future intention to permanently reinvest such earnings. We have documented our ability to reinvest earnings generated annually from our international operations. This documentation contains certain management judgments and estimates of economic conditions and the future demand for containers. Any unremitted earnings that we would be unable to reinvest in our international operations could be subject to taxation at United States tax rates.

On July 14, 2004, the United States and Barbados signed a protocol to the Treaty (“Protocol”) that contains a more restrictive limitation on benefits provision than the current Treaty does. If ratified, the Protocol might result in Interpool Limited losing its ability to rely on the Treaty to eliminate current U.S. income tax on its container rental and container sales income. This Protocol will not take effect until it is ratified by the United States Senate and the government of Barbados. It is currently uncertain whether the Senate will take action before it adjourns later in 2004. The Protocol is generally effective for taxable years commencing on or after the first of January in the year following the year the Protocol is ratified.

Under the Protocol, Interpool Limited would only be eligible for Treaty benefits with respect to its container rental and sales income if, among other things, Interpool, Inc. is listed on a “recognized stock exchange” (generally, the NASDAQ system or an SEC registered exchange such as the New York Stock Exchange), and Interpool, Inc.’s stock is “primarily” and “regularly” traded on such exchange.

As described elsewhere in this report, our common stock is currently not listed on a “recognized stock exchange” within the meaning of the Protocol. Management anticipates that Interpool, Inc. will examine all of its options with regard to listing on a “recognized stock exchange” and anticipates applying for a listing as soon as it is current with its SEC filings. However, even if Interpool Inc. is listed on a “recognized stock exchange” as of the date the Protocol comes into effect, it is not clear whether Interpool Inc. would satisfy the “primarily” and “regularly” traded requirement as defined within the Protocol. If Interpool, Inc. does not believe that it can satisfy this requirement, it will investigate alternatives to Interpool Limited being a resident in Barbados that will still entitle Interpool Limited to treaty benefits under another tax treaty with the U.S. Any such alternative would likely result in Interpool Limited being subject to a higher non-U.S. tax than the approximate 3% tax rate it currently enjoys in Barbados.

Recent Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”). SFAS 146 requires that a liability for costs associated with exit or disposal activities be recognized when the liability is incurred. Existing U.S. GAAP provides for the recognition of such costs at the date of management’s commitment to an exit plan. In addition, SFAS 146 requires that the liability be measured at fair value and be adjusted for changes in estimated cash flows. The provisions of the new standard are effective for exit or disposal activities initiated after December 31, 2002. Adoption of SFAS 146 did not materially affect our Consolidated Financial Statements.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”). FIN 45 elaborates on the disclosures to be made by a guarantor in interim and annual financial statements about its obligations under certain guarantees it has issued. A guarantor is required to disclose (a) the nature of the guarantee, including the approximate term, how the guarantee arose, and the events and circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the liability, if any, for the guarantor’s obligation under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Disclosure requirements are effective for financial statements with periods ending after December 15, 2002 while the initial recognition and initial measurement provisions shall be applied on a prospective basis to guarantees issued or modified after December 31, 2002. We have adopted the provisions of FIN 45 as required. (See Note 9 to the Consolidated Financial Statements for disclosures regarding our guarantees.) The adoption of FIN 45 did not have a material impact on our Consolidated Financial Statements.

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”) which addresses how a business should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R revised FASB Interpretation No. 46 which was issued in January 2003. We adopted FIN 46R as of December 31, 2003. There was no impact on our financial condition or results of operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”). This statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The statement also includes required disclosures for financial instruments within its scope. This pronouncement required the Company to display the Company-Obligated Mandatorily Redeemable Preferred Securities in Subsidiary Grantor Trusts within the liability section on the face of the Consolidated Balance Sheets. Most of the guidance in SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. On November 7, 2003, the provisions of SFAS 150, relating to mandatorily redeemable non-controlling interest, were deferred indefinitely. The adoption of SFAS 150 did not affect our financial conditions or results of operations.

In November 2003, the Emerging Issues Task Force (“EITF”) issued EITF Issue No. 03-1. The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. Issue 03-1 requires new tabular and narrative disclosure items effective for fiscal years ending after December 15, 2003. Companies are required to provide expanded information about their debt and marketable equity securities with market values below carrying values. The narrative information must include positive and negative information management considered in concluding the unrealized loss was not other-than-temporary and therefore was not recognized in earnings. For further discussion regarding unrealized holding losses, See Note 1 to the Consolidated Financial Statements.

Interest Rate Risk

The nature of our business exposes us to market risk arising from changes in interest rates. We manage interest rate risk to protect margins on existing transactions. Interest rate risk is the risk of earnings volatility attributable to changes in interest rates. Additionally, we consider interest rate swap contracts as an integral part of borrowing transactions. We seek to minimize our exposure by entering into amortizing interest rate swap contracts, which coincide with the principal and maturity of the underlying debt instruments hedged. We do not use leveraged swaps and do not use leverage in any of our investment activities that would put principal capital at risk.

The following table sets forth principal cash flows and related weighted average interest rates by expected maturity dates for debt and capital lease obligations at December 31, 2003:

                              Total
 (Dollars in Thousands)    Obligation      2004        2005       2006         2007      2008      Thereafter
 ---------------------     ----------    -------    --------    --------     -------    -------    ----------

Variable rate facilities    $649,237     $87,689    $202,815    $137,364     $39,936    $37,709    $143,724
Average interest rate %                     3.8%        4.2%        4.6%        4.8%       5.0%        5.0%

Fixed rate facilities(1)     991,450     131,503     143,310      70,889     262,616     43,271     339,861
Average interest rate %                     6.4%        6.4%        6.4%        5.9%       5.8%        5.8%

Total Debt                $1,640,687    $219,192    $346,125    $208,253    $302,552    $80,980    $483,585
Average interest rate %                     5.4%        5.7%        5.9%        5.5%       5.6%        5.6%

(1) These fixed rate facilities include variable instruments that have been converted to fixed rate
debt through the use of interest rate swap agreements.

Based on outstanding debt balances at December 31, 2003 of variable rate facilities, which have not been converted to fixed rate debt through the use of interest rate swaps, a 10% change in variable interest rates would have resulted in a $2.4 million change in pre-tax earnings.

For further information regarding our floating and fixed rate debt, see Note 4 to the Consolidated Financial Statements.

Credit Risk

We maintain detailed credit records about our customers. Our credit policy sets different maximum exposure limits for our customers. Credit criteria may include, but are not limited to, customer trade route, country, social and political climate, assessments of net worth, asset ownership, bank and trade credit references, credit bureau reports, operational history and financial strength.

We seek to reduce credit risk by maintaining insurance coverage against customer insolvency and related equipment losses. Through January 31, 2002 we maintained contingent physical damage, recovery/repatriation and loss of revenue insurance, which provided coverage in the event of a customer’s insolvency, bankruptcy or default giving rise to our demand for return of all of our equipment. The policy covered the cost of recovering our equipment from the customer, including repositioning cost, damage to the equipment and the value of equipment which could not be located or was uneconomical to recover. It also covered a portion of the lease revenues that we might lose as a result of the customer’s default (i.e., up to 180 days of lease payments following an occurrence under the policy). The premium rates and deductibles for this type of insurance have increased as a result of higher claim experience by us and also within the industry. As a result, effective March 1, 2003, we obtained a new policy covering similar occurrences for a twelve-month period but with revised terms. The new coverage decreased the recoverable amount per occurrence to $9 million as compared to $35 million in our previous policy and increased the deductible per occurrence from $0.4 million to $3 million. This coverage has since been extended to March 31, 2005. There can be no assurance that this or similar coverage will be available in the future or that such insurance will cover the entirety of any loss.

At December 31, 2003 approximately 47% of accounts receivable and 71% of the net investment in direct financing leases were from customers outside of the United States.

In 2003, our top 25 customers represented approximately 74% of consolidated billings, with no single customer accounting for more than 7.7%.

Allowance for Doubtful Accounts

The allowance for doubtful accounts includes our estimate of allowances necessary for receivables on both operating and finance lease receivables. The allowance for doubtful accounts is developed based on two key components (1) specific reserves for receivables which are impaired for which management believes full collection is doubtful and (2) reserves for estimated losses inherent in the receivables based upon historical trends. We believe our allowance for doubtful accounts is adequate to provide for credit losses inherent in our accounts receivable. The allowance for doubtful accounts is intended to provide for losses inherent in the accounts receivable, and requires the application of estimates and judgments as to the outcome of collection efforts and the realization of collateral, among other things. In addition, changes in economic conditions or other events may necessitate additions or deductions to the allowance for doubtful accounts. Finance leases are evaluated on a case by case basis. When evaluating our operating and finance lease receivables for impairment, we consider, among other things, the level of past-due amounts of the respective receivable, the borrower’s financial condition, credit quality indicators of the borrower, the value of underlying collateral and third party credit enhancements such as guarantees and insurance policies. Once a finance lease is determined to be non-performing, our procedures provide for the following events to take place in order to evaluate collectibility:

The adequacy of our allowance for doubtful accounts is provided based upon a quarterly review of the collectibility of our receivables. This review is based on the risk profile of the receivables, credit quality indicators such as the level of past-due amounts and economic conditions, as well as the value of underlying collateral in the case of finance lease receivables. (See Note 3 to the Consolidated Financial Statements.)

As of December 31, 2003 and 2002, included in accounts receivable are non-performing receivables of $12.8 million and $11.1 million, respectively. Our average non-performing receivables are $11.7 million and $9.2 million for the years ended December 31, 2003 and 2002, respectively. As of December 31, 2003 and 2002, included in the allowance for doubtful accounts are reserves for the non-performing receivables of $11.9 million and $9.5 million, respectively. As of December 31, 2003 and 2002 our non-performing receivables, net of applicable reserves, were 1.27% and 2.54%, respectively, of accounts receivable, net.

                                               INTERPOOL, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED BALANCE SHEETS
                                                  DECEMBER 31, 2003 AND 2002
                                  (dollars in thousands, except share and per share amounts)

ASSETS                                                                                               2003            2002
                                                                                                     ----            ----

CASH AND CASH EQUIVALENTS                                                                           $141,019       $170,613
MARKETABLE SECURITIES, available for sale at fair value                                                   24          1,467
ACCOUNTS RECEIVABLE, less allowance of $16,358 and $14,033, respectively                              69,055         63,950
NET INVESTMENT IN DIRECT FINANCING LEASES                                                            426,815        334,129
OTHER RECEIVABLES, net                                                                                25,485         26,691
LEASING EQUIPMENT, net of accumulated depreciation and amortization of $521,874
     and $463,809, respectively                                                                    1,635,893      1,556,816
OTHER INVESTMENT SECURITIES, available for sale at fair value                                         --             10,319
OTHER ASSETS                                                                                          73,922         75,234
ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL AGREEMENT                                            --              1,902
                                                                                                  ----------          -----
TOTAL ASSETS                                                                                      $2,372,213     $2,241,121
                                                                                                  ==========     ==========

LIABILITIES

ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                               $198,062       $160,013
INCOME TAXES:
     Current                                                                                             347           (216)
     Deferred                                                                                         37,392         31,869
                                                                                                      ------         ------
TOTAL TAXES                                                                                           37,739         31,653

DEFERRED INCOME                                                                                        2,704          3,688
DEBT AND CAPITAL LEASE OBLIGATIONS
     Due within one year                                                                             219,192        161,407
     Due after one year                                                                            1,421,495      1,435,804
                                                                                                   ---------      ---------
         TOTAL DEBT AND CAPITAL LEASE OBLIGATIONS                                                  1,640,687      1,597,211

LIABILITIES OF BUSINESS TRANSFERRED UNDER CONTRACTUAL
     AGREEMENT                                                                                        --              1,902
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES IN SUBSIDIARY GRANTOR TRUSTS
     (holding solely Junior Subordinated Deferrable Interest Debentures of the Company)
     (75,000 shares 9-7/8% Capital Securities outstanding, liquidation preference $75,000)            75,000         75,000
                                                                                                      ------         ------
TOTAL LIABILITIES                                                                                 $1,954,192     $1,869,467
                                                                                                  ----------     ----------

MINORITY INTEREST IN EQUITY OF SUBSIDIARIES                                                           35,184         35,461
                                                                                                      ------         ------

STOCKHOLDERS' EQUITY
     Preferred stock, par value $.001 per share; 1,000,000 authorized, none issued                       ---            ---
     Common stock, par value $.001 per share; 100,000,000 shares authorized, 27,602,452
       and 27,579,952 issued at December 31, 2003 and 2002, respectively                                  28             28
     Additional paid-in capital                                                                      128,538        126,165
     Unamortized deferred compensation                                                                (1,184)           ---
     Treasury stock, at cost, 225,900 shares at December 31, 2003 and 2002                            (2,229)        (2,229)
     Retained earnings                                                                               272,012        237,227
     Accumulated other comprehensive loss                                                            (14,328)       (24,998)
                                                                                                     -------        -------
TOTAL STOCKHOLDERS' EQUITY                                                                           382,837        336,193
                                                                                                     -------        -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                        $2,372,213     $2,241,121
                                                                                                  ==========     ==========

          The accompanying notes to consolidated financial statements are an integral part of these balance sheets.

                                               INTERPOOL, INC. AND SUBSIDIARIES
                                              CONSOLIDATED STATEMENTS OF INCOME
                                     FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                                  (dollars in thousands, except share and per share amounts)


                                                                                  2003          2002        2001
                                                                                  ----          ----        ----

REVENUES, including income recognized on direct financing leases of $46,362
   $36,246 and $26,499, respectively                                            $375,627     $326,555    $338,718
                                                                                --------     --------    --------

COSTS AND EXPENSES:
  Lease operating expenses                                                        85,201       75,417      87,144
  Administrative expenses                                                         49,734       27,945      41,745
  Provision for doubtful accounts                                                  4,248        7,843       9,001
  Fair value adjustment for derivative instruments                                  (837)       5,530       8,248
  Depreciation and amortization of leasing equipment                              91,553       93,538      79,678
  Losses for investments accounted for under the equity method                     1,698        6,603         804
  Other (income)/expense, net                                                     (5,079)       1,131      (9,798)
  Interest expense                                                               106,688      108,344      98,270
  Interest income                                                                 (3,960)      (4,638)     (9,439)
                                                                                  ------       ------      ------
                                                                                 329,246      321,713     305,653
                                                                                 -------      -------     -------
Income before minority interest (expense)/income and provision/(benefit) for
  income taxes                                                                    46,381        4,842      33,065
MINORITY INTEREST (EXPENSE)/ INCOME, NET                                          (1,910)      (1,846)        439
                                                                                  ------       ------         ---
Income before provision/(benefit) for income taxes                                44,471        2,996      33,504
PROVISION/(BENEFIT) FOR INCOME TAXES                                               3,281       (1,393)      5,400
                                                                                   -----       ------       -----
NET INCOME                                                                       $41,190       $4,389     $28,104
                                                                                 =======       ======     =======
INCOME PER SHARE
NET INCOME PER SHARE:
     Basic                                                                         $1.51        $0.16       $1.03
                                                                                   =====        =====       =====
     Diluted                                                                       $1.42        $0.15       $0.97
                                                                                   =====        =====       =====
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands):
     Basic                                                                        27,365       27,360      27,417
                                                                                  ======       ======      ======
     Diluted                                                                      30,396       29,202      28,973
                                                                                  ======       ======      ======

          The accompanying notes to consolidated financial statements are an integral part of these statements.

                                                 INTERPOOL, INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                       FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                                                (dollars and shares in thousands)


                                                                                                Acum.
                                Common Stock                                                    Other                 Total
                               ---------------  Additional    Unamortized                       Comp.    Comp-        Share-
                                         Par     Paid-in      Deferred     Treasury  Retained  Income    Income       holder's
                               Shares   Value    Capital     Compensation    Stock   Earnings  (Loss)    (Loss)       Equity
                               ------   -----    -------     ------------  --------  --------  ------    ----------   ---------
BALANCE, December 31, 2000    27,580      $28   $124,182           $---   $(1,170)  $216,245  $1,234                    $340,519

Net income                       ---      ---      ---             ---      ---       28,104     ---       28,104         28,104

Other comprehensive loss         ---      ---      ---             ---      ---         ---   (11,141)    (11,141)       (11,141)
                                                                                                          -------

Comprehensive income                                                                                       $16.963
                                                                                                           =======

Purchase of 58,100 shares
  of treasury stock              ---      ---      ---             ---     (929)        ---      ---                        (929)

Cash dividends declared:

  Common stock, $.1925  per
  share                          ---      ---      ---             ---      ---       (5,284)    ---                      (5,284)
                              ------     ----   -------          -----    -----       ------   ------                     -------

BALANCE, December 31, 2001    27,580       28   124,182             ---   (2,099)     239,065  (9,907)                    351,269

Net income                       ---      ---      ---             ---      ---         4,389     ---        4,389          4,389

Other comprehensive loss         ---      ---      ---             ---      ---         ---   (15,091)     (15,091)       (15,091)
                                                                                                           -------

Comprehensive loss                                                                                        $(10,702)
                                                                                                          ========

Purchase of 9,300 shares of
  treasury stock                 ---      ---      ---             ---      (130)       ---      ---                         (130)

Capital contribution by
  officers and directors         ---      ---     1,983            ---      ---         ---      ---                        1,983

Cash dividends declared:

  Common stock, $.2275  per
  share                          ---      ---      ---             ---      ---        (6,227)   ---                       (6,227)
                              ------     ----   -------          -----    -----        ------   ------                     -------

BALANCE, December 31, 2002    27,580       28   126,165            ---    (2,229)     237,227  (24,998)                   336,193

Net income                       ---      ---      ---             ---      ---       41,190     ---      $41,190          41,190

Other comprehensive income       ---      ---      ---             ---      ---         ---   10,670       10,670          10,670
                                                                                                           ------

Comprehensive income                                                                                      $51,860
                                                                                                          =======

Capital contribution by
  officers and directors         ---      ---      698             ---      ---         ---      ---                          698

Options exercised                 22      ---      351             ---      ---         ---      ---                          351

Restricted stock award           ---      ---    1,324          (1,324)     ---         ---      ---                          ---

Amortization of restricted
stock award                      ---      ---      ---             140      ---         ---      ---                          140

Cash dividends declared:

  Common stock, $.25 per
  share                          ---      ---      ---             ---      ---       (6,405)    ---                       (6,405)
                              ------     ----   -------          -----    -----       ------   ------                     -------

BALANCE, December 31, 2003    27,602      $28  $128,538        $(1,184)  $(2,229)   $272,012  $(14,328)                  $382,837
                              ======      ===  ========        =======   =======    ========  ========                   ========

          The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

                                               INTERPOOL, INC. AND SUBSIDIARIES
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                                                    (dollars in thousands)


                                                                                     2003             2002            2001
                                                                                     ----             ----            ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                            $41,190       $  4,389        $  28,104
Adjustments to reconcile net income to net cash provided by operating
activities --
   Depreciation and amortization                                                       97,289        101,007           88,565
   Accrued losses on business transferred under contractual agreement                       -         13,780                -
   Provision/(benefit) for deferred income taxes                                        1,808         (3,118)           3,502
   (Gain)/loss on sale of leasing equipment                                            (1,213)         4,257            1,223
   Loss on sale of marketable securities                                                   50             30                -
   Gain on sale of assets held for sale                                                     -              -           (1,774)
   Gain on sale of land held for sale                                                       -         (4,766)               -
   Provision for uncollectible accounts                                                 4,248          7,843            9,001
   Gain on retirement of debt                                                               -         (1,118)            (930)
   Restricted stock grant expense                                                         140              -                -
   Fair value adjustment for derivative instruments                                      (837)         5,530            8,248
   Losses for investments accounted for under the equity method                         1,698          6,603              804
   Sale of assets held for sale                                                             -              -          291,587
   Other, net                                                                             670        (14,290)         (17,538)
                                                                                          ---        -------          -------
         Net cash provided by operating activities                                    145,043        120,147          410,792
                                                                                      -------        -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of leasing equipment                                                     (197,713)      (191,938)        (201,370)
Proceeds from dispositions of leasing equipment                                        16,828         12,041           15,635
Purchase of leasing equipment for resale                                              (34,814)             -                -
Proceeds from disposal of leasing equipment for resale                                 37,558              -                -
Proceeds from sale of land                                                                  -          7,955                -
Investment in direct financing leases                                                (109,254)       (64,088)        (126,792)
Cash collections on direct financing leases                                            77,793         59,749           65,298
Purchase of marketable securities                                                         (10)        (1,494)            (498)
Sales and matured marketable securities and other investing activities                  1,445            574                -
Investment in and advances to subsidiary                                                    -            765                -
Proceeds from minority interest partner in chassis distributor                            500              -                -
                                                                                          ---         ------           ------

         Net cash used for investing activities                                      (207,667)      (176,436)        (247,727)
                                                                                     --------       --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt                                                        211,813      1,227,406          146,315
Payment of long-term debt and capital lease obligations                              (204,229)    (1,023,645)        (237,292)
Borrowings of revolving credit lines                                                   88,000         47,000          238,992
Repayment of revolving credit lines                                                   (56,505)      (121,846)        (358,816)
Purchase of treasury stock                                                                  -           (130)            (929)
Dividends paid                                                                         (6,049)        (5,643)          (4,799)
                                                                                       ------         ------           ------

Net cash provided by (used for) financing activities                                   33,030        123,142         (216,529)
                                                                                       ------        -------         --------

Net (decrease)/increase in cash and short-term investments                            (29,594)        66,853          (53,464)

CASH AND CASH EQUIVALENTS, beginning of period                                        170,613        103,760          157,224
                                                                                      -------        -------          -------

CASH AND CASH EQUIVALENTS, end of period                                             $141,019       $170,613         $103,760
                                                                                     ========       ========         ========

Supplemental schedule of non-cash financing activities:

Direct finance lease financed through capital lease obligation                         $4,397        $10,284               $-
Assumption of debt in connection with sale of assets held for sale                         $-             $-          $58,037
Transfers from leasing equipment to direct finance leases                             $22,124        $40,227               $-
Increase in minority interest in consolidated subsidiary from contribution of
equipment                                                                                  $-             $-          $26,326

          The accompanying notes to consolidated financial statements are an integral part of these statements.

                                                                    Year Ended December 31,
                                                           -------------------------------------
                                                              2003         2002        2001
                                                              ----         ----        ----
Net income, as reported                                     $41,190       $4,389     $28,104
Add:  Stock based employee compensation expense
included in net income, net of related tax effects              383          ---         ---
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects                     (452)        (112)        (72)
                                                               ----         ----         ---
Pro forma net income                                        $41,121       $4,277     $28,032
                                                            =======       ======     =======

Earnings per share:
Basic-as reported                                             $1.51        $0.16       $1.03
                                                              =====        =====       =====
Basic-pro forma                                               $1.50        $0.16       $1.02
                                                              =====        =====       =====
Diluted-as reported                                           $1.42        $0.15       $0.97
                                                              =====        =====       =====
Diluted-pro forma                                             $1.42        $0.15       $0.97
                                                              =====        =====       =====

          Dry freight standard containers           12.5 years
          Chassis                                   17.5 to 22.5 years
          Other                                     3 to 15 years

                                                          Gross Unrealized
                                      Amortized        Holding        Holding        Estimated
                                        Cost            Gains          Losses       Fair Value
                                        ----            -----          ------       ----------
   2003
   ----
   Marketable Securities                   $24            ---           ---               $24
                                           ---            ---           ---               ---
                                           $24           $---          $---               $24
                                           ===           ====          ====               ===
   2002
   ----
   Other Investment Securities         $10,319           $---          $---           $10,319
   Marketable Securities                 1,553            ---           (86)            1,467
                                         -----            ---           ---             -----
                                       $11,872           $---          $(86)          $11,786
                                       =======           ====          ====           =======

                                                            Before Tax         Tax        Net of
                                                              Amount         Effect     Tax Amount
                                                            -----------      ------     ----------

Year Ended December 31, 2003
Unrealized holding gains arising during the period:
Marketable securities (1)(2)                                      $83         $(29)          $54
Cumulative foreign currency translation adjustment                 71          (25)           46
Swap agreements                                                15,270       (4,700)       10,570
                                                               ------       ------        ------
                                                              $15,424      $(4,754)      $10,670
                                                              =======      =======       =======

Year Ended December 31, 2002
Unrealized holding losses arising during the period:
Marketable securities (3)                                      $(40)         $14          $(26)
Other investment securities (4)                                (304)          15          (289)
Cumulative foreign currency translation adjustment              (66)          23           (43)
Swap agreements                                             (23,436)       8,703       (14,733)
                                                            -------        -----       -------
                                                           $(23,846)      $8,755      $(15,091)
                                                           ========       ======      ========

                                                            Before Tax         Tax        Net of
                                                              Amount         Effect     Tax Amount
                                                            -----------      ------     ----------

Year Ended December 31, 2001
Unrealized holding losses arising during the period:
Marketable securities                                          $(29)         $11          $(18)
Other investment securities                                  (1,005)          50          (955)
Swap agreements (5)                                         (12,363)       2,195       (10,168)
                                                            -------        -----       -------
                                                           $(13,397)      $2,256      $(11,141)
                                                           ========       ======      ========

                                                                         December 31,
                                                                ---------------------------
                                                                   2003            2002
                                                                -----------     -----------
Marketable securities                                                 $---           $(54)
Cumulative foreign currency translation adjustment                       3            (43)
Swap agreements                                                    (14,331)       (24,901)
                                                                   -------        -------
                                                                  $(14,328)      $(24,998)
                                                                  ========       ========

                                                          December 31, 2003                 December 31, 2002
                                                     ---------------------------     -------------------------------
                                                     Estimated     Recorded Book     Estimated Fair    Recorded Book
                                                     Fair Value       Balance            Value            Balance
                                                     ----------    -------------     --------------    -------------
Financial Assets:
Cash and cash equivalents                               $141,019      $141,019          $170,613          $170,613
Marketable and investment securities                          24            24             1,467             1,467
Accounts receivable                                       69,055        69,055            63,950            63,950

Financial Liabilities:
Accounts payable and accrued expenses (excluding
  interest rate swap contracts)                          164,036       164,036           110,436           110,436
Interest rate swap contracts                              34,026        34,026            49,577            49,577
Debt                                                     904,273       910,755           802,490           823,037
Capital securities                                        68,813        75,000            60,570            75,000

                                                         Year Ended December 31,
                                                         -----------------------
                                                       2003         2002        2001
                                                       ----         ----        ----
Numerator
     Net Income - Basic EPS                          $41,190       $4,389     $28,104
     Interest Expense on convertible debentures,
     net of tax of $1,334                              2,001           --          --
                                                       -----           --          --
     Net Income-Diluted EPS                          $43,191       $4,389     $28,104
                                                     =======       ======     =======

Denominator
     Weighted average common shares
     outstanding-Basic                                27,365       27,360      27,417
     Dilutive stock options                            1,569        1,842       1,556
     Dilutive convertible debentures                   1,461           --          --
     Dilutive restricted stock grants                      1           --          --
                                                           -           --          --
     Weighted average common shares
     outstanding-Diluted                              30,396       29,202      28,973
                                                      ======       ======      ======

Earnings per common share
     Basic                                             $1.51        $0.16       $1.03
                                                       =====        =====       =====
     Diluted                                           $1.42        $0.15       $0.97
                                                       =====        =====       =====

                                                        2003         2002
                                                        ----         ----
     Deferred tax assets:
         Loss carry forwards                          $123,607     $112,925
         Other                                          28,187       30,327
                                                        ------       ------
            Total deferred tax assets                  151,794      143,252
              Valuation allowances                     (16,009)     (14,806)
                                                       -------      -------
            Net deferred tax assets                    135,785      128,446
                                                       -------      -------

     Deferred tax liabilities:
         Operating property, net                       170,167      154,878
         Other                                           3,010        5,437
                                                         -----        -----
            Total deferred tax liabilities             173,177      160,315
                                                       -------      -------
            Net deferred tax liability                 $37,392      $31,869
                                                       -------      -------

                                                            2003        2002       2001
                                                            ----        ----       ----
  U.S. statutory rate                                       35.0%        35.0%     35.0%
  Difference due to operation of subsidiary in Barbados    (32.9)      (285.5)    (26.7)
  State taxes                                                1.3        (52.0)      1.5
  Other                                                      1.4          4.3       1.4
  PCR losses                                                  --         39.3       2.1
  Valuation allowances                                       2.6        212.4       2.8
                                                             ---        -----       ---

  Actual tax rate                                            7.4%       (46.5)%    16.1%
                                                             ===        =====      ====

                    2003           2002            2001
                    ----           ----            ----
 U.S.              $1,724        $(1,883)         $5,107
 Other              1,557            490             293
                    -----            ---             ---
                   $3,281        $(1,393)         $5,400
                   ======        =======          ======

 Current           $1,473         $1,725          $1,898
 Deferred           1,808         (3,118)          3,502
                    -----         ------           -----
                   $3,281        $(1,393)         $5,400
                   ======        =======          ======

                                               December 31, 2003
                             ----------------------------------------------------
                              Total Lease            Unearned          Net Lease
                              Receivable           Lease Income       Receivable
                             ----------------------------------------------------
         2004                   $129,287              $41,206            $88,081
         2005                    107,455               32,823             74,632
         2006                     93,261               24,103             69,158
         2007                     86,804               16,492             70,312
         2008                     51,997               10,492             41,505
         Thereafter              104,152               21,025             83,127
                                 -------               ------             ------
                                $572,956             $146,141           $426,815
                                ========             ========           ========

          2004                   $   89,733
          2005                       57,762
          2006                       46,006
          2007                       31,910
          2008                       14,731
          Thereafter                  5,578
                                      -----
                                  $ 245,720
                                  =========

                                                2003              2002              2001
                                            -----------       -----------       -----------
 Balance, beginning of year                   $14,033            $6,674           $16,372
      Provision charged to expense              4,248             7,843             9,001
      Increase for allowance due to
      consolidation of CAI as of June
      27, 2002                                     --             1,898               ---
      Reclassification of Liabilities of
      Business Transferred Under
      Contractual Agreement                       ---               ---              (538)
      Write-offs                               (2,140)           (2,504)          (18,327)
      Recoveries                                  226               132               170
      Other                                        (9)              (10)               (4)
                                              -------           -------            ------
 Balance, end of year                         $16,358           $14,033            $6,674
                                              =======           =======            ======

Total Debt and Capital Lease Obligations                                  December 31, 2003      December 31, 2002
----------------------------------------                                  -----------------      -----------------

Capital lease obligations payable in varying amounts through 2018               $325,258              $363,676
Chassis Securitization Facility, interest at 5.59% and 5.08% at
  December 31, 2003 and 2002, respectively
      Warehouse facility                                                          25,490                   ---
      Debt obligation                                                             86,413               120,246
      Capital lease obligation                                                   404,674               410,497
Revolving credit facility, interest rate at 3.09% and 2.64% at
  December 31, 2003 and 2002, respectively                                       193,495               175,000
Revolving credit facility CAI, interest at 3.37% and 3.69% at December
  31, 2003 and 2002, respectively                                                 87,000                74,000
Container securitization facility, interest at 6.5% and 5.85% at
  December 31, 2003 and 2002, respectively                                        76,565                91,991
7.35% Notes due 2007 (unsecured)                                                 147,000               147,000
7.20% Notes due 2007 (unsecured)                                                  62,825                62,825
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022 (unsecured)                                                     37,182                32,118
Notes and loans repayable with various rates ranging from 1.89% to
  7.90% and maturities from 2004 to 2010                                         194,785               119,858
                                                                                 -------               -------
Total Debt and Capital Lease Obligations                                       1,640,687             1,597,211
                                                                               ---------             ---------
   Less Current Maturities                                                       219,192               161,407

Total Non-Current Debt and Capital Lease Obligations                          $1,421,495            $1,435,804
                                                                              ==========            ==========

                                Payment           Interest           Principal
                              -----------       ------------       -------------

          2004                 $ 82,028           $16,991            $ 65,037
          2005                   92,507            13,900              78,607
          2006                   63,059             9,678              53,381
          2007                   70,861             6,968              63,893
          2008                   58,576             4,713              53,863
          Thereafter            419,756             4,605             415,151
                                -------             -----             -------
                               $786,787           $56,855            $729,932
                               ========           =======            ========

          2004                                                       $154,155
          2005                                                        267,518
          2006                                                        154,872
          2007                                                        238,659
          2008                                                         27,117
          Thereafter                                                   68,434
                                                                       ------
                                                                     $910,755
                                                                     ========

                                                                       New Borrowings
Total New Debt and Capital Lease Obligations                                2003
--------------------------------------------                           --------------

Capital lease obligations payable through 2010 with
  interest imputed at rates from 4.4% to 6.4%                             $14,356
9.25% Convertible redeemable subordinated debentures,
  mandatory redemption 2022                                                 5,064
Notes and loans repayable with various rates ranging
  from 3.1% to 4.0% and maturities from 2006 to 2009                      115,560
                                                                          -------

Total New Debt and Capital Lease Obligations 2003                        $134,980
                                                                         ========

                                     Notional        Receive         Pay
                                      Amount          Rate           Rate
                                    -----------    -----------     --------

2004                                  $91,295         1.14%          4.89%
2005                                   95,091         1.14%          4.93%
2006                                   59,836         1.14%          4.98%
2007                                  166,906         1.15%          5.71%
2008                                   31,793         1.15%          5.33%
Thereafter                             95,605         1.15%          5.49%
                                       ------
Total                                $540,526         1.15%          5.29%
                                     ========

                                                                 December 31, 2002
                                                                 -----------------
     Carrying amount/fair value of retained interests                 $10,319
     Weighted-average life (in years)                                     1.8
     Expected credit losses (annual rate)                                1.5%
     Impact on fair value of 10% adverse change                           $83
     Impact on fair value of 20% adverse change                          $167
     Residual cash flows discount rate (annual)                         12.6%
     Impact on fair value of 10% adverse change                          $182
     Impact on fair value of 20% adverse change                          $354

                    2004                                $20,167
                    2005                                 15,412
                    2006                                 18,496
                    2007                                 10,919
                    2008                                  5,864
                    Thereafter                            6,483
                                                        -------
                                                        $77,341
                                                        =======

                                                  2003       2002        2001
                                                  ----       ----        ----
          Revenue                                  $---       $---        $496
                                                   ====       ====        ====
          Lease operating expense                $2,997     $3,234      $4,343
                                                 ======     ======      ======
          Administrative expense                   $157       $857      $1,495
                                                   ====       ====      ======
          Other (income)/expense, net              $---     $2,763        $---
                                                   ====     ======        ====
          Interest expense                         $540        $40        $452
                                                   ====        ===        ====

                                                                           Domestic        Computer
                                                         Container        Intermodal       Leasing
                        2003                              Leasing         Equipment        Equipment        Totals
                        ----                            -----------       ----------       ---------        ------

Revenues                                                  $176,471         $198,552           $604         $375,627

Lease operating, administrative and other expenses          45,068           93,563           (285)         138,346

Depreciation and amortization                               59,365           32,188            ---           91,553

Other (income)/expense, net and minority interest           (5,085)           1,745            171           (3,169)

Losses for investment under equity method                      ---            1,698            ---            1,698

Interest income                                             (2,636)          (1,318)            (6)          (3,960)

Interest expense                                            33,202           73,485              1          106,688

Income/(loss) before income taxes                           46,557           (2,809)           723           44,471

Net investment in DFL's                                    330,090           96,716              9          426,815

Leasing equipment, net                                     746,554          889,339            ---        1,635,893

Equipment purchases and investment in DFL's                250,404           56,563            ---          306,967

Total segment assets                                    $1,209,812       $1,162,357            $44       $2,372,213


                                                                           Domestic        Computer
                                                         Container        Intermodal       Leasing
                        2002                              Leasing         Equipment        Equipment        Totals
                        ----                            -----------       ----------       ---------        ------

Revenues                                                  $139,751         $185,283         $1,521         $326,555

Lease operating, administrative and other expenses          34,014           80,634          2,087          116,735

Depreciation and amortization                               55,757           37,703             78           93,538

Other (income)/expense, net and minority interest           (3,052)           4,579          1,450            2,977

Losses for investment under equity method                      ---            6,603            ---            6,603

Interest income                                             (2,243)          (2,395)           ---           (4,638)

Interest expense                                            27,182           81,016            146          108,344

Income/(loss) before income taxes                           28,093          (22,857)        (2,240)           2,996

Net investment in DFL's                                    245,414           89,254           (539)         334,129

Leasing equipment, net                                     676,091          880,725            ---        1,556,816

Equipment purchases and investment in DFL's                 85,585          170,342             99          256,026

Total segment assets                                    $1,074,322       $1,163,404         $3,395       $2,241,121


                                                                           Domestic        Computer
                                                         Container        Intermodal       Leasing
                        2001                              Leasing         Equipment        Equipment        Totals
                        ----                            -----------       ----------       ---------        ------

Revenues                                                  $111,362         $191,987        $35,369         $338,718

Lease operating, administrative and other expenses          28,017           86,038         32,083          146,138

Depreciation and amortization                               34,999           37,997          6,682           79,678

Other (income)/expense, net and minority interest           (5,351)          (4,501)          (385)         (10,237)

Losses for investment under the equity method                   --              804             --              804

Interest income                                             (3,789)          (5,650)            --           (9,439)

Interest expense                                            28,025           68,465          1,780           98,270

Income/(loss) before income taxes                           29,461            8,834         (4,791)          33,504

                                          2003             2002             2001
                                          ----             ----             ----
   REVENUES :
   United States (a)                    $235,254         $207,217         $227,419
   International                         140,373          119,338          111,299
                                         -------          -------          -------
                                        $375,627         $326,555         $338,718
                                        ========         ========         ========

   ASSETS:
   United States                      $1,342,939       $1,341,507
   International                       1,029,274          899,614
                                       ---------          -------
                                      $2,372,213       $2,241,121
                                      ==========       ==========

                                             2003                        2002                        2001
                                   -------------------------   -------------------------   -------------------------
                                                 Weighted                    Weighted                    Weighted
                                                 average                     average                     average
                                    Shares    exercise price    Shares    exercise price    Shares    exercise price
                                   --------   --------------   --------   --------------   --------   --------------
Outstanding at January 1,         4,539,001        $10.30     4,489,001        $10.30     4,489,001        $10.30

Granted                                 ---           ---        50,000         13.73           ---           ---
Exercised                            22,500         15.58           ---           ---           ---           ---
                                  ----------------------------------------------------------------------------------
Outstanding at December 31,       4,516,501        $10.31     4,539,001        $10.34     4,489,001        $10.30

Exercisable at December 31,       4,466,501        $10.29     4,384,001        $10.27     4,379,001        $10.27

                              Options Outstanding                                            Options Exercisable
                       -----------------------------------                           -----------------------------------
                                          Weighted Average
                          Number             Remaining                                  Number
                        Outstanding         Contractual       Weighted Average        Outstanding       Weighted Average
Exercise Prices        December 31,         Life (Years)       Exercise Price        December 31,        Exercise Price
---------------        ------------       ----------------    ----------------       ------------       ----------------

  $6.375                    15,000               6.2                $6.375                15,000              $6.375

  10.25                  4,351,501               4.2                10.25              4,351,501              10.25

  11.9375                  100,000               6.8                11.9375               50,000              11.9375

  13.73                     50,000               8.7                13.73                 50,000              13.73
------------------------------------------------------------------------------------------------------------------------
  $6.375-13.73           4,516,501               4.3                $10.31             4,466,501              $10.29

                                                           2003
                                                        As Restated
                                    ----------------------------------------------------
                                      1st            2nd            3rd            4th
                                      ---            ---            ---            ---
Revenues                            $89,965        $91,399        $95,815        $98,448
Net income                          $11,769        $12,336         $6,546        $10,539
Basic income per share                $0.43          $0.45          $0.24          $0.38
Diluted income per share              $0.41          $0.42          $0.23          $0.36

                                                   2003
                                                 As Reported
                                    -------------------------------------
                                      1st            2nd            3rd
                                      ---            ---            ---
Revenues                            $89,167        $91,169        $95,583
Net income                          $10,876        $11,172         $6,117
Basic income per share                $0.40          $0.41          $0.22
Diluted income per share              $0.38          $0.38          $0.21

                                                           2002
                                    ----------------------------------------------------
                                      1st            2nd            3rd            4th
                                      ---            ---            ---            ---
Revenues                            $74,483        $75,598        $86,718        $89,756
Net income/(loss)                    $6,190         $4,265         $3,032        $(9,098)
Basic income/(loss) per share         $0.23          $0.16          $0.11         $(0.33)
Diluted income/(loss) per share       $0.21          $0.14          $0.10         $(0.32)

                                                           2001
                                    ----------------------------------------------------
                                      1st            2nd            3rd            4th
                                      ---            ---            ---            ---
Revenues                            $88,311        $85,315        $82,337        $82,755
Net income                          $10,354         $9,879         $2,939         $4,932
Basic income per share                $0.38          $0.36          $0.11          $0.18
Diluted income per share              $0.36          $0.34          $0.10          $0.17

                                                   Annual Compensation                                  Long Term
                                           --------------------------------            Other          Compensation
      Name and Principal Position          Year       Salary          Bonus       Compensation(1)  # of Stock Options
--------------------------------------     ----       ------          -----       ---------------  ------------------

Martin Tuchman                             2003      $897,929       $751,041         $17,297                0
Chairman of the Board of                   2002       855,170        843,381(2)       31,005                0
Directors, Chief Executive                 2001       814,447        651,784          62,742                0
Officer, President and Chief Operating
Officer

Arthur L. Burns                            2003        88,459(3)      50,000          51,327                0
Executive Vice President                   2002             0              0               0                0
and General Counsel                        2001             0              0               0                0

Richard W. Gross                           2003       163,756        136,244               0                0
Executive Vice President and Chief         2002        30,541        100,000          41,300(5)             0
Operating Officer, Interpool Limited       2001             0              0          24,826(5)             0

Herbert Mertz                              2003       250,022         75,000           7,046                0
Executive Vice President, Chief            2002       250,000         50,000           7,046                0
Administrative Officer and                 2001       240,000        150,000           7,046                0
Chief Operating Officer, Trac Lease, Inc

Raoul J. Witteveen*                        2003       537,856              0         184,103(6)             0
Former Officer and Director                2002       602,691        843,381          18,998                0
                                           2001       573,991        651,784          22,542                0

Ernst Baenziger***                         2003       252,859        268,599         980,738(4)             0
Senior Vice President, Interpool           2002       179,508              0       1,864,288                0
Limited                                    2001       183,901              0         776,045                0

Mitchell I. Gordon**                       2003       137,352        200,000       1,228,100(7)             0
Former Officer and Director                2002       250,000              0               0           50,000
                                           2001       240,000              0               0                0

                                                                                          Options
                                                                                        Exercisable
                                                                         Number of        Within       Percentage
Name of Beneficial Owner                                               Shares (1)(12)     60 Days     Of Class (1)
------------------------                                               --------------   ------------  -------------
Officers and Directors:
Martin Tuchman (2)(3)............................................         9,519,110      2,280,000         32.10%
Arthur L. Burns  ................................................           210,408         96,563          *
Peter D. Halstead ...............................................            67,500         60,000          *
Clifton H. W. Maloney............................................            15,000         15,000          *
Warren L. Serenbetz (2)(4)(5)(6).................................         1,571,126        668,438          5.60%
Joseph J. Whalen.................................................            37,500         37,500          *
William A. Geoghan...............................................             9,300          7,500          *
Herbert Mertz....................................................             9,250          7,500          *
Richard W. Gross.................................................             2,000              0          *
Brian Tracey.....................................................               413              0          *
James F. Walsh...................................................                 0              0          *
Christopher N. Fermanis..........................................               516              0          *
Executive officers and directors as a
group (twelve persons) ..........................................        11,442,123      3,172,501         37.28%
Other Stockholders:
Hickory Enterprises, L.P. (8)(9).................................         4,856,911              0         17.74%
165 Signal Hill North
Wilton, CT 06897
Raoul J. Witteveen (7)...........................................         4,712,429      1,140,000         16.52%
Surinamesttaat 37
2585 CH The Hague
The Netherlands
Warren L. Serenbetz, Jr.(6)(10)..................................           292,646              0          1.07%
165 Signal Hill North
Wilton, Connecticut 06897
Paul H. Serenbetz (6)(10)........................................           292,646              0          1.07%
12 Howard Avenue
New Haven, CT 06519
Stuart W. Serenbetz (6)(10)......................................           292,646              0          1.07%
Stonebridge Development Corp.
6 Hickory Drive
Stamford, CT 06902
Clay R. Serenbetz (6)(10)........................................           292,646              0          1.07%
6 Bay Road
New Market, NH 03857
The Chartres Limited Partnership (11)............................            90,000              0          *
c/o Interpool, Inc.
633 Third Avenue
New York, NY 10017
Other Stockholders as a group....................................        10,829,924      1,140,000         37.68%

                                                                                                        (c)
                                                                                               Number of securities
                                                                                               remaining available for
                                         (a)                           (b)                     future issuance under
                                 Number of securities to        Weighted-average               equity compensation
                                 be issued upon exercise        exercise price of              plans (excluding
                                 of outstanding options,        outstanding options,           securities reflected
Plan Category                    warrants and rights            warrants and rights            in column (a))
-------------                    ------------------------       ------------------------       ----------------------------

Equity compensation
plans approved by
security holders                        4,516,501                       10.31                         1,559,999

Equity compensation
plans not approved by
security holders                           -----                        -----                           -----
                                        _________                     _________                       _________
Total                                   4,516,501                       10.31                         1,559,999

                                             2003                         2002
                                             ----                         ----

Audit Fees (1)                            $1,630,000                   $5,200,000
Audit-Related Fees (2)                           ---                       50,000
Tax Fees (3)                                  14,000                       25,000
                                          ----------                   ----------
Total Fees                                $1,644,000                   $5,275,000
                                          ==========                   ==========

                                                                 Reclassification
                                                                  of Liabilities
                                                                   of Business
                                                                   Transferred                                       Balance
                               Balance at   Charge to                 Under                                             at
                               Beginning    Costs and               Contractual                                       End of
                                of Year     Expenses    Acquired    Agreement     (Write-offs)  Recoveries   Other     Year
                               ---------    ---------   --------  --------------- ------------  ----------   -----   -------

Year Ended December 31, 2003   $14,033       $4,248       $---         $---         $(2,140)       $226       $(9)    $16,358
                               =======       ======       ====         ====         ========       ====      =====    =======
Year Ended December 31, 2002    $6,674       $7,843     $1,898         $---         $(2,504)       $132      $(10)    $14,033
                               =======       ======       ====         ====         ========       ====      =====    =======
Year Ended December 31, 2001   $16,372       $9,001       $---        $(538)       $(18,327)       $170       $(4)     $6,674
                               =======       ======       ====         ====         ========       ====      =====    =======