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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR

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

COMMISSION FILE NUMBER 1-11862

INTERPOOL, INC.
(Exact name of registrant as specified in the charter)

211 COLLEGE ROAD EAST, PRINCETON, NEW JERSEY 08540
(Address of principal executive office)                  (Zip Code)

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |_| No |X|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

Indicate by check mark whether the registrant is an accelerated filer (as defined in the Exchange Act Rule 12b-2). Yes |X| No |_|

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $167,769,211 as of December 15, 2003.

At December 15, 2003, there were 27,376,552 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

INTERPOOL, INC.

FORM 10-K

TABLE OF CONTENTS

PART I

PART II

PART III

PART IV

PART I

ITEM 1.  BUSINESS

Introductory Note

In preparation for our 2002 annual audit, we determined that several direct finance lease transactions with customers in 2001 and 2000 had been accounted for incorrectly in our prior financial statements. Down payments received from these customers had been erroneously recorded as revenue when collected rather than as a reduction to the net investment in the lease. We also determined that our former computer leasing segment, which had been classified as a discontinued operation in our financial statements for the first three quarters of 2002 and for 2001 and 2000, should have been classified as part of continuing operations because the requirements of discontinued operation accounting treatment were not satisfied.

As a result, we determined that it would be necessary for us to restate our financial statements for the first three quarters of 2002 and for the years ended December 31, 2001 and 2000. Because our financial statements for 2001 and 2000 originally had been audited by Arthur Andersen LLP, which has discontinued its auditing practice, we requested that our new auditors, KPMG LLP, conduct audits of our restated financial statements for the years ended December 31, 2001 and 2000, along with their audit of our financial statements for the year ended December 31, 2002.

The Audit Committee of our Board of Directors engaged as special counsel a law firm that had not previously represented us to conduct an internal investigation into the accounting errors and circumstances requiring restatement of our previously issued 2001 and 2000 financial statements. This investigation was not completed until the fourth quarter of 2003. The findings and recommendations of this investigation, and the measures we have taken and are taking to implement these recommendations, are detailed later in this report under Item 9A.

As a result of an extensive review by us and the re-audits conducted by KPMG, we determined that, in addition to the accounting errors mentioned above, certain additional items in our prior financial statements also would require restatement, including the following:

The aggregate effect of the restatement of all of these items had the following impact on previously issued financial statements:

While the restatement was necessary, we believe that these changes to our previously issued financial statements do not represent a material change in our financial condition or result in a material increase in the amount of our future obligations or our future cash needs.

Because our financial restatement and the 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 Annual Report on Form 10-K for the year ended December 31, 2002 and our financial statements and Quarterly Reports on Form 10-Q for interim periods in 2003, we requested and received necessary waivers under our debt agreements. Most of these waivers, as currently in effect, waive any default resulting from the late preparation and filing with the Securities and Exchange Commission (SEC) of our financial statements and required periodic reports for 2002 and the first three quarters of 2003, provided that our 2002 Annual Report on Form 10-K is filed with the SEC by January 9, 2004, and our Quarterly Reports on Form 10-Q for the first three quarters of 2003 are filed with the SEC by January 31, 2004, February 29, 2004, and March 31, 2004, respectively. We have not requested or received waivers with respect to our Annual Report on Form 10-K for the year ending December 31, 2003, or our Quarterly Reports on Form 10-Q for 2004, although we anticipate requesting such waivers prior to March 31, 2004.

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 report was filed with the SEC. The New York office of the SEC has received a copy of the written report of the internal investigation and has issued subpoenas requesting documents and information from our Audit Committee and certain other parties. We have also been advised that the United States Attorney's office for the District of New Jersey has received a copy of the written report of the internal investigation and has opened a parallel investigation focusing on certain matters described in the report by the Audit Committee's special counsel. We have been 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.

We have usually funded a significant portion of the purchase price for new containers and chassis through borrowings under our revolving credit agreement and other lines of credit or through secured financings with the financial institutions with which we have relationships. However, while we have successfully completed several significant financings during 2003, our ability to borrow funds on favorable terms has been severely limited since March 31, 2003 because of the restatement to our historical financial statements, the related Audit Committee and SEC investigations and the delay in completing our audited 2002 financial statements and the filing of our Annual Report on Form 10-K for 2002. Our reduced ability to borrow funds on favorable terms has required us to reduce the level of new business we have written with customers. In addition, although we have in the past paid our equipment manufacturers for our acquisitions of containers and chassis within normal trade terms (generally 60-90 days), in recent months we have generally not made payments on this schedule because of the limited availability of new financings. As of December 22, 2003, the total amount we owed to these manufacturers for equipment already delivered (most of which has been placed into service in our fleet) or committed to purchase was approximately $120.5 million. We advised our manufacturers that we intended to satisfy a total of $54.0 million of these outstanding obligations in December 2003, with the remaining balances to be paid in January or February 2004. Our manufacturers have consented to this payment schedule. We have made the payments due in December 2003 to these manufacturers. We may seek further deferrals from these manufacturers.

We currently intend to fund our remaining payment obligations to these manufacturers with proceeds from one or more financings that are currently in process. We have received a signed commitment from a bank regarding a term loan facility of up to $100.0 million, which would be secured by newly acquired equipment. While this financing is not assured and remains subject to documentation and other customary closing conditions before it would be consummated, our discussions with this institution are at an advanced stage as of the date of filing of this Annual Report on Form 10-K and the preparation of formal legal documentation for this loan has been commenced by counsel for the lender.

We also have had discussions with other financial institutions, though at a more preliminary stage, regarding other potential financing transactions that we believe could be consummated early in 2004. Therefore, we believe that we should be able to obtain the financing necessary for us to satisfy our remaining manufacturer payment obligations in the near future. We may also elect to fund a portion of our remaining obligations to our manufacturers through use of our available cash (subject to obtaining approval from certain lenders, if required).

While we are optimistic that we will be able to obtain the financing necessary to enable us to satisfy our remaining manufacturer obligations on the schedule we have presented to our manufacturers, in the event that we are unable to promptly consummate one or more financings of at least $50 million, our available cash resources would likely not be sufficient to make the remaining payments that may be required by our manufacturers, and one or more of these manufacturers could take action against us. In addition, the taking of such action by one or more manufacturers, or the possibility that such action could be taken based upon our failure to satisfy our remaining payment obligations to these manufacturers, may prompt one or more of our other lenders to claim that a cross-default has occurred under the provisions of such lender's debt instruments and to attempt to declare our obligations to such lender immediately due and payable.

For a further discussion of our financial restatement, see Note 2 to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.

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 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 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, 2002, our chassis fleet totaled approximately 204,000 chassis and our container fleet totaled approximately 796,000 twenty foot equivalent units (TEUs). From 1997 to 2002, we increased the size of our chassis fleet at a compound annual rate of 27%, primarily as the result of the chassis fleet acquired during 2000 from the North American Intermodal Division of Transamerica Leasing, Inc. ("TA"), and increased our container fleet at a compound annual rate of 13%.

We concentrate on leasing equipment to our customers on a long-term basis. Substantially all of our new equipment is initially leased for terms of five to eight years and approximately 75% of our total fleet of chassis and 85% 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 25% 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 15% 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 the world's third largest container lessor fleet on a combined basis. At December 31, 2002, CAI had a container fleet of approximately 299,000 containers, including approximately 189,000 containers that were managed for others. CAI's managed equipment included approximately 80,600 containers that were managed for us. CAI's average utilization at December 31, 2002 was 79.7%.

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 20 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 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 2001, worldwide container traffic at the world's major ports has grown at a compound annual rate of 9.85%, calculated using the Containerization International Yearbook of 1992 and 2003.

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 worldwide 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 have entered into a limited amount of new lease transactions, because our financial restatement and Audit Committee investigation, and the resulting delay in completion of our audited financial statements and filing of our Annual Report on Form 10-K, have significantly reduced the availability of new financing necessary to fund acquisitions of new equipment for lease to customers. We anticipate that once our delinquent financial statements and SEC reports have been filed, we will again be able to obtain long-term financing on favorable terms and will resume writing new business at the levels we have experienced over the past few years.

Operations

Lease Terms. Approximately 85% of our containers and 75% of our chassis are leased on a long-term basis as of December 31, 2002. Our long-term leases generally have five to eight year initial terms.

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. In addition, such customers must return all equipment covered by the particular long-term lease being terminated, generally 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 Equipment Tracking and Billing. We use a real time, 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 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 2002, more than 165,000 movement transactions per month were processed on average through the system, which is capable of tracking revenue on the basis of individual chassis. The system also generates a wide range of management reports containing information on all aspects of our leasing activities.

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 Orleans, Norfolk, Long Beach, Oakland, Seattle and Savannah. We also operate chassis pools at railroad locations within the United States.

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 $75 and $700 per item of equipment, 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 $1.45 per TEU 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 involve substantial cost, but remanufacture or refurbish costs are substantially less than the cost of purchasing a new chassis.

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 provided to CAI for deployment in CAI's short-term fleet. For each of our containers in CAI's fleet, CAI pays us its average total fleet per diem rate less a management fee. 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, as well as its physical condition. 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. Most chassis used in the United States are manufactured domestically. Manufacturers of chassis frequently produce over-the-road trailers as well, and can convert some production capability to chassis as needed. Because of the rising demand for containers and the availability of relatively inexpensive labor in the Pacific Rim, approximately 85% of world container production now occurs in China. Containers are also produced in other countries, such as South Korea, India, Indonesia, Malaysia, Taiwan, Turkey, South Africa, and, to a lesser extent, other parts of the world.

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™ Chassis Pool Management

Our proprietary internet-based real-time chassis management system is called "PoolStat"™. "PoolStat"™ 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"™ 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"™ provides several benefits to customers, including allowing customers to:

By providing the "PoolStat"™ service, we are able to forge closer relationships with our customers for both short-term and long-term leasing opportunities. There are now approximately 255,000 chassis under "PoolStat"™ management and we are continuing to seek opportunities to increase its level of business. We believe that "PoolStat"™ 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 20 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. Our customer base is diverse. As of December 31, 2002, our top 25 customers represented approximately 71% of our consolidated net billing, with no single customer accounting for more than 8.2%.

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 decreases the recoverable amount per occurrence to $9 million as compared to $35 million in our previous policy and increases the deductible per occurrence from $.4 million to $3 million. 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. Over the last several years, 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 long-term and direct finance lease business generated by CAI, subject to offering to CAI, at cost, 10% of this long-term and direct finance lease business. Recently, by mutual agreement, CAI has retained most of the long-term and direct finance lease business it has written. 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 15 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 475 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"). During the third quarter of 2001, we adopted a plan to exit this segment. As part of this plan, we acquired the portion of the ownership interest in Microtech that we did not already own and took steps to terminate Microtech's operations in late 2001. Also, in December 2001 we sold our ownership stake in PCR to a new company formed by certain former employees of PCR. The consideration for the sale, totaling $3.2 million, consisted of $.6 million in cash and a $2.6 million non-recourse promissory note issued by the buyer. In addition, we agreed to guarantee repayment by the buyer of $8.0 million of borrowings from its bank lenders. One of these guarantees, for $3.0 million of borrowings, was released effective December 31, 2001 by one of these bank lenders, Yardville National Bank, and was replaced by personal guarantees in the same amount from two of our principal stockholders or their affiliates. In connection with the sale of PCR, we entered into consulting and bonus contracts with two officers of PCR. In addition, our subsidiary Microtech had lease and other receivables in the amount of $1.4 million due from PCR at December 31, 2001.

During 2002, PCR experienced liquidity problems, and we took steps to assist PCR, such as by purchasing receivables of PCR and by arranging advances to PCR from The Ivy Group, a partnership controlled by several of our principal stockholders or their affiliates. PCR ultimately became insolvent and was liquidated during 2003. We have recorded our obligations relating to PCR's liquidation in the fourth quarter of 2002. As discussed elsewhere in this report, the computer leasing segment was originally reported under discontinued operation and sale accounting principles, but we subsequently determined that restatement would be necessary because the termination of Microtech's operations and legal sale of PCR did not qualify for discontinued operation or sale accounting treatment.

(See Note 2 Restatement of Previously Issued Financial Statements – "Elimination of Discontinued Operations Classification and Gain on Sale of PCR" to the Consolidated Financial Statements for further explanation regarding the accounting treatment of PCR and Microtech.)

Employees

As of December 31, 2002, we had 192 employees, 172 of whom are based in the United States, excluding CAI's 53 employees and the computer leasing segment currently being liquidated. 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. Some of our competitors have large underutilized 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 issued subpoenas requesting documents and information from us, our Audit Committee and certain other parties. We have also been advised that the United States Attorney's office for the District of New Jersey has received a copy of the written report of the internal investigation and has opened a parallel investigation focusing on certain matters described in the report by the Audit Committee's special counsel. We have been 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.

Our limited ability to consummate financings in 2003 has reduced our liquidity and impaired our ability to pay our manufacturers.

We have usually funded a significant portion of the purchase price for new containers and chassis through borrowings under our revolving credit agreement and other lines of credit or through secured financings with the financial institutions with which we have relationships. However, while we have successfully completed several significant financings during 2003, our ability to borrow funds on favorable terms has been severely limited since March 31, 2003 because of the restatement to our historical financial statements, the related Audit Committee and SEC investigations and the delay in completing our audited 2002 financial statements and the filing of our Annual Report on Form 10-K for 2002. Our reduced ability to borrow funds on favorable terms has required us to reduce the level of new business we have written with customers. In addition, although we have in the past paid our equipment manufacturers for our acquisitions of containers and chassis within normal trade terms (generally 60-90 days), in recent months we have generally not made payments on this schedule because of the limited availability of new financings. As of December 22, 2003, the total amount we owed to these manufacturers for equipment already delivered (most of which has been placed into service in our fleet) or committed to purchase was approximately $120.5 million. We advised our manufacturers that we intended to satisfy a total of $54.0 million of these outstanding obligations in December 2003, with the remaining balances to be paid in January or February 2004. Our manufacturers have consented to this payment schedule. We have made the payments due in December 2003 to these manufacturers. We may seek further deferrals from these manufacturers.

We currently intend to fund our remaining payment obligations to these manufacturers with proceeds from one or more financings that are currently in process. None of these financings is assured and each of them remains subject to documentation and other customary closing conditions before it would be consummated. We may also elect to fund a portion of our remaining obligations to these manufacturers through use of our available cash (subject to obtaining approval from certain lenders).

In the event that we are unable to promptly consummate one or more financings of at least $50 million, our available cash resources would likely not be sufficient to make the remaining payments that may be required by our manufacturers, and one or more of these manufacturers could take action against us. These actions could be very disruptive to our business and might include the commencement of legal proceedings (either in the United States or in another country), exercising offset rights with respect to lease payments due from lessees under common ownership or otherwise affiliated with the manufacturer, directing lessees of equipment not yet paid for to make their lease payments to the manufacturer, or seeking to take possession of equipment sold to us for which payment had not been made. Even without any such action being taken, our future relationships with these manufacturers could be adversely affected by our continued non-payment beyond February 2004. In addition, the taking of such action by one or more manufacturers, or the possibility that such action could be taken based upon our failure to satisfy our payment obligations to these manufacturers, may prompt one or more of our other lenders to claim that a cross-default has occurred under the provisions of such lender's debt instruments and to attempt to declare the obligations due to such lender immediately due and payable. If at that time we were to be unable to pay these obligations in full or obtain deferrals from, or otherwise satisfy, the manufacturers, such a lender might attempt to exercise its rights as a secured creditor with respect to its collateral or take other action against us. 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.

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 2004 SEC reports on a timely basis. In addition, we cannot ensure that the existing waivers we have obtained will remain in effect.

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 Annual Report on Form 10-K for the year ended December 31, 2002 and our financial statements and Quarterly Reports on Form 10-Q for interim periods in 2003, we requested and received necessary waivers under our debt agreements. Most of these waivers, as currently in effect, waive any default resulting from the late preparation and filing with the SEC of our financial statements and required periodic reports for 2002 and the first three quarters of 2003, provided that our Annual Report on Form 10-K is filed with the SEC by January 9, 2004, and our Quarterly Reports on Form 10-Q for the first three quarters of 2003 are filed with the SEC by January 31, 2004, February 29, 2004, and March 31, 2004, respectively. Although we hope that we will be able to complete and file our Quarterly Reports on Form 10-Q for 2003 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 addition, we have not requested or received any waivers with respect to our Annual Report on Form 10-K for the year ended December 31, 2003, or our quarterly reports for 2004. We anticipate requesting such waivers prior to March 31, 2004. 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 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 addition, several of the waivers we have obtained are contingent upon a determination by the applicable lender that the changes resulting from our financial restatement to our historical financial statements for 2001 and 2000 and the first nine months of 2002 do not represent a material change to our financial condition for these periods as originally reported. While the restatement was necessary, we believe that our revised financial statements do not represent such a material change, but we cannot assure that our lenders would reach a similar conclusion. 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 of any such default under the terms of our indebtedness, 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 not be adequate.

As a result of our efforts to evaluate weaknesses in the design and effectiveness of our internal controls for the years ended December 31, 2002, 2001 and 2000, we concluded that certain internal control deficiencies which we identified constituted "material weaknesses" or "significant deficiencies" as defined under the standards established by the American Institute of Certified Public Accountants. These deficiencies fall into nine 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 and deficiencies related to recordkeeping by various internal departments. 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 have addressed the material weaknesses and significant deficiencies that have affected our internal controls for the years ended 2002, 2001 and 2000. As of the date of this filing, we are satisfied that actions implemented to date and those in progress 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 internal control weakness could materially affect our financial results.

Our insurance carriers are disputing our claim for payment under our insurance coverage for lessee defaults and have commenced litigation seeking rescission of the insurance policies. The outcome of this litigation may be adverse to us.

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 includes per diem rental charges for up to 180 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. We have filed an insurance claim in excess of the policy's maximum coverage of $34.6 million, net of a $.4 million deductible under the insurance policy. The supporting documentation for our claim has been provided to an adjuster appointed by the insurance underwriters. As of December 31, 2002, the outstanding receivable recorded from the insurance carrier is $19.6 million. The difference between the receivable recorded due from the insurance carrier 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. Upon collection of the receivable from the insurance carriers, any amounts in excess of or less than the receivable recorded would be recorded as other (income)/expense, net in the Consolidated Statements of Income. For further explanation, see Note 2 Restatement of Previously Issued Financial Statements – "Accounting For Insurance Claims" to the Consolidated Financial Statements.

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 insurance underwriters' primary contention is that we did not fully disclose to them all material information concerning our South Korean lessee. The underwriters also dispute the timing of our notifications to them of this loss and the amount of the loss. We have filed a response to this complaint. We intend to vigorously pursue our claim for recovery under our insurance policies and believe that we have strong claims under the policies and defenses to the arguments asserted by the insurance underwriters. It is impossible to predict the ultimate outcome of this proceeding, in view of the uncertainties inherent in any litigation. As the litigation progresses, reserves for the impairment of the asset values on our balance sheet may become necessary.

Our insurance coverage, which reduces our exposure to credit risk, expires in March 2004. 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, 2004. 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 70.2% 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.

We previously relied in part on the knowledge and experience of Raoul J. Witteveen, our former President and Chief Operating Officer, and Mitchell Gordon, our former Executive Vice President and Chief Financial Officer, each of whom was a member of our Board of Directors. Mr. Witteveen and Mr. Gordon separately resigned as executive officers and directors during 2003. Although we have an experienced management team, the loss of these individuals may adversely affect our ability to continue to achieve our business strategy and to pursue new business initiatives.

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, 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.

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 $1,683.5 million (including $66.5 million due to certain equipment manufacturers to whom we have not paid amounts due in accordance with our normal trade terms). 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 for 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. We may not have sufficient unencumbered assets to pledge as security for new indebtedness. 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 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 lending group for 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. Such downgrades may have a negative effect on our ability to access the capital markets in the future, as well as on our interest costs.

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:

Although our common stock is listed on The New York Stock Exchange, the Exchange suspended trading in our common stock and other listed securities on December 29, 2003 and informed us that delisting proceedings will be commenced. The Exchange stated that this action was taken because of the delay in filing of our Annual Report on Form 10-K for 2002 and the uncertainty surrounding our restatement. Although we will appeal this decision and hope that trading on the New York Stock Exchange will resume after this report is filed with the Securities and Exchange Commission, we cannot give any assurance that trading in our securities will resume on the New York Stock Exchange. Since this suspension took effect, our common stock has been traded on the over-the-counter market under the symbol IPLI. Information regarding bid and asked prices may be obtained from the web site maintained by pinksheets.com.

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

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.

ITEM 2.  PROPERTIES

In connection with our acquisition of Transamerica's North American Intermodal Division in October 2000, we purchased real property located in Chicago, Illinois and Atlanta, Georgia. The purchase price for these two properties was included in the acquisition's aggregate purchase price. The Atlanta site was sold on July 31, 2001. The Chicago site was sold in April 2002.

In May 2002, we purchased an office building located at 211 College Road East, Princeton, New Jersey which houses our principal executive offices. The property was purchased from 211 College Road Associates, a New Jersey general partnership in which our chief executive officer and one of our other directors together hold 89.73% of the partnership interests. We had previously leased approximately 28,500 square feet in this building at an annual rent of $.6 million under a triple net lease with 211 College Road Associates. The purchase price we paid for the 39,000 square foot building was $6.3 million, based upon a determination of the fair market value of the property by an independent property appraisal firm. The purchase price and other terms of the purchase were approved by our Board of Directors. (See "Certain Relationships and Related Transactions" and Note 14 to the Consolidated Financial Statements for further information regarding this transaction.)

We 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.

ITEM 3.  LEGAL PROCEEDINGS

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 includes 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. The maximum insurance coverage related to this claim is $34.6 million, net of a $.4 million deductible under the insurance policy.

We provided the supporting documentation for our claim to an adjuster appointed by the insurance underwriters. Based upon discussions with the adjuster, the analysis of the supporting documentation is complete and a report of the adjuster's findings was submitted to the underwriters in November 2002.

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 insurance underwriters' primary contention is that we did not fully disclose to them all material information concerning our South Korean lessee. The underwriters also dispute the timing of our notifications to them of this loss and the amount of the loss. We have filed a response to this complaint. We intend to vigorously pursue our claim for recovery under our insurance policies and believe that we have strong claims under the policies and defenses to the arguments asserted by the insurance underwriters. Although it is impossible to give assurances as to the ultimate outcome of this proceeding in view of the uncertainties inherent in any litigation, based upon the progress of this case to date and the merits of our position, and after consultation with external counsel, we believe that the facts as they have been developed through discovery, and the applicable law, should entitle us to a recovery in the full amount of our claim. We will continue to monitor the progress and development of this litigation. As the litigation progresses, we will continue to evaluate the prospects for full recovery on our insurance claim, and reserves for the impairment of the asset values may become necessary.

For additional information about this claim, see Management's Discussion and Analysis of Financial Condition and Results of Operations – "Insurance Claim."

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 report was filed with the SEC. The New York office of the SEC has received a copy of the written report of the internal investigation and has issued subpoenas requesting documents and information from us, our Audit Committee and certain other parties. We have also been advised that the United States Attorney's office for the District of New Jersey has received a copy of the written report of the internal investigation and has opened a parallel investigation focusing on certain matters described in the report by the Audit Committee's special counsel. We have been 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.

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 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.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders through a solicitation of proxies during the fourth quarter of fiscal 2002.

PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Until December 26, 2003, our common stock was traded on the New York Stock Exchange under the symbol "IPX". The following table sets forth for the periods indicated commencing on January 1, 2000, the high and low closing sale prices for the common stock on the New York Stock Exchange. All share and per share data have been rounded to the nearest cent.

                                                                 HIGH          LOW
                                                                 ----          ----
      Calendar Year 2000
        First Quarter.....................................       $8.00        $5.75
        Second Quarter....................................        9.75         5.50
        Third Quarter.....................................       13.31         8.50
        Fourth Quarter....................................       17.50        11.63
      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

As of December 1, 2003, there were approximately 75 stockholders of record of our common stock. On December 15, 2003, the last reported sale price of the common stock on the New York Stock Exchange was $17.94 per share.

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. We will appeal this decision. Since this suspension took effect, our common stock has been traded on the over-the-counter market under the symbol IPLI. Information regarding bid and asked prices may be obtained from the web site maintained by pinksheets.com.

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. Effective January 2003, the quarterly dividend rate was increased to $0.0625 per share, which was paid in January, April, July and October of 2003 and declared on December 10, 2003 for payment on January 15, 2004 to stockholders of record on January 2, 2004. 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.

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 will be acquired on the open market by an independent third party plan administrator and not through the issuance of additional shares by us.

Equity Compensation Plan Information

The following presents equity compensation plan information as of December 31, 2002. This table does not include shares issuable under the Deferred Bonus Plan (the "Bonus Plan") as outlined in Note 19 to the Consolidated Financial Statements. The shares issuable under the Bonus Plan with respect to the calendar year ended December 31, 2002 were granted in January 2003 and vest in installments beginning in January 2004.

                                                                                                           (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              4,539,001                       10.34                         1,559,999

Equity compensation plans not
approved by security holders                -----                         -----                           -----
                                          _________                   _________                       ___________
Total                                     4,539,001                       10.34                         1,559,999

For a description of these plans see Item 10 and Note 19 to the Consolidated Financial Statements.

ITEM 6.  SELECTED FINANCIAL DATA

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. (See Note 2 to the Consolidated Financial Statements for additional details of the restated amounts in 2001 and 2000.)

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

                                                                           YEAR ENDED DECEMBER 31, (1)
                                                             2002 (2)      2001          2000 (3)        1999          1998
                                                             --------      ----          -------         ----          -----
INCOME STATEMENT DATA:                                                   Restated       Restated      Restated      Restated

Revenues                                                   $327,124      $338,718      $287,553       $216,063      $181,301

Income before cumulative effect of change in accounting      $4,389       $28,104       $44,040        $23,271       $37,064
principle                                                    ======       =======       =======        =======       =======

Income per share before change in accounting principle:

Basic                                                         $0.16         $1.03         $1.61          $0.84         $1.34
                                                              =====         =====         =====          =====         =====

Diluted                                                       $0.15         $0.97         $1.61          $0.82         $1.30
                                                              =====         =====         =====          =====         =====

Weighted average shares outstanding:

Basic                                                        27,360        27,417        27,421         27,571        27,561

Diluted                                                      29,202        28,973        27,426         28,234        28,615

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


                                                            2002          2001           2000          1999          1998
                                                            ----          ----           ----          ----          -----
BALANCE SHEET DATA:                                                     Restated       Restated      Restated      Restated


Cash and short-term investments                            $170,613      $103,760      $157,224       $207,853      $107,226

Net investment in direct financing leases                  $334,129      $275,372      $213,180       $185,350      $358,165

Leasing equipment                                        $1,556,816    $1,334,787    $1,230,214       $846,342      $716,930

Total assets                                             $2,241,121    $1,922,229    $2,203,767     $1,442,069    $1,361,051

Debt and capital lease obligations                       $1,597,211    $1,354,680    $1,631,985       $998,228      $932,157

Stockholders' equity                                       $336,193      $351,269      $340,519       $299,411      $280,601

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS

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. All financial information in this report gives effect to the restatement of our financial statements for 2001 and 2000. (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.)

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 Previously Issued Financial Statements

In preparation for our 2002 annual audit, we determined that several direct finance lease transactions with customers, in 2001 and 2000 had been accounted for incorrectly in our prior financial statements. Down payments received from these customers had been erroneously recorded as revenue when collected rather than as a reduction to the net investment in the lease. We also determined that our former computer leasing segment, which had been classified as a discontinued operation in our financial statements for the first three quarters of 2002 and for 2001 and 2000, should have been classified as part of continuing operations because the requirements of discontinued operation accounting treatment were not satisfied.

As a result, we determined that it would be necessary for us to restate our financial statements for the first three quarters of 2002 and for the years ended December 31, 2001 and 2000. Because our financial statements for 2001 and 2000 originally had been audited by Arthur Andersen LLP, which has discontinued its auditing practice, we requested that our new auditors, KPMG LLP, conduct audits of our restated financial statements for the years ended December 31, 2001 and 2000, along with their audit of our financial statements for the year ended December 31, 2002.

The Audit Committee of our Board of Directors engaged as special counsel a law firm that had not previously represented us to conduct an internal inquiry into the accounting errors and circumstances requiring restatement of our previously issued 2001 and 2000 financial statements. Upon completion of this inquiry, in July 2003 our Audit Committee decided to conduct a broader internal investigation of our accounting and related matters and engaged another law firm that had not previously represented us, Morrison & Foerster LLP, as special counsel, which in turn engaged the accounting firm of Ernst & Young LLP to assist with such investigation. This investigation was not completed until the fourth quarter of 2003. The findings and recommendations of this investigation, and the measures we have taken and are taking to implement these recommendations, are detailed later in this report under Item 9A.

As a result of an extensive review by us and the re-audits conducted by KPMG, we determined that, in addition to the accounting errors mentioned above, certain additional items in our prior financial statements also would require restatement, including the following: