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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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(Mark One)

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



For Quarterly Period Ended June 30, 2004



OR



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



For the transition period from  to



Commission file number 000-16496



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Constar International Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-1889304                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)
|                                                               | 
|One Crown Way, Philadelphia, PA                                |  | 19154                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(215) 552-3700

(Registrants telephone number, including area code)



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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  x    No ̈



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



As of August 6, 2004, 12,620,501 shares of the Registrants Common Stock were outstanding.



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##### Table of Contents

TABLE OF CONTENTS



|                               |  |                                                                                       |  |            
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | -----------
|                               |  |                                                                                       |  | Page Number
|PART I 
FINANCIAL INFORMATION |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Financial Statements (Unaudited)                                                      |  |            
|                               |  |                                                                                      
|                               |  | Condensed Consolidated Balance Sheets                                                 |  | 1          
|                               |  |                                                                                      
|                               |  | Condensed Consolidated Statements of Operations                                       |  | 2          
|                               |  |                                                                                      
|                               |  | Condensed Consolidated Statements of Cash Flows                                       |  | 3          
|                               |  |                                                                                      
|                               |  | Condensed Consolidated Statement of Stockholders Equity                              |  | 4          
|                               |  |                                                                                      
|                               |  | Notes to Condensed Consolidated Financial Statements                                  |  | 5          
|                               |  |                                                                                      
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 21         
|                               |  |                                                                                      
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 29         
|                               |  |                                                                                      
|Item 4.                        |  | Controls and Procedures                                                               |  | 30         
|                               | 
|PART II 
OTHER INFORMATION    |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                     |  | 31         
|                               |  |                                                                                      
|Item 4.                        |  | Submissions of Matters to a Vote of Security Holders                                  |  | 31         
|                               |  |                                                                                      
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |  | 32         
|                               | 
|Signatures                     |  | 33                                                                                   



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##### Table of Contents

PART I  FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands)



|                                                               |  |               |         |                   |   |        
|-------------------------------------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                                                               |  | June 30, 2004 |         | December 31, 2003
|Assets                                                         |  |               |         |                   |   |        
|                                                               |  |              
|Current Assets                                                 |  |               |         |                   |   |        
|Cash and cash equivalents                                      |  | $             | 13,910  |                   | $ | 16,478 
|Accounts receivable, net                                       |  |               | 97,517  |                   |   | 66,979 
|Inventories, net (Note 3)                                      |  |               | 84,649  |                   |   | 82,368 
|Prepaid expenses and other current assets                      |  |               | 12,278  |                   |   | 13,642 
|                                                               |  |               |         |                   |   |        
|Total current assets                                           |  |               | 208,354 |                   |   | 179,467
|                                                               |  |               |         |                   |   |        
|Property plant and equipment, net                              |  |               | 211,220 |                   |   | 223,925
|Goodwill (Note 4)                                              |  |               | 148,813 |                   |   | 148,813
|Other assets                                                   |  |               | 24,008  |                   |   | 26,136 
|                                                               |  |               |         |                   |   |        
|Total assets                                                   |  | $             | 592,395 |                   | $ | 578,341
|                                                               |  |               |         |                   |   |        
|Liabilities, Minority Interests and Stockholders Equity       |  |               |         |                   |   |        
|                                                               |  |              
|Current Liabilities                                            |  |               |         |                   |   |        
|Short-term debt (Note 5)                                       |  | $             | 1,248   |                   | $ | 1,248  
|Accounts payable and accrued liabilities                       |  |               | 132,965 |                   |   | 118,900
|Income taxes payable                                           |  |               | 1,926   |                   |   | 2,146  
|                                                               |  |               |         |                   |   |        
|Total current liabilities                                      |  |               | 136,139 |                   |   | 122,294
|Long-term debt, net of current portion (Note 5)                |  |               | 407,139 |                   |   | 396,170
|Pension and post-retirement liabilities                        |  |               | 10,187  |                   |   | 8,267  
|Deferred income taxes                                          |  |               | 11,029  |                   |   | 10,944 
|Other liabilities                                              |  |               | 5,137   |                   |   | 5,567  
|                                                               |  |               |         |                   |   |        
|Total liabilities                                              |  |               | 569,631 |                   |   | 543,242
|                                                               |  |               |         |                   |   |        
|Commitments and contingent liabilities (Note 11)               |  |               |         |                   |   |        
|Minority interests                                             |  |               | 2,266   |                   |   | 2,285  
|Stockholders equity                                           |  |               | 20,498  |                   |   | 32,814 
|                                                               |  |               |         |                   |   |        
|Total liabilities, minority interests and stockholders equity |  | $             | 592,395 |                   | $ | 578,341
|                                                               |  |               |         |                   |   |        



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



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except
per share data)



|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|--------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | - | -------- | ---- |  | - | ------- | - |  | - | -------- | -
|                                              |  | Three months ended June 30, |         |   | Six months ended June 30, |  
|                                              |  | 2004                        |         |   | 2003                      |   |          | 2004 |  |   | 2003    |  
|Net customer sales                            |  | $                           | 224,774 |   |                           | $ | 202,651  |      |  | $ | 415,519 |   |  | $ | 371,084  |  
|Net affiliate sales                           |  |                             | 1,310   |   |                           |   | 783      |      |  |   | 2,303   |   |  |   | 1,141    |  
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Net sales                                     |  |                             | 226,084 |   |                           |   | 203,434  |      |  |   | 417,822 |   |  |   | 372,225  |  
|                                              |  |                             |         |  
|Cost of products sold, excluding depreciation |  |                             | 199,010 |   |                           |   | 180,894  |      |  |   | 368,450 |   |  |   | 323,626  |  
|Depreciation                                  |  |                             | 13,179  |   |                           |   | 14,031   |      |  |   | 26,077  |   |  |   | 28,033   |  
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Gross profit                                  |  |                             | 13,895  |   |                           |   | 8,509    |      |  |   | 23,295  |   |  |   | 20,566   |  
|Operating expenses                            |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Selling and administrative expenses           |  |                             | 5,980   |   |                           |   | 5,201    |      |  |   | 12,257  |   |  |   | 9,960    |  
|Research and technology expenses              |  |                             | 1,143   |   |                           |   | 1,282    |      |  |   | 2,517   |   |  |   | 2,701    |  
|Interest expense                              |  |                             | 9,988   |   |                           |   | 8,877    |      |  |   | 19,970  |   |  |   | 17,312   |  
|Foreign exchange adjustments                  |  |                             | 361     |   |                           |   | (872     | )    |  |   | 407     |   |  |   | (825     | )
|Goodwill impairment loss                      |  |                             |         |   |                           |   | 183,000  |      |  |   |         |   |  |   | 183,000  |  
|Other (income) expenses, net                  |  |                             | (241    | ) |                           |   | 166      |      |  |   | 513     |   |  |   | 77       |  
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Total operating expenses                      |  |                             | 17,231  |   |                           |   | 197,654  |      |  |   | 35,664  |   |  |   | 212,225  |  
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Loss before taxes and minority interest       |  |                             | (3,336  | ) |                           |   | (189,145 | )    |  |   | (12,369 | ) |  |   | (191,659 | )
|Provision for income taxes                    |  |                             | (564    | ) |                           |   | 2,314    |      |  |   | (448    | ) |  |   | 2,924    |  
|Minority interests                            |  |                             | 14      |   |                           |   | (147     | )    |  |   | 19      |   |  |   | (74      | )
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Net loss                                      |  | $                           | (3,886  | ) |                           | $ | (186,978 | )    |  | $ | (12,798 | ) |  | $ | (188,809 | )
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Per common share data:                        |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Basic and diluted:                            |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Net loss                                      |  | $                           | (0.32   | ) |                           | $ | (15.58   | )    |  | $ | (1.07   | ) |  | $ | (15.73   | )
|                                              |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Weighted average shares outstanding:          |  |                             |         |   |                           |   |          |      |  |   |         |   |  |   |          |  
|Basic and diluted                             |  |                             | 12,000  |   |                           |   | 12,000   |      |  |   | 12,000  |   |  |   | 12,000   |  



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



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CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                |  |                           |         |   |      |   |          |  
|------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | -------- | -
|                                                                                |  | Six months ended June 30, |        
|                                                                                |  | 2004                      |         |   | 2003 |  
|Cash flows from operating activities                                            |  |                           |         |   |      |   |          |  
|Net loss                                                                        |  | $                         | (12,798 | ) |      | $ | (188,809 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                           |         |   |      |   |          |  
|Goodwill impairment loss                                                        |  |                           |         |   |      |   | 183,000  |  
|Depreciation and amortization                                                   |  |                           | 27,437  |   |      |   | 28,860   |  
|Deferred income taxes                                                           |  |                           | (90     | ) |      |   | (4,081   | )
|Change in other assets and liabilities, net                                     |  |                           | (12,076 | ) |      |   | 5,505    |  
|                                                                                |  |                           |         |   |      |   |          |  
|Net cash provided by operating activities                                       |  |                           | 2,473   |   |      |   | 24,475   |  
|                                                                                |  |                           |         |   |      |   |          |  
|Cash flows from investing activities                                            |  |                           |         |   |      |   |          |  
|Purchases of property, plant and equipment                                      |  |                           | (16,034 | ) |      |   | (25,169  | )
|Proceeds from sale of property, plant and equipment                             |  |                           | 71      |   |      |   | 148      |  
|                                                                                |  |                           |         |   |      |   |          |  
|Net cash used in investing activities                                           |  |                           | (15,963 | ) |      |   | (25,021  | )
|                                                                                |  |                           |         |   |      |   |          |  
|Cash flows from financing activities                                            |  |                           |         |   |      |   |          |  
|Proceeds from debt                                                              |  |                           |         |   |      |   | 1,502    |  
|Repayment of Term B Loan                                                        |  |                           | (624    | ) |      |   | (750     | )
|Proceeds from Revolver Loan                                                     |  |                           | 31,500  |   |      |   | 51,000   |  
|Repayments of Revolver Loan                                                     |  |                           | (20,000 | ) |      |   | (65,000  | )
|                                                                                |  |                           |         |   |      |   |          |  
|Net cash provided by (used in) financing activities                             |  |                           | 10,876  |   |      |   | (13,248  | )
|                                                                                |  |                           |         |   |      |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                    |  |                           | 46      |   |      |   | 170      |  
|                                                                                |  |                           |         |   |      |   |          |  
|Net change in cash and cash equivalents                                         |  |                           | (2,568  | ) |      |   | (13,624  | )
|Cash and cash equivalents at beginning of period                                |  |                           | 16,478  |   |      |   | 20,913   |  
|                                                                                |  |                           |         |   |      |   |          |  
|Cash and cash equivalents at end of period                                      |  | $                         | 13,910  |   |      | $ | 7,289    |  
|                                                                                |  |                           |         |   |      |   |          |  



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



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CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(unaudited)

(in thousands)



|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|--------------------------------------- |  | --------------------------- | ------ | - | ------------ | - | --------------------------- |  | --------------------------------------------- | ------- |  | --------------------- | ------- | - | ----------------- | - | ------ | ----- |  | - | -------- | - |  | - | ------ | -
|                                        |  | Comprehensive Income (Loss) |        |   | Common Stock |   | Additional Paid-In- Capital |  | Accumulated Other Comprehensive Income (Loss) |         |  | Unearned Compensation |         |   | Retained Earnings |   |        | Total | 
|Balance, December 31, 2003              |  |                             |        |   |              | $ | 120                         |  | $                                             | 275,070 |  | $                     | (18,300 | ) |                   | $ | (1,852 | )     |  | $ | (222,224 | ) |  | $ | 32,814 |  
|Net loss                                |  | $                           | (8,912 | ) |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   | (8,912   | ) |  |   | (8,912 | )
|Translation adjustments                 |  |                             | 764    |   |              |   |                             |  |                                               |         |  |                       | 764     |   |                   |   |        |       |  |   |          |   |  |   | 764    |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Comprehensive loss                      |  | $                           | (8,148 | ) |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Issuance of restricted stock            |  |                             |        |   |              |   |                             |  |                                               | 835     |  |                       |         |   |                   |   | (835   | )     |  |   |          |   |  |   |       |  
|Earned compensation on restricted stock |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   | 168    |       |  |   |          |   |  |   | 168    |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Balance, March 31, 2004                 |  |                             |        |   |              | $ | 120                         |  | $                                             | 275,905 |  | $                     | (17,536 | ) |                   | $ | (2,519 | )     |  | $ | (231,136 | ) |  | $ | 24,834 |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Net loss                                |  | $                           | (3,886 | ) |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   | (3,886   | ) |  |   | (3,886 | )
|Translation adjustments                 |  |                             | (632   | ) |              |   |                             |  |                                               |         |  |                       | (632    | ) |                   |   |        |       |  |   |          |   |  |   | (632   | )
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Comprehensive loss                      |  | $                           | (4,518 | ) |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Earned compensation on restricted stock |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   | 182    |       |  |   |          |   |  |   | 182    |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  
|Balance, June 30, 2004                  |  |                             |        |   |              | $ | 120                         |  | $                                             | 275,905 |  | $                     | (18,168 | ) |                   | $ | (2,337 | )     |  | $ | (235,022 | ) |  | $ | 20,498 |  
|                                        |  |                             |        |   |              |   |                             |  |                                               |         |  |                       |         |   |                   |   |        |       |  |   |          |   |  |   |        |  



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



4



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All dollar amounts in thousands unless otherwise noted)



1. Statement of Information Furnished



The accompanying unaudited interim consolidated financial statements have been prepared by Constar International Inc. (Constar or the Company) in
accordance with the Securities and Exchange Commission (SEC) regulations for interim financial reporting. In the opinion of management, these consolidated financial statements contain all adjustments of a normal and recurring nature
necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. These results have been determined on the basis of generally accepted accounting principles and practices consistently applied.



Certain information and footnote disclosures, normally included in financial
statements presented in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. Certain prior year amounts have been reclassified to conform to the current year presentation. The accompanying
consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2003.



2. Recent Accounting Pronouncements



In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46 sets forth the criteria used in determining whether an investment in a variable interest entity (VIE) should be consolidated and is based on the general premise that
companies that control another entity through interests other than voting interests should consolidate the controlled entity. FIN 46 requires the consolidation of specified VIEs created before February 1, 2003 commencing in the third quarter of
2003. For specified VIEs created after January 31, 2003, the interpretation requires immediate consolidation if circumstances warrant such consolidation. In December 2003, the FASB issued FASB Interpretation 46(R) (FIN 46(R)),
Consolidation of Variable Interest Entities. FIN 46 (R) replaces FIN 46 and clarifies the accounting for interests in VIEs. The Company analyzed certain leasing arrangements with Crown Holdings, Inc. subsidiaries and concluded that the
adoption of this standard had no impact on the Companys results of operations or financial position.



In December 2003, the FASB issued a revised SFAS No. 132 (FAS 132), Employers Disclosures about Pensions and Other Postretirement Benefits. The amended FAS 132 revises employers
disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by SFAS No.87, Employers Accounting for Pensions, and SFAS No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions. Adoption of this standard had no impact on the Companys results of operations or financial position. See Note 9 of the accompanying Notes to Consolidated
Financial Statements.



In May 2004, the FASB issued FASB Staff Position
(FSP) No. FAS 106-2 Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. (FAS 106-2), FAS 106-2 provides guidance on accounting for the
effects of the new Medicare prescription drug legislation by employers whose prescription drug benefits are actuarially equivalent to the drug benefit under Medicare Part D. It also contains basic guidance on related income tax accounting, and
complex rules for transition that permit various alternative prospective and retroactive approaches. For all public and non public companies that sponsor one or more plans with more than 100 participants, FAS 106-2 is effective as of the first
interim or annual period beginning after June 15, 2004 ( third quarter 2004 for the Company), although earlier adoption is encouraged. The Company is currently assessing the impact of this Statement.



3. Inventories



|                           |  |               |        |                   |   |       
|-------------------------- |  | ------------- | ------ | ----------------- | - | ------
|                           |  | June 30, 2004 |        | December 31, 2003
|Finished goods             |  | $             | 46,854 |                   | $ | 48,346
|Raw materials and supplies |  |               | 37,795 |                   |   | 34,022
|                           |  |               |        |                   |   |       
|Total                      |  | $             | 84,649 |                   | $ | 82,368
|                           |  |               |        |                   |   |       



The inventory balance has been reduced
by reserves for obsolete and slow-moving inventories of $1,223 and $918 as of June 30, 2004 and December 31, 2003, respectively.



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4. Goodwill



Effective January 1, 2002, Constar adopted the provisions of SFAS No. 142 (FAS 142), Goodwill and Other Intangible
Assets, which requires companies to cease amortizing goodwill and certain intangible assets deemed to have an indefinite useful life. Instead, FAS 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be
reviewed for impairment upon adoption of FAS 142 and annually thereafter and in other circumstances. Under FAS 142, goodwill is deemed to be potentially impaired if the net book value of a reporting unit exceeds its estimated fair value.



There was no change in the carrying amount of goodwill for the six months ended June 30,
2004.



5. Debt



A summary of short-term and long-term debt follows:



|                          |  |               |         |   |                   |   |         |  
|------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                          |  | June 30, 2004 |         |   | December 31, 2003 |  
|SHORT-TERM                |  |               |         |   |                   |   |         |  
|Term B Loan               |  | $             | 1,248   |   |                   | $ | 1,248   |  
|                          |  |               |         |   |                   |   |         |  
|Total                     |  | $             | 1,248   |   |                   | $ | 1,248   |  
|                          |  |               |         |   |                   |   |         |  
|LONG-TERM                 |  |               |         |   |                   |   |         |  
|Revolver                  |  |               | 36,500  |   |                   |   | 25,000  |  
|Term B Loan               |  |               | 121,316 |   |                   |   | 121,940 |  
|Senior Subordinated Notes |  |               | 175,000 |   |                   |   | 175,000 |  
|Unamortized debt discount |  |               | (2,187  | ) |                   |   | (2,317  | )
|Second Lien Term Loan     |  |               | 75,000  |   |                   |   | 75,000  |  
|Other                     |  |               | 1,510   |   |                   |   | 1,547   |  
|                          |  |               |         |   |                   |   |         |  
|Total                     |  | $             | 407,139 |   |                   | $ | 396,170 |  
|                          |  |               |         |   |                   |   |         |  



Senior Secured Credit
Agreement. Concurrent with the initial public offering of common stock and the Senior Subordinated Notes, the Company entered into a Senior Secured Credit Agreement. The Senior Secured Credit Agreement consisted of a $150 million seven-year
term loan (Term B Loan) and a $100 million five-year revolving loan (Revolver Loan) facility. The Term B Loan bears interest at a rate of LIBOR plus 450 basis points with a 200 basis point LIBOR minimum. The Revolver Loan
carries interest of LIBOR plus 375 basis points with a 200 basis point LIBOR minimum. On December 23, 2003, in consideration for the payment of fees and expenses of approximately $5.0 million, the Company obtained a $75 million Second Lien Term Loan
due December 23, 2010 (Second Lien Loan). The Second Lien Loan bears interest at a rate of LIBOR plus 800 basis points. The net proceeds from the Second Lien Loan were used to prepay $25 million of the Term B Loan with the remainder used
to paydown the Revolver Loan. The paydown of the Term B Loan resulted in a permanent $25 million reduction in the amounts available under that facility. In addition, the total amount available under the Revolver Loan was reduced from $100 million to
$90 million. Beginning October 1, 2004, the Senior Secured Credit Agreement requires that the Company maintain at least $30 million in borrowing availability under the Revolver Loan for at least 60 consecutive days between each October 1 and January
31 of the subsequent year.



At June 30, 2004, there was $122.6 million
outstanding on the Term B Loan, $75.0 million outstanding on the Second Lien Loan, $36.5 million outstanding on the Revolver Loan and $4.4 million outstanding under letters of credit. In addition, the Company had $13.9 million of cash and cash
equivalents on hand as well as $49.1 million of availability under the Revolver Loan.



The Term B Loan requires annual principal payments of approximately $1.3 million until final payment is due in November 2009. No other principal repayments are scheduled for the other loans until their respective maturity dates.



The Senior Secured Credit Agreement contains customary affirmative and negative covenants,
including certain covenants requiring the Company to maintain Senior Leverage, Total Leverage, Interest Expense Coverage and Fixed Charge Leverage ratios. In addition, the Companys Senior Secured Credit Agreement limits the Companys
ability to make capital expenditures. In order to satisfy significant business awards, including those relating to conversions from other forms of packaging, the Company may need to purchase additional equipment. To the extent such purchases would
cause the Company to exceed the capital expenditure restrictions of the Senior Secured Credit Agreement, the Company would have to obtain the lenders consent before making such purchases. There can be no assurances that the lenders would grant
any such consent.



In connection with obtaining the Second Lien Loan, the
following financial covenants and financial covenant levels were amended from September 30, 2003 through June 30, 2005: (i) Minimum EBITDA; (ii) Maximum Senior Leverage; (iii) Minimum Interest Coverage; and (iv) Maximum Capital Expenditures. The
Total Leverage and Fixed Charge Leverage ratios were eliminated until September 30, 2005. After June 30, 2005, Constars financial covenant levels will be the same as



6



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##### Table of Contents

originally set forth in the Senior Secured Credit Agreement. These covenants for the period after June 30, 2005, were
based on the Companys forecasted profitability and business plan as of the initial public offering in November 2002. In response to the increased competition in the Companys markets and decreased profitability, the Company has begun and
continues various actions intended to improve its liquidity and profitability. These actions include, among other things, reducing employment levels and operating costs, closing certain production facilities, decreasing inventory levels and reducing
warehousing and distribution expenses. The Company believes it will be able to maintain compliance with the covenants that exist through mid -2005. The Company anticipates that it will not be in compliance with the covenants that exist in the Senior
Secured Agreement for the periods after June 30, 2005. Therefore, the Company anticipates that it will be required to obtain future amendments from its current lenders or it will have to seek alternative financing from new lenders or through asset
sales. There can be no assurance that the Company will be able to maintain compliance with these amended covenants through June 30, 2005 nor any assurance that the Company will be successful in obtaining future amendments or in any future efforts to
find alternative financing. Should the Company be unable to secure a long-term solution to its expected noncompliance with its covenants and the Company defaults under its Senior Secured Credit Agreement, then the lenders would have the right to
demand repayment of their loans at that time. If the lenders make such a demand, it would cause a default under the terms of the Companys Senior Subordinated Notes, which would give the trustee or the holders of 25% in aggregate principal
amount of those notes the right to accelerate those obligations. The lenders may also require the Company to cash collateralize outstanding letters of credit under the Senior Secured Credit Agreement.



The Company was in compliance with all covenants at June 30, 2004.



Senior Subordinated Notes. On November 20, 2002, the Company completed its
public offering of $175 million aggregate principal amount of 11% Senior Subordinated Notes due 2012 (Notes). The Notes were issued at 98.51% of face value and will mature on December 1, 2012. Interest on the Notes is payable
semi-annually on each December 1 and June 1.



Optional
Redemption. The Company may not redeem the Notes prior to December 1, 2007. The Company may redeem the Notes, at its option, in whole at any time or in part from time to time, on and after December 1, 2007, at the following redemption
prices, expressed as percentages of the principal amount thereof, if redeemed during the twelve-month period commencing on December 1 of any year set forth below:



|              |  |            |  
|------------- |  | ---------- | -
|Year          |  | Percentage |  
|2007          |  | 105.5      | %
|2008          |  | 103.7      | %
|2009          |  | 101.8      | %
|2010 and 2011 |  | 100.0      | %



Optional Redemption upon Equity
Offerings. At any time, or from time to time, on or prior to December 1, 2005, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings to redeem in the aggregate up to 35% of the aggregate principal amount
of the Notes issued up to that time at a redemption price equal to 111% of the principal amount thereof; provided, that: (1) after giving effect to any such redemption at least 65% of the aggregate principal amount of the Notes issued up to that
time remains outstanding; and (2) the Company shall make such redemption not more than 90 days after the consummation of such Equity Offering.



Guarantees.All of the existing and future U.S. subsidiaries of the Company that guarantee the Senior Secured Credit Agreement will guarantee the payment of
the principal, premium and interest on the Notes on an unsecured senior subordinated basis.



6. Restructuring and Asset Impairments



In September 2003, the Company announced its plan to implement a cost reduction initiative under which it closed two facilities in the North American region. Under this plan, approximately 130 positions were eliminated at the affected
facilities and certain production assets at these locations were to be relocated to other manufacturing facilities. As a result of this initiative, the Company recognized restructuring provisions of $4.9 million and non-cash asset impairment charges
of $6.7 million during 2003. The restructuring provisions consisted of approximately $1.3 million for severance and termination benefits for both facilities and approximately $3.6 million for contract and lease termination costs.



In 2002, the U.S. operations recorded a charge through selling and administrative expenses of
$941. This was related to the excess of expected lease costs over the related sublease income for certain operations closed in 1997.



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##### Table of Contents

A reconciliation of the restructuring liability as of June 30, 2004 is as follows;



|                             |  |                                      |        |   |                                    |      |   |       |   |        |  
|---------------------------- |  | ------------------------------------ | ------ | - | ---------------------------------- | ---- | - | ----- | - | ------ | -
|                             |  | Contract and Lease Termination Costs |        |   | Severance and Termination Benefits |      |   | Total |  
|Balance at December 31, 2003 |  | $                                    | 3,797  |   |                                    | 350  |   |       | $ | 4,147  |  
|Payments                     |  |                                      | (1,372 | ) |                                    | (350 | ) |       |   | (1,722 | )
|                             |  |                                      |        |   |                                    |      |   |       |   |        |  
|Balance at June 30, 2004     |  | $                                    | 2,425  |   |                                    |     |   |       | $ | 2,425  |  
|                             |  |                                      |        |   |                                    |      |   |       |   |        |  



The balance in the restructuring
reserve at June 30, 2004 represents contract and lease termination costs of which $2,303 pertains to the 2003 plan and $122 pertains to a prior year plan. The Company expects cash payments relating to these plans to be made over the next three
years.



7.Stock-Based Compensation



The Company accounts for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market
price of the Companys stock at the date of the grant over the amount an employee must pay to acquire the stock.



The Company did not record compensation expense related to its stock option plan for the period ended June 30, 2004 because grants are at 100% of the fair market value on
the grant date. If the fair value based method prescribed in SFAS 123  Accounting for Stock-Based Compensation, had been applied to stock option grants at the grant date, the Companys net loss and basic and diluted net loss per
share would have changed as summarized below:



|                                                                                                                                            |  |                    |        |   |                  |   |          |              |  |   |               |   |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | -------- | ------------ |  | - | ------------- | - |  | - | -------- | -
|                                                                                                                                            |  | Three Months Ended |        |   | Six Months Ended |  
|                                                                                                                                            |  | June 30, 2004      |        |   | June 30,2003     |   |          | June 30,2004 |  |   | June 30, 2003 |  
|Net loss                                                                                                                                    |  |                    |        |   |                  |   |          |              |  |   |               |   |  |   |          |  
|As reported                                                                                                                                 |  | $                  | (3,886 | ) |                  | $ | (186,978 | )            |  | $ | (12,798       | ) |  | $ | (188,809 | )
|Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects                                    |  |                    | 119    |   |                  |   | 10       |              |  |   | 228           |   |  |   | 20       |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                    | (163   | ) |                  |   | (54      | )            |  |   | (317          | ) |  |   | (109     | )
|                                                                                                                                            |  |                    |        |   |                  |   |          |              |  |   |               |   |  |   |          |  
|Pro forma                                                                                                                                   |  | $                  | (3,930 | ) |                  | $ | (187,022 | )            |  | $ | (12,887       | ) |  | $ | (188,898 | )
|                                                                                                                                            |  |                    |        |   |                  |   |          |              |  |   |               |   |  |   |          |  
|Basic and diluted loss per share                                                                                                            |  |                    |        |   |                  |   |          |              |  |   |               |   |  |   |          |  
|As reported                                                                                                                                 |  | $                  | (0.32  | ) |                  | $ | (15.58   | )            |  | $ | (1.07         | ) |  | $ | (15.73   | )
|Pro forma                                                                                                                                   |  | $                  | (0.33  | ) |                  | $ | (15.59   | )            |  | $ | (1.07         | ) |  | $ | (15.74   | )



During 2003, the Company granted
360,000 shares of restricted stock to certain officers and 7,000 shares of restricted stock to the non-employee directors of the Company, of which 1,500 shares were forfeited. One third of the shares granted to non-employee directors will vest on
each of the first three anniversaries of the grant date. With respect to the grants made to officers, 20% of the shares will vest on each anniversary of the grant date, provided that no more than 25% of the shares will vest until Constar stock
achieves a $7.00 price target and no more than 55% of the shares will vest until Constar stock achieves a $12.00 price target. In addition, each grant may vest more rapidly than at the rate of 20% per year if the Companys stock reaches certain
price targets. If Constar stock achieves prices targets of $7.00, $12.00, and $15.00, then 25%, 55%, and 100% of the shares, respectively, would immediately vest. Seven years after the grant date or upon an earlier change of control of the Company,
any unvested shares will vest.



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##### Table of Contents

During February 2004, an additional 118,000 shares of restricted stock were issued to employees. No executive officers of
the Company received shares in connection with this grant. One-third of the shares vest on each of the first three anniversaries of the grant date.



In April 2004, the Company granted 15,000 shares of restricted stock to one officer and in August 2004, the Company granted an additional 108,500 shares of restricted
stock to certain other officers. These shares vest in the same manner described above with respect to the 2003 grants to officers, except that the price targets are set at $6.00, $9.00 and $12.00 instead of $7.00, $12.00 and $15.00.



During the six months ended June 30, 2004, the Company recorded an expense of approximately
$0.4 million related to the amortization of the vesting period of these grants.



8. Earnings per Share



The following
table summarizes the basic and diluted earnings per share (EPS) computations for the periods ended June 30, 2004 and 2003:



|                                     |  |                    |        |   |                  |   |          |              |  |   |              |   |  |   |          |  
|------------------------------------ |  | ------------------ | ------ | - | ---------------- | - | -------- | ------------ |  | - | ------------ | - |  | - | -------- | -
|                                     |  | Three Months Ended |        |   | Six Months Ended |  
|                                     |  | June 30, 2004      |        |   | June 30,2003     |   |          | June 30,2004 |  |   | June 30,2003 |  
|Net loss                             |  | $                  | (3,886 | ) |                  | $ | (186,978 | )            |  | $ | (12,798      | ) |  | $ | (188,809 | )
|Weighted average shares outstanding: |  |                    |        |   |                  |   |          |              |  |   |              |   |  |   |          |  
|Basic and diluted                    |  |                    | 12,000 |   |                  |   | 12,000   |              |  |   | 12,000       |   |  |   | 12,000   |  
|Basic and diluted loss per share:    |  |                    |        |   |                  |   |          |              |  |   |              |   |  |   |          |  
|Net loss                             |  | $                  | (0.32  | ) |                  | $ | (15.58   | )            |  | $ | (1.07        | ) |  | $ | (15.73   | )



Basic EPS excludes all potentially
dilutive securities and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the assumed exercise and conversion of potentially dilutive
securities, including stock options in periods when they are not anti-dilutive; otherwise, it is the same as basic EPS.



Basic and diluted EPS are the same for the three and six months ended June 30, 2004 and June 30, 2003. Common shares contingently issuable upon the exercise of
outstanding stock options amounted to 214,665 and restricted shares outstanding amounted to 498,500 for the six months ended June 30, 2004. Since the exercise prices of the then outstanding options were above the average market price for the related
period, these shares were excluded from the computation of earnings per share because the impact of their inclusion would be anti-dilutive.



9. Pension and Postretirement Benefits



The U.S. salaried and hourly personnel participate in a defined benefit pension plan. The benefits under this plan for salaried employees are based primarily on years of
service and remuneration near retirement. The benefits for hourly employees are based primarily on years of service and a fixed monthly multiplier. Plan assets consist principally of common stocks and fixed income securities.



In the U.S., the Company sponsors unfunded plans to provide health care and life insurance
benefits to pensioners and survivors. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverage. Life insurance benefits are generally provided by insurance contracts. The Company reserves the
right, subject to existing agreements, to change, modify or discontinue the plans.



Employees of the U.K. operation may participate in a contributory pension plan with a benefit based on years of service and final salary. Participants contribute 5% of their salary each year and the U.K. operation contributes the balance,
which is currently approximately 8% of salary. The assets of the plan are held in a trust and are primarily invested in equity securities.



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The components of the pension and postretirement benefit expense/(income) for the Companys plans were as follows:



|                                         |  |                                  |        |   |                                  |   |                                |         |  |                                |                 |   |         |   |     |                 |   |        |         |  |   |                 |   |  |   |        |   |  |   |    
|---------------------------------------- |  | -------------------------------- | ------ | - | -------------------------------- | - | ------------------------------ | ------- |  | ------------------------------ | --------------- | - | ------- | - | --- | --------------- | - | ------ | ------- |  | - | --------------- | - |  | - | ------ | - |  | - | ---
|                                         |  | Three Months Ended June 30, 2004 |        |   | Three Months Ended June 30, 2003 |   | Six Months Ended June 30, 2004 |         |  | Six Months Ended June 30, 2003
|                                         |  | Pension                          |        |   | Post-retirement                  |   |                                | Pension |  |                                | Post-retirement |   | Pension |   |     | Post-retirement |   |        | Pension |  |   | Post-retirement
|Service cost                             |  | $                                | 506    |   |                                  | $ | 11                             |         |  | $                              | 516             |   |         | $ | 11  |                 | $ | 1,012  |         |  | $ | 22              |   |  | $ | 1,032  |   |  | $ | 22 
|Interest cost                            |  |                                  | 1,033  |   |                                  |   | 113                            |         |  |                                | 993             |   |         |   | 172 |                 |   | 2,066  |         |  |   | 226             |   |  |   | 1,986  |   |  |   | 314
|Expected return on plan assets           |  |                                  | (1,176 | ) |                                  |   |                                |         |  |                                | (1,116          | ) |         |   |     |                 |   | (2,352 | )       |  |   |                 |   |  |   | (2,232 | ) |  |   |    
|Amortization of net loss                 |  |                                  | 626    |   |                                  |   | 196                            |         |  |                                | 512             |   |         |   | 190 |                 |   | 1,252  |         |  |   | 392             |   |  |   | 82     |   |  |   | 190
|Amortization of prior service cost       |  |                                  | 38     |   |                                  |   | (48                            | )       |  |                                | 41              |   |         |   |     |                 |   | 76     |         |  |   | (96             | ) |  |   | 900    |   |  |   |    
|                                         |  |                                  |        |   |                                  |   |                                |         |  |                                |                 |   |         |   |     |                 |   |        |         |  |   |                 |   |  |   |        |   |  |   |    
|Total pension and postretirement expense |  | $                                | 1,027  |   |                                  | $ | 272                            |         |  | $                              | 946             |   |         | $ | 373 |                 | $ | 2,054  |         |  | $ | 544             |   |  | $ | 1,768  |   |  | $ | 526
|                                         |  |                                  |        |   |                                  |   |                                |         |  |                                |                 |   |         |   |     |                 |   |        |         |  |   |                 |   |  |   |        |   |  |   |    



Constar estimates that its expected
contribution to the U.S plan for the 2004 fiscal year is $1.0 million of which $0.4 million was paid during the six months ended June 30, 2004.



10. Segment Information



Constar has only one reportable segment. The operations within Europe and the U.S. are similar in the nature of their products, production processes, the types or classes
of customers for products and the methods used to distribute products.



Net
customer sales for the countries in which Constar operated were:



|               |  |                            |         |                          |   |         |  |      |         |  |   |        
|-------------- |  | -------------------------- | ------- | ------------------------ | - | ------- |  | ---- | ------- |  | - | -------
|               |  | Three Months Ended June 30 |         | Six Months Ended June 30
|               |  | 2004                       |         | 2003                     |   | 2004    |  | 2003
|United States  |  | $                          | 162,221 |                          | $ | 149,445 |  | $    | 302,992 |  | $ | 279,410
|United Kingdom |  |                            | 34,677  |                          |   | 27,486  |  |      | 60,445  |  |   | 46,579 
|Other          |  |                            | 27,876  |                          |   | 25,720  |  |      | 52,082  |  |   | 45,095 
|               |  |                            |         |                          |   |         |  |      |         |  |   |        
|               |  | $                          | 224,774 |                          | $ | 202,651 |  | $    | 415,519 |  | $ | 371,084
|               |  |                            |         |                          |   |         |  |      |         |  |   |        



11.Commitments and
Contingencies



Prior to Constars initial public offering, Crown Cork
& Seal Technologies Corporation (CCK Technologies), held the patents relating to Oxbar and subsequently contributed these patents to Constar as part of the restructuring attendant to the Companys initial public offering. CCK
Technologies filed a lawsuit seeking unspecified monetary damages on April 8, 1999 in the U.S. District Court for the District of Delaware against Continental PET Technologies, Inc, alleging that Continental PET, a subsidiary of Owens-Illinois,
Inc., was infringing one of its U.S. Oxbar-related patents. The complaint alleges that the materials that Continental PET uses and has used since at least 1998 to achieve oxygen-scavenging properties for certain containers it sells infringe one of
CCK Technologies Oxbar patents. Chevron intervened in the action on May 31, 2000 to assert cross-claims seeking a declaratory judgment that its rights under a 1993 license from CCK Technologies predecessor include exclusive rights to the
particular application of Oxbar technology in multi-layer PET containers used by Continental PET, as well as certain other rights. On November 25, 2002, the U.S. District Court for the District of Delaware ruled in favor of CCK Technologies,
confirming that the license granted to Chevron did not include the rights that CCK Technologies claims are being infringed by Continental PET and finding instead that Continental PETs bottles are within the rights retained by CCK Technologies.
This decision allowed Constar to pursue the lawsuit that Crown initiated against Continental PET. On January 22, 2003, the Company was substituted for CCK Technologies in the lawsuit. In an April 2, 2003 ruling, the District Court entered judgment
in accordance with its November 25, 2002 opinion in favor of the Company and denied Chevron permission to pursue an immediate appeal from the judgment. Chevron must now wait to appeal until after the underlying infringement case by Constar against
Continental PET has been resolved. Discovery has concluded, except for certain depositions that are the subject of pending motions and several expert depositions yet to be scheduled. The Company is engaged in settlement discussions regarding these
actions. There can be no assurance that settlement will be completed on terms favorable to the Company or at all.



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Constar is also one of 42 defendants in a patent infringement action seeking unspecified monetary damages brought on
August 3, 1999 by North American Container, Inc. in the U.S. District Court for the Northern District of Texas based on its patent for a certain plastic container base design. The other defendants include many of the principal plastic container
manufacturers, various food and beverage companies, and three grocery store chains. On November 28, 2003, the Court granted summary judgment in favor of the defendants. The parties have dismissed without prejudice certain remaining unadjudicated
claims in order to position the case for appeal to the Federal Circuit Court of Appeals by the plaintiff. On February 24, 2004, judgment was entered in accordance with the November 28, 2003 ruling. Notices of appeal and cross-appeal have been filed,
and the plaintiff/appellants opening brief was filed in the Federal Circuit on June 28, 2004. Briefing is scheduled to be completed in the fall of 2004.



The Company and certain of its present directors, along with Crown Holdings, Inc., as well as various underwriters, have been named as defendants in a consolidated
putative securities class action lawsuit filed in the United Sates District Court for the Eastern District of Pennsylvania, In re Constar International, Inc. Securities Litigation (Master File No. 03-CV-05020). This action consolidates previous
lawsuits, namely Parkside Capital LLC v. Constar International Inc ̧et al.(Civil Action No. 03-5020), filed on September 5, 2003 and Walter Frejek v. Constar International Inc. et al. (Civil Action No.03-5166), filed on September 15, 2003. The
consolidated and amended complaint, filed June 17, 2004, generally alleges that the registration statement and prospectus for the Companys initial public offering of its common stock on November 14, 2002 contained material misrepresentations
and/or omissions. Plaintiffs claim that defendants in these lawsuits violated Sections 11 and 15 of the Securities Act of 1933. Plaintiffs seek class action certification and an award of damages and litigation costs and expenses. Under the
Companys charter documents, an agreement with Crown and an underwriting agreement with Crown and the underwriters, Constar has incurred certain indemnification and contribution obligations to the other defendants with respect to this lawsuit.
The Company believes the claims in the action are without merit and intends to defend against them vigorously.



The Company is a defendant in a lawsuit filed in the Ninth Judicial Circuit of Florida on January 9, 2001 by former and current employees of its Orlando, Florida facility seeking unspecified monetary damages. The
lawsuit alleges bodily injury as a result of exposure to polyvinyl chloride (PVC) during the manufacture of plastic bottles during the 1970s, 1980s and into the mid-1990s. The PVC manufacturers and manufacturers of the
manufacturing equipment are also defendants. The litigation is currently in the discovery stage and the Company believes the claims are without merit and is aggressively defending against the claims. A trial as to only one of the plaintiffs is
currently docketed for October 2004.



The Company is subject to other lawsuits
and claims in the normal course of business and related to businesses operated by predecessor corporations. Management believes that the ultimate liabilities resulting from these lawsuits and claims will not materially impact its results of
operations or financial position.



Constar has received requests for
information or notifications of potential responsibility from the Environmental Protection Agency, or EPA, and certain state environmental agencies for certain off-site locations. Constar has not incurred any significant costs relating to these
matters. Constar has been identified by the Wisconsin Department of Natural Resources as a potentially responsible party at three related sites in Wisconsin and agreed to share in the remediation costs with one other party. Remediation is ongoing at
two of these sites and remediation has been completed at the third site. Constar has also been identified as a potentially responsible party at the Bush Valley Landfill site in Abingdon, Maryland and entered into a settlement agreement with the EPA
in July 1997. The activities required under that agreement are ongoing. Constars share of the remediation costs has been minimal thus far and no accrual has been recorded for future remediation at these sites.



The Didam, Netherlands facility has been identified as having impacts to soil and groundwater
from volatile organic compounds at concentrations that exceed those permissible under Dutch law. The main body of the groundwater plume is beneath the Didam facility but it also appears to extend from an upgradient neighboring property. Constar has
recorded an accrual of $0.2 million for costs associated with completing the required investigations and certain other activities that may be required at the Didam facility. As more information becomes available relating to what additional actions
may be required at the site, including potential remediation activities, this accrual may be adjusted, as necessary, to reflect the new information. There are no other accruals for environmental matters.



Environmental exposures are difficult to assess for numerous reasons, including the
identification of new sites, advances in technology, changes in environmental laws and regulations and their application, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial
capability of other potentially responsible parties and the time periods over which site remediation occurs. It is possible that some of these matters, the outcomes of which are subject to various uncertainties, may be decided in a manner
unfavorable to Constar. However, management does not believe that any unfavorable decision will have a material adverse effect on our financial position, cash flows or results of operations.



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As of June 30, 2004 there were seven letters of credit outstanding under the Senior Secured Credit Agreement with a total
outstanding balance of approximately $4.4 million. These letters of credit are being used as guarantees of insurance obligations, lease security guarantees, a payment obligation to a vendor and loan obligations of a foreign affiliate.



12. Income Taxes



During the first six months of 2004, the Company recorded a valuation allowance of $4.5
million to cover the net operating losses being generated during fiscal 2004. The Company does not believe it is more likely than not that the deferred tax assets to the extent the assets exceed deferred tax liabilities will be realized.



13. Condensed Consolidating Financial Information



In connection with the initial public offering of Constars stock, Constar issued
Senior Subordinated Notes that are guaranteed on an unsecured basis by each of Constars domestic subsidiaries. The guarantor subsidiaries are 100% owned and the guarantees are made on a joint and several basis and are full and unconditional.
The following condensed consolidating financial statements are required in accordance with Regulation S-X Rule 3-10:



| |  | balance sheets as of June 30, 2004 and December 31, 2003.
| | - | ---------------------------------------------------------



| |  | statements of operations for the three months and six months ended June 30, 2004 and June 30, 2003; and
| | - | -------------------------------------------------------------------------------------------------------



| |  | statements of cash flows for the six months ended June 30, 2004 and June 30, 2003.
| | - | ----------------------------------------------------------------------------------



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF June 30, 2004

(in thousands)



|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|------------------------------------------ |  | ------ | ------- | --------- | - | -------------- |  | ------------ | ------- |  | ------------- | -------- | - |  | - | -------
|                                           |  | Parent |         | Guarantor |   | Non- Guarantor |  | Eliminations |         |  | Total Company
|Assets                                     |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Current assets                             |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Cash and cash equivalents                  |  | $      |         |           | $ | 1,801          |  | $            | 12,109  |  | $             |          |   |  | $ | 13,910 
|Intercompany receivable                    |  |        | 3,126   |           |   | 17,274         |  |              |         |  |               | (20,400  | ) |  |   |        
|Accounts receivable, net                   |  |        |         |           |   | 53,241         |  |              | 44,276  |  |               |          |   |  |   | 97,517 
|Inventories, net                           |  |        |         |           |   | 60,936         |  |              | 23,713  |  |               |          |   |  |   | 84,649 
|Prepaid expenses and other current assets  |  |        |         |           |   | 10,845         |  |              | 1,433   |  |               |          |   |  |   | 12,278 
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Total current assets                       |  |        | 3,126   |           |   | 144,097        |  |              | 81,531  |  |               | (20,400  | ) |  |   | 208,354
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Property Plant and Equipment, net          |  |        |         |           |   | 162,428        |  |              | 48,792  |  |               |          |   |  |   | 211,220
|Goodwill                                   |  |        |         |           |   | 148,813        |  |              |         |  |               |          |   |  |   | 148,813
|Investments                                |  |        | 413,735 |           |   | 53,143         |  |              |         |  |               | (466,878 | ) |  |   |        
|Other Assets                               |  |        | 12,206  |           |   | 11,731         |  |              | 71      |  |               |          |   |  |   | 24,008 
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Total assets                               |  | $      | 429,067 |           | $ | 520,212        |  | $            | 130,394 |  | $             | (487,278 | ) |  | $ | 592,395
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Liabilities and Stockholders Equity       |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Current Liabilities                        |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Short-term debt                            |  | $      | 1,248   |           | $ |                |  | $            |         |  | $             |          |   |  | $ | 1,248  
|Intercompany payable                       |  |        |         |           |   | 3,126          |  |              | 17,274  |  |               | (20,400  | ) |  |   |        
|Accounts payable and accrued liabilities   |  |        | 1,692   |           |   | 80,967         |  |              | 50,306  |  |               |          |   |  |   | 132,965
|Income taxes payable                       |  |        |         |           |   | 829            |  |              | 1,097   |  |               |          |   |  |   | 1,926  
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Total current liabilities                  |  |        | 2,940   |           |   | 84,922         |  |              | 68,677  |  |               | (20,400  | ) |  |   | 136,139
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Long-term debt, net of current portion     |  |        | 405,629 |           |   |                |  |              | 1,510   |  |               |          |   |  |   | 407,139
|Pension and post-retirement liabilities    |  |        |         |           |   | 10,066         |  |              | 121     |  |               |          |   |  |   | 10,187 
|Deferred income taxes                      |  |        |         |           |   | 6,755          |  |              | 4,274   |  |               |          |   |  |   | 11,029 
|Other liabilities                          |  |        |         |           |   | 4,734          |  |              | 403     |  |               |          |   |  |   | 5,137  
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Total liabilities                          |  |        | 408,569 |           |   | 106,477        |  |              | 74,985  |  |               | (20,400  | ) |  |   | 569,631
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Minority interest                          |  |        |         |           |   |                |  |              | 2,266   |  |               |          |   |  |   | 2,266  
|Stockholders equity                       |  |        | 20,498  |           |   | 413,735        |  |              | 53,143  |  |               | (466,878 | ) |  |   | 20,498 
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        
|Total liabilities and stockholders equity |  | $      | 429,067 |           | $ | 520,212        |  | $            | 130,394 |  | $             | (487,278 | ) |  | $ | 592,395
|                                           |  |        |         |           |   |                |  |              |         |  |               |          |   |  |   |        



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CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2003

(in thousands)



|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|------------------------------------------ |  | ------ | ------- | - | --------- | - | -------------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | -------
|                                           |  | Parent |         |   | Guarantor |   | Non- Guarantor |  | Eliminations |         |  | TotalCompany
|Assets                                     |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Current Assets                             |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Cash and cash equivalents                  |  | $      |         |   |           | $ | 6,564          |  | $            | 9,914   |  | $            |          |   |  | $ | 16,478 
|Intercompany receivable                    |  |        | 10,606  |   |           |   | 14,127         |  |              |         |  |              | (24,733  | ) |  |   |        
|Accounts receivable, net                   |  |        |         |   |           |   | 41,147         |  |              | 25,832  |  |              |          |   |  |   | 66,979 
|Inventories, net                           |  |        |         |   |           |   | 59,143         |  |              | 23,225  |  |              |          |   |  |   | 82,368 
|Prepaid expenses and other current assets  |  |        |         |   |           |   | 12,841         |  |              | 801     |  |              |          |   |  |   | 13,642 
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Total current assets                       |  |        | 10,606  |   |           |   | 133,822        |  |              | 59,772  |  |              | (24,733  | ) |  |   | 179,467
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Property plant and equipment, net          |  |        |         |   |           |   | 174,093        |  |              | 49,832  |  |              |          |   |  |   | 223,925
|Goodwill                                   |  |        |         |   |           |   | 148,813        |  |              |         |  |              |          |   |  |   | 148,813
|Investments                                |  |        | 406,271 |   |           |   | 52,664         |  |              |         |  |              | (458,935 | ) |  |   |        
|Other assets                               |  |        | 12,881  |   |           |   | 12,280         |  |              | 975     |  |              |          |   |  |   | 26,136 
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Total assets                               |  | $      | 429,758 |   |           | $ | 521,672        |  | $            | 110,579 |  | $            | (483,668 | ) |  | $ | 578,341
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Liabilities and Stockholders Equity        |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Current liabilities                        |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Short-term debt                            |  | $      | 1,248   |   |           | $ |                |  | $            |         |  | $            |          |   |  | $ | 1,248  
|Intercompany payable                       |  |        |         |   |           |   | 10,606         |  |              | 14,127  |  |              | (24,733  | ) |  |   |        
|Accounts payable and accrued liabilities   |  |        | 2,073   |   |           |   | 83,662         |  |              | 33,165  |  |              |          |   |  |   | 118,900
|Income taxes payable                       |  |        | (1,000  | ) |           |   | 1,823          |  |              | 1,323   |  |              |          |   |  |   | 2,146  
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Total current liabilities                  |  |        | 2,321   |   |           |   | 96,091         |  |              | 48,615  |  |              | (24,733  | ) |  |   | 122,294
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Long-term debt, net of current portion     |  |        | 394,623 |   |           |   |                |  |              | 1,547   |  |              |          |   |  |   | 396,170
|Pension and post-retirement liabilities    |  |        |         |   |           |   | 8,267          |  |              |         |  |              |          |   |  |   | 8,267  
|Deferred income taxes                      |  |        |         |   |           |   | 6,755          |  |              | 4,189   |  |              |          |   |  |   | 10,944 
|Other liabilities                          |  |        |         |   |           |   | 4,288          |  |              | 1,279   |  |              |          |   |  |   | 5,567  
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Total liabilities                          |  |        | 396,944 |   |           |   | 115,401        |  |              | 55,630  |  |              | (24,733  | ) |  |   | 543,242
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Minority interest                          |  |        |         |   |           |   |                |  |              | 2,285   |  |              |          |   |  |   | 2,285  
|Stockholders equity                       |  |        | 32,814  |   |           |   | 406,271        |  |              | 52,664  |  |              | (458,935 | ) |  |   | 32,814 
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        
|Total liabilities and stockholders equity |  | $      | 429,758 |   |           | $ | 521,672        |  | $            | 110,579 |  | $            | (483,668 | ) |  | $ | 578,341
|                                           |  |        |         |   |           |   |                |  |              |         |  |              |          |   |  |   |        



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CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2004

(in thousands)



|                                              |  |        |        |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|--------------------------------------------- |  | ------ | ------ | - | --------- | - | ------- | -------------- |  | - | ------------ | - |  | ------------- | ------ | - |  | - | ------- | -
|                                              |  | Parent |        |   | Guarantor |   |         | Non- Guarantor |  |   | Eliminations |   |  | Total Company |       
|Net sales                                     |  | $      |        |   |           | $ | 163,532 |                |  | $ | 62,552       |   |  | $             |        |   |  | $ | 226,084 |  
|Cost of products sold, excluding depreciation |  |        |        |   |           |   | 141,605 |                |  |   | 57,405       |   |  |               |        |   |  |   | 199,010 |  
|Depreciation                                  |  |        |        |   |           |   | 10,327  |                |  |   | 2,852        |   |  |               |        |   |  |   | 13,179  |  
|                                              |  |        |        |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Gross profit                                  |  |        |        |   |           |   | 11,600  |                |  |   | 2,295        |   |  |               |        |   |  |   | 13,895  |  
|Selling and administrative expenses           |  |        |        |   |           |   | 5,225   |                |  |   | 755          |   |  |               |        |   |  |   | 5,980   |  
|Research and technology expenses              |  |        |        |   |           |   | 948     |                |  |   | 195          |   |  |               |        |   |  |   | 1,143   |  
|Interest expense                              |  |        | 9,782  |   |           |   |         |                |  |   | 206          |   |  |               |        |   |  |   | 9,988   |  
|Foreign exchange adjustments                  |  |        |        |   |           |   | (18     | )              |  |   | 379          |   |  |               |        |   |  |   | 361     |  
|Other expenses, net                           |  |        |        |   |           |   | (4      | )              |  |   | (237         | ) |  |               |        |   |  |   | (241    | )
|                                              |  |        |        |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Income (loss) before taxes                    |  |        | (9,782 | ) |           |   | 5,449   |                |  |   | 997          |   |  |               |        |   |  |   | (3,336  | )
|Provision for income taxes                    |  |        |        |   |           |   | (114    | )              |  |   | (450         | ) |  |               |        |   |  |   | (564    | )
|Equity earnings                               |  |        | 5,896  |   |           |   | 561     |                |  |   |              |   |  |               | (6,457 | ) |  |   |         |  
|Minority interest                             |  |        |        |   |           |   |         |                |  |   | 14           |   |  |               |        |   |  |   | 14      |  
|                                              |  |        |        |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net income (loss)                             |  | $      | (3,886 | ) |           | $ | 5,896   |                |  | $ | 561          |   |  | $             | (6,457 | ) |  | $ | (3,886  | )
|                                              |  |        |        |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2003

(in thousands)



|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|--------------------------------------------- |  | ------ | -------- | - | --------- | - | -------- | -------------- |  | - | ------------ | - | ------------- | - | ------- |  | - | -------- | -
|                                              |  | Parent |          |   | Guarantor |   |          | Non- Guarantor |  |   | Eliminations |   | Total Company |  
|Net sales                                     |  | $      |          |   |           | $ | 150,228  |                |  | $ | 53,206       |   |               | $ |         |  | $ | 203,434  |  
|Cost of products sold, excluding depreciation |  |        |          |   |           |   | 132,859  |                |  |   | 48,035       |   |               |   |         |  |   | 180,894  |  
|Depreciation                                  |  |        |          |   |           |   | 11,625   |                |  |   | 2,406        |   |               |   |         |  |   | 14,031   |  
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|Gross profit                                  |  |        |          |   |           |   | 5,744    |                |  |   | 2,765        |   |               |   |         |  |   | 8,509    |  
|Selling and administrative expenses           |  |        |          |   |           |   | 4,387    |                |  |   | 814          |   |               |   |         |  |   | 5,201    |  
|Research and technology expenses              |  |        |          |   |           |   | 1,144    |                |  |   | 138          |   |               |   |         |  |   | 1,282    |  
|Interest expense                              |  |        | 8,670    |   |           |   |          |                |  |   | 207          |   |               |   |         |  |   | 8,877    |  
|Foreign exchange adjustments                  |  |        |          |   |           |   | (435     | )              |  |   | (437         | ) |               |   |         |  |   | (872     | )
|Goodwill impairment loss                      |  |        |          |   |           |   | 183,000  |                |  |   |              |   |               |   |         |  |   | 183,000  |  
|Other expenses, net                           |  |        |          |   |           |   | 268      |                |  |   | (102         | ) |               |   |         |  |   | 166      |  
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|Income (loss) before taxes                    |  |        | (8,670   | ) |           |   | (182,620 | )              |  |   | 2,145        |   |               |   |         |  |   | (189,145 | )
|Benefit (provision) for income taxes          |  |        | 3,035    |   |           |   | (127     | )              |  |   | (594         | ) |               |   |         |  |   | 2,314    |  
|Equity earnings                               |  |        | (181,343 | ) |           |   | 1,404    |                |  |   |              |   |               |   | 179,939 |  |   |         |  
|Minority interest                             |  |        |          |   |           |   |          |                |  |   | (147         | ) |               |   |         |  |   | (147     | )
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|Net income (loss)                             |  | $      | (186,978 | ) |           | $ | (181,343 | )              |  | $ | 1,404        |   |               | $ | 179,939 |  | $ | (186,978 | )
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2004

(in thousands)



|                                              |  |        |         |   |           |   |                |  |   |              |   |  |               |        |   |  |   |         |  
|--------------------------------------------- |  | ------ | ------- | - | --------- | - | -------------- |  | - | ------------ | - |  | ------------- | ------ | - |  | - | ------- | -
|                                              |  | Parent |         |   | Guarantor |   | Non- Guarantor |  |   | Eliminations |   |  | Total Company |       
|Net sales                                     |  | $      |         |   |           | $ | 305,295        |  | $ | 112,527      |   |  | $             |        |   |  | $ | 417,822 |  
|Cost of products sold, excluding depreciation |  |        |         |   |           |   | 264,861        |  |   | 103,589      |   |  |               |        |   |  |   | 368,450 |  
|Depreciation                                  |  |        |         |   |           |   | 20,653         |  |   | 5,424        |   |  |               |        |   |  |   | 26,077  |  
|                                              |  |        |         |   |           |   |                |  |   |              |   |  |               |        |   |  |   |         |  
|Gross profit                                  |  |        |         |   |           |   | 19,781         |  |   | 3,514        |   |  |               |        |   |  |   | 23,295  |  
|Selling and administrative expenses           |  |        |         |   |           |   | 10,675         |  |   | 1,582        |   |  |               |        |   |  |   | 12,257  |  
|Research and technology expenses              |  |        |         |   |           |   | 2,127          |  |   | 390          |   |  |               |        |   |  |   | 2,517   |  
|Interest expense                              |  |        | 19,586  |   |           |   |                |  |   | 384          |   |  |               |        |   |  |   | 19,970  |  
|Foreign exchange adjustments                  |  |        |         |   |           |   | 366            |  |   | 41           |   |  |               |        |   |  |   | 407     |  
|Other expenses, net                           |  |        |         |   |           |   | 288            |  |   | 225          |   |  |               |        |   |  |   | 513     |  
|                                              |  |        |         |   |           |   |                |  |   |              |   |  |               |        |   |  |   |         |  
|Income (loss) before taxes                    |  |        | (19,586 | ) |           |   | 6,325          |  |   | 892          |   |  |               |        |   |  |   | (12,369 | )
|Provision for income taxes                    |  |        |         |   |           |   |                |  |   | (448         | ) |  |               |        |   |  |   | (448    | )
|Equity earnings                               |  |        | 6,788   |   |           |   | 463            |  |   |              |   |  |               | (7,251 | ) |  |   |         |  
|Minority interest                             |  |        |         |   |           |   |                |  |   | 19           |   |  |               |        |   |  |   | 19      |  
|                                              |  |        |         |   |           |   |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net income (loss)                             |  | $      | (12,798 | ) |           | $ | 6,788          |  | $ | 463          |   |  | $             | (7,251 | ) |  | $ | (12,798 | )
|                                              |  |        |         |   |           |   |                |  |   |              |   |  |               |        |   |  |   |         |  



17



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2003

(in thousands)



|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|--------------------------------------------- |  | ------ | -------- | - | --------- | - | -------- | -------------- |  | - | ------------ | - | ------------- | - | ------- |  | - | -------- | -
|                                              |  | Parent |          |   | Guarantor |   |          | Non- Guarantor |  |   | Eliminations |   | Total Company |  
|Net sales                                     |  | $      |          |   |           | $ | 280,551  |                |  | $ | 91,674       |   |               | $ |         |  | $ | 372,225  |  
|Cost of products sold, excluding depreciation |  |        |          |   |           |   | 240,862  |                |  |   | 82,764       |   |               |   |         |  |   | 323,626  |  
|Depreciation                                  |  |        |          |   |           |   | 23,249   |                |  |   | 4,784        |   |               |   |         |  |   | 28,033   |  
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|Gross profit                                  |  |        |          |   |           |   | 16,440   |                |  |   | 4,126        |   |               |   |         |  |   | 20,566   |  
|Selling and administrative expenses           |  |        |          |   |           |   | 8,373    |                |  |   | 1,587        |   |               |   |         |  |   | 9,960    |  
|Research and technology expenses              |  |        |          |   |           |   | 2,437    |                |  |   | 264          |   |               |   |         |  |   | 2,701    |  
|Interest expense                              |  |        | 16,907   |   |           |   |          |                |  |   | 405          |   |               |   |         |  |   | 17,312   |  
|Foreign exchange adjustments                  |  |        |          |   |           |   | (353     | )              |  |   | (472         | ) |               |   |         |  |   | (825     | )
|Goodwill impairment loss                      |  |        |          |   |           |   | 183,000  |                |  |   |              |   |               |   |         |  |   | 183,000  |  
|Other expenses, net                           |  |        |          |   |           |   | 330      |                |  |   | (253         | ) |               |   |         |  |   | 77       |  
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|Income (loss) before taxes                    |  |        | (16,907  | ) |           |   | (177,347 | )              |  |   | 2,595        |   |               |   |         |  |   | (191,659 | )
|Benefit (provision) for income taxes          |  |        | 5,917    |   |           |   | (1,978   | )              |  |   | (1,015       | ) |               |   |         |  |   | 2,924    |  
|Equity earnings                               |  |        | (177,819 | ) |           |   | 1,506    |                |  |   |              |   |               |   | 176,313 |  |   |         |  
|Minority interest                             |  |        |          |   |           |   |          |                |  |   | (74          | ) |               |   |         |  |   | (74      | )
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  
|Net income (loss)                             |  | $      | (188,809 | ) |           | $ | (177,819 | )              |  | $ | 1,506        |   |               | $ | 176,313 |  | $ | (188,809 | )
|                                              |  |        |          |   |           |   |          |                |  |   |              |   |               |   |         |  |   |          |  



18



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2004

(in thousands)



|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------- | - | ------- | -------------- |  | - | ------------ | - |  | ------------- | ------ | - |  | - | ------- | -
|                                                                                                   |  | Parent |         |   | Guarantor |   |         | Non- Guarantor |  |   | Eliminations |   |  | Total Company |       
|Cash flows from operating activities                                                               |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net income (loss)                                                                                  |  | $      | (12,798 | ) |           | $ | 6,788   |                |  | $ | 463          |   |  | $             | (7,251 | ) |  | $ | (12,798 | )
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Depreciation and amortization                                                                      |  |        | 1,361   |   |           |   | 20,653  |                |  |   | 5,423        |   |  |               |        |   |  |   | 27,437  |  
|Deferred income taxes                                                                              |  |        |         |   |           |   |         |                |  |   | (90          | ) |  |               |        |   |  |   | (90     | )
|Equity earnings                                                                                    |  |        | (6,788  | ) |           |   | (463    | )              |  |   |              |   |  |               | 7,251  |   |  |   |         |  
|Change in assets and liabilities, net:                                                             |  |        | (131    | ) |           |   | (11,653 | )              |  |   | (292         | ) |  |               |        |   |  |   | (12,076 | )
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net cash (used in) provided by operating activities                                                |  |        | (18,356 | ) |           |   | 15,325  |                |  |   | 5,504        |   |  |               |        |   |  |   | 2,473   |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Cash flows from investing activities                                                               |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Purchases of property, plant and equipment, net                                                    |  |        |         |   |           |   | (9,533  | )              |  |   | (6,501       | ) |  |               |        |   |  |   | (16,034 | )
|Proceeds from sale of property, plant and equipment                                                |  |        |         |   |           |   | 71      |                |  |   |              |   |  |               |        |   |  |   | 71      |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net cash used in investing activities                                                              |  |        |         |   |           |   | (9,462  | )              |  |   | (6,501       | ) |  |               |        |   |  |   | (15,963 | )
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Cash flows from financing activities                                                               |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Repayment of Term B Loan                                                                           |  |        | (624    | ) |           |   |         |                |  |   |              |   |  |               |        |   |  |   | (624    | )
|Proceeds from (repayment of) Revolver Loan                                                         |  |        | 11,500  |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   | 11,500  |  
|Net change in Constar intercompany loans                                                           |  |        | 7,480   |   |           |   | (10,626 | )              |  |   | 3,146        |   |  |               |        |   |  |   |         |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net cash provided by (used in) financing activities                                                |  |        | 18,356  |   |           |   | (10,626 | )              |  |   | 3,146        |   |  |               |        |   |  |   | 10,876  |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                                       |  |        |         |   |           |   |         |                |  |   | 46           |   |  |               |        |   |  |   | 46      |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Net change in cash and cash equivalents                                                            |  |        |        |   |           |   | (4,763  | )              |  |   | 2,195        |   |  |               |       |   |  |   | (2,568  | )
|Cash and cash equivalents at beginning of period                                                   |  |        |         |   |           |   | 6,564   |                |  |   | 9,914        |   |  |               |        |   |  |   | 16,478  |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $      |        |   |           | $ | 1,801   |                |  | $ | 12,109       |   |  | $             |       |   |  | $ | 13,910  |  
|                                                                                                   |  |        |         |   |           |   |         |                |  |   |              |   |  |               |        |   |  |   |         |  



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##### Table of Contents

CONSTAR INTERNATIONAL INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2003

(in thousands)



|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------ | -------- | - | --------- | - | -------- | -------------- |  | - | ------------ | - |  | ------------- | -------- | - |  | - | -------- | -
|                                                                                                   |  | Parent |          |   | Guarantor |   |          | Non- Guarantor |  |   | Eliminations |   |  | Total Company |         
|Cash flows from operating activities                                                               |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Net income (loss)                                                                                  |  | $      | (188,809 | ) |           | $ | (177,819 | )              |  | $ | 1,506        |   |  | $             | 176,313  |   |  | $ | (188,809 | )
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Goodwill impairment loss                                                                           |  |        |          |   |           |   | 183,000  |                |  |   |              |   |  |               |          |   |  |   | 183,000  |  
|Depreciation and amortization                                                                      |  |        | 822      |   |           |   | 23,249   |                |  |   | 4,789        |   |  |               |          |   |  |   | 28,860   |  
|Deferred income taxes                                                                              |  |        |          |   |           |   | (4,069   | )              |  |   | (12          | ) |  |               |          |   |  |   | (4,081   | )
|Equity earnings                                                                                    |  |        | 177,819  |   |           |   | (1,506   | )              |  |   |              |   |  |               | (176,313 | ) |  |   |          |  
|Change in assets and liabilities, net                                                              |  |        | (1,073   | ) |           |   | 14,488   |                |  |   | (7,910       | ) |  |               |          |   |  |   | 5,505    |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Net cash (used in) provided by operating activities                                                |  |        | (11,241  | ) |           |   | 37,343   |                |  |   | (1,627       | ) |  |               |         |   |  |   | 24,475   |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Cash flows from investing activities                                                               |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Purchases of property, plant and equipment, net                                                    |  |        |          |   |           |   | (22,274  | )              |  |   | (2,895       | ) |  |               |          |   |  |   | (25,169  | )
|Proceeds from sale of property, plant and equipment                                                |  |        |          |   |           |   | 38       |                |  |   | 110          |   |  |               |          |   |  |   | 148      |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Net cash used in investing activities                                                              |  |        |          |   |           |   | (22,236  | )              |  |   | (2,785       | ) |  |               |          |   |  |   | (25,021  | )
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Cash flows from financing activities                                                               |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Proceeds from debt                                                                                 |  |        |          |   |           |   |          |                |  |   | 1,502        |   |  |               |          |   |  |   | 1,502    |  
|Repayment of Revolver Loan                                                                         |  |        | (14,000  | ) |           |   |          |                |  |   |              |   |  |               |          |   |  |   | (14,000  | )
|Repayment of Term B Loan                                                                           |  |        | (750     | ) |           |   |          |                |  |   |              |   |  |               |          |   |  |   | (750     | )
|Net change in Constar intercompany loans                                                           |  |        | 25,991   |   |           |   | (20,795  | )              |  |   | (5,196       | ) |  |               |          |   |  |   |          |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Net cash provided by (used in) financing activities                                                |  |        | 11,241   |   |           |   | (20,795  | )              |  |   | (3,694       | ) |  |               |          |   |  |   | (13,248  | )
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                                       |  |        |          |   |           |   |          |                |  |   | 170          |   |  |               |          |   |  |   | 170      |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Net change in cash and cash equivalents                                                            |  |        |         |   |           |   | (5,688   | )              |  |   | (7,936       | ) |  |               |         |   |  |   | (13,624  | )
|Cash and cash equivalents at beginning of period                                                   |  |        |          |   |           |   | 8,906    |                |  |   | 12,007       |   |  |               |          |   |  |   | 20,913   |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  
|Cash and cash equivalents at end of period                                                         |  | $      |         |   |           | $ | 3,218    |                |  | $ | 4,071        |   |  | $             |         |   |  | $ | 7,289    |  
|                                                                                                   |  |        |          |   |           |   |          |                |  |   |              |   |  |               |          |   |  |   |          |  



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS



Overview



The Company is a manufacturer
of PET plastic containers for food and beverages. Approximately 73% of its revenues for the first half of the year were generated in the United States with the remainder attributable to its European operations. During the first half of 2004, one
customer accounted for approximately 32% of the Companys consolidated revenues, while the top ten customers accounted for an aggregate of 75% of the Companys consolidated revenues. Over 75% of the Companys 2004 first half sales
relate to conventional PET containers which are primarily used for carbonated soft drinks and bottled water. These products generally carry low profit margins. Profitability is driven principally by volume and maintaining efficient manufacturing
operations. In recent years, the largest growth within conventional products has come from bottled water. The Company believes that in the long run, profitability from bottled water may decline as economic factors force some water bottlers into self
manufacturing of PET bottles and some smaller water bottlers out of business.



In addition to the conventional product lines, the Company is also a producer of higher margin custom products that are used in such packaging applications as hot-fill beverages, food, beer and flavored alcoholic beverages, most of which
require containers with special performance characteristics. Critical success factors in the custom PET market include technology, design capabilities and expertise with specialized equipment. The technology required to produce certain types of
custom products is commonly available, which has resulted in increased competition and lower margins for such products.



The PET packaging industry is in a very competitive pricing environment. The Company expects that competitive pricing pressure will begin to decrease because of a recent
reduction in the industrys available capacity. However, the Company will continue to face two other significant sources of pricing pressure. The first source is customer consolidation. When smaller customers are acquired by larger customers,
the profitability of Constars business with the smaller customer tends to decline. In addition, as customers grow through acquisitions, they acquire more leverage in contract negotiations. The second source of pricing pressure is contractual
provisions that permit customers to terminate contracts if the customer receives an offer from another manufacturer that the Company chooses not to match. The Company is making efforts to remove these provisions in all new contracts and contract
renewals. Thus, despite a reduction in the industrys available capacity, price declines remain a concern. The Company continues to focus its efforts on effective cost controls, manufacturing efficiencies and overhead reductions in an effort to
offset pricing pressures.



The primary raw material and component cost of the
Companys products is PET resin which is a commodity available globally. The price of PET resin is subject to frequent fluctuations as a result of oil prices, overseas markets and seasonal demand. Substantially all of the Companys
customer contracts contain provisions that allow for the pass through of changes in the price of PET resin. Constar is one of the largest purchasers of PET resin in North America, which it believes provides it with negotiating leverage necessary to
obtain resin at favorable prices. However, higher resin prices may impact the Companys sales where customers have a choice between PET and other forms of packaging.



PET bottle manufacturing is capital intensive, requiring both specialized production equipment and significant support infrastructure for
power, high pressure air and resin handling. The Company believes that the introduction of new PET technologies has created significant opportunities for the conversion of glass containers to PET containers for bottled teas, beer, flavored alcoholic
beverages and food applications. These conversion opportunities will require significant capital expenditures to obtain the appropriate production equipment. Constars ability to make capital expenditures is limited by the covenants contained
in its credit agreement discussed below. If Constar is awarded a significant volume of conversions over a short period of time, the Company may have to obtain waivers or amendments to these covenants.



In negotiations with certain customers for new business and the extension of current
business, the Company has agreed to price concessions averaging approximately $6 million to $10 million dollars for each year between 2005 and 2007. The Company is currently attempting to improve its margins by improving customer and product mix,
maximizing utilization rates, updating existing facilities, and investing in cost reduction and efficiency improvements. If the Company is not successful in its efforts to improve margins, the Companys ability to increase profits will be
adversely affected. During the second quarter the Company operated at high utilization rates, and the Company does not intend to invest in additional conventional capacity unless those investments improve overall margins in the Companys
conventional business.



The Company is highly leveraged. The Companys
debt structure consists of a $90 million revolving loan, $123 million term loan, $75 million second lien term loan and $175 million of publicly held senior subordinated notes. As of June 30, 2004, the Company had $36.5 million borrowed under the
revolving loan, $4.4 million outstanding on letters of credit and was fully drawn on the other instruments. Interest expense for the six months ended June 30, 2004 was $20.0 million. There is a mandatory paydown of one of the term loans of
approximately $1.3 million for fiscal 2004. Certain of the debt instruments contain customary affirmative and negative covenants, including covenants related to operating performance and financial leverage. Certain of these covenants were amended
during fiscal 2003 to reflect the Companys recent downturn in operating performance and lowered expectations for future increased profitability. However, these covenants were not amended beyond the period ending June 30, 2005. Therefore, even
if the Company achieves its revised business plan, Constar will be required to obtain additional amendments in the future or will be required to seek alternative financing from new lenders or through asset sales.



21



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##### Table of Contents

Results of Operations



Second Quarter



Net Sales



Net sales increased
by $22.7 million, or 11.1%, to $226.1 million in the second quarter of 2004 from $203.4 million in the second quarter of 2003. In the U.S., net sales increased $13.3 million, or 8.9%, to $163.5 million in the second quarter of 2004 from $150.2
million in the second quarter of 2003. In Europe, net sales increased $9.3 million, or 17.6%, to $62.5 million in the second quarter of 2004 from $53.2 million in the second quarter of 2003. Net sales in the U.S. accounted for 72.3% of net sales in
the second quarter of 2004 compared to 73.8% of net sales in the second quarter of 2003.



In the U.S., the increase in net sales in the second quarter of 2004 from the second quarter of 2003 reflects increased sales of both conventional and custom products and the pass-through of higher resin prices to
customers, partly offset by price concessions that were given in exchange for additional volume and contract extensions.



In Europe, the increase in net sales in the second quarter of 2004 compared to the second quarter of 2003 was primarily due to a stronger British pound sterling and Euro
against the U.S. dollar. Higher unit sales of performs also contributed to the increase.



Gross Profit



Gross profit
increased $5.4 million, or 63.3%, to $13.9 million in the second quarter of 2004 from $8.5 million in the second quarter of 2003. Gross profit benefited from an increase in unit sales and reduced spending in warehousing and product handling costs as
well as cost savings from the Companys 2003 restructuring initiative. These improvements were partially offset by increased spending on utilities and freight during the second quarter of 2004 as well as price reductions implemented to extend
key contracts and meet competitive pricing.



Selling and Administrative
Expenses



Selling and administrative expenses increased by $0.8
million, or 15.0%, to $6.0 million in the second quarter of 2004 from $5.2 million in the second quarter of 2003. The increase reflects costs associated with Sarbanes-Oxley compliance efforts and additional legal expenses related to a patent
infringement action.



Research and Technology Expenses



Research and technology expenses were $1.1 million in the second
quarter of 2004 compared to $1.3 million in the second quarter of 2003.



Interest Expense



Interest expense increased $1.1
million to $10.0 million in the second quarter of 2004 from $8.9 million in the second quarter of 2003. The increase reflects higher debt levels when compared to the same period in 2003 as well as an increase in the Companys effective interest
rate due to the December 2003 refinancing.



Foreign Exchange Adjustments



Foreign exchange adjustments were approximately $0.4 million expense
in the second quarter of 2004 compared to $0.9 million income in the second quarter of 2003. The change between 2004 and 2003 was primarily related to the changes in the foreign currency translation rates of intra company balances.



Goodwill Impairment Loss



Due to the trading price of the Companys common stock, operating results that reflect
lower volumes of domestic conventional product sales, increased handling and shuttling costs and other factors, the Company determined that a goodwill impairment existed at June 30, 2003. The Company recognized an estimated impairment charge of $183
million in the second quarter of 2003. The fair value of the Company was determined by quoted market prices of the Companys common stock plus a control premium.



22



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##### Table of Contents

Other (Income) Expenses, Net



Other income, net was $0.2 million in the second quarter of 2004 compared to $0.2 million expense in the second quarter of 2003. Lower bad
debt expense and gain on sale of assets were the primary factors contributing to the change.



Provision for Income Taxes



Provision for income taxes was $0.6 million expense in the second quarter of 2004 compared to a $2.3 million benefit in the second quarter of 2003. The tax provision for the second quarter of 2004 relates primarily to the income generated
in the European operations. During the second quarter of 2004, the Company recorded a valuation allowance of approximately $1.6 million to reduce certain deferred tax assets in the United States.



Net Loss



Net loss was $3.9 million in the second quarter of 2004 compared to net loss of $186.9 million in the second quarter of 2003. The goodwill
impairment loss recognized in the second quarter of 2003 and the increase in gross profit during the second quarter of 2004 were the primary factors contributing to the favorable change.



Adjusted EBITDA



EBITDA is a non-GAAP measurement that the Company defines as income or loss before interest expense, provision for income taxes, depreciation and amortization, and the
cumulative effect of a change in accounting. This measure does not represent cash flow for the periods presented and should not be considered as an alternative to net income/(loss) as an indicator of the Companys operating performance or as an
alternative to cash flows as a source of liquidity. EBITDA is a key financial measure used by our senior credit facility lenders. The Companys definition of EBITDA may not be comparable to EBITDA as defined by other companies. Although EBITDA
is a non-GAAP measurement, the Company believes it is a useful measure of pre-tax operating cash flow prior to debt service.



The Companys Senior Secured Credit Agreement adjusts EBITDA for certain non-cash accruals and uses the adjusted EBITDA figure to determine the Companys
compliance with certain financial covenants in the Senior Secured Credit Agreement. This definition of adjusted EBITDA may not be comparable to adjusted EBITDA as defined by other companies.



EBITDA increased to $19.8 million for the second quarter of 2004 from $(166.3) million in the
second quarter of 2003. After giving effect to the non-cash accruals for purposes of the Companys compliance with certain covenants in the Senior Secured Credit Agreement, Adjusted EBITDA increased to $20.1 million from $17.7 million.



Reconciliation of Adjusted EBITDA to Net loss



|                                                          |  |          |      |   |      |   |        |  
|--------------------------------------------------------- |  | -------- | ---- | - | ---- | - | ------ | -
|                                                          |  | June 30, |     
|(In Millions)                                             |  | 2004     |      |   | 2003 |  
|Net loss                                                  |  | $        | (3.9 | ) |      | $ | (186.9 | )
|Add back:                                                 |  |          |      |   |      |   |        |  
|Interest expense                                          |  |          | 10.0 |   |      |   | 8.9    |  
|Taxes                                                     |  |          | 0.6  |   |      |   | (2.3   | )
|Depreciation                                              |  |          | 13.1 |   |      |   | 14.0   |  
|                                                          |  |          |      |   |      |   |        |  
|EBITDA                                                    |  | $        | 19.8 |   |      | $ | (166.3 | )
|Adjustments under Senior Secured Credit Agreement         |  |          | 0.3  |   |      |   | 184.0  |  
|                                                          |  |          |      |   |      |   |        |  
|Adjusted EBITDA under the Senior Secured Credit Agreement |  | $        | 20.1 |   |      | $ | 17.7   |  
|                                                          |  |          |      |   |      |   |        |  



The Company feels that the three month
Adjusted EBITDA amounts shown above are informative in connection with certain financial covenants contained within the Companys Senior Secured Credit Agreement. Even though these covenants are based on the last twelve months of Adjusted
EBITDA, the Company has presented the comparable periods above to provide additional insight into the rolling twelve month data. The Companys Senior Secured Credit Agreement contains a Minimum EBITDA financial covenant based on Adjusted EBITDA
for the last twelve months. The Companys Adjusted EBITDA for the last twelve months was $54.7 million as compared to the financial covenant amount of $48.0 million.



23



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##### Table of Contents

Six Months



Net Sales



Net sales increased by $45.6 million, or 12.2%, to $417.8 million in the first six months of 2004 from $372.2 million in the first six months of 2003. In the U.S., net sales increased $24.7 million, or 8.8%, to $305.3
million in the first six months of 2004 from $280.6 million in the first six months of 2003. In Europe, net sales increased $20.9 million, or 22.8%, to $112.5 million in the first six months of 2004 from $91.6 million in the first six months of
2003. Net sales in the U.S. accounted for 73.0% of net sales in the first six months of 2004 compared to 75.4% of net sales in the first six months of 2003.



In the U.S., the increase in net sales in the first six months of 2004 from the first six months of 2003 reflects increased sales of conventional and custom products and
the pass-through of higher resin prices to customers, partly offset by price concessions that were given in exchange for additional volume and contract extensions.



In Europe, the increase in net sales in the first six months of 2004 compared to the first six months of 2003 was primarily due to the
stronger British pound sterling and Euro against the U.S. dollar. Higher unit sales of performs also contributed to the increase.



Gross Profit



Gross profit increased $2.7 million, or 13.3%, to $23.3 million in the first six months of 2004 from $20.6 million in the first six months of 2003. Gross profit benefited from an increase in unit sales and reduced
spending in warehousing and product handling costs as well as cost savings from the Companys 2003 restructuring initiative. These benefits were partly offset by price reductions implemented to extend key contracts and meet competitive pricing.



Selling and Administrative Expenses



Selling and administrative expenses increased by $2.3 million, or 23.1%, to $12.3 million in
the first six months of 2004 from $10.0 million in the first six months of 2003. The increase reflects stand alone administrative costs associated with being a public company since the organization was not fully staffed during the first six months
of 2003, expenses related to Sarbanes-Oxley compliance efforts and additional legal spending.



Research and Technology Expenses



Research and technology expenses were $2.5 million in the first six months of 2004 compared to $2.7 million in the first six months of 2003.



Interest Expense



Interest expense increased $2.7 million to $20.0 million in the first six months of 2004 from $17.3 million in the first six months of 2003. The increase reflects higher debt levels when compared to the same period in
2003 as well as an increase in the Companys effective interest rate due to the December 2003 refinancing.



Foreign Exchange Adjustments



Foreign exchange adjustments were approximately $0.4 million expense in the first six months of 2004 compared to $0.9 million income in the first six months of 2003. The
change between 2004 and 2003 was primarily related to the changes in the foreign currency translation rates of intra company balances.



Goodwill Impairment Loss



Due to the trading price of the Companys common stock, operating results that reflect lower volumes of domestic conventional product sales, increased handling and
shuttling costs and other factors, the Company determined that a goodwill impairment existed at June 30, 2003. The Company recognized an estimated impairment charge of $183 million in the second quarter of 2003. The fair value of the Company was
determined by quoted market prices of the Companys common stock plus a control premium.



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Other (Income) Expenses, Net



Other expenses, net were $0.5 million expense in the first six months of 2004 compared to $0.1 million expense in the first six months of
2003. The Company recorded a $1.8 million charge representing costs incurred from a fire at one of its European facilities.

This charge has been reduced by
$1.3 million related to recoveries under an insurance claim.



Provision
for Income Taxes



Provision for income taxes was a $0.4 million
expense in the first six months of 2004 compared to $2.9 million benefit in the first six months of 2003. The tax provision for the first six months of 2004 related to the income attributable to the European operations. During the first six months
of 2004, the Company recorded a valuation allowance of approximately $4.6 million to reduce certain deferred tax assets in the United States.



Net Loss



Net loss was $12.8 million in the first six months of 2004 compared to net loss of $188.8 million in the first six months of 2003. The goodwill impairment loss recognized in the first six months of 2003 was the
primary factor contributing to the favorable change.



Adjusted EBITDA



EBITDA is a non-GAAP measurement that the Company defines as income
or loss before interest expense, provision for income taxes, depreciation and amortization, and the cumulative effect of a change in accounting. This measure does not represent cash flow for the periods presented and should not be considered as an
alternative to net income/(loss) as an indicator of the Companys operating performance or as an alternative to cash flows as a source of liquidity. EBITDA is a key financial measure used by our senior credit facility lenders. The
Companys definition of EBITDA may not be comparable to EBITDA as defined by other companies. Although EBITDA is a non-GAAP measurement, the Company believes it is a useful measure of pre-tax operating cash flow prior to debt service.



The Companys Senior Secured Credit Agreement adjusts EBITDA for certain
non-cash accruals and uses the adjusted EBITDA figure to determine the Companys compliance with certain financial covenants in the Senior Secured Credit Agreement. This definition of adjusted EBITDA may not be comparable to adjusted EBITDA as
defined by other companies.



EBITDA increased to $33.7 million for the first
six months of 2004 from $(146.4) million in the first six months of 2003. After giving effect to the non-cash accruals for purposes of the Companys compliance with certain covenants in the Senior Secured Credit Agreement, Adjusted EBITDA
decreased to $34.4 million from $38.0 million.



Reconciliation
of Adjusted EBITDA to Net loss



|                                                          |  |          |       |   |      |   |        |  
|--------------------------------------------------------- |  | -------- | ----- | - | ---- | - | ------ | -
|                                                          |  | June 30, |      
|(In Millions)                                             |  | 2004     |       |   | 2003 |  
|Net loss                                                  |  | $        | (12.8 | ) |      | $ | (188.8 | )
|Add back:                                                 |  |          |       |   |      |   |        |  
|Interest expense                                          |  |          | 20.0  |   |      |   | 17.3   |  
|Taxes                                                     |  |          | 0.4   |   |      |   | (2.9   | )
|Depreciation                                              |  |          | 26.1  |   |      |   | 28.0   |  
|                                                          |  |          |       |   |      |   |        |  
|EBITDA                                                    |  | $        | 33.7  |   |      | $ | (146.4 | )
|Adjustments under Senior Secured Credit Agreement         |  |          | 0.7   |   |      |   | 184.4  |  
|                                                          |  |          |       |   |      |   |        |  
|Adjusted EBITDA under the Senior Secured Credit Agreement |  | $        | 34.4  |   |      | $ | 38.0   |  
|                                                          |  |          |       |   |      |   |        |  



The Company feels that
the six month Adjusted EBITDA amounts shown above are informative in connection with certain financial covenants contained within the Companys Senior Secured Credit Agreement. Even though these covenants are based on the last twelve months of
Adjusted EBITDA, the Company has presented the comparable periods above to provide additional insight into the rolling twelve month data. The Companys Senior Secured Credit Agreement contains a Minimum EBITDA financial covenant based on
Adjusted EBITDA for the last twelve months. The Companys Adjusted EBITDA for the last twelve months was $54.7 million as compared to the financial covenant amount of $48.0 million.



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Liquidity and Capital Resources



On November 20, 2002, the Company completed its public offering of $175 million aggregate principal amount of 11% Senior Subordinated Notes
(Notes) due 2012. The Notes were issued at 98.51% of face value and will mature on December 1, 2012. Interest on the Notes is payable semi-annually on each December 1 and June 1.



Concurrent with the closing of the Companys initial public offering of common stock and
concurrent with the offering of the Notes, the Company entered into a senior secured credit agreement (Senior Secured Credit Agreement) with a syndicate of lenders. The Senior Secured Credit Agreement consisted of a $150 million
seven-year term loan (Term B Loan) and a $100 million five-year revolving loan (Revolver Loan). The Term B Loan bears interest at a rate of LIBOR plus 450 basis points with a 200 basis point LIBOR minimum. The Revolver Loan
currently carries interest of LIBOR plus 375 basis points with a 200 basis point LIBOR minimum. After the $25 million paydown discussed below, the Term B Loan will require annual payments of $1.3 million, with a final balloon payment of $116.0
million due on the loan maturity date in November 2009. On December 23, 2003 the Company obtained a $75 million Second Lien Term Loan (Second Lien Loan) due December 2010. Net of fees and expenses of approximately $5 million, the
proceeds from the Second Lien Loan were used to prepay $25 million of the Term B Loan with the remainder used to paydown the Revolver. The paydown of the Term B Loan resulted in a permanent $25 million reduction in the amount available under that
facility. In addition, the total amount available under the Revolver Loan was reduced from $100 million to $90 million. Beginning October 1, 2004, the Senior Secured Credit Agreement requires that the Company maintain at least $30 million in
borrowing availability for 60 consecutive days between each October 1 and January 31 of the subsequent year.



As of June 30, 2004, there was $122.6 million outstanding on the Term B Loan, $36.5 million outstanding on the Revolver Loan and $4.4 million outstanding on letters of credit. In addition, as of June 30, 2004, the
Company had $13.9 million of cash and cash equivalents on hand as well as $49.1 million of availability under the Revolver Loan.



The Term B Loan requires annual principal payments of approximately $1.3 million until final payment is due in November 2009. No other principal repayments are scheduled
for the other loans until their respective maturity dates.



The Senior Secured
Credit Agreement contains customary affirmative and negative covenants, including certain covenants requiring the Company to maintain Senior Leverage, Total Leverage, Interest Expense Coverage and Fixed Charge Leverage ratios. The Companys
Senior Secured Credit Agreement also limits the Companys ability to make capital expenditures. In order to satisfy significant business awards, including those relating to conversions from others forms of packaging, the Company may need to
purchase additional equipment. To the extent that such purchases would cause the Company to exceed the capital expenditure restrictions of the Senior Secured Credit Agreement, the Company would have to obtain the lenders consent before making such
purchases. There can be no assurances that the lenders would grant any such consent.



In connection with obtaining the Second Lien Loan, the following financial covenants and financial covenant levels were amended from September 30, 2003 through June 30, 2005: (i) Minimum EBITDA; (ii) Maximum Senior Leverage; (iii) Minimum
Interest Coverage; and (iv) Maximum Capital Expenditures. The Total Leverage and Fixed Charge Leverage ratios were eliminated until September 30, 2005. After June 30, 2005, Constars financial covenants and covenant levels will remain the same
as those set forth in the Senior Secured Credit Agreement. These covenants for the period after June 30, 2005 were based on the Companys forecasted profitability and business plan as of the initial public offering in November 2002. In response
to the increased competition in the Companys markets and decreased profitability, the Company has begun and continues various actions intended to improve its liquidity and profitability. These actions include, among other things, reducing
employment levels and operating costs, closing certain production facilities, decreasing inventory levels, and reducing warehousing and distribution expenses. The Company has revised its 2004 operating forecasts and believes it will be able to
maintain compliance with the covenants through mid-2005. The Company anticipates that it will not be in compliance with the covenants that exist in the Senior Secured Credit Agreement for the periods after June 30, 2005. Therefore, the Company
anticipates that it will be required to obtain future amendments from its current lenders or it will have to seek alternative financing from new lenders or through asset sales. There can be no assurances that the Company will be able to maintain
compliance with these amended covenants through June 30, 2005 and no assurances that the Company will be successful in obtaining future amendments or in any future efforts to find alternative financing. Should the Company be unable to secure a
long-term solution to its expected noncompliance with its covenants and the Company defaults under its Senior Secured Credit Agreement, then the lenders would have the right to demand repayment of their loans at that time. If the lenders make such a



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demand, it would cause a default under the terms of the Companys Senior Subordinated Notes, which would give the
trustee or the holders of 25% in aggregate principal amount of those notes the right to accelerate those obligations. The lenders may also require the Company to cash collateralize outstanding letters of credit under the Senior Secured Credit
Agreement.



The Company was in compliance with all covenants at June 30, 2004.



The Companys ratio of total debt to total capitalization increased to
94.7% at June 30, 2004 from 92.1% at December 31, 2003 due to the net loss reported during the first six months of 2004. The Company defines total capitalization as the sum of total debt, minority interests, and stockholders equity.



The Company believes that cash available under existing and new credit
facilities combined with net cash provided by operating activities will be sufficient to finance its activities through mid- 2005.



Cash Flow



Net cash provided by operating activities was $2.5 million in the first six months of 2004 as compared to $24.5 million in the first six months of 2003. During the first six months of 2004, the Companys
inventory level increased $2.3 million as compared to an increase of $13.5 million during the same period in 2003. This reduction in seasonal inventory build was more than offset by an increase in accounts payable and accrued liabilities of $14.1
million in the six months ending June 30, 2004, as compared to an increase of $45.7 million in the same period in 2003. In addition, there was an increase of $30.5 million in accounts receivable, net, during the first six months of 2004 which is
consistent with the $29.8 million increase in that balance during the same period in 2003. The increase in accounts receivable, net, reflects the seasonal increase in sales volumes during the second quarter of the fiscal year as compared to the
fourth quarter. These changes in working capital combined with increases in interest expense and selling and administrative expenses led to the reduction in net cash provided by operating activities during the first half of 2004.



Net cash used for investing activities decreased $9.0 million to $16.0 million in the first
six months of 2004 from $25.0 million in the first six months of 2003, reflecting a decrease in capital spending associated with capacity for conventional products.



Net cash provided by financing activities was $10.9 million in the first six months of 2004 reflecting $0.6 million for the scheduled
quarterly payments on the Term B Loan and a $11.5 million increase in the amounts outstanding under the Revolver Loan. Net cash used for financing activities was $13.2 million in the first six months of 2003 reflecting $0.8 million for the scheduled
quarterly payments on the Term B Loan and a $14.0 million reduction of the Revolver Loan. This net reduction in debt was partly offset by proceeds from a $1.5 million loan that was entered into by the Companys affiliate in Turkey during the
first half of 2003.



Commitments



Information regarding the Companys contingent liabilities appears in Part I within
Item 1 of this report under Note 11 to the accompanying Consolidated Financial Statements, which information is incorporated herein by reference.



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Forward-Looking Statements



Statements included herein, which are not historical facts (including any statements concerning plans and objectives of management for
future operations or economic performance, or assumptions related thereto), are forward-looking statements within the meaning of the federal securities laws. In addition, the Company and its representatives may from time to time make
other oral or written statements which are also forward-looking statements. These forward-looking statements are based on the Companys current expectations and projections about future events. Statements that include the words
expect, believe, intend, plan, anticipate, project, will, may, could, should, pro forma, continues,
estimates, potential, predicts, goal, objective and similar statements of a future nature identify forward-looking statements. These forward-looking statements and forecasts are subject to
risks, uncertainties and assumptions, including, among other things, the Companys debt level and its ability to service existing debt or, if necessary, to refinance that debt; the Companys ability to comply with restrictive covenants
contained in the instruments governing its indebtedness or obtain waivers if not in compliance; the Companys ability to compete successfully against competitors; the impact of price competition on gross margins and profitability; the level of
demand for packaging requiring the Companys proprietary technologies and know-how; continued conversion from metal, glass and other materials for packaging to plastic packaging; the Companys relationship with its largest customers, two
of which represent a combined total of approximately 45% of the Companys 2003 consolidated revenue; the success of the Companys customers in selling their products in their markets; the Companys ability to manage inventory levels
based on its customers projected sales; risks associated with the Companys international operations; the terms upon which the Company acquires resin and its ability to reflect those terms in its sales; general economic and political
conditions, including those that affect the price of petrochemical products such as PET resin; the Companys ability to protect its existing technologies and to develop new technologies; the Companys ability to timely market products
incorporating MonOxbar technology and the realization of the expected benefits of the MonOxbar technology; the Companys ability to control costs; the Companys ability to achieve improved utilization on its equipment; legal and regulatory
proceedings and developments; seasonal fluctuations in demand and the impact of weather on sales; the Companys ability to identify trends in the markets and to offer new solutions that address the changing needs of these markets; the
Companys ability to successfully execute its business model and enhance its product mix; the Companys ability to successfully prosecute or defend the legal proceedings to which it is a party; and the other factors disclosed from time to
time by the Company in its filings with the Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this quarterly report might not occur. The Company does not intend to
review or revise any particular forward-looking statement or forecast in light of future events.



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Item 3. Quantitative and Qualitative Disclosures about Market Risk



Market Risk



In the normal course of business, the Company is exposed to fluctuations in currency values, interest rates, commodity prices and other market risks.



The Company derived approximately 27% of total revenues from sales in foreign currencies
during the first six months ending June 30, 2004. In the Companys financial statements operating results in local currency are translated into U.S. dollars based on average exchange rates during the period and balance sheet items are
translated at rates on the balance sheet date. During periods of a strengthening dollar, the Companys U.S. dollar financial results related to operations conducted in foreign currencies are reduced because the local currency amounts are
translated into fewer U.S. dollars. Conversely, as the dollar weakens, the Companys foreign results reported in U.S. dollars will improve. Approximately 2% of total revenues in the first six months ending June 30, 2004 were derived from sales
in Turkey. These sales were made in Turkish lira and the invoiced sale prices are adjusted to account for fluctuations in the exchange rate between the lira and the dollar. The Company is exposed to fluctuations in such exchange rate from the date
of the invoice until settlement. The Company may enter into foreign exchange contracts to reduce the effects of fluctuations in foreign currency exchange rates on assets, liabilities, firm commitments and anticipated transactions. However, Constar
does not generally hedge its exposure to translation gains or losses on non-U.S. net assets because it reinvests the cash flows within the operations where they are generated. At June 30, 2004, there were no foreign currency derivatives outstanding.



The Companys borrowings under the Revolver Loan, Term B Loan and Second
Lien Loan bear interest rates based on either a floating rate Base Rate or the LIBOR Rate. Therefore, the Company has an exposure to interest rate risk. However, both the Revolver Loan and Term B Loan contain an interest rate floor which is defined
as the greater of either 2% or the LIBOR rate. As of August 1, 2004, the floor of 2% was higher than the LIBOR rate of 1.50%. The definitive extent of the Companys interest rate risk in connection with these loan facilities is not quantifiable
or predictable because of the variability of future interest rates and borrowing requirements.



The principal raw materials used in the manufacture of the Companys products and a major component of cost of goods sold are resins that are petrochemical derivatives. The markets for these resins are cyclical,
and are characterized by fluctuations in supply, demand and pricing. Substantially all of Constars customer contracts contain provisions permitting it to pass through changes in the price of resin. When the Company adjusts its prices under
these agreements to pass through changes in resin prices, its net sales change accordingly but there is little effect on gross profit. In the aggregate, the lag between the effective date of resin price changes and the effective date of price
adjustments to its customers under various pass through mechanisms is approximately equal to the Companys inventory exposure.



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Item 4. Controls and Procedures



Disclosure Controls
and Internal Controls



The Companys disclosure controls and procedures
are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms. Disclosure controls are designed with the objective of ensuring that this information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding the required disclosure. Internal controls and procedures for financial reporting are procedures that are designed with the objective of providing reasonable assurance that:



| |  | Our transactions are properly authorized;
| | - | -----------------------------------------



| |  | Assets are safeguarded against unauthorized or improper use;
| | - | ------------------------------------------------------------



| |  | Transactions are properly recorded and reported; and
| | - | ----------------------------------------------------



| |  | The internal controls permit the preparation of our financial statements in conformity with GAAP.
| | - | -------------------------------------------------------------------------------------------------



Limitations on the Effectiveness of Controls



Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or internal controls will prevent
all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include realities that judgments in decision making can be faulty and that breakdown can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls is also based on certain assumptions about the likelihood of
future events, and there can be no assurance that any control will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions, or degree of compliance with
the policies or procedures related to the control may deteriorate. Because of inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.



Evaluation of Disclosure Controls



At the end of the period covered by this report, Constar carried out an evaluation, under
the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, the Companys
principal executive officer and principal financial officer concluded that its disclosure controls and procedures are effective, and provide reasonable assurance that the material information required to be included in the Companys periodic
SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms. In addition, there have been no significant changes in the Companys internal controls over financial reporting
during the quarter that have come to managements attention that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. The Company has hired additional staff and
has worked to improve its processes to address material weaknesses in the internal controls and procedures for financial reporting relating to (i) the lack of documentation and information systems necessary to ensure compliance with sales contracts
terms and to support the accounting for fixed assets and (ii) an inefficient financial reporting closing process as disclosed in the Companys 2003 annual report filed on form 10-K. The Company will continue to evaluate its needs in the
controls area and respond accordingly.



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##### Table of Contents

PART II  Other Information



Item 1. Legal Proceedings



Prior to Constars
initial public offering, Crown Cork & Seal Technologies Corporation (CCK Technologies), held the patents relating to Oxbar and subsequently contributed these patents to Constar as part of the restructuring attendant to the
Companys initial public offering. CCK Technologies filed a lawsuit seeking unspecified monetary damages on April 8, 1999 in the U.S. District Court for the District of Delaware against Continental PET Technologies, Inc, alleging that
Continental PET, a subsidiary of Owens-Illinois, Inc., was infringing one of its U.S. Oxbar-related patents. The complaint alleges that the materials that Continental PET uses and has used since at least 1998 to achieve oxygen-scavenging properties
for certain containers it sells infringe one of CCK Technologies Oxbar patents. Chevron intervened in the action on May 31, 2000 to assert cross-claims seeking a declaratory judgment that its rights under a 1993 license from CCK
Technologies predecessor include exclusive rights to the particular application of Oxbar technology in multi-layer PET bottles used by Continental PET, as well as certain other rights. On November 25, 2002, the U.S. District Court for the
District of Delaware ruled in favor of CCK Technologies, confirming that the license granted to Chevron did not include the rights that CCK Technologies claims are being infringed by Continental PET and finding instead that Continental PETs
containers are within the rights retained by CCK Technologies. This decision allowed Constar to pursue the lawsuit that Crown initiated against Continental PET. On January 22, 2003, the Company was substituted for CCK Technologies in the lawsuit. In
an April 2, 2003 ruling, the District Court entered judgment in accordance with its November 25, 2002 opinion in favor of the Company and denied Chevron permission to pursue an immediate appeal from the judgment. Chevron must now wait to appeal
until after the underlying infringement case by Constar against Continental PET has been resolved. Discovery has concluded, except for certain depositions that are the subject of pending motions and several expert depositions yet to be scheduled.
The Company is engaged in settlement discussions regarding these actions. There can be no assurance that settlement will be completed on terms favorable to the Company or at all.



Item 4. Submission of Matters to a Vote of Security Holders



On April 29, 2004 the Company held its Annual Meeting of Stockholders. At this meeting, the stockholders voted in favor of the following proposal listed in the Proxy Statement dated March 23, 2004



(1) Election of the following four Class II Directors:



|                |  |            |  |         
|--------------- |  | ---------- |  | --------
|                |  | For        |  | Withheld
|James C. Cook   |  | 10,840,854 |  | 52,068  
|James A. Lewis  |  | 10,854,554 |  | 38,368  
|John P. Neafsey |  | 10,673,254 |  | 219,668 
|Angus F. Smith  |  | 10,673,254 |  | 219,668 



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Item 6. Exhibits and Reports on Form 8-K



(a)
Exhibits



|      |  |                                                                                                                                                                             
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Benefits Allocation Agreement dated as of November 20, 2002, between Crown Cork & Seal Company, Inc. and Constar International Inc.                                         
|      | 
|10.14 |  | Amended Philadelphia Lease Agreement, dated as of January 1, 2004, by and between Crown Cork & Seal Company (PA), Inc. and Constar, Inc.                                    
|      | 
|31.1  |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                         
|      | 
|31.2  |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                         
|      | 
|32.1  |  | Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002.            
|      | 
|32.2  |  | Certification of Executive Vice President and Chief Financial Officer Pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(b) Reports on Form 8-K



Form 8-K, dated April 28, 2004, pursuant to Items 7 and 12, regarding a
press release announcing the Companys 2004 first quarter results.



Form 8-K, dated May 26, 2004, pursuant to Items 7 and 9, regarding a presentation made to certain investors.



Form 8-K, dated June 14, 2004, pursuant to Items 7 and 9, regarding a press release announcing the completion of the FDAs Food Contact Notification
Process for the Companys MonOxbar Monolayer Oxygen Scavenging Technology.



Form 8-K, dated June 21, 2004, as amended on June 28, 2004, pursuant to Items 4 and 7, regarding a change in the independent accountants of the Companys 401(k) Retirement Savings Plan.



Form 8-K, dated June 22, 2004, pursuant to Items 7 and 9, regarding a
presentation made to certain investors.



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SIGNATURES



Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |                            |  |                                                                                                                
|--------------------- |  | -------------------------- |  | ---------------------------------------------------------------------------------------------------------------
|                      |  | Constar International Inc.
|                      |  |                           
|Dated: August 6, 2004 |  | By:                        |  | /s/ James C. Cook                                                                                              
|                      |  |                            |  | James C. Cook                                                                                                  
|                      |  |                            |  | Executive Vice President and Chief Financial Officer (duly authorized officer and principal accounting officer)



33