SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K/A

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR
|__|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11862

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

|DELAWARE
(State or other jurisdiction of
Incorporation or organization) | 13-3467669
(I.R.S. Employer
Identification Number)
|----------------------------------------------------------------------- | --------------------------------------------------

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

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

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

|Title of Each Class | Name on Each Exchange
on which Registered
|------------------- | -----------------------------------------

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|COMMON STOCK, PAR VALUE $.001
9.25% CONVERTIBLE REDEEMABLE
SUBORDINATED DEBENTURES | NEW YORK STOCK EXCHANGE
NEW YORK STOCK EXCHANGE
|---------------------------------------------------------------------------------- | -----------------------------------------------

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

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

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

The aggregate market value
of the common stock, $.001 par value, held by non-affiliates of the registrant
was approximately $195,719,057 based upon the closing price of $19.00 per common
share as quoted on the New York Stock Exchange on October 25, 2005.

As of October 25, 2005,
there were 28,494,973 shares of the registrants common stock outstanding.

Explanatory Note

Interpool, Inc. (the
"Company") is filing this Amendment No. 2 (the "Amendment No
2") to its Form 10-K for the year ended December 31, 2004, originally filed
with the Securities and Exchange Commission (the "SEC") on March 30,
2005 (the "Original Filing"), as amended by Amendment No. 1 to the
Original Filing, filed with the SEC on May 2, 2005 (the Original Filing, as so
amended, the "2004 Form 10-K"), because, subsequent to the filing of
Amendment No. 1, we determined that we had not recorded the full amount of
compensation expense required by U.S. generally accepted accounting principles
("GAAP") with respect to a separation agreement with Mr. Raoul
Witteveen, our former President, which was entered into in connection with Mr.
Witteveens resignation in October 2003. When originally preparing our
Consolidated Financial Statements for the year ended December 31, 2003, we
recorded compensation expense related to the cash separation payments we agreed
to make to Mr. Witteveen. However, the separation agreement we entered into with
Mr. Witteveen also contained a provision under which Mr. Witteveens fully
vested stock options, which had a five year remaining term at the time of his
resignation, would instead expire two years after his resignation and therefore
would not be subject to a provision of our 1993 Stock Option Plan under which
vested options terminate if not exercised within ten business days after
resignation. In our 2003 Consolidated Financial Statements, we should have
re-measured the intrinsic value of the options (the difference between the
market price of the underlying stock and the exercise price of the options) at
the date of the modification and recorded the intrinsic value of the options at
the modification date as additional compensation expense (non-cash) in the
fourth quarter of 2003. As a result of the correction, we are recording
additional compensation expense and additional paid-in capital of $7.1 million
for the year ended December 31, 2003 resulting from the option modification. In
addition, we are recording a deferred tax asset of $2.8 million for the tax
benefit to be derived in the future related to the additional compensation
expense. These changes have the effect of increasing stockholders equity
by $2.8 million. These adjustments reduced net income for the year ended
December 31, 2003 by approximately $4.3 million.

In connection with our
decision to correct our Consolidated Financial Statements for the option
modification discussed above, we will also be correcting our 2003 and 2004
Consolidated Financial Statements for an accounting error previously disclosed
in the Companys 2004 Form 10-K relating to hedge accounting that affected
the Companys 2003 financial results. Because the hedge accounting error
had not been considered sufficiently material to require a modification of the
2003 Consolidated Financial Statements, we recorded a non-cash adjustment to
correct this error during the fourth quarter of 2004. This non-cash adjustment
increased our net income for 2004 by $0.6 million. In light of the decision to
correct our 2003 Consolidated Financial Statements for the option modification,
we are adjusting our 2003 and 2004 Consolidated Financial Statements to reflect
the correction for the hedge accounting error.

The adjustments to properly
account for these transactions are reflected in our Consolidated Financial
Statements included as part of this Amendment No. 2 and are more fully discussed
in Notes 1, 5, 8, 14 and 18 to the Consolidated Financial Statements.

Because of these changes to
our Consolidated Financial Statements, we are amending our 2003 and 2004
Consolidated Financial Statements as included in our 2004 Form 10-K (as
previously amended) to:

| |  | Revise Item 6, "Selected Financial Data."  The revisions appear in:
| | - | -------------------------------------------------------------------

| |  | the Companys Income Statement Data for the year ended December 31, 2004 in
the line items "Income before cumulative effect of change in accounting
principle," "Income per share-Basic" and "Income per
share-Diluted";
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Income Statement Data for the year ended December 31, 2003 in
the line items "Income before cumulative effect of change in accounting
principle," "Income per share-Basic," "Income per
share-Diluted" and "Weighted average shares outstanding-Diluted";
and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Balance Sheet Data as of December 31, 2004 and 2003 in the
line item "Stockholders equity";
| | - | ----------------------------------------------------------------------------------------------------------

| |  | Revise Item 7, "Managements Discussion and Analysis of Financial
Condition and Results of Operations." We have amended Item 7 as follows:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| |  | added an eighth paragraph to the untitled section before the section entitled
"General";
| | - | ----------------------------------------------------------------------------------------

| |  | revised the lease operating and administrative expense percentage for 2003 and
the related discussion within the seventh from last paragraph of the section
entitled "General";
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | revised net income for 2004 and 2003, net income per share for 2004 and 2003 and
the related percentage comparing net income for 2004 with net income for 2003,
as well as the return on average shareholders equity for 2004 and 2003
within the fourth from the last paragraph of the section entitled
"General";
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | revised the discussions regarding "Lease Operating and Administrative
Expenses," "Fair Value Adjustment for Derivative Instruments,"
"Provision for Income Taxes" and "Net Income" within the
sections entitled "Results of Operations, Year Ended December 31, 2004
Compared to Year Ended December 31, 2003" and "Year Ended December 31,
2003 Compared to Year Ended December 31, 2002"; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | revised the first paragraph of the section entitled "Cash Flow" due to
the changes in net income for 2004 and 2003 resulting from compensation expense
related to a modification of the terms for the options held by our former
President which resulted in a new measurement date and the non-cash adjustment
to reflect the correction for the error relating to hedge accounting.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Revise Item 8, "Financial Statements and Supplementary Data." The revisions
appear in:
| | - | --------------------------------------------------------------------------------------

| |  | the Companys Consolidated Balance Sheet as of December 31, 2004 in the
line items "Income taxes-deferred," "Total taxes," "Total liabilities,"
"Additional paid-in-capital," "Retained earnings" and "Total stockholders
equity";
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Balance Sheet as of December 31, 2003 in the
line items "Income taxes-deferred," "Total taxes,"
"Total liabilities," "Additional paid-in capital,"
"Retained earnings," "Accumulated other comprehensive loss"
and "Total stockholders equity";
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Statement of Income for the year ended December
31, 2004 in the line items "Fair value adjustment for derivative
instruments," "Total costs and expenses," "Income before
minority interest expense and provision/(benefit) for income taxes,"
"Income before provision/(benefit) for income taxes," "Provision
(benefit) for income taxes," "Net income," "Net income per
share-Basic" and "Net income per share-Diluted";
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Statement of Income for the year ended December
31, 2003 in the line items "Lease operating expenses,"
"Administrative expenses," "Fair value adjustment for derivative
instruments," "Total costs and expenses," "Income before
minority interest expense and provision/(benefit) for income taxes,"
"Income before provision/(benefit) for income taxes,"
"Provision/(benefit) for income taxes," "Net income,"
"Net income per share-Basic," "Net income per share-Diluted"
and "Weighted average shares outstanding-Diluted";
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Statements of Changes in Stockholders
Equity for 2004 in the line items "Net income (restated)," "Other
comprehensive income (restated)" and "Balance, December 31, 2004
(restated)";
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Statements of Changes in Stockholders
Equity for 2003 in the line items "Net income (restated)," "Other
comprehensive income (restated)" "Comprehensive income
(restated)," "Balance, December 31, 2003 (restated)" and added
the line item "Intrinsic value of option modification";
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Statement of Cash Flows for the year ended
December 31, 2004 in the line items "Net income,"
"Provision/(benefit) for deferred income taxes" and "Fair value
adjustment for derivative instruments";
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Companys Consolidated Statement of Cash Flows for the year ended
December 31, 2003 in the line items "Net income,"
"Provision/(benefit) for deferred income taxes," "Fair value
adjustment for derivative instruments" and the new line item "Option
modification compensation expense"; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Company's Notes to Consolidated Financial Statements:
| | - | ---------------------------------------------------------

| |  | Note 1  revising the subsections "Stock based compensation";
"Comprehensive income/(loss)," "Net income per share"; and
adding a new subsection entitled "Restatement";
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Note 2  revising years 2004 and 2003 in the table detailing the components
of deferred tax assets and liabilities, revising years 2004 and 2003 in the
table detailing the reconciliation of the U.S. statutory tax rate to the
effective tax rate and revising years 2004 and 2003 in the table detailing the
components of the provisions (benefit) for income taxes;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Note 5  revising the unrealized pre-tax income and the related income tax
effect on cash flow hedges and the pre-tax income due to changes in the fair
value of swap agreements which do not qualify as cash flow hedges for the years
ended December 31, 2004 and 2003;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Note 8 - revising the subsection "Separation Agreements";
| | - | ---------------------------------------------------------

| |  | Note 13 - revising years 2004 and 2003 in the table entitled "Segment
Information";
| | - | -----------------------------------------------------------------------------------

| |  | Note 14 - revising the tenth paragraph; and
| | - | -------------------------------------------

| |  | Note 18  revising the subsection entitled "Restatement of previously
reported quarterly results related to hedging transaction" and adding a new
subsection entitled "Restatement of previously reported quarterly results
related to the modification of a stock option award granted to the former
President."
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As required by SEC Rule 12b-15, set forth below in their
entirety are Item 6 (Selected Financial Data), Item 7 (Managements
Discussion and Analysis of Financial Condition and Results of Operations) and
Item 8 (Financial Statements and Supplementary Data).

As part of this Amendment
No. 2 the Company is also filing new certifications from our Chief Executive
Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1 and 32.2).

No attempt has been made in
this Form 10-K/A to update other disclosures presented in the 2004 Form 10-K (as
previously amended), except as described above. This Form 10-K/A does not
reflect events occurring after the filing of the Original Filing or modify or
update those disclosures. Accordingly, this Form 10-K/A should be read in
conjunction with our filings made with the SEC subsequent to the filing of the
Original Filing, including any amendments to those filings.

INTERPOOL, INC.
FORM 10-K/A
TABLE OF CONTENTS

|Item |  | Page
|---- |  | ----

PART II

|ITEM 6.  
ITEM 7.  
ITEM 8.  
ITEM 15. | SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 7
  9
 51
113
|-------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------

|SIGNATURES | 115
|---------- | ---

PART II

ITEM 6.       SELECTED FINANCIAL DATA

The following table sets
forth our selected historical consolidated financial data, for the periods and
at the dates indicated. This information should be read in conjunction with our
historical Consolidated Financial Statements included in this Annual Report on
Form 10-K/A and the notes thereto. (See Note 1B, Restatement, to the
Consolidated Financial Statements for additional details of the restated
amounts.)

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

`YEAR ENDED DECEMBER 31
                                            2004          2003(1) (2)     2002(1)(2)(3)   2001(1)(2)(4)    2000(1)(2)(4)(5)
                                            ----          -----------     -------------   -------------    ----------------
 INCOME STATEMENT DATA:                  Restated         Restated

 Equipment leasing revenue                $388,183         $374,287        $325,080        $338,718          $287,553

 Depreciation and amortization of
 leasing equipment                         $89,458          $87,498         $88,707         $79,678           $66,075

 Interest expense                         $112,013         $106,688        $108,344         $98,270           $87,809

Fair value adjustment for warrants        $49,222               --              --              --                --

Income before cumulative effect of
 change in accounting principle             $7,869          $37,496          $4,389         $28,104           $44,040

 Income per share:
 Basic                                       $0.29            $1.37           $0.16           $1.03             $1.61
                                             =====            =====           =====           =====             =====
 Diluted                                     $0.27            $1.30           $0.15           $0.97             $1.61
                                             =====            =====           =====           =====             =====
 Weighted average shares
 outstanding:

 Basic                                      27,380           27,365          27,360          27,417            27,421

 Diluted                                    28,960           28,935          29,202          28,973            27,426

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

                                          2004             2003            2002            2001             2000
                                          ----             ----            ----            ----             ----
 BALANCE SHEET DATA:                      Restated         Restated

 Cash and cash equivalents                $309,458         $141,019        $170,613        $103,760          $157,224

 Net investment in direct financing       $363,445         $426,815        $334,129        $275,372          $213,180
 leases

 Leasing equipment, net                 $1,579,196       $1,636,716      $1,557,639      $1,335,610        $1,231,037

 Total assets                           $2,404,086       $2,373,036      $2,241,944      $1,923,052        $2,204,590

 Debt and capital lease obligations     $1,718,198       $1,715,687      $1,672,211      $1,429,680        $1,706,985

 Stockholders' equity                     $397,023         $386,477        $336,996        $352,072          $341,322`

|(1) | As disclosed in our Quarterly Report on Form 10-Q for the nine months ended
September 30, 2004, the Company uncovered an immaterial error related to
financial statements not part of any current filing, which has been reported as
an adjustment to opening retained earnings. For further information regarding
this adjustment, see Note 1 to the Consolidated Financial Statements
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Certain reclassifications have been made to the 2003, 2002, 2001 and 2000
amounts in order to conform to the 2004 presentation.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(3) | Effective June 27, 2002, our financial statements include CAI as a consolidated
subsidiary. (See Note 11 to the Consolidated Financial Statements.)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As a result of adopting Statement of Financial Accounting Standards No. 145
("SFAS 145") extraordinary gains related to the retirement of debt during the
years ended December 31, 2001 and 2002, respectively, have been reclassified
into operating income on a pretax basis. Income before cumulative effect of
change in accounting principle include net of tax amounts of $558 and $840 for
years ended December 31, 2001 and 2000, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The 2000 income statement data excludes $660 resulting from the cumulative
effect of change in accounting principle. The 2000 results include earnings from
the assets acquired from Transamerica ("TA"), which we acquired on October 24,
2000, with an effective date of October 1, 2000. The 2000 results include only
the chassis acquired from TA as the rail trailers and domestic containers were
identified as assets held for sale at the time of purchase.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The following discussion of
our historical financial condition and results of operations should be read in
conjunction with the historical consolidated financial statements and the notes
thereto and the other financial information appearing elsewhere in this report.
(All fleet statistics including the size of the fleet, utilization of the
leasing equipment or the rental rates per day that are set forth in this Annual
Report on Form 10-K include our equipment, including that portion of our
equipment managed by CAI. To the extent that our equipment is managed by CAI,
the equipment is considered fully utilized since it is not available for us to
put on hire regardless of whether all of the units are generating equipment
leasing revenue. All equipment owned by CAI or managed by CAI (with the
exception of equipment owned by us and managed by CAI), is excluded from all
statistics, unless otherwise indicated. In addition, all of our chassis assigned
to chassis pools are considered fully utilized. This exclusion of information
relative to CAI, unless indicated otherwise, provides a focus on the drivers
which are critical to our core business.)

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

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

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

In preparation for the 2003
audit, we determined that the previously reported quarterly results for the
quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 required
restatement. For additional information regarding this restatement, see Note 19
in our 2003 Form 10-K.

During the preparation of
the third quarter of 2004 financial statements, we uncovered an immaterial error
related to financial statements not part of any current filing, which has been
reported as an adjustment to opening retained earnings. For further information
regarding this adjustment, see Note 1 to the Consolidated Financial Statements.
All financial information for 2004 and prior periods included in this Report on
Form 10-K/A gives effect to the adjustment.

During the preparation of
the December 31, 2004 Consolidated Financial Statements, a weakness in our
documentation of certain hedging relationships was uncovered. It was determined
that the previously reported quarterly results for March 31, 2004, June 30, 2004
and September 30, 2004 required restatement. For additional information
regarding this restatement, see Notes 1(B) and 18 to the Consolidated Financial
Statements.

During the third quarter of
2005, we determined that we had not recorded the full amount of compensation
expense required by U.S. generally accepted accounting principles
("GAAP") with respect to a separation agreement with Mr. Raoul
Witteveen, our former President, which was entered into in connection with Mr.
Witteveens resignation in October 2003. When originally preparing our
financial statements for the year ended December 31, 2003, we recorded
compensation expense related to the cash separation payments we agreed to make
to Mr. Witteveen. However, the separation agreement we entered into with Mr.
Witteveen also contained a provision under which Mr. Witteveens fully
vested stock options, which had a five year remaining term at the time of his
resignation, would instead expire two years after his resignation and therefore
would not be subject to a provision of our 1993 Stock Option Plan under which
vested options terminate if not exercised within ten business days after
resignation. In our 2003 Consolidated Financial Statements, we should have
re-measured the intrinsic value of the options (the difference between the
market price of the underlying common stock and the exercise price of the
options) at the date of the modification and recorded the intrinsic value of the
options as additional compensation expense (non-cash) in the fourth quarter of
2003. In connection with our decision to correct our Consolidated Financial
Statements for the option modification discussed above, we are correcting our
2003 and 2004 Consolidated Financial Statements for an accounting error
previously disclosed in our 2004 Form 10-K relating to hedge accounting that
affected our 2003 financial results. Because the hedge accounting error had not
been considered sufficiently material to require a modification of the 2003
Consolidated Financial Statements, we had previously recorded a non-cash
adjustment to correct this error during the fourth quarter of 2004.

For further information
regarding the restatement, see Note 1(B) to the Consolidated Financial
Statements.

Certain reclassifications
have been made to the 2002 and 2003 amounts in order to conform to the 2004
presentation. In addition, we determined it was necessary to change the
classification of certain types of revenue which had been previously reported as
a reduction to lease operating expenses. This revenue consists primarily of fees
charged to lessees for handling, repositioning and repairs which had previously
reduced the related costs for these services. This revenue is reported
separately as other revenue on the face of our Consolidated Statements of
Income. These reclassifications have no impact on net income.

General

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

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

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

During the year ended
December 31, 2004, as compared with the year ended December 31, 2003, our
equipment leasing revenues increased due to strong demand for equipment,
resulting in a favorable increase in utilization rates for our chassis and
continued high utilization rates for our containers. During 2004, the size of
our chassis fleet was at essentially the same level as the earlier period.
However, our fleet of containers decreased from 870,000 twenty-foot equivalent
units ("TEU") to 808,000 TEU primarily due to the number of direct
financing leases maturing being greater than the investment in new direct
financing lease containers. Utilization of our container and chassis fleets
(including equipment on both operating and direct financing leases) was 99% and
97%, respectively, at December 31, 2004.

Although daily rental rates
for new long-term leases in our operating lease container fleet remained
relatively flat during 2003, container daily lease rates on new equipment rose
in 2004 and are expected to continue to increase in 2005 due to the increased
demand for equipment as well as the increases in costs of new containers.
However, daily rental rates for used containers are very competitive and
expiring operating leases for larger contracts are sometimes renewed at daily
rental rates that are lower than the rental rates in the initial lease term.

Lease rates for new chassis
were essentially flat during the first half of 2004. They rose in the last half
of 2004, and continue to rise thus far in 2005. Price increases for new chassis
are largely driven by the increase in steel costs, but have increased at a
slower rate than container costs due to the large number of sub-assemblies that
make up a chassis. Many of these sub-assemblies were in inventory prior to the
steel cost increases and only recently have started to rise in price. The effect
of higher material costs has been tempered by the recent shift in the
manufacturing base for chassis toward China, where there are significantly lower
labor and overhead costs. Lease rates for used chassis remained flat during the
first half of 2004, but have been rising since then. The increases are due
largely to the depletion of used chassis inventories and the rising price of new
and remanufactured chassis.

We anticipate that industry
demand for chassis and containers will continue to be strong well into 2006.
This projection is supported by the fact that all major shipyards are reporting
large order backlogs through 2007. The world cellular container ship fleet is
expected to increase by 13.3% in 2005, 15.2% in 2006 and 9.3% in 2007 (excluding
scrapping) as reported in the November 2004 edition of Containerisation
International. As of October 1, 2004, the total order book was for 892 ships
with a total capacity of approximately 3.3 million TEU, or approximately 50% of
the world cellular container ship fleet.

We believe a number of
factors have contributed to the strong demand for equipment in the industry.
From 2002 to 2003, according to the Containerisation International Yearbook
2005, global containerized traffic increased by 9.6%, from 276.6 million TEU in
2002 to 303.1 million TEU in 2003, fueling demand for transportation equipment
generally. In addition, as mentioned above, several major shipping lines started
to bring new, very large 8,000-9,000 TEU ships to the West Coast of the United
States in the fall of 2004. When ships of this size are unloaded, they require
the use of a larger number of chassis to move the containers to local railroad
terminals or their final destinations. The large quantity of vessels on order
will also require additional containers to support them. Demand for chassis has
also been affected by the inability of large, fully loaded ships to pass through
the Panama Canal. These ships typically discharge their cargo on the West Coast
of the United States, with the cargo being moved by "land bridges", by
truck and rail, inland and across the country, using chassis at various stages
during this process. At the same time, the demand for chassis, along with
increased congestion at many of the rail and marine facilities around the
country, have fueled an increase in the pooling of chassis for greater
efficiencies. Correspondingly, we have experienced an increase in demand for our
"PoolStat"TM chassis management services as more shipping lines are
entering into these chassis sharing arrangements. In addition, we have continued
to experience high demand in our own Trac Lease neutral chassis pools at
railroads and marine terminals.

Our container fleet
(including units on hire as direct financing leases) decreased in size by 7.0%
from December 31, 2003 to December 31, 2004, while our chassis fleet held at
essentially the same level. We were not able to take full advantage of the
strong customer demand for containers and chassis during the latter part of 2003
and the first nine months of 2004, as a result of the delay in filing our Annual
Report on Form 10-K for 2002, our Quarterly and Annual Reports on Forms 10-Q and
10-K for 2003 and our Quarterly Reports on Form 10-Q for 2004 which adversely
affected our ability to obtain the financing necessary for us to purchase
equipment for lease to customers. In addition, the requirement to maintain
certain levels of unrestricted cash continued to limit the amount of new
business we have written with our customers during the first nine months of
2004. This requirement was eliminated when our revolving credit facility and one
other facility were repaid in full during November 2004. We have successfully
completed $747.0 million of financings and commitments from January 1, 2004 to
December 31, 2004, of which $517.0 million is secured by equipment and leases,
while the remaining $230.0 million is unsecured debt. Of the $517.0 million of
new financings and commitments secured by equipment and leases, approximately
$333.0 million was used (1) to satisfy required payments to equipment
manufacturers, (2) to finance previously unencumbered assets, (3) to re-finance
existing secured debt, and (4) for other working capital requirements. This left
$184.0 million available under these facilities for future use at December 31,
2004. Of the $230.0 million of unsecured debt, one financing for $150.0 million
was completed during September 2004, with $49.1 million of the proceeds
concurrently used to reduce existing unsecured debt. A second financing for
$80.0 million of unsecured debt was completed during November 2004. (For further
discussion of these transactions, see "Debt and Capital Lease
Obligations" below and Note 4 to the Consolidated Financial Statements.) In
addition, our cost of new financing during 2004 was higher than we experienced
in 2003, due to higher interest rates in general and increased borrowing costs
resulting from the lowering of our credit ratings over the past year. The
increase in interest expense during 2004 was the result of increased interest
rates and bank fees paid in order to obtain waivers related to our delayed
filings, offset by carrying lower debt balances as compared to the prior year
period. We regularly evaluate financing proposals which, when coupled with
available cash balances and funds available under commitments mentioned above,
could be used for growth, for refinancing existing facilities and for working
capital.

As of December 31, 2004,
our commitments for future capital expenditures totaled approximately $149.6
million with approximately $116.7 million committed for fiscal 2005. Our
available liquidity at December 31, 2004, including $223.0 million available
under credit facilities, was $507.6 million after deducting $24.9 million
of restricted cash. Required debt repayments and capital lease payments for the
next 12 months totaled $240.6 million. Based on our existing cash balances,
financings closed, and our financial projections of operating cash flow for the
future, we believe that we will have sufficient liquidity to grow our portfolio
while meeting our obligations and commitments as they become due.

Other than interest expense
and depreciation expense on our operating lease equipment, our primary expenses
are corporate administrative and lease operating expenses, which include
maintenance and repair expense, as well as storage and positioning expense. Our
lessees are generally responsible for lease operating expenses during the term
of their lease. Our corporate administrative expenses are primarily employee
related costs such as salary expense, costs of employee benefits, information
technology expenses and travel and entertainment costs, as well as expenses
incurred for outside services such as legal, consulting and audit related fees.
During 2004, lease operating and administrative expenses as a percentage of
total revenues were 35.9%, compared to 40.7% during the same period in 2003. The
additional personnel and systems enhancements we are adding to improve our
internal controls, as well as additional procedures being implemented to comply
with Sarbanes-Oxley requirements, have added incremental administrative expenses
in 2004. During 2004, the incremental administrative expenses were offset by a
reduction in legal fees resulting from the Audit Committee and SEC
investigations, a reduction in storage costs resulting from an increase in fleet
utilization, and a reduction in compensation expense resulting from a one time
charge during 2003 for the modification of the terms of stock options held by
our former President.

During 2003 and 2004, we
incurred significant costs related to the investigations by our Audit Committee
and the SEC, separation agreements with our former Chief Financial Officer and
our former President, legal representation for the Company as well as our
officers, directors and employees, the payment of fees in order to obtain
necessary waivers from our financial institutions and, during 2004, the
proceedings before The New York Stock Exchange to delist our securities. We will
continue to incur additional costs relating to the formal investigation by the
SEC and the class action lawsuit, including the cost of legal representation for
the Company and our current and former officers, directors and employees.

Non-performing receivables
totaled $12.5 million at December 31, 2004 compared with $12.8 million at
December 31, 2003. Reserves of $11.8 million and $11.9 million, respectively,
have been established against these non-performing receivables. During 2004,
receivable write-offs net of recoveries totaled $3.7 million as compared with
$1.9 million for the same period in 2003.

Our net income for the year
ended December 31, 2004 was $7.9 million as compared with $37.5 million for the
year ended December 31, 2003, a reduction of 79%. The December 31, 2004 net
income included non-cash expense of $49.2 million (for which no tax benefit is
derived) resulting from the change in fair value of the warrants issued by us
during September 2004 in connection with a Securities Purchase Agreement
pursuant to which we sold $150.0 million of 6.0% notes due in 2014 (See Note 4
to the Consolidated Financial Statements). In addition, our 2004 net income
included an after tax gain on the settlement of an insurance litigation of $5.2
million. Our net income per share on a fully diluted basis for the year ended
December 31, 2004 and 2003 was $0.27 and $1.30, respectively. Annualized return
on average stockholders equity was 2.0% for the year ended December 31,
2004 compared to 10.4% for the year ended December 31, 2003. Excluding the
non-cash expense for the change in the fair value of the warrants and the gain
on settled insurance litigation, the annualized return on average
stockholders equity was 12.6 for the year ended December 31, 2004.

We conduct business with
shipping line customers throughout the world and are therefore subject to the
risks of operating in disparate political and economic conditions including
those associated with increasing oil prices. Offsetting this risk is the
worldwide nature of the shipping business and the ability of our shipping line
customers to shift their operations from areas of unfavorable political and/or
economic conditions to more promising areas. Approximately 99% of our revenues
are billed and paid in U.S. dollars. We believe these factors substantially
mitigate foreign currency rate risks.

Our container leasing
operations are primarily conducted through our subsidiary, Interpool Limited, a
Barbados corporation, as well as through CAI, our consolidated 50% owned
subsidiary. Our effective tax rate benefits substantially from the application
of an income tax convention, pursuant to which the profits of Interpool Limited
from international container leasing operations are exempt from federal taxation
in the United States. As discussed below, these profits are subject to Barbados
tax at rates that are significantly lower than the applicable rates in the
United States. For further information regarding the United States and Barbados
Tax Treaty and the recently-enacted Protocol to this Treaty, see Note 2 to the
Consolidated Financial Statements and the "United States Federal Income
Tax" section of Managements Discussion and Analysis in this Form
10-K/A.

The sections that follow
analyze our results of operations by financial statement caption and provide a
more detailed discussion of our performance for the year ended December 31, 2004
as compared to December 31, 2003 and for the year ended December 31, 2003
compared to the year ended December 31, 2002.

Results of Operations
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Equipment Leasing Revenue. Our equipment leasing
revenues increased to $388.2 million for the year ended December 31, 2004, from
$374.3 million in the year ended December 31, 2003, an increase of $13.9 million
or 4%.

Container leasing segment
revenues increased to $181.5 million for the year ended December 31, 2004, from
$175.1 million in the year ended December 31, 2003, an increase of $6.4 million
or 4%. The increase was primarily attributable to an increase in container
operating lease revenues of $9.4 million, partially offset by a decrease in
direct financing lease revenues of $3.1 million. The incremental container
operating lease revenues, as compared to the prior year period, are primarily
due to our container operating lease fleet which increased in size by 7%. The
daily rental rates for the overall container fleet were lower, partially
offsetting the incremental revenue resulting from the increased average size of
our container operating lease fleet. Utilization rates of our container fleet
have historically been calculated assuming containers managed by CAI were 100%
utilized since they were not available to us to put on hire regardless of
whether all of these units are generating revenue. Under this method,
utilization rates of our container operating lease fleet were 99% at December
31, 2004 and 2003. The utilization rates of our operating lease container fleet,
considering CAIs actual utilization rates for our operating lease
containers managed by CAI, were 96% and 94% at December 31, 2004 and 2003,
respectively.

Domestic intermodal
equipment segment revenues increased to $206.7 million for the year ended
December 31, 2004, from $198.5 million in the year ended December 31, 2003, an
increase of $8.2 million or 4%. The increase was attributable to an increase in
chassis operating lease revenues of $9.4 million, partially offset by a decrease
in direct financing lease revenues of $1.2 million. The incremental chassis
operating lease revenues are primarily due to an increase in the utilization and
daily rental rates for our chassis fleet as compared to the prior year period.
The utilization rates of our domestic intermodal chassis operating lease fleet
were 97% and 96% at December 31, 2004 and 2003, respectively.

Computer leasing equipment
segment revenues decreased $0.6 million as compared to the prior year period due
to the liquidation of the computer leasing segment which was completed during
the first quarter of 2004.

Other Revenue. Our other
revenues decreased to $16.2 million for the year ended December 31, 2004, from
$27.8 million in the year ended December 31, 2003, a decrease of $11.6 million
or 42%.

Container leasing segment
other revenues decreased to $8.7 million for the year ended
December 31, 2004, from $11.8 million in the year ended December 31,
2003, a decrease of $3.1 million or 26%. The decrease was primarily
attributable to a decrease in container positioning revenue of $2.0 million as
well as a reduction in billable repairs to our lessees at the termination of a
lease of $1.2 million.

Domestic intermodal
equipment segment other revenues decreased to $7.5 million for the year
ended December 31, 2004, from $16.0 million in the year ended December 31,
2003, a decrease of $8.5 million or 53%. The decrease was primarily
attributable to a reduction in billable services for positioning of equipment
provided to the United States military of $4.0 million and a reduction in
billable repairs to our lessees at the termination of a lease of
$4.4 million.

Lease Operating and Administrative Expenses. Our
lease operating and administrative expenses decreased to $145.3 million for
the year ended December 31, 2004 from $163.5 million in the year ended December
31, 2003, a decrease of $18.2 million or 11%.

The decrease was primarily due to:

| |  | A decrease in storage costs of $4.7 million primarily due to increased
utilization experienced within CAIs container fleet as well as within the
domestic intermodal chassis product line.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease of $2.7 million in positioning and handling expenses, primarily
due to a reduction in services incurred for the United States military.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in maintenance and repair costs of $2.6 million primarily due to a
decrease in repairs of equipment for both the chassis and container product
lines.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in legal and consulting fees of $2.0 million primarily due to a
reduction in legal fees related to the Audit Committee and SEC investigations in
2003 and the class action lawsuit, partially offset by increased consulting
services.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in commission expense of $1.1 million primarily due to the write-off
of deferred sales commissions in the prior year period, as well as an overall
reduction in agency commissions.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in foreign exchange gains of $1.1 million primarily due to the
effects of foreign currency fluctuations.
| | - | --------------------------------------------------------------------------------------------------------------------

| |  | A decrease in travel and entertainment expense of $0.7 million primarily due to
reduced executive travel incurred within the container leasing segment.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in compensation related expense of $3.2 million primarily due to
$12.9 million recorded in 2003 related to separation agreements with our former
Chief Financial Officer who resigned in July 2003 and our former President who
resigned in October 2003. These costs included a $7.1 million charge related to
the modification of the options held by our former President. This reduction due
to the separation agreements was largely offset by an increase in headcount and
other employee related costs.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A further breakdown of the lease operating and administrative
expense variances, as compared to the prior period, by reportable segment is as
follows:

| |  | Container leasing segment lease operating and administrative expenses decreased
to $46.7 million for the year ended December 31, 2004 from $54.2 million in the
year ended December 31, 2003, a decrease of $7.5 million or 14%. This
decrease can be summarized as follows:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Container
                 (Dollars in millions)                                  Leasing
                 ---------------------                                ---------
                 Storage expense                                        $(3.9)
                 Legal and consulting fees                               (1.7)
                 Commissions expense                                     (1.1)
                 Exchange                                                (1.1)
                 Maintenance and repairs expense                         (0.8)
                 Travel and entertainment expense                        (0.7)
                 Positioning and handling expense                        (0.5)
                 Compensation related expense                             3.0
                 Other, net                                              (0.7)
                                                                         ----
                 Total                                                 $ (7.5)
                                                                       =======`

| |  | Domestic intermodal equipment segment lease operating and administrative
expenses decreased to $98.6 million for the year ended December 31, 2004 from
$109.2 in the year ended December 31, 2003, a decrease of $10.6 million or 10%.
This decrease can be summarized as follows:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Domestic
                                                                     Intermodal
                 (Dollars in millions)                                Equipment
                 --------------------                                ----------
                 Compensation related expense                           $(6.2)
                 Positioning and handling expense                        (2.2)
                 Maintenance and repairs expense                         (1.8)
                 Storage expense                                         (0.8)
                 Legal and consulting fees                               (0.3)
                 Other, net                                               0.7
                                                                          ---
                 Total                                                 $(10.6)
                                                                       =======`

During 2003 and 2004, we
incurred significant costs related to the investigations by our Audit Committee
and the SEC, separation agreements with our former Chief Financial Officer and
our former President, legal representation for the Company as well as our
officers, directors and employees, the payment of fees in order to obtain
necessary waivers from our financial institutions and, during 2004, the
proceedings before The New York Stock Exchange to delist our securities. We will
continue to incur additional costs relating to the formal investigation by the
SEC and the class action lawsuit including the cost of legal representation for
the Company and our current and former officers, directors and employees. The
costs incurred during 2003 and 2004 are as follows:

`Year Ended        Year Ended
                                               December 31,      December 31,
           (Dollars in millions):                  2003              2004
           ----------------------              ------------      ------------
           Audit fees for the reaudits
              and restatements                      $3.6              $0.5
           Cost of investigations                    5.9               0.2
           Legal and consulting fees                 3.2               2.4
           Separation agreements                    13.0               0.3
           Bank waiver fees                          1.6               2.5
                                                     ---               ---
           Amounts before tax                      $27.3              $5.9
                                                   =====              ====
           Amounts net of tax                      $17.2              $4.0
                                                   =====              ====`

Provision for Doubtful
Accounts. Our provision for doubtful accounts decreased to $1.5 million for the
year ended December 31, 2004 from $4.2 million for the year ended December 31,
2003. The decrease was primarily attributable to an improvement in the risk
profile of our outstanding receivables, partially offset by the reversal during
the prior year period of bad debt provisions previously recorded by Microtech,
without a similar reversal of bad debt provisions during the current year period
($0.4 million). During the year ended December 31, 2004, our non-performing
receivables decreased $0.3 million ($12.5 million at December 31, 2004 and $12.8
million at December 31, 2003). As of December 31, 2004 and December 31, 2003,
our non-performing receivables, net of applicable reserves, were 1.01% and
1.27%, respectively, of accounts receivable, net. Our provision for doubtful
accounts is provided based upon a quarterly review of the receivables. This
review is based on the risk profile of the receivables, credit quality
indicators such as the level of past-due amounts and economic conditions, as
well as the value of underlying collateral in the case of direct financing lease
receivables.

Fair Value Adjustment for Derivative Instruments. Our non-cash
fair value adjustment for derivative instruments income amounted to $1.5 million
for the year ended December 31, 2004 as compared to income of $1.8 million for
the year ended December 31, 2003. The income for the year ended December 31,
2004, as well as the prior year period, was primarily due to the change in fair
value of interest rate swap agreements held which do not qualify as cash flow
hedges.

Fair Value Adjustment for Warrants. Our non-cash fair value
adjustment for warrants expense amounted to $49.2 million for the quarter and
year ended December 31, 2004, without a similar item in the prior year period.
The expense for the year ended December 31, 2004 was due to the change in the
fair value of the Warrants issued during September 2004 in connection with the
6.0% Notes, which Warrants are classified as a liability on the accompanying
Consolidated Balance Sheets. Due primarily to the increase in the market value
of our common stock during the last quarter of 2004, the fair market value of
these Warrants increased from $22.5 million at September 30, 2004 to $71.7
million at December 31, 2004. For the period of time that these Warrants are
classified as a liability, any further increase in the fair market value of the
Warrants will result in an additional non-cash expense to the Consolidated
Statements of Income. If the fair market value of the Warrants decreases in the
future, we will record non-cash income in our Consolidated Statements of Income.
Accordingly, future changes to the fair market value of these Warrants have the
potential to cause volatility in our future results.

Depreciation and Amortization of Leasing Equipment. Our
depreciation and amortization expenses increased to $89.5 million for the year
ended December 31, 2004, from $87.5 million for the year ended December 31,
2003, an increase of $2.0 million or 2%. This increase was primarily due to
additions to our operating lease fleet.

Impairment of Leasing Equipment. Our impairment of leasing
equipment expense decreased to $4.6 million for year ended December 31, 2004,
from $9.0 million for the year ended December 31, 2003, a decrease of $4.4
million. This decrease was primarily due to a reduction in impairment losses
related to damaged equipment that was subsequently remanufactured ($3.0
million), and a decrease in impairment losses for idle equipment
($1.5 million).

(Income)/Loss for Investments Accounted for Under the Equity
Method. The increase in (income)/loss for investments accounted for under the
equity method of $2.1 million during the year ended December 31, 2004 resulted
primarily from improved earnings for certain investments accounted for under the
equity method.

Gain on Insurance Settlement. During the year ended December 31,
2004, we signed an agreement settling the lawsuit and claims under our insurance
policy related to the default of a South Korean Customer. In connection with
this settlement, we recognized a pre-tax gain of $6.3 million related to the
$26.4 million settlement of the claim during the three months ended June 30,
2004. (See Note 16  Settled Insurance Litigation).

Other (Income)/Expense, Net. We had other income of $15.7
million during the year ended December 31, 2004 compared to $5.1 million of
other income for the year ended December 31, 2003. The increase of $10.6 million
was primarily due to:

| |  | An increase in gains on equipment sales of $13.7 million, including an increase
of $10.4 million in gains on equipment sales to third parties recognized by CAI.
The increase in gains on equipment sales recognized by CAI was due to an
increase in volume, as well as an increase in the returns generated on the
equipment sales due to the favorable market conditions within the container
resale sector. In addition, during the fourth quarter of 2004, we sold certain
assets of CTC Container Trading (U.K.) Limited, a wholly-owned subsidiary which
leased specialized cargo carrying units and other equipment for use by companies
operating in the North Sea, which resulted in a pre-tax profit of approximately
$0.9 million. The remainder of the increase in gains on equipment sales was
primarily due to the favorable market conditions we experienced in the resale
sector for containers as compared to the prior year period, as well as sales of
certain railcars which contributed favorably to profits on equipment sales.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $2.9 million gain recorded in October 2003 resulting from the consolidation of
assets and liabilities of a special purpose entity (which no longer qualified
for off-balance sheet treatment for accounting purposes) formed as part of our
container lease securitization program. This gain resulted primarily from the
favorable credit loss experience through September 30, 2003 on the underlying
direct financing leases as compared to the assumed credit losses of 1.5%. See
Note 7 to the Consolidated Financial Statements for further discussion of the
accounting for this special purpose entity.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Expense. Our
interest expense increased to $112.0 million in the year ended December 31, 2004
from $106.7 million in the year ended December 31, 2003, an increase of $5.3
million or 5%. The increase in interest expense was primarily attributable to an
increase in amortization of deferred financing fees of $2.8 million, increased
interest rates resulting in increased interest expense of $2.6 million and an
increase of $0.9 million for bank fees in order to obtain waivers related to our
delayed filings. These increases were partially offset by reduced borrowings
resulting in a reduction in interest expense of $1.0 million.

Interest Income. Our
interest income decreased to $3.4 million in the year ended December 31, 2004
from $4.0 million in the year ended December 30, 2003, a decrease of $0.6
million or 15%. The decrease in interest income was primarily due to reduced
earnings on invested cash balances due to lower interest rates, partially offset
by an increase in average invested balance.

Minority Interest Expense, Net. The change in minority interest
expense, net of $6.5 million for the year ended December 30, 2004 as compared to
the prior year was primarily due to a $13.5 million increase in net income
reported by our 50%-owned consolidated subsidiary, CAI.

Provision for Income Taxes.
We recorded an income tax provision of $13.4 million for the year ended December
31, 2004 as compared to $0.8 million for the year ended December 31, 2003. This
increase was principally caused by an increase in taxable income of $32.2
million as adjusted for the $49.2 million permanent tax difference that arose
from the non-cash expense pertaining to the Warrant liability. In addition, a
larger proportion of taxable income was generated from United States sources as
compared to lower-taxed international source income.

Interpool Limiteds
pre-tax income (international sourced income) is taxed at a low rate
(approximately 3%) due to the income tax convention between the United States
and Barbados. The domestic intermodal divisions pre-tax income (United
States sourced income), including corporate activities and the results of
operations of CAI, is taxed at the higher United States tax rates. During the
year ended December 31, 2004, 35% of taxable income was generated from
United States sources as compared to a loss experienced during the year ended
December 31, 2003, thus contributing to the increase in the provision for
income taxes.

Net Income.As a result of
the factors described above, our net income decreased to $7.9 million in the
year ended December 31, 2004 from $37.5 million in the year ended December 31,
2003.

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

Equipment Leasing Revenue.
Our equipment leasing revenues increased to $374.3 million for the year ended
December 31, 2003, from $325.1 million in the year ended December 31, 2002, an
increase of $49.2 million or 15%.

Container leasing segment
revenues increased to $175.1 million for the year ended December 31, 2003, from
$138.3 million in the year ended December 31, 2002, an increase of $36.8 million
or 27%. The increase was attributable to $17.1 million of incremental leasing
revenues as a result of consolidating the activities of CAI for a full year in
2003 as compared to approximately six months in 2002. In addition, container
operating lease revenues increased $10.1 million and direct financing lease
revenues increased $9.6 million. The incremental container operating lease
revenues are primarily due to our container operating lease fleet which
increased in size by 11% and an increase in the utilization rates for our
containers as compared to the prior year period. The daily rental rates for
containers were relatively flat as compared to the prior year period.
Utilization rates of our container fleet have historically been calculated
assuming containers managed by CAI were 100% utilized since they were not
available to us to put on hire regardless of whether all of these units are
generating revenue. Under this method, utilization rates of our container
operating lease fleet were 99% and 98% at December 31, 2003 and 2002,
respectively. The utilization rates of our operating lease container fleet,
considering CAIs actual utilization rates for our operating lease
containers managed by CAI, were 94% and 92% at December 31, 2003 and 2002,
respectively.

Domestic intermodal
equipment segment revenues increased to $198.5 million for the year ended
December 31, 2003, from $185.3 million in the year ended December 31, 2002, an
increase of $13.2 million or 7%. The increase was attributable to an increase in
chassis operating lease revenues of $12.4 million and direct financing lease
revenues which increased $0.8 million. The incremental chassis operating lease
revenues are primarily due to our chassis operating lease fleet which increased
in size by 5% and an increase in the utilization rates for our chassis as
compared to the prior year period. The daily rental rates for chassis were
relatively flat as compared to the prior year period. The utilization rates of
our domestic intermodal chassis operating lease fleet were 96% and 93% at
December 31, 2003 and 2002, respectively.

Computer leasing equipment
segment revenues decreased to $0.6 million for the year ended December 31, 2003,
from $1.5 million in the year ended December 31, 2002, a decrease of $0.9
million or 60%. This decrease is due to the liquidation of the computer leasing
segment which was taking place throughout 2003.

Other Revenue. Our other
revenues increased to $27.8 million for the year ended December 31, 2003, from
$19.9 million in the year ended December 31, 2002, an increase of
$7.9 million or 40%.

Container leasing segment
other revenues increased to $11.8 million for the year ended December 31, 2003,
from $8.1 million in the year ended December 31, 2002, an increase of
$3.7 million or 46%. The increase was primarily attributable to an increase
in container positioning revenue of $2.1 million and an increase in
billable repairs to our lessees at the termination of a lease of $1.6 million.

Domestic intermodal
equipment segment other revenues increased to $16.0 million for the year ended
December 31, 2003, from $11.8 million in the year ended December 31, 2002,
an increase of $4.2 million or 36%. The increase was primarily attributable to
an increase in billable services for positioning of equipment provided to the
United States military of $4.0 million.

Lease Operating and Administrative Expenses. Our lease operating
and administrative expenses increased to $163.5 million for the year ended
December 31, 2003 from $117.0 million in the year ended December 31, 2002, an
increase of $46.5 million or 40%.

The increase was primarily due to:

| |  | An increase of $13.0 million resulting from the consolidation of the activities
of CAI for the full year in 2003 compared to approximately six months in the
prior year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in legal fees of $11.6 million primarily related to the Audit
Committee and SEC investigations as well as the restatement of our 2001 and 2000
annual financial results and the financial results of the first three quarters
of 2002.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in compensation related expense of $13.0 million due to the
recording of costs related to separation agreements with our former Chief
Financial Officer who resigned in July 2003 and our former President who
resigned in October 2003. Of this amount, $7.1 million was related to the
modification of fully vested stock options held by the former President and $5.9
million related to severance and other costs incurred under the terms of the
separation agreements. In addition, salary expense increased by $2.6 million as
a result of an increase in headcount and other employee related costs.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in maintenance and repair costs of $4.7 million primarily due to the
refurbishment of chassis for use within the chassis product line and an increase
in repairs within the container product line.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in audit expenses of $4.3 million primarily as a result of the
restatement of our 2001 and 2000 annual financial results and the financial
results of the first three quarters of 2002.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase of $3.5 million in positioning and handling expenses, primarily due
to an increase in services provided for the United States military during 2003.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in insurance expense of $0.8 million primarily due to premiums for
insurance coverage against customer insolvency and related equipment losses. The
premium rates and deductibles for this type of insurance have increased as a
result of higher claim experience by the Company and others within the industry.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in storage costs of $6.4 million primarily due to increased
utilization, as well as a reduction in storage related expenses as we sold
equipment recovered from a customer in default.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in computer leasing equipment segment lease operating and
administrative expenses of $0.4 million due to the liquidation of the computer
leasing segment which was taking place throughout 2003.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A further breakdown of the lease operating and administrative
expense variances, as compared to the prior period, by reportable segment is as
follows:

| |  | Container leasing segment lease operating and administrative expenses (excluding
the activities of CAI as CAI was a consolidated entity for the full year in 2003
compared to approximately six months in the prior year) increased to
$27.0 million for the year ended December 31, 2003 from $26.1 in the year
ended December 31, 2002, an increase of $0.9 million or 3%. This increase
can be summarized as follows:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Container
           (Dollars in millions)                          Leasing
           ---------------------                         ----------
           Legal fees                                       $1.7
           Audit expense                                     1.3
           Compensation related expense                      1.2
           Maintenance and repairs expense                   1.2
           Insurance expense                                 0.3
           Storage expense                                  (5.0)
           Other, net                                        0.2
                                                            -----
           Total                                            $0.9
                                                            ======`

| |  | Domestic intermodal equipment segment lease operating and administrative
expenses increased to $109.2 million for the year ended December 31, 2003 from
$76.3 in the year ended December 31, 2002, an increase of $32.9 million or 43%.
This increase can be summarized as follows:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Domestic
                                                        Intermodal
           (Dollars in millions)                         Equipment
           ---------------------                        -----------
           Compensation related expense                    $14.4
           Legal fees                                        9.9
           Maintenance and repairs expense                   3.5
           Positioning and handling expense                  3.5
           Audit expense                                     3.0
           Insurance expense                                 0.5
           Storage expense                                  (1.4)
           Other, net                                       (0.5)
                                                           ------
           Total                                           $32.9
                                                           =======`

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

Fair Value Adjustment for Derivative Instruments. Our non-cash
fair value adjustment for derivative instruments income amounted to $1.8 million
for the year ended December 31, 2003 as compared to expense of $5.5 million in
the year ended December 31, 2002, a change of $7.3 million. This change is
primarily related to the change in the fair market value of interest rate swaps
accounted for as free standing derivatives.

Depreciation and Amortization of Leasing Equipment. Our
depreciation and amortization expenses decreased to $87.5 million for the year
ended December 31, 2003, from $88.7 million for the year ended December 31,
2002, a decrease of $1.2 million or 1%.

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

| |  | A decrease related to the write-off of $7.5 million during the year ended
December 31, 2002, representing the book value of the unrecovered equipment from
a lease customer in default. No similar write off was recorded in 2003.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A depreciation reduction of $2.3 million and $0.2 million for chassis and
containers, respectively, due to the change to our estimated useful lives which
was effective April 1, 2002. For further discussion of leasing equipment see
Note 1 to the Consolidated Financial Statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $1.0 million decrease in impairment write-downs recorded in 2003 ($3.1
million) as compared to 2002 ($4.1 million) based on an evaluation of the
carrying value of our long-lived assets.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in depreciation expense of $7.7 million resulting from the
consolidation of the activities of CAI for full year 2003, as opposed to
approximately six months in 2002.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impairment of Leasing Equipment. Our impairment of leasing
equipment expense decreased to $9.0 million for the year ended December 31,
2003, from $9.6 million for the year ended December 31, 2002, a decrease of $0.6
million. This decrease was primarily due to a reduction in impairment losses for
idle equipment ($0.8 million), partially offset by an increase in impairment
losses related to damaged equipment that was subsequently remanufactured ($0.3
million).

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

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

| |  | The establishment of reserves during 2002 for our notes receivable from PCR
($4.0 million), which effectively reduced the carrying value of these notes to
zero during 2002, and the establishment of a reserve for our guarantee of PCR
debts due to third parties as well as other liquidation accruals which are our
responsibility ($5.7 million).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Payments of $2.7 million made to PCR by a company controlled by certain of our
officers and directors which were expensed during 2002.
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | The write-off in 2002 of Microtechs $1.4 million of computer equipment
related receivables from PCR which have been determined to be uncollectible.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $2.9 million gain recorded in October 2003 resulting from the consolidation of
assets and liabilities of a special purpose entity (which no longer qualified
for off-balance sheet treatment for accounting purposes) formed as part of our
container lease securitization program. This gain resulted primarily from the
favorable credit loss experience through September 30, 2003 on the underlying
direct financing leases as compared to the assumed credit losses of 1.5%. See
Note 8 to the Consolidated Financial Statements for further discussion of the
accounting for this special purpose entity.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in fee income of $0.7 million as a result of our acting as an agent
and arranging a lease transaction between two parties during 2003.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Gains on equipment sales of $0.7 million during the year ended December 31, 2003
as compared to losses on equipment sales of $4.3 million during the prior year
period. The change of $5.0 million resulted primarily from gains on equipment
sales to third parties recognized by CAI which became a consolidated subsidiary
on June 27, 2002, as well as losses on the sale of leasing equipment of $3.0
million resulting primarily from equipment recovered from a customer in default
which generated losses during 2002.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In 2003 we recorded $0.5 million in insurance revenue, which resulted in the
recovery of costs incurred, resulting from a policy covering losses realized on
a defaulted loan as compared to $10.6 million recorded in 2002.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The sale of our Chicago property in 2002, which had been acquired as part of the
acquisition of TA and resulted in a pre-tax gain of $4.8 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in gains on retirement of debt of $1.1 million as compared to the
prior year period.
| | - | ------------------------------------------------------------------------------------------------

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

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

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

Provision/(Benefit) for Income Taxes.
We recorded an income tax provision of $0.8 million for the year ended December
31, 2003 as compared to a tax benefit of $1.4 million for the year ended
December 31, 2002. This increase in the provision for income taxes was caused by
an increase in pre-tax income of $35.3 million and the mix between pre-tax
income and losses generated from international sources and United States
sources. The international container division that is taxed at lower rates
(approximately 3%) based upon the income tax convention between the United
States and Barbados, contributed favorably to net income. The domestic
intermodal division (including corporate activities) which is taxed at higher
United States tax rates, experienced reduced losses during the year ended
December 31, 2003, as compared to the prior year. Additionally, other provisions
for deferred tax asset valuation allowances increased the tax provision by $1.2
million during the year ended December 31, 2003 while the provisions for
deferred tax asset valuation allowances decreased tax benefits by $6.3 million
for the year ended December 31, 2002.

Net Income. As a result of the factors described
above, our net income increased to $37.5 million in the year ended December 31,
2003 from $4.4 million in the year ended December 31, 2002.

Liquidity and Capital Resources

Historically, we have used
funds from various sources to meet our corporate obligations and to finance the
acquisition of equipment for lease to customers. The primary funding sources
have been cash provided by operations, borrowings (generally from banks),
securitization of lease receivables, the issuance of capital lease obligations
and the sale of our securities. In addition, we have generated cash from the
sale of equipment being retired from our fleet. In general, we have sought to
meet debt service requirements from the leasing revenue generated by our
equipment. Our scheduled capital lease and debt service payments (principal and
estimated interest) for 2005 total $341.9 million and for 2006 total $230.0
million. Scheduled payments due to us under non-cancelable operating and direct
financing lease agreements with our lessees total $302.2 million for 2005 and
$260.6 million for 2006 (see Note 3 to our Consolidated Financial Statements).
In addition, as of December 31, 2004, we had approximately $284.6 million of
unrestricted cash and marketable securities on hand. The combination of
unrestricted cash and marketable securities ($284.6 million) and non-cancelable
lease payments due to us during 2005 and 2006 ($562.8 million) exceeds our
scheduled debt service payments (principal and estimated interest) of $571.9
million for 2005 and 2006 by approximately $275.5 million. As indicated
previously in Item 7 of this document, demand for both chassis and containers is
currently strong, and our utilization rates, as well as those of our competitors
are at high levels. We anticipate that industry demand for chassis and
containers will continue to be strong well into 2006, driven primarily by the
fact that all major shipyards are reporting large order backlogs through 2007.
As of October 1, 2004, the existing order backlog was enough to account for an
increase of approximately 50% in the worlds cellular container ship fleet
and is expected to result in demand for a significant number of additional
containers and chassis, as well as high utilization of existing units, for the
next several years. Lease rates on both new and used chassis have been rising
since the middle of 2004, reflecting increases in the cost of new chassis and
increased utilization of used chassis. Lease rates for new containers have also
been increasing along with the cost of the underlying units. Lease rates for
used containers were competitive for much of 2004, although expiring leases are
sometimes renewed at lower lease rates. It is managements expectation that
lease rates will also remain strong for the next several years.

We have usually funded a
significant portion of the purchase price for new containers and chassis through
borrowings under a revolving credit facility and other lines of credit, or
through secured financings with financial institutions. While we successfully
completed financings and commitments totaling $747.0 million during 2004, $563.0
million of which has been utilized and $184.0 million of which is available for
use in the future, our ability to borrow funds on terms as favorable as those
available previously was limited from March 31, 2003 through September 30, 2004.
This limitation was due to the delay in filing our Annual Report on Form 10-K
for 2002, our Quarterly and Annual Reports on Forms 10-Q and 10-K for 2003 and
our Quarterly Reports on Form 10-Q for 2004. These factors, coupled with the
requirement to maintain certain levels of unrestricted cash until the delayed
financial filings were completed, affected the amount of business we wrote with
our customers during 2004. During the first quarter of 2005, we received an
additional $223.0 million in net financing commitments, none of which has been
utilized as of the date this report was filed with the SEC, and completed a
draw-down under a lease arrangement with a Japanese lessor for which we received
additional cash proceeds of approximately $4.2 million. In addition, we
regularly evaluate financing proposals which, when coupled with available cash
balances and funds available under commitments mentioned above, could be used
for growth, for re-financing existing facilities and for working capital.

Our financial restatement
and re-audits, as well as the completion of the internal investigations by
special counsel to our Audit Committee, prevented the timely completion of our
financial statements and Form 10-K for the year ended December 31, 2003, our
financial statements and SEC filings for 2004 and other required periodic
reports contained in our loan documents. We requested and received necessary
waivers under our loan documents. During February 2004, we provided our lenders
with a revised schedule for completing and filing our financial statements and
periodic SEC filings for 2003 and 2004, and requested that our lenders waive any
default resulting from the late preparation and filing of the financial
statements and required periodic reports. We completed and filed each of the
financial statements and required periodic reports mentioned above before the
dates required by our lenders.

During 2003 and 2004, we
received waivers from various financial institutions for the delay in issuing
our SEC financial reports. In connection with certain of those waivers, we
agreed to certain modifications to the terms of several of our debt agreements,
including, in a few cases, the pledging of additional collateral and changes to
amortization schedules. With the filing of our report on form 10-Q for the third
quarter of 2004 on December 27, 2004 we were no longer delinquent with our SEC
financial filings and the waivers were no longer required. In addition, the two
facilities where amortization schedules had been accelerated were paid off in
full during the fourth quarter of 2004.

In connection with our
delayed SEC filings and the receipt of waivers from our lenders necessitated by
the delayed filings, beginning in January 2004, the members of our Board of
Directors and certain of their affiliates who own shares of our common stock
agreed to defer their receipt of any dividend payments, until we were in
compliance with all SEC filing requirements. As of December 27, 2004, we were no
longer delinquent with regard to our SEC filings and the deferred dividends
described above were paid prior to December 31, 2004.

Over the years, we have
explored from time to time the possibility of raising capital or reducing our
leverage through the issuance and sale of our equity securities. As of the date
this Form 10-K is being filed, we have not entered into any agreement for any
such transaction other than the sale of our Warrants in September 2004. There is
no assurance that any such transaction will occur or, if a transaction occurs,
what the terms thereof would be.

Cash Flow

Net cash provided by
operating activities amounted to $160.3 million in 2004, $150.0 million in 2003
and $120.1 million in 2002. While net income for the year ended December 31,
2004 was $29.6 million lower than net income for the year ended December 31,
2003, it included a non-cash expense of $49.2 million related to the adjustment
of the fair value of warrants issued by us in the third quarter of 2004. Net
income for the year ended December 31, 2003 included a non-cash charge of $7.1
million ($4.3 million after tax) related to the modification of options held by
our former President. Excluding these adjustments for the fair value of the
warrants and the option modification, net cash provided by these activities
increased $15.3 million. This increase, along with a decrease in other
receivables ($26.8 million) was partially offset by a decrease in accounts
payable and accrued expenses ($13.6 million) and an increase in other assets
($13.0 million). The increase in net cash provided by these activities in 2003
as compared to 2002 was primarily due to an increase in net income, as well as
changes in operating assets and liabilities in the ordinary course of business.

Net cash used for investing
activities amounted to $8.3 million in 2004, $212.7 million in 2003 and $176.4
million in 2002. The decrease in net cash used in these activities in 2004 as
compared to 2003 was primarily due to a decrease in the investment in direct
financing leases ($65.5 million), a decrease in acquisition of leasing equipment
($30.9 million), an increase in cash collections on direct financing leases
($11.1 million) and an increase in the proceeds from disposition of leasing
equipment ($98.7 million). The increase in net cash used in these activities in
2003 as compared to 2002 was primarily due to an increase in the acquisition of
leasing equipment ($45.6 million) and an increase in the investment in direct
financing leases ($45.2 million), partially offset by an increase in cash
collections on direct financing leases ($18.0 million).

Net cash provided by
financing activities amounted to $16.4 million in 2004, $33.0 million in 2003
and $123.1 million in 2002. The decrease in net cash provided by these
activities in 2004 as compared to 2003 was primarily due to an increase in
repayment of revolving credit lines ($189.5 million), an increase in repayment
of long term debt and capital lease obligations ($183.1 million) and a decrease
in borrowings under revolving credit facilities ($57.5 million), partially
offset by an increase in the proceeds from the issuance of debt ($415.5
million). The decrease in net cash provided by these activities in 2003 as
compared to 2002 was primarily due to a decrease in the proceeds from the
issuance of debt ($1,015.6 million), partially offset by a decrease in repayment
of long term debt and capital lease obligations ($819.4 million), a decrease in
repayment of revolving credit lines ($65.3 million) and an increase in
borrowings under revolving credit facilities ($41.0 million).

The following table sets forth certain historical cash flow
information for the three years ended December 31, 2004.

`Year Ended December 31

                                                                        2004         2003         2002
                                                                        ----         ----         ----
                                                                             (Dollars in millions)
Net cash provided by operating activities                                $160.3     $150.0        $120.1
Proceeds from disposition of leasing equipment                            153.1       54.4          12.0
Acquisition of leasing equipment                                         (206.6)    (237.5)       (191.9)
Investment in direct financing leases                                     (43.7)    (109.3)        (64.1)
Net collections on direct financing leases                                 88.9       77.8          59.7
Net proceeds of issuance of long-term debt and capital lease
obligations in excess of payment of long-term debt and capital lease
obligations                                                               240.0        7.6         203.8
Net (repayment) borrowings of revolving credit lines                     (215.5)      31.5         (74.8)`

Contractual Obligations and Commercial Commitments

We and our subsidiaries are
parties to various operating and capital leases and are obligated to make
payments related to our long-term borrowings. (See Notes 4 and 8 to the
Consolidated Financial Statements.) We are also obligated under various
commercial commitments, including obligations to our equipment manufacturers.

The following tables
summarize our contractual obligations and commercial commitments at December 31,
2004.

`Amounts Due by Period
                                                                   (Dollars in millions)
                                                    Less than 1                                                More than
      Contractual Obligations            Total         year            1-3 years           4-5 years            5 years
     -------------------------        ---------      ----------        ---------           ----------         ----------
     Long-Term Debt                   $  990.7      $  161.3         $   298.5             $   108.7           $  422.2
     Capital Lease Obligations           727.5          79.3             125.5                 136.8              385.9
     Interest on Long-Term
       Debt and Capital Lease
       Obligations                       732.6         101.3             168.9                 122.8              339.6
     Operating Leases                     56.6          15.2              29.1                   9.6                2.7
     Unconditional Purchase
     Obligations                         149.6         116.7              32.9                   ---                ---
     Employment Agreements                10.3           2.8               2.5                   2.4                2.6
     Separation Agreements                 2.6           1.3               1.3                   ---                ---
                                           ---           ---               ---                   ---                ---
     Total Contractual Cash
     Obligations                      $2,669.9        $477.9            $658.7                $380.3           $1,153.0
                                      ========        ======            ======                ======           ========


                                  Total                        Amount of Commitment Expiration Per Period
                                 Amounts     -------------------------------------------------------------------------
Other Commercial                 Committed      Less than 1
 Commitments                     ---------         year             1-3 years        4-5 years        Over 5 years
----------------                                   ----             ---------        ---------        ------------
Standby Letters of Credit          $ 6.0           $6.0            $---              $---                   $---
Guarantees                          16.8           ---               1.5               6.6                   8.7
                                    ----           ---               ---               ---                   ---
Total Commercial Commitments       $22.8           $6.0             $1.5              $6.6                  $8.7`

Debt and Capital Lease Obligations:

The following table summarizes our debt and capital lease
obligations as of December 31, 2004 and 2003:

`(Dollars in Millions)
                                                                          December 31, 2004      December 31, 2003
                                                                          ------------------     -----------------
Capital lease obligations payable in varying amounts through 2013                $329.6                $325.2
Chassis Securitization Facility, interest at 5.99% and 5.59% at
  December 31, 2004 and 2003, respectively
      Warehouse facility                                                           22.5                  25.5
      Debt obligation                                                              53.9                  86.4
      Capital lease obligation                                                    397.8                 404.7
Secured equipment financing facility, interest at 4.45% at December
  31, 2004, revolving period ending October 31, 2006, term out period
  ending April 30, 2012                                                           243.0                   ---
Revolving credit facility, interest rate at 3.09% at December 31, 2003              ---                 193.5
Revolving credit facility CAI, interest rate at 4.56% and 3.37% at
  December 31, 2004 and 2003, respectively                                         65.0                  87.0
Container securitization facility, interest at 6.50% at December 31,
  2003                                                                              ---                  76.6
6.00% Notes due 2014 (unsecured) net of unamortized discount of $33.7
  at December 31, 2004                                                            196.3                   ---
7.35% Notes due 2007 (unsecured)                                                  115.4                 147.0
7.20% Notes due 2007 (unsecured)                                                   45.3                  62.8
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022 (unsecured)                                                      37.2                  37.2
9.875% Preferred capital securities due 2027 (unsecured)                           75.0                  75.0
Notes and loans payable with various rates ranging from 3.60% to 7.90%
  and maturities from 2005 to 2010                                                137.2                 194.8
                                                                                  -----                 -----
Total Debt and Capital Lease Obligations                                        1,718.2               1,715.7
                                                                                -------               -------
   Less Current Maturities                                                        240.6                 219.2
Total Non-Current Debt and Capital Lease Obligations                           $1,477.6              $1,496.5
                                                                               ========              ========`

Our debt consists of notes,
loans and capital lease obligations with installments payable in varying amounts
through 2027, with a weighted average interest rate of 6.2% in 2004. The
principal amount of debt and capital lease obligations payable under fixed rate
contracts is $898.7 million. Remaining debt and capital lease obligations of
$819.5 million is payable under floating rate arrangements, of which $408.3
million has been converted to fixed rate debt through the use of interest rate
swap agreements. At December 31, 2004, most of our debt and capital lease
obligations are secured by a substantial portion of our leasing equipment,
direct financing leases, and accounts receivable, except for $469.2 million of
debt which is unsecured. For further information on the accounting treatment for
interest rate swap contracts see Note 5 to the Consolidated Financial
Statements.

Debt Modifications:
Throughout 2003 and 2004, in connection with obtaining necessary waivers from
lenders for late filing of our periodic reports with the SEC and the restatement
of our past financial statements, we agreed to certain modifications to our
existing debt agreements as follows:

| |  | Our container securitization facility was amended to relinquish our right to
request additional advances under the facility and we agreed that all lease
payments subsequently received under the facility would be used to reduce the
indebtedness. In addition, we agreed to comply with several new covenants,
consistent with those contained in the amendment to our revolving credit
agreement, as described below. This facility was paid in full during December
2004.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In May 2003, we established a $200.0 million revolving warehouse facility within
our chassis securitization facility and received funding from a $25.5 million
debt obligation issuance. In July 2003 and October 2003, we agreed, among other
things, to suspend our ability to incur additional funding under the warehouse
facility until such time as the loan and guarantee parties have each agreed in
their sole discretion to reinstate their funding commitments. The loan and
guarantee parties are under no obligation to reinstate any commitments to the
warehouse facility.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In July 2003 and October 2003, and January and February 2004, in connection with
obtaining necessary amendments under the revolving credit facility due to the
late filing of our periodic reports with the SEC and the restatement of our past
financial statements, we agreed, among other things, to reduce advance rates
under this revolving facility, to add several events of default, to increase the
interest rate margin, and to maintain specified levels of unrestricted cash and
cash equivalents until delinquent SEC filings were made. Specifically, we agreed
to maintain unrestricted cash and cash equivalents of at least $71.0 million at
all times and at least $80.0 million as of the last business day of each month,
until our 2002 Form 10-K was filed. Our 2002 Form 10-K was filed on January 9,
2004. Subsequent to January 9, 2004, we were obligated to maintain unrestricted
cash and cash equivalents of at least $60.0 million at all times and at least
$67.5 million as of the last business day of the month until completion and
filing of all delayed financial statements for 2003 and 2004. This minimum cash
requirement was also adopted in the waivers of the container securitization and
one other loan agreement. In conjunction with the waiver received during
February 2004, we replaced our annual amortization payment with monthly
amortization payments under our revolving credit facility beginning in March
2004. The related minimum cash requirement was subsequently reduced
dollar-for-dollar with the amortization payments and, at June 30, 2004, amounted
to $50.0 million. Beginning with the amortization payment due September 1, 2004,
the minimum cash requirement was again reduced dollar-for-dollar as amortization
payments were made. These facilities were paid in full during November 2004.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We also agreed to restrictions on dispositions of collateral and on encumbrances
of assets as well as a limitation on concessions that could be made to our other
financial institutions in connection with obtaining waivers. The October 2003
amendment also required us to provide additional financial information to the
lenders under the facility and to continue the engagement of a financial
advisor. With the filing of our Form 10-Q for the third quarter of 2004 during
December 2004, the payment in full of certain financing facilities during the
fourth quarter of 2004, and the agreement of three lenders during the first
quarter of 2005, these restrictions and reporting requirements are no longer in
effect.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In addition to the debt specifically identified above, we had additional notes
and loans outstanding with various financial institutions. In the fourth quarter
of 2003, we agreed to certain modifications to the provisions of some of these
instruments. These modifications included, in certain instances, changes to the
amortization schedule resulting in a requirement for accelerated principal
payments of $16.6 million ($2.0 million of which were made during January and
February 2004 and the rest of which were eliminated when the facility in
question was paid in full during March 2004), an average interest rate increase
of 241 basis points on two debt facilities having a total of $67.7 million
outstanding as of December 31, 2003 and the pledging of $9.1 million in
additional collateral to four facilities having a total of $38.6 million
outstanding at the time the additional collateral was pledged.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In April 2003, in connection with a borrowing under the container
securitization, we entered into an interest rate swap agreement with an original
notional amount of $31.2 million. This swap contract matures in 2009 and the
swap was used to manage interest rate risks on the floating rate borrowings in
the securitization facility. In May 2003, in connection with a borrowing under
the chassis revolving warehouse securitization facility, we entered into an
interest rate swap with an original notional amount of $25.5 million. This swap
contract matures in 2014 and the swap is used to manage interest rate risks on
floating rate facilities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

New Financings and Commitments: During 2004, we entered into new
financings and commitments totaling $747.0 million of which $563.0 million was
utilized. The new debt utilized during 2004 consisted of the following:

`New Borrowings
Total New Debt and Capital Lease Obligations                                                    2004
Capital lease obligations payable through 2013 with interest
  imputed at rates from 5.45% to 7.45%                                                          $55.8
6.00% Notes due 2014 (unsecured)                                                                230.0
Secured equipment financing facility, interest at 4.45% at
  December 31, 2004, revolving period ending 10/31/06, term out
  period ending 4/30/12                                                                         243.0
Notes and loans repayable with various rates ranging from 4.28%
  to 7.53% and maturities from 2005 to 2009                                                      34.2
                                                                                                 ----
Total New Debt and Capital Lease Obligations 2004                                              $563.0
Original Issue Discount on 6.00% Notes due 2014                                                 (34.2)
                                                                                                ------
Total Net New Debt and Capital Lease Obligations 2004                                          $528.8
                                                                                               ======`

New Financings: The following
financings, which are included in the above summary, were completed during
2004:

| |  | In March 2004, we completed secured financings of $81.6 million and in May 2004,
$13.6 million, the proceeds of which were used to pay amounts due to equipment
manufacturers and for general corporate purposes. One of the March financings
which was originally $76.0 million was subsequently refinanced in November and
thus not included above.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We successfully completed a secured financing of $15.0 million during July 2004
with installments payable through 2005 at an interest rate of LIBOR plus 2.5%. A
portion of the proceeds was used to satisfy a note payable from PCR to an
unrelated financial institution, which we guaranteed for PCR. The remaining
proceeds were used for general corporate purposes.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | During August 2004, we entered into a lease arrangement with a Japanese lessor
involving $21.1 million of equipment previously financed with a financial
institution during December 2003 and May 2004. The lease "advance
rate" against this equipment was 107% ($22.5 million total advance),
increasing the cash proceeds received by us by $5.8 million from the level of
the previous financings. The lease expires in December 2008, and we have a fixed
purchase option at that time for $14.6 million that we expect to exercise. The
aggregate fixed interest rate is 7.44%.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On September 14, 2004, we entered into a Securities Purchase Agreement pursuant
to which we sold $150.0 million total principal amount of a new series of 6.0%
notes due 2014 (the "Notes") in a private transaction with four
investors. In connection with the sale of the Notes, we also issued to the
investors two series of Warrants exercisable for a total of 8,333,333 shares of
our common stock at an exercise price of $18.00 per share (the
"Warrants"). The exercise price will be subject to customary
anti-dilution adjustments as set forth in the Warrants.
The
Notes mature on September 1, 2014, with interest payable semi-annually at a rate
of 6.0% per annum. We have the right to redeem the Notes at any time after
September 1, 2009 with a declining premium. The maturity of the Notes can be
accelerated upon the occurrence of an "Event of Default" as such term
is defined in the indenture governing the Notes (the "Indenture"). The
Indenture also contains various restrictive covenants, including limitations on
the payment of dividends and other restricted payments, limitations on
incurrence of indebtedness, and limitations on asset sales, the violation of
which would result in an Event of Default.
The first series of Warrants (the "Series A" Warrants) is exercisable at any
time for a total of 5,475,768 shares. The second series of warrants (the Series
"B" Warrants) will become exercisable at any time for a total of 2,857,565
shares, following stockholder approval of such exercise at a special meeting of
our stockholders. We also entered into agreements with the investors to file
registration statements with the Securities and Exchange Commission, for the
benefit of the investors, with respect to the Notes and the Warrants. The terms
of the Warrants provide that the exercise price will be paid by the investors to
us solely in cash except that after we have filed a registration statement with
the Securities and Exchange Commission relating to the Warrants and underlying
common stock, in the event such registration statement has not become effective
or is otherwise not available to the Warrant holders or if the exercise of the
Warrants for cash would not be permitted under the federal securities laws, the
exercise price may be paid by tendering a principal amount of 6.0% Notes equal
to the exercise price of the Warrants then being exercised. The sale of the
Notes and Warrants pursuant to the Securities Purchase Agreement was made in
reliance on the exemption from the registration requirements of the Securities
Act of 1933 (the "Act") pursuant to Section 4(2) of the Act.
Of the $150.0 million in proceeds from the September 14, 2004 sale of the Notes
and Warrants, we repurchased, at face value, a portion of our outstanding 7.35%
notes due 2007 ($31.6 million) and 7.20% notes due 2007 ($17.5 million) which
were held by the investors. The remaining proceeds are being used for general
corporate purposes, including, but not limited to, the purchase of equipment,
retirement of debt, potential acquisitions and/or working capital.
The Warrants expire on September 1, 2014, although we have the right under
certain conditions to require that they be exercised at any time after our
common stock trades at $30.00 per share or more for five consecutive trading
days assuming the shares being issued upon exercise are registered
shares.
The fair value of the warrants at the date of the transaction was estimated at
$22.5 million and was recorded in warrant liability on the Consolidated Balance
Sheet, with the offset recorded as a discount on the Notes. This discount is
being amortized as interest expense using the effective interest method over the
ten-year life of the Notes. The overall interest rate on the Notes, considering
the amortization of the discount, is approximately 8.3%.
EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and
potentially Settled in a Companys Own Stock ("EITF 00-19") requires
freestanding contracts that are settled in a Companys own stock, including
common stock warrants, to be designated as an equity instrument, asset or
liability. Under the provisions of EITF 00-19, a contract designated as an asset
or liability must be carried at fair value until the contract meets the
requirements for classification as equity, until the contract is exercised or
until the contract expires. We have classified these warrants as a liability, as
noted above, because the requirements of EITF 00-19 for classification of the
warrants as equity have not yet been met. During the period in which the
warrants are classified as a liability, any changes in fair value will be
reported as fair value adjustment for warrants in the Consolidated Statement of
Income. Due primarily to the increase in the market value of our common stock
during the last quarter of 2004, the fair market value of these Warrants has
increased from $22.5 million at September 30, 2004 to $71.7 million at December
31, 2004. As a result, during the three months ended December 31, 2004, we have
recorded a non-cash expense of $49.2 million (for which no tax benefit is
derived) which has been reflected as fair value adjustment for warrants on the
accompanying Consolidated Statements of Income. Accordingly, future changes to
the fair market value of these Warrants have the potential to cause volatility
in our future results. For the period of time that these warrants are classified
as a liability, any increase in the fair market value of the Warrants will
result in an additional non-cash expense to the Consolidated Statements of
Income. If the fair market value of the Warrants decreases in the future we will
record non-cash income in our Consolidated Statements of Income. At such time as
all of the conditions of EITF 00-19 are met for classification of the Warrants
as equity, the liability account representing the fair value of the warrants at
the date the conditions are met will be reclassified to additional
paid-in-capital on the Consolidated Balance Sheets.
We have agreed to file a Registration Statement for the Warrants and the Notes
with the Securities and Exchange Commission by May 1, 2005. In addition, we have
agreed to use commercially reasonable efforts to have the Warrant Registration
Statement and the Notes Registration Statement declared effective by July 1,
2005. It is impossible for us to predict when either of these registration
statements will become effective. If either of these Registration Statements is
not effective by October 1, 2005, or is not filed by May 1, 2005, we will be
required to pay liquidated damages to the holders of these securities based upon
a value of $150.0 million for the Notes and $150.0 million for the Warrants. For
the first 90 days, the amount of liquidated damages to be paid related to the
Warrants and the Notes will be calculated using a rate of 0.25% per annum for
each day the Registration Statements are not effective after September 30, 2005
or if the Registration Statements are not filed by May 1, 2005. This percentage
will be increased by 0.25% for each 90 day period, until these conditions are
met, up to a maximum of 1.00% per annum.
A condition that must be met for equity treatment under the provisions of EITF
00-19 is that there can be no possibility of a net cash settlement of the
Warrants. Under the terms of the Warrant Agreement, in the event that
stockholder approval of the issuance of common stock pursuant to the Series B
Warrants is not obtained prior to April 30, 2005, the holders of the Series B
Warrants have the right to settle their warrants for cash. In order to do this,
the Series B Warrant holders, upon payment of the exercise price would receive
cash from us in an amount equal to 105% of the market price of our common stock
on the day prior to exercise. For example, if the market value of our stock was
$22 at the date that the Series B Warrant holders exercised their right for a
net cash settlement, the net cash settlement paid to the holders of the Series B
Warrants would be approximately $14.6 million ($22 market value X 105% X
2,857,565 shares  less exercise price of 2,857,565 shares X $18). We
intend to hold a special meeting of the Stockholders as soon as practicable and
at that meeting will seek stockholder approval for the exercise of the Series B
Warrants. It is impossible for us to hold this meeting until our Proxy
requesting this approval has been filed with and accepted by the Securities and
Exchange Commission and all stockholders have been notified regarding the
meeting. In connection with the sale of the Notes and Warrants, certain of our
significant stockholders, whose combined ownership interest represents more than
50% of the issued and outstanding shares of our common stock, entered into a
voting agreement pursuant to which they have agreed to vote to approve the
exercise of the second series of Warrants by the investors. In addition, Martin
Tuchman, our Chairman and Chief Executive Officer, Warren L. Serenbetz, a former
member of our Board of Directors, and an entity controlled by members of Mr.
Serenbetzs family agreed to certain restrictions on their ability to
transfer shares of our common stock in private transactions. If the approval for
the issuance of the shares related to the Series B Warrants is obtained after
April 30, 2005 and prior to the exercise of the Series B Warrants by the Holders
of the Warrants, the holders of the Series B Warrants will lose their right to
exercise the net cash settlement feature of Series B Warrants once such
shareholder approval is received. At that time, this will no longer be a
condition for liability treatment under the provisions of
EITF 00-19.
Copies of the Securities Purchase Agreement, the Indenture, the Warrant
Agreement, the Notes Registration Rights Agreement and the Investor Rights
Assessment were filed as exhibits to our report on Form 8-K issued September 15,
2004.
| | - | 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| |  | On November 1, 2004, we consummated a secured equipment financing with one of
our existing lenders. The financing is secured by shipping containers and
related leases owned by one of our special purpose consolidated subsidiaries and
leased to various third parties. The financing allows for advances from time to
time up to the amount of available collateral under the facility, subject to a
maximum principal amount that may be outstanding under the facility of $252.0
million. Of the $243.0 million drawn down on November 1, 2004, we used $224.4
million to refinance outstanding indebtedness, which includes the entire $154.8
million of outstanding borrowings under our revolving credit facility, which has
now been terminated, as well as an existing $69.6 million loan from this lender.
The remaining balance of $18.6 million was used for transaction fees and working
capital purposes. The interest rate under this new facility is currently LIBOR
plus 175 basis points, with a reduction to LIBOR plus 150 basis points possible
as our credit rating improves. This agreement, as amended, requires that we
enter into interest rate swap contracts in order to effectively convert at least
seventy percent of the debt associated with operating lease equipment and ninety
percent of the debt associated with direct financing leases from floating rate
debt to fixed rate debt by March 31, 2005. As of December 31, 2004, we have not
entered into any swap contracts related to this facility. The facility has a
two-year term, after which the outstanding balance will be paid out in full over
66 months if it is not refinanced.
This agreement requires that we maintain a tangible net worth (as defined in the
Agreement) of at least $300.0 million. The facility also requires us to maintain
a fixed charge coverage ratio of 1.5 to 1 and a funded debt to tangible net
worth ratio of 4.0 to 1.0 and contains other customary restrictive covenants. At
December 31, 2004 we were in compliance with these covenants.
During the first quarter of 2005, we received additional commitments under this
facility totaling $248.0 million from six additional financial institutions. As
of the date this Form 10-K was filed, none of these additional commitments had
been utilized.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On November 29, 2004, we sold $80.0 million total principal amount of new 6.0%
notes (the "November notes") due 2014 to eight investors under the
same indenture used for the $150.0 million unsecured financing completed during
September 2004. The terms of the November notes are identical to those of the
notes sold during September (as described previously in this document) with the
following exceptions: (1) there were no warrants associated with the November
notes and (2) the original issue discount on the November notes was
approximately 14.7% versus 15.0% for the September notes. The November notes
were sold at a discount which provided net proceeds totaling $68.1 million. The
net proceeds are for general corporate purposes, including, but not limited to
the purchase of equipment, retirement of debt, acquisitions, and/or working
capital.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In December 2004, we completed two capital lease obligation transactions
totaling $50.0 million, the proceeds of which were used for general corporate
purposes.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In addition to the revolving credit facility mentioned previously, we
paid-in-full three other secured lending facilities, totaling $37.0 million,
during November 2004, including two facilities with Yardville National Bank (a
subsidiary of an entity in which our Chief Executive Officer owns approximately
five percent of the common stock and serves on the executive Committee of the
Board of Directors.) Also in December 2004 we paid in full the remaining
outstanding debt obligations of the container securitization.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commitments: A commitment
for $150.0 million was completed on December 29, 2004 and will be open for 364
days, after which it will either be renewed, refinanced or will be paid out in
full over the following 48 months. The advance rate under this facility will be
either 60% or 75% at our option. The interest rate is determined by a pricing
grid and can range from LIBOR plus 140 to 180 basis points, depending upon our
tangible debt to total net worth ratio (as defined in the agreement) or our
corporate credit rating, and the advance rate chosen. As of December 31, 2004,
the rate would be LIBOR plus 165 basis points at a 75% advance rate and LIBOR
plus 150 basis points at a 60% advance rate. There is a commitment fee of 45
basis points per annum on any unused portion of this commitment, payable
quarterly in arrears. Another commitment for $25.0 million was available for
future use at December 31, 2004. This commitment was scheduled to be open until
March 31, 2005, after which any unfunded portion of the commitment would expire.
This commitment was subsequently cancelled during February 2005 to allow the
financial institution to provide a larger commitment as part of the $150.0
million facility mentioned above. During the first quarter of 2005, we received
additional commitments under a secured equipment financing established on
November 1, 2004 totaling $248.0 million from six additional financial
institutions. As of the date this Form 10-K was filed, none of these additional
commitments had been utilized.

Container Securitization Facility: Effective October 1, 2003, a
customer elected to return a portion of the equipment covered by a direct
financing lease which had been included in a qualified special purpose entity as
part of the lease securitization program. The equipment was subsequently leased
to another customer under the terms of an operating lease agreement. As such,
the lease could no longer be considered a financial asset and the Securitization
Trust entity could no longer be treated as an off-balance sheet qualified
special purpose entity for accounting purposes. Therefore, effective October 1,
2003, we consolidated the assets and liabilities of this special purpose entity
and recorded the remaining obligation of this special purpose entity amounting
to $17.8 million as debt and capital lease obligations on the Consolidated
Balance Sheets. At December 31, 2003, $13.3 million of this debt remained
outstanding. This debt was repaid in full during December 2004. See Note 7 to
the Consolidated Financial Statements for further discussion regarding the
change in accounting for this special purpose entity.

Covenants: Under our
secured equipment financing facility (and most of our other debt instruments, we
were required to maintain covenants (as defined) for tangible net worth (the
most stringent of which required the Company to maintain tangible net worth of
at least $300.0 million), a fixed charge coverage ratio of 1.5 to 1 and a funded
debt to net worth ratio (as defined in the agreement) of 4.0 to 1. A servicing
agreement to which we are a party requires that we maintain a tangible net worth
(as defined in the agreement) of at least $375.0 million plus 50% of any
positive net income reported from October 1, 2004 forward. Additionally, under a
credit agreement, we are required to maintain a security deposit in the
aggregate amount of at least 80% of the outstanding loan balance, including
interest. This amounted to $4.8 million at December 31, 2004 and is included in
other assets on the Consolidated Balance Sheet. At December 31, 2004, we were in
compliance with these covenants, as amended. At December 31, 2004, under a
restriction in our 6.0% Note Indenture, approximately $3.6 million of
retained earnings were available for dividends.

Other: As of December 31,
2004, our commitments for future capital expenditure totaled approximately
$149.6 million with approximately $116.7 million committed for 2005. Our
available liquidity, including $223.0 million available under credit facilities,
at December 31, 2004 was $507.6 million after deducting $24.9 million of
restricted cash. Required debt repayments and capital lease payments for 2005
totaled $240.6 million as of December 31, 2004 which we anticipate making
through our unrestricted cash balances and cash flow from operations.

In the past, cash on hand,
cash flow from operations, borrowings under credit facilities and the net
proceeds of the issuance of debt and equity securities has been sufficient to
meet our needs for working capital, capital expenditures and required debt
repayments. We expect to continue to rely in substantial part on long-term
financing for the purchase of equipment or strategic acquisitions to expand our
business in the future. We cannot assure that long-term financing will be
available for these purposes on acceptable terms or at all. In addition, from
time to time, we may explore new sources of capital both at the parent and
subsidiary levels. We successfully entered into secured financing commitments of
approximately $517.0 million during 2004, $333.0 million of which was utilized
as of December 31, 2004, plus an additional $230.0 million of unsecured
financings. We regularly evaluate financing proposals which when coupled with
available cash balances and funds available under commitments mentioned above,
could be used for growth, for refinancing existing facilities and for working
capital.

Settled Insurance Litigation

In connection with an
insurance claim related to the default of a South Korean customer and a
subsequent lawsuit filed by the insurance carriers against us, on June 17, 2004
we signed an agreement settling the lawsuit and our claims under the policy.
Under the terms of the settlement agreement, the insurance carriers paid us a
total of $26.4 million during 2004. In addition, we received the right to retain
any of the equipment we had recovered since the date of the claim. We recognized
a pre-tax gain of $6.3 million related to the $26.4 million settlement, which is
recorded in gain on insurance settlement on the Consolidated Statements of
Income.

CAI

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

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

On June 27, 2002, CAI
entered into an amended $110.0 million senior revolving credit agreement with a
group of financial institutions. To facilitate the closing of this new credit
facility, we agreed to extend the repayment terms of our Note so as to require
mandatory quarterly principal payments of $1.7 million beginning July 30, 2006
through April 30, 2011 and modified certain financial covenants in the Note.
Interest on the Note continues to accrue at an annual fixed rate of 10.5% and is
payable quarterly. The Note continues to be cross-collateralized with CAIs
senior credit agreement, subject to the terms of an amended and restated
subordination agreement. At the same time, we were provided a majority position
on CAIs board of directors. As a result of these transactions and gaining
a majority position on CAIs board, our financial statements include CAI as
a consolidated subsidiary commencing June 27, 2002. Previously, CAI was
accounted for under the equity method of accounting. Our share of the equity
losses of CAI for the periods from January 1, 2002 through June 26, 2002 have
been recorded in losses for investments accounted for under the equity method in
the accompanying Consolidated Statements of Income. Since June 27, 2002,
CAIs results of operations have been included in the appropriate captions
on the accompanying Consolidated Statements of Income. The assets and
liabilities of CAI at December 31, 2004 and 2003 have been included on the
accompanying Consolidated Balance Sheets.

A total of $65.0 million
was outstanding under CAIs senior revolving credit facility at December
31, 2004. Borrowings under CAIs senior credit facility are secured by
substantially all of CAIs assets, other than certain excluded assets, and
are payable on June 27, 2005. CAI is currently in discussions with its lenders
regarding a renewal of its senior revolving credit facility. The senior credit
facility contains various financial and other covenants. At December 31, 2004,
CAI was in compliance with these covenants. The senior credit facility was
amended in May 2003 to increase the letter of credit commitment by the
lenders administrative agent.

In April 2004, we reached
an agreement with CAI resolving differences in interpretation of certain
provisions of the Operating and Administration Agreement (the "CAI
Agreement") governing payment of appropriate remedial compensation when an
age disparity develops between our containers managed by CAI and the balance of
CAIs managed fleet. Pursuant to our agreement with CAI, we paid CAI $2.0
million for resolution of all disputes through February 29, 2004. The impact of
this agreement was recorded by us during the three months ended March 31,
2004, as a reduction in consolidated pre-tax income of $1.0 million ($0.6
million net of tax). We anticipate that the earnings related to certain of our
containers managed by CAI will be reduced to the extent the average age of such
containers exceeds the average age of all other containers in CAIs fleet.

Chassis Holdings I, LLC

For many years, The Ivy
Group, a New Jersey general partnership composed directly or indirectly of
certain of our current and former directors and executive officers, together
with certain of its principals, leased chassis to our wholly-owned subsidiary
Trac Lease, Inc. ("Trac Lease") for use in Trac Leases business.
As of January 1, 2001, Trac Lease leased a total of 6,047 chassis from The Ivy
Group and its principals for an aggregate annual lease payment of approximately
$2.6 million. On July 1, 2001, we restructured our relationship with The Ivy
Group and its principals to provide us with managerial control over the 6,047
chassis previously leased by Trac Lease from The Ivy Group and its principals.
As a result of the restructuring, the partners of The Ivy Group contributed
these 6,047 chassis and certain other assets and liabilities to a newly formed
subsidiary, Chassis Holdings I, LLC ("Chassis Holdings"), in exchange
for $26.0 million face value of preferred membership units and 10% of the common
membership units, and Trac Lease contributed 902 chassis and two thousand
dollars in cash to Chassis Holdings in exchange for $3.0 million face value of
preferred membership units and 90% of the common membership units. The preferred
membership units are entitled to receive a preferred return prior to the receipt
of any distributions by the holders of the common membership units. The value of
the contributed chassis was determined by taking the arithmetic average of the
results of independent appraisals performed by three nationally recognized
appraisal firms in connection with our establishment of a chassis securitization
facility in July 2000. As the managing member of Chassis Holdings, Trac Lease
exercises sole managerial control over the entitys operations. Chassis
Holdings leases all of its chassis to Trac Lease at a rental rate equal to the
then current Trac Lease fleet average per diem. Chassis Holdings and the holders
of the preferred membership units are party to a Put/Call Agreement providing
that the holders of preferred units may put such units to Chassis Holdings under
certain circumstances and Chassis Holdings has the right to redeem such units
under certain circumstances. Chassis Holdings will be required to make certain
option payments to the holders of the preferred membership units in order to
preserve its right to redeem such units. Dividends paid on the common units and
distributions on the preferred units totaling $3.1 million, $2.9 million and
$3.1 million for the years ended December 31, 2004, 2003 and 2002,
respectively, are included in minority interest (income)/expense, net in the
accompanying Consolidated Statements of Income.

Chassis Distribution Agreement

In April 2003, we agreed to
become a 50% owner through an initial investment of $0.5 million of a limited
liability company (the "LLC") formed with a foreign chassis
manufacturer. The purpose of the LLC is to be the exclusive worldwide
distributor of chassis built by this manufacturer and for us to share in the
profits the LLC earns in selling these chassis to third parties. Under the terms
of the Distribution agreement for this equipment, we have agreed to purchase at
least 15,000 chassis at preferred pricing over a ten-year period, of which 5,651
chassis were purchased or ordered by us through December 31, 2004. We may elect
to purchase additional equipment during the ten-year period at identical terms.
The LLC began operations during the second quarter of 2003. We consolidate the
financial statements of the LLC.

Share Repurchases

In December 2004, Warren L.
Serenbetz (a former member of our Board of Directors) advised us that he
intended to exercise 668,438 stock options which represented the remaining
options issued to him under the terms of the 1993 Stock Option Plan. In
addition, Mr. Serenbetz requested, and the Compensation Committee of the Board
of Directors allowed him, to exercise these options on a cashless basis. These
options had an exercise price of $10.25 per share and the market value at the
date he exercised his options was $22.05 per share.

In connection with the
cashless exercise feature, we withheld 310,725 shares with a market value of
$6.9 million representing the cost to Mr. Serenbetz of exercising these options.
In addition, we withheld 110,086 shares with a market value of $2.4 million
representing the amounts advanced to Mr. Serenbetz for the payment of his
minimum taxes related to the exercise. The remaining 247,627 shares were issued
to Mr. Serenbetz.

The 420,811 shares withheld
by the Company for the exercise price of the options and Mr. Serenbetzs
minimum taxes have been recorded as treasury shares, at their market value at
the date of exercise on the accompanying Consolidated Balance Sheets. The
exercise also resulted in the issuance of 668,438 shares at a par value of $.001
and increased additional paid-in-capital by $6.9 million. In addition, since
these options were granted to Mr. Serenbetz as compensation for services
rendered, we are entitled to claim a tax deduction for non-employee compensation
on our 2004 federal tax return. Since we did not recognize compensation expense
on the grant or exercise of these options, the tax benefit (amounting to $3.1
million) has been recorded as additional paid-in-capital at the time these
options were exercised.

During 2002, we purchased
9,300 shares for an aggregate price of $0.13 million. No shares were repurchased
during 2003.

United States Federal Income Tax

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

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

Based upon the operating
results for 2004, we will not be considered a personal holding company for
federal income tax purposes for 2004. If we or any of our subsidiaries were
classified as a personal holding company for federal income tax purposes, in
addition to our regular federal income tax liability, our undistributed personal
holding company income (generally taxable income with certain adjustments,
including a deduction for federal income taxes and dividends paid) would be
subject to a personal holding company tax at the rate of 15%. Management
anticipates that for the immediate future, our current level of dividends will
be sufficient to avoid having any undistributed personal holding company income,
and thus does not anticipate that any personal holding company tax will be
imposed. There can be no assurance, however, that we will not at some point in
the future become liable for personal holding company tax. Furthermore, we may
at some point in the future elect to increase the dividend rate on our common
stock in order to avoid personal holding company tax.

We have incurred certain
losses from leasing activities that are characterized for tax purposes as
"Suspended Passive Activity Losses." These losses can be carried
forward indefinitely to offset income from future leasing activities. As of
December 31, 2004, such suspended passive activity loss carryovers, including
the passive activity loss carryovers of CAI, totaled approximately $356.0
million.

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

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

If Interpool Limited were
treated as a foreign personal holding company for any year, we would be taxed on
the amount we would have received if Interpool Limited had distributed all its
income to us as a dividend. However, based on the operating results for 2004,
Interpool Limited will not be considered a foreign personal holding company for
2004. The American Jobs Creation Act of 2004 repealed the foreign personal
holding company provisions beginning after December 31, 2004.

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

No deferred U.S. Federal
income taxes have been provided on the unremitted earnings of Interpool Limited
since it is the Companys intention to indefinitely reinvest such earnings.
At December 31, 2004, unremitted earnings of this subsidiary were approximately
$334.0 million. The deferred U.S. Federal Income taxes related to the unremitted
earnings of this subsidiary would be approximately $110.0 million, assuming
these earnings are taxable at the U.S. statutory rate, net of foreign tax
credits. We are now exploring the implications of the repatriation provision
recently enacted by the American Jobs Creation Act of 2004, but we have not yet
decided whether to repatriate any unremitted earnings.

United States/Barbados income tax convention. Interpool
Limiteds business is managed and controlled in Barbados; it also has a
permanent establishment in the United States. Under the income tax convention
between the United States and Barbados, including any protocols and amendments
(the "pre-2005 Treaty"), any profits of Interpool Limited from leasing of
containers used in international trade generally are taxable only in Barbados
and not in the United States.

Interpool Limited has been
entitled to the benefits of the Tax Convention for each year by satisfying the
two-pronged test to the "limitation of benefits" provision: (1) more
than 50% of the shares of Interpool Limited were owned, directly or indirectly,
by any combination of individual United States residents or citizens (the
"51% U.S. ownership test"), and (2) its income was not used in
substantial part, directly or indirectly, to meet liabilities to persons who are
not residents or citizens of the United States (the "base erosion
test"). We believe Interpool Limited passed both of these tests and was
eligible for the benefits of the pre-2005 Treaty through December 31, 2004. If
Interpool Limited had ceased to be eligible for the benefits of the pre-2005
Treaty, a substantial portion of its income would become subject to the 35%
United States federal income tax and the 30% branch profits tax.

The Tax Convention does not
afford Interpool Limited any relief from the personal holding company tax or any
other tax that may be imposed on the undistributed earnings of a Barbados
corporation. However, based on the operating results for 2004, Interpool Limited
will not be considered a foreign personal holding company and there will be no
personal holding company tax for 2004. The American Jobs Creation Act of 2004
repealed the foreign personal holding company provisions beginning after
December 31, 2004.

July 2004 Protocol to the United States and Barbados Tax Treaty.
On July 14, 2004, the United States and Barbados signed a protocol to the
pre-2005 Treaty which was ratified on December 20, 2004 ("post-2004 Treaty")
that contains a more restrictive limitation on benefits provision than the
pre-2005 Treaty. The post-2004 Treaty took effect on January 1, 2005 following
its ratification by the United States Senate and the government of Barbados on
December 20, 2004. Under the post-2004 Treaty, in addition to having to satisfy
the 51% U.S. ownership and base erosion tests described above, Interpool Limited
is only eligible for Treaty benefits with respect to its container rental and
sales income if Interpool, Inc. is listed on a "recognized stock exchange" and
Interpool, Inc.s stock is "primarily" and "regularly" traded on such
exchange.

During April 2004
Interpool, Inc. was de-listed by the New York Stock Exchange. During this
de-listing, our common stock was traded on the over-the-counter market under the
symbol IPLI. In December 2004, after making all delinquent SEC filings, we
applied for relisting on the New York Stock Exchange. On January 13, 2005 our
common stock was re-listed on the New York Stock Exchange; a "recognized
stock exchange" within the meaning of the post-2004 Treaty. Interpool
believes this listing and its current trading volume satisfies the
"primarily" and "regularly" traded requirements of the
post-2004 Treaty, and Interpool Limited qualified for benefits under the
post-2004 Treaty on January 13, 2005. We have estimated there should be no U.S.
current tax expense for the period January 1, 2005 to January 12, 2005.

Barbados tax returns. As a
company resident in Barbados, Interpool Limited is required to file tax returns
in Barbados and pay any tax liability to Barbados. However, no Barbados tax
returns have been prepared or filed for Interpool Limited for any period
subsequent to its 1997 tax year. We believe the failure to file these returns
has not resulted in any material underpayment of taxes, interest or penalties
(other than a normal late filing penalty), because we believe no material
Barbados taxes would have been due for the years for which returns have not been
filed. We further believe Interpool Limiteds failure to file these returns
would not present any other material risk to Interpool. Preparation of these tax
returns is currently in process, and it is our intent to submit them as promptly
as practical.

State and Local Taxes

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

Sales tax To date, Interpool, Trac Lease and
Interpool Limited generally have not paid sales taxes on their long-term leasing
revenues to the states in which they conduct business because management has
believed such revenues to be exempt from state sales taxes on several grounds,
including a long-standing interpretation of the Commerce Clause of the United
States Constitution that would prohibit the imposition of a tax on cargo
containers and chassis used primarily for transportation of goods in interstate
commerce or international trade. Under the terms of our equipment leases, in the
event sales tax is imposed, we would generally be entitled to recover any such
sales tax from our lessees. Interpool and Trac Lease do, however, collect and
remit sales tax on their short-term chassis pool (intrastate) activity.

Inflation

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

Critical Accounting Policies and Estimates

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

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

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

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

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

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

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

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

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

Warrant Valuation 
Our outstanding warrants are classified as a liability in accordance with EITF
00-19. Under the provisions of EITF 00-19, a contract designated as an asset or
liability must be carried at fair value until the contract meets the
requirements for treatment as equity, until the contract is exercised or until
the contract expires. Accordingly, future changes to the fair market value of
these Warrants have the potential to cause volatility in our future results. For
the period of time that these Warrants are classified as a liability, any
increase in the fair market value of the Warrants will result in an additional
non-cash expense to the Consolidated Statements of Income. If the fair market
value of the Warrants decreases in the future, we will record non-cash income in
our Consolidated Statements of Income. We estimate the fair value of our
Warrants on a quarterly basis using a lattice model.

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

In certain situations, a
taxing authority may challenge positions adopted in our income tax filings. We
may apply a different tax treatment for these selected transactions in filing
the tax return than for income tax financial reporting purposes. We regularly
assess the tax positions for such transactions and include reserves for those
differences in position. The reserves are utilized or reversed once the statute
of limitations has expired or the matter is otherwise resolved. In addition, we
believe the ultimate outcome of these matters will not have a material impact on
the Companys financial condition or liquidity.

Through December 31, 2004
we claimed tax benefits under an income tax convention between the United States
and Barbados ("pre-2005 Treaty"), the jurisdiction in which our
subsidiary, Interpool Limited, operates our container business, is incorporated.
Specifically, under the pre-2005 Treaty, any profits of Interpool Limited from
leasing of containers used in international trade generally are taxable only in
Barbados at an approximate 3% tax rate, and not in the United States. Interpool
Limited was entitled to the benefits of the tax convention for each year that
more than 50% of the shares of Interpool Limited were owned, directly or
indirectly, by any combination of individual United States residents or citizens
(the "51% U.S. ownership test") and its income was not used in
substantial part, directly or indirectly, to meet liabilities to persons who
were not residents or citizens of the United States (the "base erosion
test"). We believe Interpool Limited passed both of these tests through
December 31, 2004.

Historically, no deferred
U.S. Federal income taxes have been provided on the unremitted earnings of the
subsidiary since it is our past practice and future intention to permanently
reinvest such earnings. We have documented our ability to reinvest earnings
generated annually from our international operations. This documentation
contains certain management judgments and estimates of economic conditions and
the future demand for containers. Any unremitted earnings that we would be
unable to reinvest in our international operations could be subject to taxation
at United States tax rates. We are now exploring the implications of the
repatriation provision contained in the American Jobs Creation Act of 2004, but
we have not yet decided whether to repatriate any unremitted earnings.

On July 14, 2004, the
United States and Barbados signed a protocol to the pre-2005 Treaty which was
ratified on December 20, 2004 ("post-2004 Treaty") that contains a
more restrictive limitation on benefits provision than the pre-2005 Treaty. The
post-2004 Treaty took effect on January 1, 2005 following its ratification by
the United States Senate and the government of Barbados on December 20, 2004.
Under the post-2004 Treaty, in addition to having to satisfy the 51% U.S.
ownership and base erosion tests described above, Interpool Limited is only
eligible for Treaty benefits with respect to its container rental and sales
income if Interpool, Inc. is listed on a "recognized stock exchange"
and Interpool, Inc.s stock is "primarily" and
"regularly" traded on such exchange.

As described elsewhere in
this report, on January 13, 2005 our common stock was listed on the New York
Stock Exchange; a "recognized stock exchange" within the meaning of
the post-2004 Treaty. Interpool believes this listing and its current trading
volume satisfies the "primarily" and "regularly" traded
requirements of the post-2004 Treaty, and that Interpool Limited qualified for
benefits under the post-2004 Treaty on January 13, 2005. We have estimated there
should be no U.S. current tax expense for the period January 1, 2005 to January
12, 2005.

Recent Accounting Pronouncements

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

In November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in interim and annual
financial statements about its obligations under certain guarantees it has
issued. A guarantor is required to disclose (a) the nature of the guarantee,
including the approximate term, how the guarantee arose, and the events and
circumstances that would require the guarantor to perform under the guarantee;
(b) the maximum potential amount of future payments under the guarantee; (c) the
carrying amount of the liability, if any, for the guarantors obligation
under the guarantee; and (d) the nature and extent of any recourse provisions or
available collateral that would enable the guarantor to recover the amounts paid
under the guarantee. FIN 45 also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Disclosure requirements were
effective for financial statements with periods ending after December 15, 2002
while the initial recognition and initial measurement provisions were to be
applied on a prospective basis to guarantees issued or modified after December
31, 2002. We have adopted the provisions of FIN 45 as required. (See Note 8 to
the Consolidated Financial Statements for disclosures regarding our guarantees.)
The adoption of FIN 45 did not have a material impact on our Consolidated
Financial Statements.

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

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

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

In December 2004, the FASB
published SFAS No. 123(R), Share-Based Payment, ("SFAS 123 (R)") which
will be effective for periods beginning after June 15, 2005. We currently
account for our stock option plans in accordance with SFAS No. 148, Accounting
for Stock-Based Compensation ("SFAS 148"). This Statement amends SFAS
No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), which
allows for the retention of principles within Accounting Principles Board
Opinion 25, Accounting for Stock Issued to Employees ("APB 25"). As
permitted, we have chosen to continue to account for stock-based compensation
using the intrinsic value method described in APB 25 and related
interpretations. APB 25 generally requires compensation costs, if any, to be
recognized for the difference between the exercise price and the market price of
the underlying stock on the date of the grant. Alternatively, SFAS 123 employs
fair value-based measurement and generally results in the recognition of
compensation expense for all stock-based awards. The adoption of SFAS 123(R)
will require the recognition of compensation expense for all share-based
compensation. Based on the number of options currently outstanding, the adoption
of SFAS 123(R) is not expected to have a significant impact on our financial
condition or results of operations. However, all future grants of share-based
compensation will result in the recognition of compensation expense.

ITEM 8.        
            
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

|INTERPOOL, INC.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets--At December 31, 2004 (restated) and 2003 (restated)
Consolidated Statements of Income For the Years Ended December 31, 2004 (restated),
      2003 (restated) and 2002
Consolidated Statements of Changes in Stockholders' Equity For the Years Ended
      December 31, 2004 (restated), 2003 (restated) and 2002
Consolidated Statements of Cash Flows For the Years Ended December 31, 2004 (restated),
      2003 (restated) and 2002
Notes to Consolidated Financial Statements | Page No.
53
54 
55 
56 
57 
58
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------

Report of Independent Registered
Public Accounting Firm

The Board of Directors
Interpool, Inc.:

We have audited the
accompanying consolidated balance sheets of Interpool, Inc. (a Delaware
corporation) and subsidiaries as of December 31, 2004 and 2003 and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the years in the three year period ended December 31, 2004.
These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Interpool, Inc. and subsidiaries as
of December 31, 2004 and 2003, and the results of their operations and their
cash flows for each of the years in the three year period ended December 31,
2004 in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to
the consolidated financial statements, in 2002 the Company changed its method of
accounting for (i) goodwill and (ii) the impairment or disposal of long-lived
assets.

As discussed in Note 1(B)
to the consolidated financial statements, the Company has restated its
consolidated balance sheets as of December 31, 2004 and 2003, and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the years in the two year period ended December 31, 2004.

(signed) KPMG LLP
Short Hills, N.J.
March 28, 2005, except for Note 1(B) which is as of November 8, 2005

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003(dollars in thousands, except share and per share amounts)

`ASSETS                                                                                               2004            2003
                                                                                                   Restated         Restated
                                                                                                   --------         --------
CASH AND CASH EQUIVALENTS (including restricted cash of $24,927 and $24,985 at
     December 31, 2004 and 2003, respectively)                                                      $309,458       $141,019
MARKETABLE SECURITIES, available for sale at fair value                                                   27             24
ACCOUNTS RECEIVABLE, less allowance of $14,091 and $16,358, respectively                              72,598         69,055
NET INVESTMENT IN DIRECT FINANCING LEASES                                                            363,445        426,815
OTHER RECEIVABLES, net                                                                                 3,602         25,485
LEASING EQUIPMENT, net of accumulated depreciation and amortization of $538,575 and
     $522,431, respectively                                                                        1,579,196      1,636,716
OTHER ASSETS                                                                                          75,760         73,922
                                                                                                      ------         ------
TOTAL ASSETS                                                                                      $2,404,086     $2,373,036
                                                                                                  ==========     ==========
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                               $127,057       $198,062
WARRANT LIABILITY                                                                                     71,722            ---
INCOME TAXES:
     Current                                                                                           1,915            367
     Deferred                                                                                         46,367         34,555
                                                                                                      ------         ------
TOTAL TAXES                                                                                           48,282         34,922

DEFERRED INCOME                                                                                        2,018          2,704
DEBT AND CAPITAL LEASE OBLIGATIONS
     Due within one year                                                                             240,553        219,192
     Due after one year                                                                            1,477,645      1,496,495
                                                                                                   =========      =========
         TOTAL DEBT AND CAPITAL LEASE OBLIGATIONS                                                  1,718,198      1,715,687

TOTAL LIABILITIES                                                                                 $1,967,277     $1,951,375
                                                                                                  ----------     ----------
MINORITY INTEREST IN EQUITY OF SUBSIDIARIES                                                           39,786         35,184
                                                                                                      ------         ------
STOCKHOLDERS' EQUITY
     Preferred stock, par value $.001 per share; 1,000,000 authorized, none issued                       ---            ---
     Common stock, par value $.001 per share; 100,000,000 shares authorized, 28,278,759
       and 27,602,452 issued at December 31, 2004 and 2003, respectively                                  28             28
     Additional paid-in capital                                                                      145,112        135,629
     Unamortized deferred compensation                                                                  (554)        (1,184)
     Treasury stock, at cost, 646,711 and 225,900 shares at December 31, 2004 and 2003,
       respectively                                                                                  (11,508)        (2,229)
     Retained earnings                                                                               269,694        269,121
     Accumulated other comprehensive loss                                                             (5,749)       (14,888)
                                                                                                      -------       --------
TOTAL STOCKHOLDERS' EQUITY                                                                           397,023        386,477
                                                                                                     -------        -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                        $2,404,086     $2,373,036
                                                                                                  ==========     ===========`

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

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002(dollars and shares in thousands)

`2004         2003          2002
                                                                                Restated      Restated       -----
REVENUES:                                                                       --------      --------
   Equipment leasing revenue, including income recognized on direct
      financing leases of $41,659, $46,362 and $36,246, respectively             $388,183     $374,287     $325,080
   Other revenue                                                                   16,204       27,825       19,855
                                                                                   ------       ------       ------
TOTAL REVENUES                                                                    404,387      402,112      344,935
                                                                                  -------      -------      -------
COSTS AND EXPENSES:
  Lease operating expenses                                                         95,332      108,465       89,078
  Administrative expenses                                                          49,943       55,052       27,945
  Provision for doubtful accounts                                                   1,476        4,248        7,843
  Fair value adjustment for derivative instruments                                 (1,511)      (1,756)       5,530
  Fair value adjustment for warrants                                               49,222          ---          ---
  Depreciation and amortization of leasing equipment                               89,458       87,498       88,707
  Impairment of leasing equipment                                                   4,610        9,049        9,550
  (Income)/loss for investments accounted for under the equity method                (416)       1,698        6,603
  Other (income)/expense, net                                                     (15,686)      (5,079)       1,131
  Gain on insurance settlement                                                     (6,267)         ---         ---
  Interest expense                                                                112,013      106,688      108,344
  Interest income                                                                  (3,390)      (3,960)      (4,638)
                                                                                   -------      -------      -------
TOTAL COST AND EXPENSES                                                           374,784      361,903      340,093
                                                                                  -------      -------      -------
Income before minority interest expense and provision/(benefit) for income
  taxes                                                                            29,603       40,209        4,842
MINORITY INTEREST EXPENSE                                                          (8,372)      (1,910)      (1,846)
                                                                                   -------      -------      -------
Income before provision/(benefit) for income taxes                                 21,231       38,299        2,996
PROVISION/(BENEFIT) FOR INCOME TAXES                                               13,362          803       (1,393)
                                                                                   -------         ---       -------
NET INCOME                                                                         $7,869      $37,496       $4,389
                                                                                   =======     ========      =======
INCOME PER SHARE
NET INCOME PER SHARE:
     Basic                                                                          $0.29        $1.37        $0.16
                                                                                    =====        =====        =====
     Diluted                                                                        $0.27        $1.30        $0.15
                                                                                    =====        =====        =====
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands):
     Basic                                                                         27,380       27,365       27,360
                                                                                   =======     ========      =======
     Diluted                                                                       28,960       28,935       29,202
                                                                                   =======     ========      =======`

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

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (dollars and shares in thousands)

`Acum.
                                   Common Stock                 Unamortized                        Other              Total
                                -------------------  Additional   Deferred                          Comp.    Comp-     Share-
                                 Outstanding  Par    Paid-in      Compensa   Treasury  Retained     Income   Income    holder's
                                   Shares    Value    Capital      tion       Stock     Earnings    (Loss)   (Loss)    Equity
                                 --------    ------  ---------   ----------  --------- ---------   --------  -------   --------
BALANCE, December 31, 2001 as
previously reported                27,355     $28    $124,182       $---     $(2,099)  $239,065   $(9,907)            $351,269

Adjustment (see Note 1)               ---     ---         ---        ---         ---        803       ---       ---        803

BALANCE, December 31, 2001, as
adjusted                           27,355      28     124,182        ---      (2,099)   239,868    (9,907)             352,072

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

Other comprehensive loss              ---     ---         ---        ---         ---        ---   (15,091)  (15,091)   (15,091)
                                                                                                            -------
Comprehensive loss                                                                                         $(10,702)
                                                                                                           ========
Purchase of 9,300 shares of
  treasury stock                      ---     ---         ---        ---        (130)       ---       ---                 (130)

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

Cash dividends declared:

  Common stock, $.2275  per share     ---     ---         ---        ---         ---     (6,227)      ---               (6,227)
                                                                                         ------                         ------
BALANCE, December 31, 2002         27,355      28     126,165        ---      (2,229)   238,030   (24,998)             336,996

Net income (Restated)                 ---     ---         ---        ---         ---     37,496       ---    37,496     37,496

Other comprehensive income
(Restated)                            ---     ---         ---        ---         ---        ---    10,110    10,110     10,110
                                                                                                             ------
Comprehensive income (Restated)                                                                             $47,606
                                                                                                            =======
Capital contribution by officers
  and directors                       ---     ---         698        ---         ---        ---       ---                  698

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

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

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

Intrinsic value of option
modification (Restated)               ---     ---       7,091        ---         ---         ---      ---                7,091

Cash dividends declared:

  Common stock, $.25 per share        ---     ---         ---        ---         ---     (6,405)      ---               (6,405)
                                                                                         -------      ---               -------
BALANCE, December 31, 2003
(Restated)                         27,377     $28    $135,629    $(1,184)    $(2,229)  $269,121  $(14,888)            $386,477

Net income (Restated)                 ---     ---         ---        ---         ---      7,869       ---     7,869      7,869

Other comprehensive income
(Restated)                            ---     ---         ---        ---         ---        ---     9,139     9,139      9,139
                                                                                                              -----
Comprehensive income                                                                                        $17,008
                                                                                                            =======
Restricted stock award                  2     ---         371       (371)        ---        ---       ---
Amortization of restricted stock
award                                 ---     ---         ---         85         ---        ---       ---                   85

Forfeitures restricted stock award    ---     ---      (1,017)       916         ---        ---       ---                 (101)

Options exercised (See Note 14)       248     ---      10,006        ---      (9,279)       ---       ---                  727

Stock grant                             5     ---         123        ---         ---        ---       ---                  123


Cash dividends declared:

  Common stock, $0.25 per share       ---     ---         ---        ---         ---     (7,296)      ---               (7,296)
                                                                                         -------                        ------
BALANCE, December 31, 2004
(Restated)                         27,632     $28    $145,112      $(554)  $(11,508)   $269,694   $(5,749)            $397,023
                                  =======     ===    ========      ======  =========   ========   ========            =========`

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

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002(dollars in thousands)

`2004            2003             2002
                                                                                     ----            ----             ----
                                                                                  (Restated)       (Restated)
                                                                                  ----------       ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                           $7,869          $37,496        $4,389
Adjustments to reconcile net income to net cash provided by operating
activities --
   Depreciation and amortization                                                     97,123           94,210        91,457
   Impairment of leasing equipment                                                    4,610            9,049         9,550
   Amortization of debt discount                                                        506              ---           ---
   Accrued losses on business transferred under contractual agreement                   ---              ---        13,780
   Provision/(benefit) for deferred income taxes                                     11,124             (670)       (3,118)
   (Gain)/loss on sale of leasing equipment                                         (14,743)          (1,213)        4,257
   Loss on sale of marketable securities                                                ---               50            30
   Gain on sale of land held for sale                                                   ---              ---        (4,766)
   Provision for uncollectible accounts                                               1,476            4,248         7,843
   Gain on retirement of debt                                                           ---              ---        (1,118)
   Restricted stock grant expense                                                        85              140           ---
   Option modification compensation expense                                             ---            7,091           ---
   Fair value adjustment for derivative instruments                                  (1,511)          (1,756)        5,530
   Fair value adjustment for warrants                                                49,222              ---           ---
   (Income)/losses for investments accounted for under the equity method               (416)           1,698         6,603
   Gain on settled insurance litigation                                              (6,267)             ---           ---
   (Increase)/decrease in accounts receivable                                        (3,619)          (9,351)        8,018
   Decrease (increase) in other receivables                                          26,610             (194)       (5,447)
   (Increase)/decrease in other assets                                              (11,342)           1,701        (9,938)
   (Decrease)/increase in accounts payable and accrued expenses                      (5,801)           7,834       (11,168)
   Increase/(decrease) in income taxes payable                                        1,488             (436)         (248)
   Other, net                                                                         3,915              140         4,493
                                                                                      -----              ---         -----
         Net cash provided by operating activities                                  160,329          150,037       120,147
                                                                                    -------          -------       -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of leasing equipment                                                   (206,613)        (237,521)     (191,938)
Proceeds from dispositions of leasing equipment                                     153,058           54,386        12,041
Proceeds from sale of land                                                              ---              ---         7,955
Investment in direct financing leases                                               (43,708)        (109,254)      (64,088)
Cash collections on direct financing leases                                          88,939           77,793        59,749
Purchase of marketable securities                                                       ---              (10)       (1,494)
Sales and matured marketable securities and other investing activities                  ---            1,445           574
Investment in and advances to subsidiary                                                ---              ---           765
Proceeds from minority interest partner in chassis distributor                          ---              500           ---
         Net cash used for investing activities                                      (8,324)        (212,661)     (176,436)
                                                                                     -------        ---------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt                                                      627,296          211,813     1,227,406
Payment of long-term debt and capital lease obligations                            (387,296)        (204,229)   (1,023,645)
Borrowings of revolving credit lines                                                 30,500           88,000        47,000
Repayment of revolving credit lines                                                (245,995)         (56,505)     (121,846)
Purchase of treasury stock                                                              ---              ---          (130)
Dividends paid                                                                       (8,071)          (6,049)       (5,643)
                                                                                     -------          -------       -------
Net cash provided by financing activities                                            16,434           33,030       123,142
                                                                                     ------           ------        ------
Net increase/(decrease) in cash and cash equivalents                                168,439          (29,594)       66,853
CASH AND CASH EQUIVALENTS, beginning of period                                      141,019          170,613       103,760
                                                                                    -------          -------       -------
CASH AND CASH EQUIVALENTS, end of period                                           $309,458         $141,019      $170,613
                                                                                   ========         ========      ========
Supplemental schedule of non-cash investing activities:
Direct financing lease financed through capital lease obligation                        ---           $4,397       $10,284
Transfers from leasing equipment to direct financing leases                         $24,449          $25,775       $40,227
Transfer from direct financing leases to leasing equipment                          $12,546           $3,651           ---
Exercise of stock option on a cashless basis                                           $727              ---           ---`

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

INTERPOOL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)     Nature of
operations, significant accounting policies and restatement:

A.     Nature of operations and significant accounting policies

The nature of operations
and the significant accounting policies used by Interpool, Inc. and subsidiaries
(the "Company" or "Interpool") in the preparation of the
accompanying consolidated financial statements are summarized below. The
Companys accounting records are maintained in United States dollars and
the consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("U.S.
GAAP").

Nature of operations

The Company and its
subsidiaries conduct business principally in a single industry segment, the
leasing of intermodal dry freight standard containers, chassis and other
transportation related equipment. Within this single industry segment, the
majority of the Companys operations come from two reportable segments:
container leasing and domestic intermodal equipment leasing. The container
leasing segment specializes primarily in the leasing of intermodal dry freight
standard containers, while the domestic intermodal equipment segment specializes
primarily in the leasing of intermodal container chassis. The Company leases its
containers principally to international container shipping lines located
throughout the world. The customers for the Companys chassis are a large
number of domestic companies, many of which are domestic subsidiaries or
branches of international shipping lines, as well as major U.S. railroads.
Equipment is purchased directly or acquired through conditional sales contracts
and lease agreements, many of which qualify as capital leases.

The Companys
container leasing operations are primarily conducted through our wholly-owned
subsidiary, Interpool Limited, a Barbados corporation, as well as CAI, our 50%
owned consolidated subsidiaries. Profits of Interpool Limited from
international container leasing operations are exempt from federal taxation in
the United States. These profits are subject to Barbados tax at rates that are
substantially lower than the applicable rates in the United States.

The Company also had
limited operations in a third reportable segment that specialized in leasing
microcomputers and related equipment. The computer leasing segment consisted of
two majority owned subsidiaries, Microtech Leasing Corporation
("Microtech") and Personal Computer Rental Corporation
("PCR"). During the third quarter of 2001, the Company adopted a plan
to exit this segment. The Company liquidated the assets of Microtech as of March
31, 2004. PCR ceased active operations and began to liquidate in the first
quarter of 2003. At March 31, 2004, all of the assets of PCR were liquidated.

Beginning June 27, 2002,
the Companys consolidated financial statements include Container
Applications International, Inc. ("CAI"), which was previously
accounted for under the equity method of accounting. The Company owns a 50%
common equity interest in CAI. (See Note 11 for further information regarding
CAI.)

Basis of consolidation

The Companys
consolidated financial statements are prepared in accordance with U.S. GAAP. The
consolidated financial statements include the accounts of the Company and
subsidiaries more than 50% owned or otherwise controlled by the Company. All
significant intercompany transactions have been eliminated. Minority interest in
equity of subsidiaries represents the minority stockholders proportionate
share of the equity in the income of the subsidiaries.

In connection with certain
investments in which the Company does not own a majority interest but has the
ability to assert significant influence over the investee, these investments are
accounted for using the equity method of accounting. The Companys
investment in its equity method investees is included in other assets on the
accompanying Consolidated Balance Sheet.

Goodwill

On June 29, 2001, the FASB
approved its proposed SFAS No. 142, Goodwill and Other Intangible Assets
("SFAS 142"). SFAS 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of SFAS 142. SFAS
142 also requires that intangible assets with definite useful lives be amortized
over their respective estimated useful lives to their estimated residual value,
and reviewed for impairment in accordance with SFAS No. 144, Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of ("SFAS 144").

Commencing January 1,
2002, as a result of adopting SFAS 142, goodwill is no longer amortized but is
reviewed for impairment. During December 2002, the Company conducted its annual
goodwill impairment test. The test disclosed that at December 31, 2002 the
fair value of an investment accounted for using the equity method included in
the domestic intermodal leasing segment was below its carrying value. As a
result, the Companys basis for this equity method investment was written
down by $1,095 to its estimated fair market value. During December 2003 and
2004, the Company conducted its annual goodwill impairment tests. The tests
disclosed that at both December 31, 2003 and 2004, the implied fair value of the
goodwill was in excess of its carrying value, therefore additional impairment
charges were not required. Total goodwill recorded at December 31, 2004 and
2003 was $5,495 for both years and is included in other assets on the
accompanying Consolidated Balance Sheet. This goodwill is included in total
assets within the Domestic Intermodal Leasing segment.

Translation of foreign currencies

The Company has determined that the U. S. dollar is
its functional currency for each of its overseas operations therefore, all gains
and losses resulting from translating foreign currency transactions into the
functional currency are included in income.

Revenues

Equipment leasing revenues
include revenue from operating leases and income on direct financing leases,
which is recognized over the term of the lease using the effective interest
method. Rental income on operating leases is recognized on the accrual basis
based on the contractual agreement with the lease customer.

Other revenue consists
primarily of fees charged to the lessee for handling, delivery and repairs which
is recognized as earned based on the terms of the contractual agreements with
the lease customer.

Maintenance and repair expense

Maintenance and repair
expenses are accounted for under the direct expense method; thus these amounts
are charged to operating expenses when incurred.

Cash and cash equivalents

The Company considers
investments with original maturities of three months or less to be cash
equivalents. The Companys policy is to invest cash in excess of short-term
operating and debt service requirements in cash equivalents. These instruments
are stated at cost, which approximates market value because of the short-term
nature of the instruments.

Allowance for doubtful accounts

The Companys
allowance for doubtful accounts is provided based upon a quarterly review of the
collectibility of its receivables. This review is based on the risk profile of
the receivables, credit quality indicators such as the level of past-due amounts
and economic conditions, as well as the value of underlying collateral. An
account is considered past due when a payment has not been received in
accordance with the contractual terms. Accounts are generally charged off after
an analysis is completed which indicates that collection of the full principal
balance is in doubt. Changes in economic conditions or other events may
necessitate additions or deductions to the allowance for doubtful accounts. The
allowance for doubtful accounts is intended to provide for losses inherent in
the accounts receivable, and requires the application of estimates and judgments
as to the outcome of collection efforts and the realization of collateral, among
other things. The Company believes its allowance for doubtful accounts is
adequate to provide for credit losses inherent in its accounts receivable. See
Note 3 to the Consolidated Financial Statements for further discussion regarding
the allowance for doubtful accounts.

Non-performing receivables

Non performing receivables
reflect both operating lease receivables and direct financing lease receivables
which the Company considers impaired. When evaluating its operating and direct
financing lease receivables for impairment, the Company considers, among other
things, the level of past-due amounts of the respective receivable, the
borrowers financial condition, credit quality indicators of the borrower,
and the value of underlying collateral.

Direct financing leases

Direct financing leases are
recorded at the aggregate future minimum lease payments, including any purchase
options granted to the customer, less unearned income. Income from these leases
is recognized over the term of the lease using the effective interest method.

Stock-based compensation

Stock option plans are
accounted for in accordance with SFAS No. 148, Accounting for Stock-Based
Compensation ("SFAS 148"). This Statement amends SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), which allows for
the retention of principles within Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees. As permitted by the Statement, the
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method. To date, all options were granted with an exercise price
equal to the market price of the Companys stock at grant date.

The following table
illustrates the effect on net income and earnings per share had the fair value
method of accounting been applied to the Companys stock compensation
plans.

`Year Ended December 31,
                                                               -------------------------------------------------------
                                                                        2004              2003               2002
                                                                        ----              ----               ----
                                                                     (Restated)         (Restated)
                                                                     ----------         ----------
  Net income, as reported                                             $7,869             $37,496           $4,389
  Add:  Stock based employee compensation expense
  included in net income, net of related tax effects                   1,463               4,637              ---
  Deduct: Total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects                          (1,503)             (5,380)            (112)
                                                                      -------             -------            -----
  Pro forma net income                                                $7,829             $36,753           $4,277
                                                                      =======             =======            =====
  Earnings per share:
  Basic-as reported                                                    $0.29               $1.37            $0.16
                                                                       =====               =====            =====
  Basic-pro forma                                                      $0.29               $1.34            $0.16
                                                                       =====               =====            =====
  Diluted-as reported                                                  $0.27               $1.30            $0.15
                                                                       =====               =====            =====
  Diluted-pro forma                                                    $0.27               $1.27            $0.15
                                                                       =====               =====            =====`

The average fair value of
options granted during 2004 was $9.76 per option. The fair value was estimated
using the Black-Scholes Option pricing model based on the market price at Grant
Date of $22.05 and the following assumptions: risk-free interest rate of 3.57%,
expected life of 7 years, volatility of 45% and dividend yield of 1.44%. No
Options were granted by the Company in 2003.

During the third quarter of
2005, the Company determined that it had not recorded the full amount of
compensation expense required by U.S. generally accepted accounting principles
("GAAP") with respect to a separation agreement with Mr. Raoul
Witteveen, its former President, which was entered into in connection with Mr.
Witteveens resignation in October 2003. The separation agreement between
the Company and Mr. Witteveen contained a provision under which Mr.
Witteveens fully vested stock options, which had a five year remaining
term at the time of his resignation, would instead expire two years after his
resignation and therefore would not be subject to a provision of the
Companys 1993 Stock Option Plan under which vested options terminate if
not exercised within ten business days after resignation. In the 2003
Consolidated Financial Statements, the Company should have re-measured the
intrinsic value of the options (the difference between the market price of the
underlying common stock and the exercise price of the options) at the date of
the modification and recorded the intrinsic value of the options as additional
compensation expense (non-cash) in the fourth quarter of 2003. As a result, the
Companys Consolidated Financial Statements have been restated for the
years ended 2003 and 2004. See Note 1(B) for further discussion of this
restatement. The modification to these vested stock options resulted in the
recognition of compensation expense of $7,091. The fair value of these fully
vested options as modified on October 9, 2003 was $8,214 or approximately $7.21
per option. These values are reflected in the above chart in 2003, net of tax.
The fair value was estimated using the Black-Scholes Option pricing model based
on the market price at the new measurement date of $16.47 and the following
assumptions: risk-free interest rate of 1.75%, expected life of 2 years,
volatility of 47% and dividend yield of 1.58%.

The average fair value of
options granted during 2002 was $6.66 per option. The fair value was estimated
using the Black-Scholes Option pricing model based on the market price at Grant
Date of $13.73 and the following assumptions: risk-free interest rate of 3.5%,
expected life of 7 years, volatility of 50% and dividend yield of 1.31%.

Insurance receivables

The Company has maintained
insurance coverage in the event of a lessees insolvency, bankruptcy or
default. Amounts recorded as an insurance claim receivable are included in other
receivables, net at December 31, 2003 in the Consolidated Balance Sheets and are
limited to those amounts that are probable of collection and include only
incurred costs and losses related to the insurable event. There are no insurance
receivables at December 31, 2004. Amounts recorded as insurance claim receivable
are recorded in other (income)/expense, net in the Consolidated Statements of
Income. Upon collection of the receivable from the insurance carriers, any
amounts in excess of or less than the receivable recorded would be recorded as
gain or loss on insurance settlement in the Consolidated Statements of Income.

Property and equipment

The Company records
property and equipment at cost, except for property and equipment that has been
impaired, for which the Company reduces the carrying amount to the estimated
fair value at the impairment date. Property and equipment is included in other
assets on the accompanying Consolidated Balance Sheet. The Company capitalizes
significant improvements; the Company charges repairs and maintenance costs that
do not extend the lives of the assets to expense as incurred. The Company
removes the cost and accumulated depreciation of assets sold or otherwise
disposed of from the accounts and recognizes any resulting gain or loss upon the
disposition of the assets.

The Company depreciates the
cost of property and equipment over their estimated useful lives on a
straight-line basis as follows: buildings  40 years; furniture and
fixtures  3 to 7 years; computers and office equipment  3 to 5
years; and other property and equipment  3 to 10 years.

Leasing equipment

The Company records
equipment at cost, except for equipment that it considers impaired. When
equipment is considered impaired, the Company reduces the carrying amount to the
equipments estimated fair value at the impairment date. The Company
capitalizes significant improvements if such improvements extend the life of the
equipment. The Company charges repair and maintenance costs that do not extend
the lives of the assets to expense as incurred. Upon disposition of equipment,
the Company removes the cost and accumulated depreciation of assets disposed of
from the accounts and recognizes any resulting gain or loss.

Depreciation and
amortization of leasing equipment (both equipment on-lease to customers and
available for hire) is provided under the straight-line method based upon the
following estimated useful lives:

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

In March 2002, the Company
completed a $500,000 chassis securitization facility. At that time, independent
appraisals indicated a chassis useful life of between 20 and 25 years. As a
result, effective April 1, 2002, the Company revised its estimate of the useful
life of certain of its chassis from 17.5 years to 22.5 years. The effect of this
change was to decrease depreciation expense by $6,866 ($4,120 net of tax) for
the year ended December 31, 2002 which resulted in a $0.15 and $0.14 increase in
the basic and diluted net income per share, respectively. The valuations and
in-depth review concluded that no change was required to the residual value of
the Companys chassis.

CAI, the Companys 50%
owned subsidiary, had an independent valuation performed on its container fleet
to determine the useful life of the containers as well as the estimated market
value at the end of their useful life. As a result, effective April 1, 2002, the
Company adjusted the useful life for all of its containers to 12.5 years
(previously 12.5 to 15 years) and changed its residual values to the estimated
market value of the containers as determined by the appraisal. The effect of
these changes for the year ended December 31, 2002 was to decrease depreciation
expense of the Company by $489. In addition, the Company recognized additional
depreciation recorded by CAI prior to June 27, 2002 of $626 that was recorded by
the Company in loss for investments accounted for under the equity method. The
net effect of all these changes increased net income by $51 for the year ended
December 31, 2002 considering the Companys 50% common equity interest in
CAI.

Gains or losses resulting
from the disposition of leasing equipment are recorded in the year of
disposition. These amounts are recorded in other (income)/expense, net on the
Consolidated Statement of Income.

In August 2001, the FASB
approved its proposed SFAS No. 144, Accounting for the Impairment or Disposal of
Long Lived Assets ("SFAS 144"). SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS 144 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances occur measured by a comparison of the
carrying amount of an asset to undiscounted future net cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
future undiscounted cash flows, an impairment charge is recognized for the
amount by which the carrying amount of the asset exceeds the fair value of the
asset. SFAS 144 requires companies to separately report discontinued operations
and extends that reporting to a component of an entity that either has been
disposed of (by sales, abandonment, or in a distribution to owners) or is
classified as held for sale. Assets to be disposed are reported at the lower of
the carrying amount or fair value less costs to sell. The Company adopted SFAS
144 on January 1, 2002. During the first quarter of 2002, the Company evaluated
the carrying value of its long-lived assets as prescribed by SFAS 144. The
adoption of this statement in the first quarter of 2002 did not result in an
adjustment to our Consolidated Financial Statements.

At December 31, 2004, 2003
and 2002, the Company performed a review of its container and chassis fleets in
order to determine whether these assets are impaired in accordance with SFAS
144. The container fleet is reported within the container leasing segment, while
the chassis are reported within the domestic intermodal equipment segment. This
review indicated that there was no impairment to the fleet with the exception of
specific units that were idle, some of which were badly damaged, and other
specific units with design flaws. The Company performed a review of this
equipment to determine whether the units would be repaired and returned to
service or sold based upon the best economic alternative for the Company. This
determination was based on the condition of the unit, its location and the
resale market within that location. All units identified for sale were then
written down, if required, to estimated net realizable value. The measurement of
an impairment loss requires a determination of fair value, which is based on the
best information available. The Company uses market prices of similar equipment
when available and the estimated residual value of a used chassis within the
remanufacturing process to determine fair value. For the years ended December
31, 2004, 2003 and 2002, the impairment loss on chassis and containers
(excluding CAI) was $4,335, $8,059 and $8,784, respectively. Impairment amounts
are recorded in impairment of leasing equipment on the accompanying Consolidated
Statements of Income.

During the years ended
December 31, 2004, 2003 and 2002, CAI performed a review of its container
fleet in order to determine whether these assets were impaired in accordance
with SFAS 144. The container fleet is reported in the container leasing segment.
The loss was calculated by comparing the equipments net book value to the
estimated realizable value of the equipment. The total impairment loss recorded
by CAI at December 31, 2004 was $275 which reduced income before taxes by $138
after taking into account the Companys 50% minority interest adjustment.
This compares to an impairment loss at December 31, 2003 of $990 which
reduced income before taxes by $495 after taking into account the Companys
50% minority interest adjustment. The total impairment loss at December 31,
2002 was $4,231. The Companys 50% share of this loss is $2,115 of which
$1,732 was recognized by CAI before June 27, 2002 and was recorded by the
Company in loss for investments accounted for under the equity method. In
addition $766 of additional depreciation was recognized by CAI after June 27,
2002 which reduced income before taxes by $383 after taking into account the
Companys 50% minority interest adjustment.

Marketable and other investment securities

Management has determined
that all securities are to be held for an indefinite period of time and
classified as securities available-for-sale carried at market value. Unrealized
holding gains and losses for available-for-sale securities are credited
(charged) to a component of stockholders equity net of related income
taxes. Management determines the appropriate classifications of securities at
the time of purchase.

Premium and discount on
securities are included in interest income over the period from acquisition to
maturity using the level-yield method. The specific identification method is
used to record gains and losses on security transactions.

Through September 30, 2003,
the Company classified its retained interest in the off-balance sheet direct
financing lease securitization completed in March 1999 as an available-for-sale
security in the Consolidated Balance Sheets. Effective October 1, 2003, a
customer elected to return a portion of the equipment covered by a direct
financing lease which had been included in the lease securitization program.
This equipment was subsequently leased to another customer under the terms of an
operating lease agreement. As such, the lease could no longer be considered a
financial asset and the Securitization Trust special purpose entity could no
longer be treated as an off-balance sheet qualified special purpose entity for
accounting purposes. Therefore, effective October 1, 2003, the Company
consolidated the assets and liabilities of this special purpose entity. For
further information regarding the lease securitization program and the
consolidation of this special purpose entity, see Note 7 to the Consolidated
Financial Statements. Impairment losses of $134 for the year ended
December 31, 2002, were recorded and included in the accompanying
Consolidated Income Statements based upon managements analysis of
projected cash flows of the underlying direct financing lease receivables in the
Securitization Trust.

During the year ended
December 31, 2004, no sales of available-for-sale securities took place. During
the year ended December 31, 2003, sale of available-for-sale securities resulted
in proceeds of $1,445, and gross losses of $50. During the year ended December
31, 2002, sales of available-for-sale securities resulted in proceeds of $574,
gross gains of $5, and gross losses of $35.

The amortized cost and
estimated fair value of available for sale securities as of December 31, 2004
and 2003 are as follows:

`Gross Unrealized
                                                   Amortized        Holding        Holding        Estimated
                                                     Cost            Gains          Losses       Fair Value
                                                   ---------        -------        -------       ----------
           2004
           ----
           Marketable Securities                        $24             $3          $---               $27
                                                        ===             ==          ====               ===
           2003
           ----
           Marketable Securities                        $24            $--          $---               $24
                                                        ===            ===          ====               ===`

Comprehensive income/(loss)

Comprehensive income/(loss)
consists of net income for the current period and gains and losses that have
been previously excluded from the income statement and were only reported as a
component of equity.

The tax effect of other
comprehensive income/(loss) is as follows:

`Before Tax         Tax          Net of
                                                                                  Amount         Effect       Tax Amount
                                                                                ----------       ------       ----------
Year Ended December 31, 2004 (Restated)
Unrealized holding gains arising during the period:
Marketable securities                                                                    $3          $(1)           $2
Cumulative foreign currency translation adjustment                                       88          (32)           56
Swap agreements                                                                      12,941       (3,860)        9,081
                                                                                     ------       -------        -----
                                                                                    $13,032      $(3,893)       $9,139
                                                                                    =======      ========       ======


                                                                                Before Tax         Tax          Net of
                                                                                  Amount         Effect       Tax Amount
                                                                                ----------       ------       ----------
Year Ended December 31, 2003 (Restated)
Unrealized holding gains arising during the period:
Marketable securities (1)(2)                                                            $83         $(29)          $54
Cumulative foreign currency translation adjustment                                       71          (25)           46
Swap agreements                                                                      14,351       (4,341)       10,010
                                                                                     ------       -------       ------
                                                                                    $14,505      $(4,395)      $10,110
                                                                                    =======      ========      =======`

|(1) | Amounts are net of losses on sales of marketable securities of $50 (before
income tax effect of $2) recognized in the income statement.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts are net of a realized loss of $44 (before income tax effect of $18)
considered permanent and recognized in the income statement.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | Amounts are net of losses on sales of marketable securities of $30 (before
income tax effect of $12) recognized in the income statement.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(4) | Amounts are net of impairments of $134 (before income tax effect of $5)
recognized in the income statement.
|--- | -----------------------------------------------------------------------------------------------------------

The components of
accumulated other comprehensive loss, net of taxes, are as follows:

`December 31,
                                                                                ----------------------------
                                                                                     2004            2003
                                                                                                  (Restated)
                                                                                     ----         ----------
Marketable securities                                                                    $2            $---
Cumulative foreign currency translation adjustment                                       59               3
Swap agreements                                                                      (5,810)        (14,891)
                                                                                     -------        --------
                                                                                    $(5,749)       $(14,888)
                                                                                    --------       ---------`

Fair value of financial instruments

Statement of Financial Accounting Standards No. 107, Disclosures
about Fair Value of Financial Instruments ("SFAS 107") requires disclosure of
the estimated fair value of the Companys financial instruments, excluding
leasing transactions accounted for under Statement of Financial Accounting
Standards No. 13, Accounting for Leases ("SFAS 13"). The fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than a forced or
liquidation sale. Estimated fair values have been determined using the best
available data and estimation methodology suitable for each category of
financial instrument. The estimation methodologies used to estimate the fair
values and recorded book balances of the Companys financial instruments at
December 31, 2004 and 2003 are as follows:

Cash and cash equivalents

For such short-term
investments, the carrying value is considered to be a reasonable estimate of
fair value.

Marketable securities

For marketable securities
in the Companys portfolio, fair value was determined by reference to
quoted market prices, when available.

Accounts receivable

The carrying value of
accounts receivable is considered to be a reasonable estimate of fair value
based on their short-term nature.

Accounts payable and accrued expenses

The carrying value of
accounts payable and accrued expenses is considered to be a reasonable estimate
of fair value based on their short-term nature.

Interest rate swaps

Interest rate swap
contracts are included in accounts payable and accrued expenses on the
Consolidated Balance Sheets. The estimated fair value (which is also the
recorded book value) is calculated externally using market data taking into
account current market rates.

Warrant liability

The warrants issued by the
Company during September 2004, are classified as a liability on the Consolidated
Balance Sheets. The estimated fair value of this liability (which is also the
recorded book value) is calculated quarterly using external market data.
Assuming that the warrants are not exercised or expired, the warrants will
continue to be classified as a liability until certain conditions set forth in
applicable accounting literature (specifically, ETIF 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock) are satisfied, at which time the value of the warrants
will be reclassified to stockholders equity.

Debt and capital securities

The fair value of the
Companys debt and capital securities was based on quoted market prices
where available. For those borrowings with floating interest rates, it is
presumed their estimated fair value generally approximates their carrying value.
The fixed-rate debt instruments, where quoted market prices were not available,
were valued using a present value discounted cash flow analysis with a discount
rate approximating current market rates of similar term debt at the end of the
year. The discount rates used in the present value calculations ranged from
5.20% to 5.86% at December 31, 2004 and 4.75% to 5.02% at December 31, 2003.

`December 31, 2004                 December 31, 2003
                                                     ---------------------------     -------------------------------
                                                     Estimated     Recorded Book     Estimated Fair    Recorded Book
                                                     Fair Value       Balance            Value            Balance
                                                     ----------    -------------     --------------    -------------
Financial Assets:
Cash and cash equivalents                              $309,458      $309,458           $141,019          $141,019
Marketable securities                                        27            27                 24                24
Accounts receivable                                      72,598        72,598             69,055            69,055

Financial Liabilities:
Accounts payable and accrued expenses (excluding
  interest rate swap contracts)                         107,312       107,312            164,036           164,036
Interest rate swap contracts                             19,745        19,745             34,026            34,026
Warrant liability                                        71,722        71,722                ---               ---
Debt                                                    922,568       915,741            904,273           910,755
Capital securities                                       66,375        75,000             68,813            75,000`

Concentration of Credit risk

At both December 31, 2004
and 2003, approximately 47% of accounts receivable and 70% of the net investment
in direct financing leases were from customers outside of the United States.

In 2004, 2003 and 2002 the
Companys top 25 customers represented approximately 75%, 74% and 71%,
respectively, of its consolidated billings, with no single customer accounting
for more than 8.2% in any year.

Net income per share

Basic net income per share
is computed by dividing net income by the weighted average number of shares
outstanding during the period (which is net of treasury shares). Diluted income
per share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. The dilutive effect of stock options and warrants and the unvested
portion of restricted stock grants is computed using the treasury stock method,
which assumes the repurchase of common shares at the average market price for
the period. Stock options and warrants that do not have a dilutive effect
(because the exercise price is above the market price) are not included in the
diluted income per share. For the year ended December 31, 2004 (using the
treasury stock method) warrants to purchase 76,052 shares and options to
purchase 905 shares were not dilutive and were not included in diluted earnings
per share. For the years ended December 31, 2003, and 2002, all stock
options to acquire common shares were dilutive. There were no warrants
outstanding during the year ended December 31, 2003 and 2002. Unvested
restricted stock grants were dilutive for the years ended December 31, 2004
and 2003. See Note 14 to the Consolidated Financial Statements. There were no
unvested restricted stock grants outstanding during the year ended
December 31, 2002. For the years ended December 31, 2004, 2003 and 2002,
the convertible redeemable subordinated debentures issued by the Company in
December 2002, January 2003, and February 2003 (convertible into 1,487,285,
1,460,461 (as restated) and 17,599 shares, respectively) were not dilutive and
were not included in diluted earnings per share. For further discussion of the
debt characteristics of the convertible redeemable subordinated debentures, see
Note 4 to the Consolidated Financial Statements.

A reconciliation of the
numerator and denominator of basic EPS with that of diluted EPS is presented
below:

`Year Ended December 31,
                                                                                -----------------------
                                                                             2004         2003         2002
                                                                             ----         ----         ----
                                                                          (Restated)   (Restated)
                                                                          ----------   ----------
        Numerator
             Net Income - Basic and Diluted EPS                              $7,869      $37,496      $4,389

        Denominator
             Weighted average common shares
             outstanding-Basic                                               27,380       27,365      27,360
             Dilutive stock options and warrants                              1,573        1,569       1,842
             Dilutive restricted stock grants                                     7            1         ---
                                                                             ------       ------      ------
             Weighted average common shares
             outstanding-Diluted                                             28,960       28,935      29,202
                                                                             ======       ======      ======

        Earnings per common share
             Basic                                                            $0.29        $1.37       $0.16
                                                                              =====        =====       =====
             Diluted                                                          $0.27        $1.30       $0.15
                                                                              =====        =====       =====`

Use of estimates

The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
reported amounts of revenues and expenses during the reporting period and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications
have been made to the 2003 and 2002 amounts in order to conform to the 2004
presentation. In addition, the Company determined it was necessary to change the
classification of certain types of revenue which had been previously reported as
a reduction to lease operating expenses. This revenue consists primarily of fees
charged to lessees for handling, repositioning and repairs which had previously
reduced the related costs for these services. This revenue will be reported
separately as other revenue on the face of the Companys Consolidated
Statements of Income. These reclassifications have no impact on net income.

Adjustment to Opening Retained Earnings

During the fourth quarter
of 2004, the Company sold certain assets (with a book value of approximately
$1,865) of CTC Container Trading (U.K.) Limited ("CTC"), a
wholly-owned subsidiary which leased specialized cargo carrying units and other
equipment for use by companies operating in the North Sea. While quantifying the
approximate impact related to this sale, the Company noted that there was an
elimination entry of approximately $803, net of tax, in the Interpool Limited
consolidation related to CTC. This entry reduced retained earnings with a
comparable reduction to leasing equipment. The entry originated when Interpool
Limited sold container equipment to CTC at a profit prior to 1994. The
elimination entry was recorded to eliminate the inter-company profits generated
from the sale of the equipment. The inter-company profit included in the
elimination entry should have been amortized over the period the equipment was
being depreciated by CTC using the higher book values. No such amortization ever
took place. The depreciation would have ended prior to any period being reported
on by the Company in the December 31, 2004 Form 10-K/A. The effect of this error
was to understate earnings during the period that the equipment was being
depreciated. The Company determined the impact of this error should be reported
as an adjustment to opening retained earnings.

B.
     Restatement

During the third quarter of
2005, the Company determined that it had not recorded the full amount of
compensation expense required by U.S. GAAP with respect to a separation
agreement with Mr. Raoul Witteveen, its former President, which was entered into
in connection with Mr. Witteveens resignation in October 2003. When
originally preparing the consolidated financial statements for the year ended
December 31, 2003, the Company recorded compensation expense related to the cash
separation payments it agreed to make to Mr. Witteveen. However, the separation
agreement between the Company and Mr. Witteveen also contained a provision under
which Mr. Witteveens fully vested stock options, which had a five year
remaining term at the time of his resignation, would instead expire two years
after his resignation and therefore would not be subject to a provision of the
1993 Stock Option Plan under which vested options terminate if not exercised
within ten business days after termination of employment. In the 2003
Consolidated Financial Statements, the Company should have re-measured the
intrinsic value of the options (the difference between the market price of the
underlying common stock and the exercise price of the options) at the date of
the modification and recorded the intrinsic value of the options at the
modification date as additional compensation expense (non-cash) in the fourth
quarter of 2003. As a result, the Company should have recorded additional
compensation expense and additional paid-in capital of $7,091 for the year ended
December 31, 2003 resulting from the option modification. In addition, the
Company should have recorded a deferred tax asset of $2,837 for the tax benefit
to be derived in the future related to the additional compensation expense. This
adjustment would have resulted in an increase in stockholders equity of
$2,837 and a reduction to net income for the year ended December 31, 2003 of
approximately $4,254.

In connection with its
decision to restate its Consolidated Financial Statements for the option
modification discussed above, the Company is also adjusting these Consolidated
Financial Statements for an accounting error that was previously considered
immaterial. As previously disclosed in the Companys original Form 10-K for
the year ended December 31, 2004, in April 2003, the Company re-designated
certain swap agreements to a number of its debt instruments and the
documentation of these hedging relationships did not meet the criteria
prescribed by U.S. generally accepted accounting principles to achieve the hedge
accounting treatment used by the Company. As a result, the quarterly changes to
the market value of these swap agreements during 2004 should have been recorded
as fair value adjustment for derivative instruments in the 2004 Consolidated
Financial Statements. This problem was identified during the year end 2004 audit
and the Company restated its quarterly results in the Form 10Q for the periods
March 31, June 30 and September 30, 2004. In addition, the Company had
determined that the effect of this error for the period from April 1, 2003 to
December 31, 2003 was immaterial to the 2003 Consolidated Financial Statements
and, therefore, recorded an entry to correct this error during the fourth
quarter of 2004. This adjustment, if properly reflected in the Consolidated
Financial Statements at December 31, 2003 would have resulted in an increase to
net income of $560 in 2003 and a reduction in net income of a similar amount in
the December 31, 2004 Consolidated Financial Statements.

The Consolidated Financial
Statements included in this Form 10-K/A Amendment No. 2 include the effect of
the adjustments required to correct these errors.

The following table sets
forth the effect of the restatement adjustments on the Consolidated Statements
of Income for the years ended December 31, 2003 and 2004.

`As Previously
                                                                   Reported 2003       Change      As Restated 2003
                                                                   -------------       ------      ----------------
Lease operating expenses                                             $ 106,692          $1,773         $108,465
Administrative expenses                                                 49,734           5,318           55,052
Fair value adjustment for derivative instruments                          (837)           (919)          (1,756)
Total cost and expenses                                                355,731           6,172          361,903
Income before minority interest expense and provision/(benefit)
for income taxes                                                        46,381          (6,172)          40,209
Income before provision/(benefit) for income taxes                      44,471          (6,172)          38,299
Provision/(benefit) for income taxes                                     3,281          (2,478)             803
Net income                                                             $41,190         $(3,694)         $37,496

Net income per share:
Basic                                                                    $1.51          $(0.14)           $1.37
Diluted                                                                  $1.42          $(0.12)           $1.30

Weighted average shares outstanding (in thousands)
Diluted                                                                 30,396          (1,461)          28,935`

`As Previously
                                                                   Reported 2004       Change      As Restated 2004
                                                                   -------------       ------      ----------------
Fair value adjustment for derivative instruments                       $(2,430)           $919          $(1,511)
Total cost and expenses                                                373,865             919          374,784
Income before minority interest expense and provision/(benefit)
for income taxes                                                        30,522            (919)          29,603
Income before provision/(benefit) for income taxes                      22,150            (919)          21,231
Provision/(benefit) for income taxes                                    13,721            (359)          13,362
Net income                                                              $8,429           $(560)          $7,869

Net income per share:
Basic                                                                    $0.31          $(0.02)           $0.29
Diluted                                                                  $0.29          $(0.02)           $0.27`

The correction of the above
items resulted in the restatement of certain amounts on the Consolidated Balance
Sheet as of December 31, 2003 and 2004 as follows:

`As Previously
                                                                   Reported 2003       Change      As Restated 2003
                                                                   -------------       ------      ----------------
Deferred Income Taxes                                                  $37,392         $(2,837)        $34,555
Total taxes                                                             37,759          (2,837)         34,922
Total liabilities                                                    1,954,212          (2,837)      1,951,375
Additional paid-in-capital                                             128,538           7,091         135,629
Retained earnings                                                      272,815          (3,694)        269,121
Accumulated other comprehensive loss                                   (14,328)           (560)        (14,888)
Total stockholders' equity                                            $383,640          $2,837        $386,477

                                                                   As Previously
                                                                   Reported 2004       Change      As Restated 2004
                                                                   -------------       ------      ----------------
Deferred Income Taxes                                                  $49,204         $(2,837)        $46,367
Total taxes                                                             51,119          (2,837)         48,282
Total liabilities                                                    1,970,114          (2,837)      1,967,277
Additional paid-in-capital                                             138,021           7,091         145,112
Retained earnings                                                      273,948          (4,254)        269,694
Total stockholders' equity                                            $394,186          $2,837        $397,023`

(2)     Income taxes:

Significant components of
deferred tax assets and liabilities as of December 31, 2004 and 2003 were as
follows:

`2004          2003
                                                                              ----          ----
             Deferred tax assets:                                           Restated      Restated
                                                                            --------      --------

                 Loss carry forwards                                         $141,893     $123,607
                 Other                                                         22,262       31,024
                                                                               ------       ------
                    Total deferred tax assets                                 164,155      154,631
                      Valuation allowances                                    (9,963)      (16,009)
                                                                              -------      --------
                    Net deferred tax assets                                   154,192      138,622
                                                                              -------      -------

             Deferred tax liabilities:
                 Operating property, net                                      197,951      170,167
                 Other                                                          2,608        3,010
                                                                                -----        -----
                    Total deferred tax liabilities                            200,559      173,177
                                                                              -------      -------
                    Net deferred tax liability                                $46,367      $34,555
                                                                              -------      -------`

One of the Companys
subsidiaries had net operating loss carryforwards ("NOLs") for Federal
income tax purposes totaling approximately $15,602 for which a $6,070 valuation
allowance had been recorded. Since this $15,602 NOL expired in 2004, the related
deferred tax asset of $6,070 was written off during the year resulting in a
reduction to the valuation allowance of that amount. Other changes to the
valuation allowance during the year related to various items including an equity
investment, Chassis Holdings 1, LLC, and state NOLs. In 2003 the Company
recorded additional valuation allowances aggregating $1,203 for future tax
deductions related to an equity investment, Chassis Holdings I, LLC and for
losses incurred with respect to PCR.

Through December 31, 2004,
the Company, including CAI, has incurred passive activity loss carryovers of
approximately $355,639 for U.S. federal income tax purposes. These losses can be
carried forward indefinitely to offset income from future leasing activities.
Additionally, the Company and its subsidiaries have net operating loss
carryovers aggregating approximately $323,898 which can be used to offset fully
or partially future taxable income for state purposes. For New Jersey state tax
purposes these losses are scheduled to expire between 2005 and 2012 if not
utilized.

A significant subsidiary of
the Company, Interpool Limited, is a Barbados corporation. Under the terms of an
income tax convention between the United States and Barbados, Interpool
Limiteds leasing income is fully taxable by Barbados, but exempt from U.S.
Federal taxation. For information regarding the July 2004 Protocol between the
United States and Barbados, see Note 17 to the Consolidated Financial
Statements. The Barbados tax rate is a maximum of 21⁄2% of income earned in
Barbados.

No deferred U.S. Federal
income taxes have been provided on the unremitted earnings of Interpool Limited
since it is the Companys intention to indefinitely reinvest such earnings.
At December 31, 2004 unremitted earnings of Interpool Limited were approximately
$334,000. The deferred U.S. Federal income taxes related to the unremitted
earnings of Interpool Limited would be approximately $110,000, assuming these
earnings were taxable at the U.S. statutory rate, net of foreign tax credits. We
are now exploring the implications of the repatriation provision recently
enacted by the American Jobs Creation Act of 2004, but we have not yet decided
whether to repatriate any unremitted earnings.

As a company resident in
Barbados, Interpool Limited is required to file tax returns in Barbados and pay
any tax liability to Barbados. However, no Barbados tax returns have been
prepared or filed for Interpool Limited for any period subsequent to its 1997
tax year. The Company believes the failure to file these returns has not
resulted in any material underpayment of taxes, interest or penalties (other
than a nominal late filing penalty), because the Company believes no material
Barbados taxes would have been due for the years for which returns have not been
filed. The Company further believes Interpool Limiteds failure to file
these returns would not present any other material risk to Interpool.
Preparation of these tax returns is currently in process, and it is the
Companys intent to submit them as promptly as practical.

A reconciliation of the U. S. statutory tax rate to the
effective tax rate follows:

`2004         2003          2002
                                                                                  ----         ----          ----
                                                                                Restated     Restated
                                                                                --------     --------
           U.S. statutory rate                                                    35.0%         35.0%         35.0%
           Difference due to operation of subsidiary in Barbados                 (75.8)        (38.0)       (285.5)
           State taxes                                                            10.1           0.7         (52.0)
           Warrant liability                                                      81.2           ---          ---
           Other                                                                  11.7           1.5           4.3
           PCR losses                                                             ---            ---          39.3
           Valuation allowances                                                    0.8           2.9         212.4
                                                                                   ---           ---         -----
           Effective tax rate                                                     63.0%          2.1%        (46.5)%
                                                                                  -----          ----        -------`

The non-cash expense of
$49,222 recorded in 2004 pertaining to the increase in the Companys
liability for warrants (see Note 4 to the Consolidated Financial Statements) is
non-deductible for Federal income tax purposes. This resulted in a 81.2%
increase in the Companys 2004 actual tax rate.

The provision (benefit) for
income taxes is as follows:

`2004         2003            2002
                                                ----         ----            ----
                                               Restated    Restated
                                               --------    --------
             U.S.                             $13,277        $(754)        $(1,883)
             Other                                 85        1,557             490
                                              $13,362         $803         $(1,393)
                                              =======         ====         ========
             Current                           $2,238       $1,473          $1,725
             Deferred                          11,124         (670)         (3,118)
                                               ------         -----         -------
                                              $13,362         $803         $(1,393)
                                              =======         ====         ========`

(3)     Leasing activities:

As lessor

The Company has entered
into various leases of equipment that qualify as direct financing leases. At the
inception of a direct financing lease, the Company records a net investment
based on the total investment (representing the total future minimum lease
payments plus unguaranteed residual value), net of unearned lease income. The
unguaranteed residual value is generally equal to the purchase option of the
lessee, and is included in total lease receivables (approximately $66,298 and
$63,927 at December 31, 2004 and 2003, respectively). Unearned income represents
the excess of total future minimum lease payments plus residual value over
equipment cost. Receivables under these direct financing leases, net of unearned
income, are collectible through 2015 as follows:

`December 31, 2004
                                                   --------------------------------------------------
                                                   Total Lease           Unearned           Net Lease
                                                    Receivable         Lease Income        Receivable
                                                   -----------         ------------        ----------
         2005                                        $113,953            $33,913             $80,040
         2006                                          99,874             25,234              74,640
         2007                                          92,509             17,479              75,030
         2008                                          56,112             11,220              44,892
         2009                                          31,943              7,797              24,146
         Thereafter                                    78,152             13,455              64,697
                                                       ------             ------              ------
                                                     $472,543           $109,098            $363,445
                                                     ========           ========            ========`

As of December 31, 2003,
the Company had total lease receivable, unearned lease income and net lease
receivables of $572,956, $146,141 and $426,815 respectively.

As of December 31, 2004,
the Company also had noncancelable operating leases, under which it will receive
future minimum rental payments as follows:

`2005                                  $188,249
                           2006                                   160,690
                           2007                                   129,454
                           2008                                    78,831
                           2009                                    45,577
                           Thereafter                              44,510
                                                                 --------
                                                                 $647,311
                                                                 ========`

The Company capitalizes
lease commissions and amortizes this cost over the average life of the related
lease contract. At December 31, 2004 and 2003, $2,473 and $3,902 of these
commissions were included in other assets on the accompanying Consolidated
Balance Sheet.

Allowance for doubtful accounts

The following summarizes
the activity in the allowance for doubtful accounts:

`2004               2003                  2002
                                                   -------             --------               ------
      Balance, beginning of year                   $16,358              $14,033               $6,674
           Provision charged to expense              1,476                4,248                7,843
           Increase for allowance due to
           consolidation of CAI as of June
           27, 2002                                    ---                  ---                1,898
           Write-offs                               (5,247)              (2,140)              (2,504)
           Recoveries                                1,507                  226                  132
           Other                                        (3)                  (9)                 (10)
                                                   -------              -------              -------
      Balance, end of year                         $14,091              $16,358              $14,033
                                                   =======              =======              =======`

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

| |  | The past due amounts are reclassified to accounts receivable,
| | - | -------------------------------------------------------------

| |  | The equipment value supporting such direct financing lease is
reclassified to leasing equipment, and
| | - | ----------------------------------------------------------------------------------------------------

| |  | Collectibility is evaluated, taking into consideration equipment book value, and
the total outstanding receivable, as well as the likelihood of collection
through the recovery of equipment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2004 and
2003, included in accounts receivable are non-performing receivables of $12,498
and $12,795, respectively. The Companys average non-performing receivables
are $12,704 and $11,669 for the years ended December 31, 2004 and 2003,
respectively. As of December 31, 2004 and 2003, included in the allowance for
doubtful accounts are reserves for the non-performing receivables of $11,764 and
$11,918, respectively. As of December 31, 2004 and 2003, our non-performing
receivables, net of applicable reserves, were 1.01% and 1.27%, respectively, of
accounts receivable, net.

All outstanding amounts due
for non-performing direct financing lease accounts are reclassified to accounts
receivable, therefore an allowance for doubtful accounts for the net investment
in direct financing leases is not required.

The Company seeks to reduce
credit risk by maintaining insurance coverage against customer insolvency and
related equipment losses. The Company maintains contingent physical damage,
recovery and loss of revenue insurance, which provides coverage in the event of
a customers insolvency, bankruptcy or default giving rise to its demand
for return of all of its equipment. The policy covers the cost of recovering the
Companys equipment from the customer, including repositioning cost, damage
to the equipment and the value of equipment that could not be located or was
uneconomical to recover. It also covers a portion of the equipment leasing
revenue that the Company might lose as a result of the customers default
(i.e., up to 180 days of lease payments following an occurrence under the
policy). The Companys current policy, which will expire on April 30, 2005,
includes coverage of $9,000 with a $3,000 deductible, per occurrence. While the
Company believes it will be able to renew this coverage on comparable or more
favorable terms, for an additional twelve month period, there can be no
assurance that this or similar coverage will be available in the future or that
such insurance coverage will cover the entirety of any loss.

(4)     Debt:

The following table
summarizes the Companys debt and capital lease obligations as of December
31, 2004 and 2003.

`Total Debt and Capital Lease Obligations                                  December 31, 2004      December 31, 2003
----------------------------------------                                  -----------------      -----------------
Capital lease obligations payable in varying amounts through 2013             $329,623                $325,258
Chassis Securitization Facility, interest at 5.99% and 5.59% at
  December 31, 2004 and 2003, respectively
      Warehouse facility                                                        22,490                  25,490
      Debt obligation                                                           53,875                  86,413
      Capital lease obligation                                                 397,834                 404,674
Secured equipment financing facility, interest at 4.45% at December
  31, 2004, revolving period ending October 31, 2006, term out period
  ending April 30, 2012                                                        243,000                     ---
Revolving credit facility, interest rate at 3.09% at December 31, 2003           ---                   193,495
Revolving credit facility CAI, interest at 4.56% and 3.37% at December
  31, 2004 and 2003, respectively                                               65,000                  87,000
Container securitization facility, interest at 6.50% at December 31,
  2003                                                                           ---                    76,565
6.00% Notes due 2014 (unsecured) net of unamortized discount of
  $33,729 at December 31, 2004                                                 196,271                     ---
7.35% Notes due 2007 (unsecured)                                               115,395                 147,000
7.20% Notes due 2007 (unsecured)                                                45,335                  62,825
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022 (unsecured)                                                   37,182                  37,182
9.875% Preferred capital securities due 2027 (unsecured)                        75,000                  75,000
Notes and loans repayable with various rates ranging from 3.60% to
  7.90% and maturities from 2005 to 2010                                       137,193                 194,785
                                                                               -------                 -------
Total Debt and Capital Lease Obligations                                     1,718,198               1,715,687
                                                                             ---------               ---------
   Less Current Maturities                                                     240,553                 219,192
Total Non-Current Debt and Capital Lease Obligations                        $1,477,645              $1,496,495
                                                                            ==========              ==========`

At December 31, 2004, the
Company had available $223,000 under various facilities which includes
approximately $39,000 available under CAIs revolving credit facility. A
commitment for $150,000 was completed on December 29, 2004 and will be open for
364 days, after which it will either be renewed, refinanced, or will be paid out
in full over the following 48 months. The advance rate under this facility will
be either 60% or 75% at the Companys option. The interest rate is
determined by a pricing grid and can range from LIBOR plus 140 to 180 basis
points, depending upon the Companys tangible debt to total net worth ratio
or its corporate credit rating, and the advance rate chosen. As of December 31,
2004, the rate would be LIBOR plus 165 basis points at a 75% advance rate and
LIBOR plus 150 basis points at a 60% advance rate. There is a commitment fee of
45 basis points per annum on any unused portion of this commitment, payable
quarterly in arrears. Another commitment for $25,000 was available for future
use at December 31, 2004. This commitment was scheduled to be open until March
31, 2005, after which any unfunded portion of the commitment would expire. This
commitment was subsequently cancelled during February 2005 to allow the
financial institution to provide a larger commitment as part of the 150,000
facility mentioned above. During the first quarter of 2005, we received
additional commitments under a secured equipment financing established on
November 1, 2004 totaling $248,000 from six additional financial institutions.
As of the date this Form 10-K was filed, none of these additional commitments
had been utilized.

As of December 31, 2004,
the annual maturities of capital leases and related interest were as follows:

`Payment               Interest             Principal
                                                -------               --------             ---------
                 2005                           $96,962               $17,634              $79,328
                 2006                            68,826                13,643               55,183
                 2007                            80,990                10,641               70,349
                 2008                            79,685                 7,974               71,711
                 2009                            69,904                 4,888               65,016
                 Thereafter                     391,535                 5,665              385,870
                                                -------                 -----              -------
                                               $787,902               $60,445             $727,457
                                               ========               =======             ========`

As of December 31, 2004, the
scheduled principal maturities of debt, were as follows:

`2005                                                 $161,225
                 2006                                                   83,939
                 2007                                                  214,564
                 2008                                                   65,501
                 2009                                                   43,296
                 Thereafter                                            422,216
                                                                       -------
                                                                      $990,741
                                                                      ========`

The Companys debt
consists of notes, loans and capital lease obligations with installments payable
in varying amounts through 2027, with a weighted average interest rate of 6.2%
and 6.0% in 2004 and 2003, respectively. The principal amount of debt and
capital lease obligations payable under fixed rate contracts was $898,712.
Remaining debt and capital lease obligations of $819,486 were payable under
floating rate arrangements, of which $408,367 was effectively converted to fixed
rate debt through the use of interest rate swap agreements. At December 31,
2004, most of the debt and capital lease obligations of the Company are secured
by a substantial portion of the Companys leasing equipment, direct
financing leases and accounts receivable, except for $469,183 of debt which is
unsecured. For further information on the accounting treatment for interest rate
swap contracts see Note 5 to the Consolidated Financial Statements.

In March 2002, the Company
established a $500,000 chassis asset-backed securitization facility. This
facility is guaranteed by MBIA and was therefore rated AAA by Standard &
Poors and Aaa by Moodys. On September 30, 2002, the Company entered
into a sale/leaseback transaction and expanded the total debt and capital lease
obligations to a total of $540,968 outstanding, of which $129,328 is a debt
obligation and $411,640 is a capital lease obligation under the sale/leaseback.
In May 2003, the Company established a $200,000 revolving warehouse facility
within its chassis securitization facility and received funding from a $25,500
debt obligation issuance. In July 2003 and October 2003, the Company agreed,
among other things, to suspend its ability to incur additional funding under the
warehouse facility until such time as the loan and guarantee parties have each
agreed in their sole discretion to reinstate their funding commitments.
Additionally in January 2004, as a result of the downgrade of the ratings on the
Companys debt securities Moodys reduced the "shadow
rating" of the Companys chassis securitization. The Company was
subsequently advised by the provider of the insurance "wrap" portion
of the chassis securitization that, as a result of the downgrade of the shadow
rating, the Company was liable to indemnify such provider for certain of the
providers increased capital charge costs. During October 2004, the Company
reached an agreement with such provider, pursuant to which it will pay
approximately $220 per month in additional premium, declining as the loan is
paid down. Such additional premium will be further adjusted downward after
eighteen months if the shadow rating improves, potentially going away entirely.
In addition, as part of this agreement the wrap provider and the other
participants in the chassis securitization have permanently waived any early
amortization event or default associated with the downgrade of the shadow
rating. At December 31, 2004, the total debt and capital lease obligation
outstanding under the facility totaled $474,199 of which $22,490 was outstanding
under the warehouse facility, $53,875 is a debt obligation and $397,834 is a
capital lease obligation. The interest rate on this facility is 5.99%, including
the effect of interest rate swap contracts in place as of December 31, 2004.
This facility continues to be accounted for as an on-balance sheet secured
financing. The assets used to secure this facility are segregated in a Delaware
statutory titling trust (the "Trust") and in a special purpose entity
(which is consolidated by the Company) and consist of $18,500 of accounts
receivable and fixed assets with a net book value of $522,480 at December 31,
2004. In addition, $24,927 of cash and marketable securities at December 31,
2004 are restricted for use by the Trust and the special purpose entity and
included on the Companys consolidated balance sheet. The assets, which are
segregated in the special purpose entity and included on the Companys
consolidated balance sheet, are not available to pay the claims of the
Companys creditors.

On November 1, 2004, the
Company consummated a secured equipment financing with one of its existing
lenders. The financing is secured by shipping containers and related leases
owned by a special purpose consolidated subsidiary of the Company and leased to
various third parties. The financing allows for advances from time to time up to
the amount of available collateral under the facility, subject to a maximum
principal amount that may be outstanding under the facility of $252,000. The
interest rate under this new facility is LIBOR plus 175 basis points, with a
reduction to LIBOR plus 150 basis points possible as the Companys credit
rating improves. This agreement, as amended, requires that the Company enter
into interest rate swap contracts in order to effectively convert at least
seventy percent of the debt associated with operating lease equipment and ninety
percent of the debt associated with direct financing leases from floating rate
debt to fixed rate debt by March 31, 2005. The facility has a two-year term,
after which the outstanding balance will be paid out in full over 66 months if
it is not refinanced. At December 31, 2004 $243,000 of debt was outstanding
under this facility and $9,000 was available for future use. Of the $243,000
drawn down, the Company used $224,400 to refinance outstanding indebtedness,
which included the entire $154,800 of outstanding borrowings under its revolving
credit facility, which has now been terminated, as well as an existing $69,600
loan from this lender. The remaining balance of $18,600 was used for transaction
fees and working capital purposes. During the first quarter of 2005 the Company
received additional commitments under this facility totaling $248,000 from six
additional financial institutions. As of the date this Form 10-K was filed, none
of these additional commitments had been utilized.

The Company had a $215,000
revolving credit facility with a group of commercial banks. In July 2000, this
facility was renewed and amended with the term extended to July 31, 2005. The
credit limit was $215,000 through July 31, 2003; thereafter the credit limit
declined to $193,500 through July 31, 2004 and $172,000 through July 31, 2005.
In July 2003 and October 2003, in connection with obtaining necessary waivers
under the revolving credit facility due to the late filing of the Companys
periodic reports with the SEC and the restatement of its past financial
statements, the Company agreed, among other things, to reduce advance rates
under this facility, to define several additional events as events of default,
to increase the interest rate margin until it is in compliance with all SEC
reporting requirements, and to maintain specified levels of unrestricted cash
and cash equivalents until the delinquent SEC filings are made. The Company also
agreed to restrictions on dispositions of collateral and encumbrances of assets
as well as a limitation on concessions that could be made to its other financial
institutions in connection with obtaining waivers. The October 2003 amendment
also required the Company to provide additional financial information to the
lenders under the facility and to continue the engagement of a financial
advisor. On November 1, 2004, the Company paid off the entire $154,757 of
outstanding borrowings under its revolving credit facility, and terminated the
facility.

On June 27, 2002, CAI
entered into an amended $110,000 senior revolving credit agreement with a group
of financial institutions. To facilitate the closing of this new credit
facility, the Company agreed to extend the repayment terms of its Note so as to
require mandatory quarterly principal payments of $1,683 beginning July 30, 2006
through April 30, 2011 and modified certain financial covenants in the Note.
Interest on the Note continues to accrue at an annual fixed rate of 10.5% and is
payable quarterly. The Note continues to be cross-collateralized with CAIs
senior credit agreement, subject to the terms of an amended and restated
subordination agreement.

A total of $65,000 was
outstanding under CAIs senior revolving credit facility at December 31,
2004. Borrowings under CAIs senior credit facility are secured by
substantially all of CAIs assets totaling approximately $181,958 in the
Companys Consolidated Financial Statements at December 31, 2004, and are
payable on June 27, 2005. CAI is currently in discussions with its lenders
regarding a renewal of their senior revolving credit facility. The senior credit
facility contains various financial and other covenants. CAI was in compliance
with the covenants at December 31, 2004.

In July 2001, the
Companys container securitization facility, which was originally
established as an off-balance sheet source of financing in March 1999, was
amended allowing additional financings to be accounted for as on-balance sheet
secured debt financing. In August 2002, the container securitization facility
was extended with the maximum outstanding limited to $150,000. In October 2002
the facility was renewed and the facility amount was increased to $200,000.
Subsequently, the Company amended its container securitization facility to
relinquish the right to request additional advances under the facility and
agreed that all lease payments subsequently received under the facility would be
used to reduce the indebtedness. On December 28, 2004, the Company paid off the
remaining $25,933 of outstanding borrowings under this facility, and terminated
the facility.

On September 14, 2004, the
Company entered into a Securities Purchase Agreement pursuant to which it sold
$150,000 total principal amount of a new series of 6.0% notes due 2014 (the
"Notes") in a private transaction with four investors. In connection
with the sale of the Notes, the Company also issued to the investors two series
of Warrants exercisable for a total of 8,333,333 shares of the Companys
common stock at an exercise price of $18.00 per share (the
"Warrants"). The exercise price will be subject to customary
anti-dilution adjustments as set forth in the Warrants.

The Notes mature on
September 1, 2014, with interest payable semi-annually at a rate of 6.0% per
annum. The Company has the right to redeem the Notes at any time after September
1, 2009 with a declining premium. The maturity of the Notes can be accelerated
upon the occurrence of an "Event of Default" as such term is defined
in the indenture governing the Notes (the "Indenture"). The Indenture
also contains various restrictive covenants, including limitations on the
payment of dividends and other restricted payments, limitations on incurrence of
indebtedness, and limitations on asset sales, the violation of which by the
Company would result in an Event of Default.

The first series of
Warrants (the "Series A" Warrants) is exercisable at any time for a
total of 5,475,768 shares. The second series of warrants (the Series
"B" Warrants) will become exercisable at any time for a total of
2,857,565 shares, following stockholder approval of such exercise at a special
meeting of the Companys stockholders. The Company also entered into
agreements with the investors to file registration statements with the
Securities and Exchange Commission, for the benefit of the investors, with
respect to the Notes and the Warrants. The terms of the Warrants provide that
the exercise price will be paid by the investors to the Company solely in cash
except that after the Company has filed a registration statement with the
Securities and Exchange Commission relating to the Warrants and underlying
common stock, in the event such registration statement has not become effective
or is otherwise not available to the Warrant holders or if the exercise of the
Warrants for cash would not be permitted under the federal securities laws, the
exercise price may be paid by tendering a principal amount of 6.0% Notes equal
to the exercise price of the Warrants then being exercised. The sale of the
Notes and Warrants pursuant to the Securities Purchase Agreement was made in
reliance on the exemption from the registration requirements of the Securities
Act of 1933 (the "Act") pursuant to Section 4(2) of the Act

Of the $150,000 in proceeds
from the September 14, 2004 sale of the Notes and Warrants, the Company
repurchased, at face value, a portion of its outstanding 7.35% notes due 2007
($31,605) and 7.20% notes due 2007 ($17,490) which were held by the investors.
The remaining proceeds are being used for general corporate purposes, including,
but not limited to, the purchase of equipment, retirement of debt, potential
acquisitions and/or working capital.

The Warrants expire on
September 1, 2014, although the Company has the right under certain conditions
to require that they be exercised at any time after its common stock trades at
$30.00 per share or more for five consecutive trading days assuming the shares
being issued upon exercise are registered shares.

The fair value of the
warrants at the date of the transaction was estimated at $22,500 and was
recorded in warrant liability on the Consolidated Balance Sheet, with the offset
recorded as a discount on the Notes. This discount is being amortized as
interest expense using the effective interest method over the ten-year life of
the Notes. The overall interest rate on the Notes, considering the amortization
of the discount, is approximately 8.3%.

EITF 00-19, Accounting for
Derivative Financial Instruments Indexed to, and potentially Settled in a
Companys Own Stock ("EITF 00-19") requires freestanding
contracts that are settled in a Companys own stock, including common stock
warrants, to be designated as an equity instrument, asset or liability. Under
the provisions of EITF 00-19, a contract designated as an asset or liability
must be carried at fair value until the contract meets the requirements for
classification as equity, until the contract is exercised or until the contract
expires. The Company has classified these warrants as a liability, as noted
above, because the requirements of EITF 00-19 for classification of the warrants
as equity have not yet been met. During the period in which the warrants are
classified as a liability, any changes in fair value will be reported as fair
value adjustment for warrants in the Consolidated Statement of Income. Due
primarily to the increase in the market value of the Companys common stock
during the last quarter of 2004, the fair market value of these Warrants has
increased from $22,500 at September 30, 2004 to $71,722 at December 31, 2004. As
a result, during the three-months ended December 31, 2004, the Company has
recorded a non-cash expense of $49,222 (for which no tax benefit is derived)
which has been reflected as fair value adjustment for warrants on the
accompanying Consolidated Statements of Income. Accordingly, future changes to
the fair market value of these Warrants have the potential to cause volatility
in our future results. For the period of time that these warrants are classified
as a liability, any increase in the fair market value of the Warrants will
result in an additional non-cash expense to the Consolidated Statements of
Income. If the fair market value of the Warrants decreases in the future the
Company will record non-cash income in its Consolidated Statements of Income. At
such time as all of the conditions of EITF 00-19 are met for classification of
the Warrants as equity, the liability account representing the fair value of the
warrants at the date the conditions are met will be reclassified to additional
paid-in-capital on the Consolidated Balance Sheets.

The Company has agreed to
file a Registration Statement for the Warrants and the Notes with the Securities
and Exchange Commission by May 1, 2005. In addition, the Company has agreed to
use commercially reasonable efforts to have the Warrant Registration Statement
and the Notes Registration Statement declared effective by July 1, 2005. It is
impossible for the Company to predict when either of these registration
statements will become effective. If either of these Registration Statements is
not effective by October 1, 2005, or is not filed by May 1, 2005, the Company
will be required to pay liquidated damages to the holders of these securities
based upon a value of $150,000 for the Notes and $150,000 for the Warrants. For
the first 90 days, the amount of liquidated damages to be paid related to the
Warrants and the Notes will be calculated using a rate of 0.25% per annum for
each day the Registration Statements are not effective after September 30, 2005
or if the Registration Statements are not filed by May 1, 2005. This percentage
will be increased by 0.25% for each 90 day period, until these conditions are
met, up to a maximum of 1.00% per annum.

A condition that must be
met for equity treatment under the provisions of EITF 00-19 is that there can be
no possibility of a net cash settlement of the Warrants. Under the terms of the
Warrant Agreement, in the event that stockholder approval of the issuance of
common stock pursuant to the Series B Warrants is not obtained prior to April
30, 2005, the holders of the Series B Warrants have the right to settle their
warrants for cash. In order to do this, the Series B Warrant holders, upon
payment of the exercise price of the Series B Warrants, would receive cash from
the Company in an amount equal to 105% of the market price of the Companys
common stock on the day prior to exercise. For example, if the market value of
the Companys stock was $22 at the date that the Series B Warrant holders
exercised their right for a net cash settlement, the net cash settlement paid to
the holders of the Series B Warrants would be approximately $14,574 ($22 market
value X 105% X 2,857,565 shares  less exercise price of 2,857,565 shares X
$18). The Company intends to hold a special meeting of the Stockholders as soon
as practicable and at that meeting will seek stockholder approval for the
exercise of the Series B Warrants. It is impossible for the Company to hold this
meeting until the Companys Proxy requesting this approval has been filed
with and accepted by the Securities and Exchange Commission and all stockholders
have been notified regarding the meeting. In connection with the sale of the
Notes and Warrants, certain of the Companys significant stockholders,
whose combined ownership interest represents more than 50% of the issued and
outstanding shares of its common stock, entered into a voting agreement pursuant
to which they have agreed to vote to approve the exercise of the second series
of Warrants by the investors. In addition, Martin Tuchman, the Companys
Chairman and Chief Executive Officer, Warren L. Serenbetz, a former member of
its Board of Directors, and an entity controlled by members of Mr.
Serenbetzs family agreed to certain restrictions on their ability to
transfer shares of the Companys common stock in private transactions. If
the approval for the issuance of the shares related to the Series B Warrants is
obtained after April 30, 2005 and prior to the exercise of the Series B Warrants
by the holders of the Warrants, the holders of the Series B Warrants will lose
their right to exercise the net cash settlement feature of Series B Warrants
once such stockholder approval is received. At that time, this will no longer be
a condition for liability treatment under the provisions of EITF 00-19.

On November 29, 2004, the
Company sold $80,000 total principal amount of new 6.0% notes (the
"November notes") due 2014 to eight investors under the same indenture
used for the $150,000 unsecured financing completed during September 2004. The
terms of the November notes are identical to those of the notes sold during
September (as described previously in this document) with the following
exceptions: (1) there were no warrants associated with the November notes; and
(2) the original issue discount on the November notes was approximately 14.7%
versus 15.0% for the September notes. The November notes were sold at a discount
which provided net proceeds totaling $68,065. The net proceeds are for general
corporate purposes, including, but not limited to the purchase of equipment,
retirement of debt, acquisitions, and/or working capital.

In July and August 1997,
the Company issued $225,000 of ten year notes, comprised of $150,000 of 7.35%
Notes due 2007 and $75,000 of 7.20% Notes due 2007. The net proceeds from these
offerings were used to repay secured indebtedness, to purchase equipment and for
other investments. During 2004, the Company retired $31,605 of the 7.35% Notes
and $17,490 of the 7.20% Notes. As of December 31, 2004, $115,395 and $45,335
principal amount of the 7.35% and 7.20% Notes, respectively, remains
outstanding.

In July 2002, the Company
commenced a registered subscription rights offering of up to $31,465 of its
9.25% Convertible Redeemable Subordinated Debentures. The debentures were
offered to holders of its common stock pursuant to the exercise of
non-transferable subscription rights and were to be convertible into shares of
its common stock. The Company had the right in its discretion to accept offers
from other parties to purchase debentures not subscribed for by stockholders. On
August 14, 2002, the Company terminated the subscription rights offering due to
a delay in filing its Form 10-Q for the quarter ended June 30, 2002. The Company
re-commenced the offering during November 2002 and accepted subscriptions for
$32,118 of debentures, which were issued in December 2002. The Company also
increased the size of the offering and subsequently accepted $5,064 of
additional subscriptions in January and February 2003, resulting in a total of
$37,182 of debentures being issued. The debentures bear interest at an annual
rate of 9.25%. They have a mandatory redemption feature upon the earlier of the
occurrence of a change of control or on December 27, 2022. They have an optional
redemption feature after the third anniversary at a price of 100% of outstanding
principal, plus accrued interest. They have a special redemption feature between
December 27, 2006 and December 27, 2007, during which period the Company may
redeem the debentures by issuing common stock at $25.50 per debenture plus
accrued interest, if the average closing price of its common stock for five
consecutive trading days equals or exceeds $25.50 per share. Lastly, at any
time, the holder of the debentures may convert the debentures into the
Companys common stock at a per share conversion price of $25 per
debenture.

On January 27, 1997,
Interpool Capital Trust, a Delaware business trust and special purpose entity
(the "Trust"), issued to outside investors 75,000 shares of 9-7/8%
Capital Securities with an aggregate liquidation preference of $75,000 (the
"Capital Securities") for proceeds of $75,000. Interpool owns all the
common securities of the Trust. The proceeds received by the Trust from the sale
of the Capital Securities were used by the Trust to acquire $75,000 of 9-7/8%
Junior Subordinated Deferrable Interest Debentures due February 15, 2027 of the
Company (the "Debentures"). The sole asset of the Trust is $77,320
aggregate principal amount of the Debentures. The Capital Securities represent
preferred beneficial interests in the Trusts assets. Distributions on the
Capital Securities are cumulative and payable at the annual rate of 9-7/8% of
the liquidation amount, semi-annually in arrears and commenced February 15,
1997. The Company has the option to defer payment of distributions for an
extension period of up to five years if it is in compliance with the terms of
the Capital Securities. Interest at 9-7/8% will accrue on such deferred
distributions throughout the extension period. The Capital Securities will be
subject to mandatory redemption upon repayment of the Debentures to the Trust.
The redemption price decreases from 104.9375% of the liquidation preference in
2007 to 100% in 2017 and thereafter. Under certain limited circumstances, the
Company may, at its option, prepay the Debentures and redeem the Capital
Securities prior to 2007 at a prepayment price specified in the governing
instruments. The obligations of the Company under the Debentures, under the
Indenture pursuant to which the Debentures were issued, under certain guarantees
and under certain back-up obligations, in the aggregate constitute a full and
unconditional guarantee by the Company of the obligations of the Trust under the
Capital Securities.

In May 2003, the FASB
issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity ("SFAS 150"). The
adoption of SFAS 150 required the Company to display the Company-obligated
mandatorily redeemable preferred securities in subsidiary grantor trusts within
the liability section. At December 31, 2004 and 2003 these Capital Securities
are included in debt and capital lease obligations in the Consolidated Balance
Sheets.

Covenants: Under the
Companys secured equipment financing facility (and most of its other debt
instruments, the Company was required to maintain covenants (as defined) for
tangible net worth (the most stringent of which required the Company to maintain
tangible net worth of at least $300,000), a fixed charge coverage ratio of 1.5
to 1 and a funded debt to net worth ratio (as defined in the agreement) of 4.0
to 1. A servicing agreement to which the Company is a party requires that it
maintains a tangible net worth (as defined in the agreement) of at least
$375,000 plus 50% of any positive net income reported from October 1, 2004
forward. Additionally, under a credit agreement, the Company is required to
maintain a security deposit in the aggregate amount of at least 80% of the
outstanding loan balances, including interest. This amounted to $4,834 at
December 31, 2004 and is included in other assets on the Consolidated Balance
Sheet. At December 31, 2004, the Company was in compliance with these covenants,
as amended. At December 31, 2004, under a restriction in the Companys 6.0%
Note Indenture approximately $3,561 of retained earnings were available for
dividends.

(5)     Derivative instruments:

The Companys assets
are primarily fixed rate in nature while its debt instruments are primarily
floating rate. The Company employs derivative financial instruments (interest
rate swap agreements) to effectively convert certain floating rate debt
instruments into fixed rate instruments and thereby manage its exposure to
fluctuations in interest rates.

As of December 31, 2004 and
December 31, 2003, included in accounts payable and accrued expenses in the
accompanying Consolidated Balance Sheets is a liability of $19,745 and $34,026,
respectively, representing the market value of the Companys interest rate
swap contracts.

The unrealized pre-tax
income on cash flow hedges for the year ended December 31, 2004 of $12,941
(restated) and the related income tax effect of $3,860 (restated) have been
recorded by the Company as a component of other comprehensive income (loss).

The unrealized pre-tax
income on cash flow hedges for the year ended December 31, 2003 of $14,351
(restated) and the related income tax effect of $4,341 (restated) have been
recorded by the Company as a component of other comprehensive income (loss). See
Note 1 to the Consolidated Financial Statements for additional disclosures
regarding swap agreements and their impact on other comprehensive income.

The Company may at its
discretion terminate or redesignate any such interest rate swap agreements prior
to maturity. At that time, any gains or losses previously reported in
accumulated other comprehensive loss on termination would continue to amortize
into interest expense or interest income to correspond to the recognition of
interest expense or interest income on the hedged debt. If such debt instrument
was also terminated, the gain or loss associated with the terminated derivative
included in accumulated other comprehensive loss at the time of termination of
the debt would be recognized in the Consolidated Income Statement at that time.

For the year ended December
31, 2004, the Company reported $1,511 (restated) of pre-tax income in the
Consolidated Statements of Income due to changes in the fair value of interest
rate swap agreements which do not qualify as cash flow hedges under SFAS 133.
This compares to $1,756 (restated) of pre-tax income for the year ended December
31, 2003.

In addition to the amounts
included in the fair value adjustment for derivative instruments related to
changes in the fair value of interest rate swap agreements, a change in the fair
value of the Warrants issued during September 2004 in connection with the 6.0%
Notes, which is classified as a liability on the accompanying Consolidated
Balance Sheets, resulted in a non cash charge of $49,222 (for which no tax
benefit is derived) which is included in fair value adjustment for warrants on
the accompanying Consolidated Statement of Income.

As of December 31, 2004,
the annual maturities of the notional principal amounts, with installments
payable in varying amounts through 2014, and the weighted average interest rates
expected to be received or paid for interest rate swap contracts were as
follows:

`Notional        Receive           Pay
                                      Amount          Rate            Rate
                                     --------        -------          -----
2005                                  $85,248         2.32%           5.08%
2006                                   53,027         2.38%           5.26%
2007                                  161,645         2.40%           5.81%
2008                                   29,337         2.41%           5.56%
2009                                   27,675         2.41%           5.64%
Thereafter                             67,789         2.41%           5.43%
                                       ------         -----           -----
Total                                $424,721         2.39%           5.51%
                                     ========         =====           =====`

The weighted average
receive rate is based on the floating rate option specified by the interest rate
swap contract and are either one-month or three-month USD-LIBOR.

(6)     Sale of PCR and Discontinuation
of Microtech's Operations

During the three months
ended September 30, 2001, the Company adopted a formal plan to dispose of PCR, a
51%-owned subsidiary, and to discontinue the operations of Microtech, (after
acquiring the remaining 24.5% ownership interest of this 75.5%-owned subsidiary)
and liquidate its lease portfolio. Within the historical financial statements of
the Company, PCR and Microtech comprised the computer-leasing segment and
specialized in the leasing of microcomputers and related equipment.

On December 31, 2001, the
Company acquired from the management of Microtech (who are the same individuals
who managed PCR) the remaining 24.5% ownership interest in Microtech for $792 in
cash, thereby increasing the Companys ownership in Microtech to 100%.

In addition, on December
31, 2001, the Company completed the contractual sale of its 51% ownership stake
of PCR to an investment group comprised of the management of PCR. Under the
agreement, the Company sold its share of PCR for $3,200. The purchase price was
satisfied through the issuance of a non-recourse note in the amount of $2,560
and a cash payment of $640 received by the Company on January 2, 2002. This
transaction was not accounted for as a sale by the Company because of the level
of the Companys continued involvement in PCR subsequent to the transaction
which included:

| |  | A $3,500 loan due from PCR under a long-term revolving credit facility;
| | - | -----------------------------------------------------------------------

| |  | A $1,400 direct financing lease and other receivables due from PCR primarily for
its lease of computer equipment from Microtech;
| | - | --------------------------------------------------------------------------------------------------------------------------------

| |  | A $5,000 guarantee provided by the Company for PCR borrowings from an unrelated
financial institution. This guarantee was paid off through a secured financing
arrangement completed by the Company in July 2004.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $3,000 guarantee provided by certain directors and officers of the Company for
a line of credit obtained by PCR from a financial institution related to the
Company;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Bonus and consulting
contracts entered into between the Company and the key executives of PCR.
| | - | ----------------------------------------------------------------------------------------------

During 2002, the Company
included in other (income)/expense, net in the Companys Consolidated
Income Statement losses resulting from PCRs operations with a
corresponding reduction to assets of business transferred under contractual
agreement in the Companys Consolidated Balance Sheet. During the first
three quarters of 2002, $4,002 of such PCRs losses were recorded by the
Company.

During the fourth quarter
of 2002, the Company determined that it was unlikely that PCR would be able to
continue as a going concern, and, in the first quarter of 2003, PCR entered
bankruptcy proceedings and began the voluntary liquidation of its business. As a
result, during the fourth quarter of 2002, the Company accrued for its
obligations related to the liquidation of PCR. The amounts accrued by the
Company in 2002 included $4,429 related to its guarantee of PCRs debt,
$2,681 in payments made by The Ivy Group (which had assumed the $3,000 guarantee
made by certain officers and directors of the Company) to pay off PCRs
bank debt and provide short-term liquidity (see further discussion below), the
write-off of $1,400 in computer equipment related receivables due to Microtech,
and $1,168 related to consulting and bonus agreements provided to key officers
of PCR. These amounts have been included in other (income)/expense, net in the
Companys Consolidated Statements of Income.

At the time of closing of
the sale of the Companys interest in PCR, the Company provided a guarantee
of an additional line of credit from a financial institution of up to $3,000 on
PCRs behalf. The financial institution subsequently agreed, at the
Companys request, to rescind this guarantee, retroactive to December 31,
2001. In lieu of the Companys guarantee, effective December 31, 2001,
certain directors and officers of the Company guaranteed an additional line of
credit of up to $3,000 on behalf of PCR. Advances amounting to $698 and $1,983
in 2003 and 2002, respectively, were made to PCR by The Ivy Group to pay off
borrowings under the line of credit and to provide PCR with working capital. The
Ivy Group is a partnership controlled by certain current and former officers and
directors of the Company. The advances made by The Ivy Group to PCR are
considered capital contributions to the Company and payments by the Company to
PCR. The payments to PCR have been determined to be uncollectible and,
accordingly, were written off by the Company as described above. Payments made
in 2002 amounting to $1,983 have been included in additional paid-in-capital.
The remaining payments made in 2003 of $698 were recorded in additional
paid-in-capital during 2003 when the payments were made.

(7)     Lease securitization program:

On March 30, 1999, the
Company entered into an asset backed note program (the "ABN Program").
The ABN Program involved the sale by the Company of direct financing leases
collateralized by intermodal containers. The assets were sold to a qualified
special purpose entity whose sole business activity is issuing asset backed
notes ("ABNs"), supported by the future cash flows of the assets and
the underlying residuals.

The Companys retained
interest in this program was accounted for at fair value, with any changes in
fair value over its allocated historical book value recorded as a component of
accumulated other comprehensive income/(loss), net of tax, in the Consolidated
Statement of Changes in Stockholders Equity. As of September 30, 2003 the
Companys estimated fair market value of its retained interest was $3,801,
using a discounted cash flow model assuming expected credit losses of 1.5% and a
discount rate of 12.6%. Prior to October 1, 2003 and for the year ended December
31, 2002, the Company recorded interest income on the retained interest totaling
$976 and $1,777, respectively, which is included in equipment leasing revenue in
the accompanying Consolidated Statements of Income. Impairment losses of $571
and $134 for the nine months ended September 30, 2003 and for the year ended
December 31, 2002 were recorded and included in the accompanying Consolidated
Statements of Income based upon changes in managements projected cash
flows of the underlying direct financing lease receivables in the securitization
trust. The impairment charge recorded in 2003 resulted primarily from an
amendment and waiver dated September 19, 2003, wherein the Company agreed that
all future cash flows generated by the securitization facility that would have
otherwise been remitted to the Company in satisfaction of its retained interest
would be used to reduce the remaining obligations of its container
securitization facility until such obligations were fully repaid. In addition,
the Company agreed to defer its receipt of servicing fees. Once all obligations
are repaid, the Company would then receive the future lease payments in
satisfaction of its net investment in direct financing leases and deferred
servicing fees. For the nine months ended September 30, 2003 and for the year
ended December 31, 2002 cash flows received on the retained interest were $6,923
and $6,435 respectively.

Effective October 1, 2003,
a customer elected to return a portion of the equipment covered by a direct
financing lease which had been included in a qualified special purpose entity as
part of the lease securitization program. The equipment was subsequently leased
to another customer under the terms of an operating lease agreement. As such,
the lease could no longer be considered a financial asset and the Securitization
Trust special purpose entity could no longer be treated as an off-balance sheet
qualified special purpose entity for accounting purposes. Therefore, effective
October 1, 2003, the Company consolidated the assets and liabilities of this
special purpose entity. As a result, the Company recorded the net investment in
direct financing leases of $19,742 on the accompanying Consolidated Balance
Sheets which represents the remaining lease payments for the direct financing
leases in the securitization, net of the interest implicit in the leases. In
addition, the Company recorded leasing equipment of $1,326 related to the
equipment subsequently leased under the terms of the operating lease agreement.
The remaining obligations under the ABNs amounting to $17,793 were
recorded as debt and capital lease obligations on the Consolidated Balance
Sheets at October 1, 2003. After consolidating these and other assets and
liabilities of the special purpose entity, net of the book value of the
Companys retained interest in the securitization of $3,801 on October 1,
2003, the Company recognized income of $2,870 in other (income)/expense, net in
the Consolidated Statements of Income at October 1, 2003. This income resulted
from the favorable credit loss experience through September 30, 2003 on the
underlying direct financing leases as compared to the assumed credit losses of
1.5%.

Interpool Limited, a
subsidiary of the Company (the "Servicer"), acted as servicer for the
assets prior to October 1, 2003. Pursuant to the terms of the servicing
agreement as amended on October 18, 2002, the Servicer was paid a fee of 0.75%
of the assets under management. Prior to the amendment to the servicing
agreement, the Servicer was paid a fee of 0.40%. As a result of this amendment,
the Company recorded a permanent impairment loss of $240 for the year ended
December 31, 2002 in the accompanying Consolidated Statements of Income. The
Companys management determined that the servicing fee paid approximates
the fair value for services provided, as such, no servicing asset or liability
was recorded. For the nine months ended September 30, 2003 and for the year
ended December 31, 2002, the Company received servicing fees totaling $706 and
$591 which are included in equipment leasing revenue in the accompanying
Consolidated Statement of Income.

(8)     Other contingencies and commitments:

Lease Commitments: The
Company and its subsidiaries are parties to various operating leases relating to
office facilities, transportation vehicles, and certain other equipment with
various expiration dates through 2010. All leasing arrangements contain normal
leasing terms without unusual purchase options or escalation clauses. Rental
expense under operating leases aggregated $20,927, $21,470 and $17,074 for the
years ended December 31, 2004, 2003 and 2002, respectively.

As of December 31,
2004, the aggregate minimum rental commitment under operating leases having
initial or remaining noncancelable lease terms in excess of one year was as
follows:

`2005                                $15,162
                        2006                                 18,311
                        2007                                 10,739
                        2008                                  5,882
                        2009                                  3,761
                        Thereafter                            2,780
                                                            -------
                                                            $56,635
                                                            =======`

The Company and its
subsidiaries are parties to various capital leases and obligated to make
payments related to its long-term borrowings. (See Note 4 to the Consolidated
Financial Statements).

Employment Agreements: The
Company has entered into employment agreements with certain executive officers
and employees which provide for minimum salary, bonus arrangements and benefits
for periods from 1 to 7 years. As of December 31, 2004, the minimum obligation
related to these agreements approximated $10,336.

Separation Agreements: The
Company has entered into separation agreements with its former President and
Chief Operating Officer and its former Executive Vice President and Chief
Financial Officer that provide for payments and benefits for periods of 1 to 3
years. As of December 31, 2004, the remaining obligation related to these
agreements approximated $2,555. Expenses related to these separation agreements
amounting to $12,935 (restated) were recorded during 2003, including the
compensation expense resulting from the modification of the terms of the fully
vested options held by the Companys former President. (See Note 1(B),
Restatement, to the Consolidated Financial Statements.) During 2004, as
contemplated by the separation agreement with the Companys former
President and Chief Operating Officer, the Company paid and recorded to expense
employment related taxes in connection with the previous employment of this
executive officer prior to October 9, 2003, amounting to $274. These taxes could
not be estimated in 2003 and a portion of these taxes are recoverable in 2005,
and possibly in later years, by the Company from the former President and Chief
Operating Officer under certain circumstances. For further information regarding
a modification of the separation agreement with the former President and Chief
Operating Officer, see Note 17 to the Consolidated Financial Statements.

Guarantees: At December 31, 2004, the following
guarantees were issued and outstanding:

Indemnifications: In the
ordinary course of business, the Company executes contracts involving
indemnifications standard in the industry and indemnifications specific to a
transaction such as an assignment and assumption agreement. These
indemnifications might include claims related to any of the following: tax
matters and governmental regulations, and contractual relationships. Performance
under these indemnities would generally be triggered by a breach of terms of the
contract or by a third party claim. The Company regularly evaluates the
probability of having to incur costs associated with these indemnifications and
have accrued for any expected losses that are probable. The types of
indemnifications for which payment are possible are as follows:

| | Taxes:
In the ordinary course of business, the Company provides various tax-related
indemnifications as part of transactions. The indemnified party typically is
protected from certain events that result in a tax treatment different from that
originally anticipated. The Companys liability typically is fixed when a
final determination of the indemnified partys tax liability is made. In
some cases, a payment under a tax indemnification may be offset in whole or in
part by refunds from the applicable governmental taxing authority. The Company
is party to numerous tax indemnifications and many of these indemnities do not
limit potential payment; therefore, it is unable to estimate a maximum amount of
potential future payments that could result from claims made under these
indemnities.Contractual
Relationships: The Company entered into a number of operating leases during 2000
and 2002 in which it guaranteed a portion of the residual value of the leased
equipment. These leases have terms that expire between 6 and 9 years. If at the
end of the lease term the fair market value of the equipment is below the
guaranteed residual value in the agreement, the Company is liable for a
percentage of the deficiency. The total of these guarantees is $12,405 of which
$1,451 could be due in 2 to 3 years, $6,560 could be due in 4 to 5 years, and
the remaining $4,394 potentially due in greater than 5 years. As of December 31,
2004 and 2003, included in accounts payable and accrued expenses in the
accompanying Consolidated Balance Sheets is a liability of $188 and $144,
respectively, representing the accrual for these guarantees.
During
the second quarter of 2003, the Company arranged a leasing transaction between
one of its major customers and a financial institution for up to 3,000
containers. As part of this transaction, the Company agreed to provide certain
guarantees related to the fair value of the equipment if the lessee terminated
the lease or if the lessee was unable to meet its obligations under the terms of
the lease. In addition, if the lessee agreed to extend the lease, the Company
agreed to purchase the equipment from the financial institution at a stated
value and lease it to the lessee for this additional period at a stated lease
rate. The Company further agreed to provide the lessee with a purchase option at
the end of the extended lease period that would be less than the fair market
value of the equipment at the date the lessee could exercise its option (the
"Bargain Purchase Option").
In
return for the arrangement of the transaction on behalf of the financial
institution and the guarantees discussed above, the Company was paid an
arrangement fee and a portion of the initial rent for each container included in
the lease. During the year ended December 31, 2003, 2,076 containers were
delivered to the lessee and the Company received payments amounting to $1,240.
The remaining 924 containers were purchased by the Company and leased to the
customer under the terms of a direct financing lease.
The
estimated fair value at the end of the lease term guaranteed by the Company for
these containers amounts to approximately $4,360. The Company has estimated that
its potential liability related to these guarantees is less than the estimated
potential liability related to the Bargain Purchase Option granted to the
lessee. As such, the Company has accrued for the estimated value of its
liability for this Bargain Purchase Option amounting to $1,017 that could be due
in greater than 5 years. All fees collected from the lessor have been deferred
by the Company and included in accounts payable and accrued liabilities on the
accompanying Consolidated Balance Sheets. The fees received from the lessor, net
of the estimated liability for the Bargain Purchase Option, are being recognized
by the Company over the term of the residual guarantee.Standby
Letters of Credit: As of December 31, 2004, CAI, a consolidated subsidiary of
the Company, has two outstanding letters of credit totaling $6,000 which
guarantee its obligations under certain operating lease agreements. These
letters of credit expire in May 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other:

At December 31, 2004,
commitments for capital expenditures for leasing equipment totaled approximately
$149,634, with approximately $116,681 committed for 2005 and $32,953 committed
for 2006.

The Company is engaged in
various legal proceedings from time to time incidental to the conduct of its
business. Such proceedings may relate to claims arising out of equipment
accidents that occur from time to time which involve death and injury to persons
and damage to property. Accordingly, the Company requires all of its lessees to
indemnify the Company against any losses arising out of such accidents or other
occurrences while the chassis are on-hire to the lessees. In addition, lessees
are generally required to maintain a minimum of $2,000 in general liability
insurance coverage which is standard in the industry. In addition, the Company
maintains a general liability policy of $255,000 in the event that the above
lessee coverage is insufficient. While the Company believes that such coverage
should be adequate to cover current claims, there can be no guarantee that
future claims will never exceed such amounts. Nevertheless, the Company believes
that no current or potential claims of which it is aware will have a material
adverse effect on its financial condition or results of operations and that the
Company is adequately insured against such claims.

Pending Governmental Investigations

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

Stockholder Litigation

In February and March 2004,
several lawsuits were filed in the United States District Court for the District
of New Jersey, by purchasers of the Companys common stock naming the
Company and certain of its present and former executive officers and directors
as defendants. The complaints alleged violations of the federal securities laws
relating to the Companys reported Consolidated Financial Statements for
the years ended December 31, 2000 and 2001 and the nine months ended September
30, 2002, which the Company announced in March 2003 would require restatement.
Each of the complaints purported to be a class action brought on behalf of
persons who purchased the Companys securities during a specified period.
In April 2004, the lawsuits, which seek unspecified amounts of compensatory
damages and costs and expenses, including legal fees, were consolidated into a
single action with lead plaintiffs and lead counsel having been appointed. The
plaintiffs filed a consolidated amended complaint in September 2004, which
includes allegations of purported misstatements and omissions in the
Companys public disclosures throughout an expanded purported class period
from March 31, 1999 through December 26, 2003. In November 2004, the Company
filed a motion to dismiss the amended complaint, which is currently pending. In
the event the Companys motion to dismiss is denied, the Company would
expect to incur additional defense costs typical of this type of class action
litigation. The Company intends to vigorously defend this lawsuit but is unable
at this time to ascertain the impact this litigation may have on its financial
position or results of operations.

(9)     Cash flow information:

For purposes of the
Consolidated Statements of Cash Flows, the Company includes all highly liquid
short-term investments with an original maturity of three months or less in cash
and cash equivalents.

For the years ended
December 31, 2004, 2003 and 2002, cash paid for interest was approximately
$108,542, $105,272 and $108,886, respectively. Cash paid for income taxes was
approximately $1,202, $2,175 and $3,249, respectively.

(10)     Related party transactions:

During 2001, the Company
leased approximately 28,500 square feet of commercial space for its corporate
offices in Princeton, New Jersey from 211 College Road Associates, a New Jersey
general partnership in which Martin Tuchman, a director and Chief Executive
Officer and Warren L. Serenbetz, a director until December 15, 2004, held a
significant equity interest. The 2001 annual base rental for this property was
approximately $557 under a triple net lease expiring in 2010. In the opinion of
the Companys management, rent paid under this lease did not exceed rent
that the Company would have paid in an arms length transaction with an
unrelated third party. On January 28, 2002, the Company executed a Purchase and
Sale Agreement, pursuant to which on May 1, 2002 the Company acquired the
building which houses its corporate offices. The fair market value purchase
price of the approximately 39,000 square feet building was $6,250, based upon a
determination of the fair market value of the property by an independent
property appraisal firm. The purchase price and other terms of the purchase were
unanimously approved by the Companys Board of Directors.

In January 1992 the Company
executed a Consultation Services Agreement with Radcliff Group, Inc. pursuant to
which Radcliff designated Warren L. Serenbetz, a stockholder and director until
December 15, 2004, as an executive consultant. The Consultation Services
Agreement was terminated in January 1995. Under the terms of the agreement
compensation continued through December 2002 and payment of health related costs
will continue through December 31, 2007. The final payment under the terms of
the Consultation Services Agreement was made in January 2003. Compensation under
this agreement was $492 in 2002.

Eurochassis L.P., a New
Jersey limited partnership in which Raoul J. Witteveen, our former President and
Chief Operating Officer, is one of the limited partners and the general partner,
leases 100 chassis to Trac Lease, a subsidiary of Interpool. Annual lease
expense amounted to $86 for the year ended December 31, 2004 and approximately
$91 for each of the years ended December 31, 2003 and 2002. The annual lease
term renews automatically unless canceled or renewed under renegotiated lease
rate terms by either party prior to the first day of the renewal period. The
members of the Board of Directors have unanimously determined that the terms of
all arrangements between Eurochassis L.P. and Trac Lease are beneficial and fair
to the Company.

In January 1998, the
Company entered into a non-exclusive Consulting Agreement with Atlas Capital
Partners, LLC ("Atlas") pursuant to which Atlas provided investment
banking consultation services. Mitchell I. Gordon, a Director of Interpool from
1998 to October 2003 and Chief Financial Officer and Executive Vice President
from October 2000 to July 2003 also served as president of Atlas when the
Consulting Agreement was entered into. Under the terms of the Consulting
Agreement, Atlas was to have been paid $240 (plus reimbursement of reasonable
expenses), additional compensation of $560 and a twenty percent carried interest
in investments made with funds provided by Interpool. In addition, Atlas was
contractually entitled to an annual bonus in an amount that is usual and
customary in the investment banking business for investment opportunities
actually completed by the Company subject to set-off of the $560 additional
compensation. In 2000, other compensation in the amount of $1,650 to be paid
over three years, was earned by Atlas in connection with the acquisition by the
Company of the North American Intermodal Division of Transamerica. As of October
2000, the Consulting Agreement was terminated with the exception of the deferred
compensation related to the acquisition of Transamerica. Mr. Gordon resigned as
an officer and director of the Company in 2003.

Chassis Holdings I, LLC

The Ivy Group, which is a
New Jersey general partnership composed directly or indirectly of Martin
Tuchman, Radcliff Group, Inc., Raoul J. Witteveen, Thomas P. Birnie and Graham
K. Owen, has previously leased chassis to Trac Lease, Inc. ("Trac
Lease"). As of December 31, 2000, pursuant to various equipment lease
agreements, Trac Lease leased 6,047 chassis from The Ivy Group and its
principals for an aggregate annual lease payment of approximately $2,900. On
January 1, 2001, the various leases for the 6,047 units were combined into a
single lease pursuant to which The Ivy Group and its principals were paid an
aggregate lease payment of $2,691 through June 30, 2001. On July 1, 2001, the
Company restructured its relationship with The Ivy Group and its principals to
provide the Company with managerial control over 6,047 chassis previously leased
by Trac Lease, a wholly owned subsidiary of the Company, from The Ivy Group. As
a result of the restructuring, the partners of The Ivy Group contributed these
6,047 chassis and certain other assets and liabilities to a newly formed
subsidiary, Chassis Holdings I, LLC ("Chassis Holdings"), in exchange
for $26,000 face value of preferred membership units and 10% of the common
membership units, and Trac Lease contributed 902 chassis and $2 in cash to
Chassis Holdings in exchange for $3,000 face value of preferred membership units
and 90% of the common membership units. The preferred membership units are
entitled to receive a preferred return prior to the receipt of any distributions
by the holders of the common membership units. The value of the contributed
chassis was determined by taking the arithmetic average of the results of
independent appraisals performed by three nationally recognized appraisal firms
in connection with the Companys establishment of a chassis securitization
facility in July 2000. As the managing member of Chassis Holdings, Trac Lease
exercises sole managerial control over the entitys operations. Chassis
Holdings leases all of its chassis to Trac Lease at a rental rate equal to the
then current Trac Lease fleet average per diem. Chassis Holdings and the holders
of the preferred membership units are party to a Put/Call Agreement which
provides that the holders of preferred units may put such units to Chassis
Holdings under certain circumstances and Chassis Holdings may redeem such units
under certain circumstances. Chassis Holdings will be required to make certain
option payments to the holders of the preferred membership units in order to
preserve its right to redeem such units.

Based on 90% common unit
ownership held by Trac Lease, the Companys Consolidated Financial
Statements include the accounts of Chassis Holdings. The Ivy Groups
interest in the common and preferred units of Chassis Holdings of approximately
$26,326 is classified as minority interest in equity of subsidiaries in the
accompanying Consolidated Balance Sheets. Dividends paid on the common units and
distributions on the preferred units totaling $3,071, $2,906 and $3,120 for the
years ended December 31, 2004, 2003 and 2002, are included in minority
interest (income)/expense, net in the accompanying Consolidated Statements of
Income.

The members of the Board of
Directors have unanimously determined that the terms of all arrangements between
The Ivy Group and Trac Lease, including the formation of Chassis Holdings, are
beneficial and fair to the Company.

PCR Transactions

In July 2000, Yardville
National Bank (a subsidiary of an entity in which the Companys Chief
Executive Officer owns approximately five percent of the common stock and serves
on the Executive Committee of the Board of Directors) extended a revolving
credit facility of $2,500 to PCR, secured by substantially all of PCRs
assets. On August 31, 2000 this facility was increased to $5,000.

In connection with the sale
of PCR in December 2001, Martin Tuchman and Raoul Witteveen agreed in March 2002
to guarantee this line of credit between PCR and Yardville National Bank which
had been reduced to $3,000 and the Company was released from a guarantee it had
previously executed. This guarantee was subsequently paid off through advances
made to PCR by The Ivy Group. PCRs line of credit with Yardville National
Bank was reduced to $1,656 in March 2002 and later increased to $2,000 in
September 2002. Advances amounting to $698 and $1,983 in 2003 and 2002,
respectively, were made to PCR by The Ivy Group to pay off borrowings under the
line of credit and to provide working capital. The Ivy Group is a partnership
controlled by certain current and former officers and directors of the Company.
The advances made by The Ivy Group to PCR are considered capital contributions
to the Company and payments by the Company to PCR. The payments to PCR have been
determined to be uncollectible and have been expensed by the Company and
included in other (income)/expense, net. Payments made in 2002 amounting to
$1,983 were included in additional paid-in-capital. The remaining payments made
in 2003 of $698 were recorded in additional paid-in-capital during 2003 when the
payments were made.

Since 2000, the Company has
guaranteed PCR debts due to third parties totaling $5,000. At December 31, 2002,
with PCR in liquidation, a determination was made that it was probable that the
Company would incur costs related to the guarantee. As a result, the Company
recorded a liability for $4,429 representing its guarantee of PCR debts, net of
amounts collected related to PCRs liquidation. This amount is included in
accounts payable and accrued expenses in the December 31, 2003 Consolidated
Balance Sheet. The $5,000 guarantee was paid off through a secured financing
arrangement with another financial institution completed by the Company in July
2004.

Bank Loans

In September 2000,
Yardville National Bank (a subsidiary of an entity in which the Companys
Chief Executive Officer owns approximately five percent of the common stock and
serves on the Executive Committee of the Board of Directors) provided a
revolving line of credit to the Company. The line of credit was initially $9,750
and was secured by equipment and the related leases. The interest rate was
Yardville National Banks base interest rate minus 0.5%. The Company
utilized a portion of this facility from inception through April 2002 when the
loan balance was paid and the facility ended.

In April 2003 and August
2003 the Company borrowed $16,000 and $7,000, respectively, from Yardville
National Bank. The term of the $16,000 loan was three years with thirty-four
fixed monthly principal payments of $250 commencing May 25, 2003 and a final
principal payment of $7,500 due on March 25, 2006. Interest was payable monthly,
at an initial rate of 4.25%, and was adjusted monthly to the prime rate as
published in the Wall Street Journal subject to a 4% minimum and 5% maximum per
annum rate.

The term of the $7,000 loan
was five years with fifty-nine monthly principal payments of $75 commencing
September 7, 2003 and a final principal payment of $2,575 due on August 7, 2008.
Interest was payable monthly, at an initial rate of 4%, and was adjusted monthly
to the prime rate as published in the Wall Street Journal subject to a 4%
minimum and 6% maximum per annum rate.

During November 2004, the
Company paid in full both of these facilities. In connection with our borrowings
from Yardville National Bank, our Board of Directors unanimously determined that
the interest rate and other terms of such borrowings were at least as favorable
to us as could have been obtained in an arms-length transaction with an
unrelated third party.

Fathom Co., LTD Agency Fees

The Company paid Fathom
Co., LTD ("Fathom"), its local representative in Taiwan, $116 for each
of the years ended December 31, 2004, 2003 and 2002 to represent the Company
with the Taiwan depots that store and repair damaged containers and to provide
customer support. Fathom is owned by a Regional Vice President of Interpool
Limited (who is not an executive officer of the Company) and members of his
family. Management has determined that the fee for these services between Fathom
and Interpool Limited are beneficial and fair to the Company.

Summary of Related Party Transactions

The effects of the above
related party transactions included in the accompanying Consolidated Statement
of Income are as follows:

`2004       2003        2002
                                                      ----       ----        ----
                Lease operating expense              $3,157     $2,997      $3,234
                                                     ======     ======      ======
                Administrative expense                 $116       $157        $857
                                                       ====       ====        ====
                Other (income)/expense, net            $---       $---      $2,763
                                                       ====       ====      ======
                Interest expense                       $733       $540         $40
                                                       ====       ====         ===`

(11)     Relationship with CAI:

The Company holds a 50%
common equity interest in CAI, which it acquired in April 1998. CAI owns and
leases its own fleet of containers and also manages, for a fee, containers owned
by the Company and third parties. The Company entered into its operating
relationship with CAI primarily to facilitate the leasing in the short-term
market of containers coming off long-term operating lease, to gain access to new
companies looking to lease containers on a long-term basis and to realize cost
efficiencies from the operation of a coordinated container lease marketing
group. For containers managed by CAI for the Company on a short-term basis, the
Company earns the net operating income and pays CAI a fee for managing its
equipment and leasing it on its behalf. The calculation is based on the average
daily net operating income of CAIs fleet of owned, leased-in and managed
containers (including the portion of CAIs fleet that consists of the
Companys equipment) for each day such managed containers are part of the
CAI fleet. The marketing group, which is organized as a wholly-owned subsidiary
of the Company, is responsible for soliciting container lease business for both
the Company and CAI, including long-term operating and direct financing lease
business and short-term lease business on master lease agreements. The Company
has a right to purchase all long-term operating and direct financing lease
business generated by the marketing group, subject to the Company offering to
CAI, at cost, 10% of this long-term operating and direct financing lease
business. By mutual agreement, CAI has purchased for its own account long-term
operating and direct financing lease business the marketing group has generated
in excess of such amounts. During 2003, CAI sold containers to Interpool in the
amount of $5,890 and recorded a gain on these sales of $557. During 2002, CAI
sold containers to Interpool in the amount of $38,705 and recorded a gain on
these sales of $5,102. These gains have been eliminated from the accompanying
Consolidated Financial Statements. There were no sales between CAI and Interpool
during 2004. Such equipment, as well as certain other containers purchased from
time to time, are currently managed for the Company by CAI for a fee based upon
the actual net operating income earned by such containers.

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

In connection with the
acquisition of its equity interest in CAI, the Company loaned CAI $33,650 under
a Subordinated Note Agreement (Note), which is collateralized by all containers
owned by CAI as of April 30, 1998 or thereafter acquired, subject to the
priority security interest lien of CAIs senior credit facility, except for
certain excluded collateral. Interest on the Note is at an annual fixed rate of
10.5% and is payable quarterly. The original repayment terms required mandatory
quarterly principal payments of $1,683 beginning July 30, 2003 through April 30,
2008. The Note was subject to certain financial covenants and was
cross-collateralized with CAIs senior credit facility, subject to the
terms of a subordination agreement.

On June 27, 2002, CAI
entered into an amended $110,000 senior revolving credit agreement with a group
of financial institutions. To facilitate the closing of this new credit
facility, the Company agreed to extend the repayment terms of its Note so as to
require mandatory quarterly principal payments of $1,683 beginning July 30, 2006
through April 30, 2011 and modified certain financial covenants in the Note.
Interest on the Note continues to accrue at an annual fixed rate of 10.5% and is
payable quarterly. The Note continues to be cross-collateralized with CAIs
senior credit agreement, subject to the terms of an amended and restated
subordination agreement. At the same time, the Company was granted the right to
appoint a majority of CAIs board of directors. As a result of these
transactions and gaining a majority position on CAIs board, the
Companys financial statements include CAI as a consolidated subsidiary
commencing June 27, 2002. Previously, CAI was accounted for under the equity
method of accounting. The Companys share of the equity losses of CAI for
the period from January 1, 2002 through June 26, 2002 have been recorded in
losses for investments accounted for under the equity method in the accompanying
Consolidated Statement of Income. Since June 27, 2002 CAIs results of
operations have been included in the appropriate captions on the accompanying
Consolidated Statements of Income. The assets and liabilities of CAI at December
31, 2004 and 2003, after elimination of intercompany transactions, have been
included on the accompanying Consolidated Balance Sheets.

A total of $65,000 and
$87,000 was outstanding under CAIs senior revolving credit facility at
December 31, 2004 and 2003, respectively. Borrowings under CAIs senior
credit facility are secured by substantially all of CAIs assets, other
than certain excluded assets, and are payable on June 27, 2005. CAI is currently
in discussions with its lenders regarding a renewal of its senior revolving
credit facility. The senior credit facility contains various financial and other
covenants. At December 31, 2004, CAI was in compliance with these covenants.

The senior credit facility
was amended in May 2003 to increase the letter of credit commitment by the
lenders administrative agent.

In addition, CAI has
entered into sale-leaseback transactions with third parties pursuant to which
CAI sells maritime shipping containers to such third parties and then leases the
shipping containers back from such third parties. Certain of these leases
contain financial and other covenants. At December 31, 2004, CAI was in
compliance with these covenants.

During the period from 1998
to December 2003, there were several inter-company transactions wherein
Interpool acquired equipment, and the related leases from CAI, at terms that
resulted in a profit for CAI. These transactions were negotiated on an
arms-length basis and management believes that the terms are similar to those
that a third party would have negotiated with CAI under the circumstances.

During 2004, 2003, and
2002, Interpool paid CAI $1,761, $1,774 and $2,189 respectively for the
management of its equipment.

Subsequent to June 27,
2002, revenues and expenses for transactions between the Company and CAI are
eliminated in consolidation. Minority interest expense recorded by the Company
for the year ended December 31, 2004 was $5,696. This compares to minority
interest income recorded by the Company for the year ended December 31, 2003 and
the period from June 27, 2002 to December 31, 2002 of $1,151 and $1,306,
respectively.

In April 2004, the Company
reached an agreement with CAI resolving differences in interpretation of certain
agreements with CAI including provisions governing payment of appropriate
remedial compensation when an age disparity develops between the Companys
containers managed by CAI and the balance of CAIs fleet. Pursuant to the
agreement with CAI, the Company paid CAI $2,000 for resolution of all disputes
through February 29, 2004. The impact of this agreement, was a reduction in
consolidated pre-tax income of $1,000 ($600 net of tax).

(12)     Retirement plans:

Certain subsidiaries have
defined contribution plans covering substantially all full-time employees.
Participating employees may make contributions to the plan, through payroll
deductions. Matching contributions are made by the Company equal to 75% of the
employees contribution to the extent such employee contribution did not
exceed 6% of their compensation. During the years ended December 31, 2004, 2003
and 2002, the Company expensed approximately $533, $454 and $423, respectively,
related to this plan. These amounts are included in administrative expense on
the Consolidated Statement of Income.

(13)     Segment and geographic data:

The Company and its
subsidiaries conduct business principally in a single industry segment, the
leasing of intermodal dry freight standard containers, chassis and other
transportation related equipment. Within this single industry segment, the
majority of the Companies operations come from two reportable segments:
container leasing, and domestic intermodal equipment leasing. The container
leasing segment specializes primarily in the leasing of dry freight standard
containers, while the domestic intermodal equipment segment specializes
primarily in the leasing of intermodal container chassis. The Company also had
limited operations in a third reportable segment that specialized in leasing
microcomputers and related equipment.

The computer leasing
segment consisted of two subsidiaries, Microtech Leasing Corporation
("Microtech") and Personal Computer Rentals ("PCR"). During
the third quarter of 2001, the Company adopted a plan to exit this segment. As
of December 31, 2002 the assets of Microtech continued to be liquidated and
PCRs financial condition had deteriorated. PCR ceased active operations
and liquidated in 2003. (See Note 6 to the Consolidated Financial Statements) As
of December 31, 2004, all assets of Microtech and PCR were liquidated. For the
year ended December 31, 2002, expenses related to the liquidation of PCR are
included in the Domestic Intermodal Equipment segment.

Beginning June 27, 2002 the
container leasing segment includes revenues and expenses and related balance
sheet accounts for CAI, previously accounted for under the equity method of
accounting.

The accounting policies of
the segments are the same as those described in Note 1. The Company evaluates
performance based on profit or loss before income taxes. The Companys
reportable segments are strategic business units that offer different products
and services. All significant transactions between segments have been
eliminated. Historically, funds have been borrowed by Interpool, Inc. Trac
Lease, and Interpool Limited (or their subsidiaries). Interpool, Inc. has
borrowed all of the Companys public debt. Trac Lease and Interpool, Inc.
comprise the Companys domestic intermodal equipment segment, and Interpool
Limited and CAI comprise the container leasing segment. For purposes of segment
reporting the outstanding debt and related interest expense are recorded by the
borrowing entity. Advance rates for secured loans have been approximately the
same for both chassis and containers, and have generally been in the 75-85%
range. To the extent that we lease chassis equipment in from other parties, the
effective advance rate is generally 100%.

Segment Information:

`Domestic       Computer
                                                         Container       Intermodal       Leasing
                        2004                              Leasing        Equipment       Equipment        Totals
                        ----                             ---------       ----------      ---------        ------
Equipment leasing revenue                                 $181,485         $206,698          $---         $388,183

Other revenue                                                8,671            7,533           ---           16,204

Lease operating and administrative expenses                 46,674           98,594             7          145,275

Provision for doubtful accounts                                950              526           ---            1,476

Fair value adjustments for derivative instruments
(restated)                                                  (1,303)            (208)          ---           (1,511)

Fair value adjustment warrants                                 ---           49,222           ---           49,222

Depreciation and amortization                               57,161           32,297           ---           89,458

Impairment of leasing equipment                              1,373            3,237           ---            4,610

Gain on settled insurance litigation                        (3,781)          (2,486)          ---           (6,267)

Other (income)/expense, net and minority interest           (8,485)           1,171           ---           (7,314)

Income for investments under equity method                     ---             (416)          ---             (416)

Interest income                                             (1,865)          (1,520)           (5)          (3,390)

Interest expense                                            36,347           75,666           ---          112,013

Income / (loss) before income taxes (restated)              63,085          (41,852)           (2)          21,231

Net investment in DFL's                                    277,461           85,984            ---         363,445

Leasing equipment, net                                     685,786          893,410            ---       1,579,196

Equipment purchases                                        212,402           37,919            ---         250,321

Total segment assets                                    $1,107,813       $1,296,248            $25      $2,404,086

                                                                          Domestic       Computer
                                                         Container       Intermodal       Leasing
                        2003                              Leasing        Equipment       Equipment        Totals
                        ----                             ---------       ----------      ---------        ------
Equipment leasing revenue                                 $175,131         $198,552           $604         $374,287

Other revenue                                               11,838           15,987            ---           27,825

Lease operating and administrative expenses
(restated)                                                  54,193          109,218            106          163,517

Provision for doubtful accounts                              2,005            2,634           (391)           4,248
Fair value adjustments for derivative instruments
(restated)                                                    (657)          (1,099)           ---           (1,756)

Depreciation and amortization                               56,677           30,821            ---           87,498

Impairment of leasing equipment                              2,688            6,361            ---            9,049

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

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

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

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

Income/(loss) before income taxes (restated)                46,582           (9,006)           723           38,299

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

Leasing equipment, net                                     747,377          889,339            ---        1,636,716

Equipment purchases and investment in DFL's                279,888           66,887            ---          346,775

Total segment assets                                    $1,210,635       $1,162,357            $44       $2,373,036


                                                                         Domestic       Computer
                                                        Container       Intermodal       Leasing
                        2002                             Leasing        Equipment       Equipment        Totals
                        ----                             -------        ----------      ---------        ------
Equipment leasing revenue                                 $138,276        $185,283         $1,521        $325,080

Other revenue                                                8,094          11,761            ---          19,855

Lease operating and administrative expenses                 40,212          76,303            508         117,023

Provision for doubtful accounts                                325           5,939          1,579           7,843

Fair value adjustments for derivative instruments               96           5,434            ---           5,530

Depreciation and amortization                               51,245          37,384             78          88,707

Impairment of leasing equipment                              4,512           5,038             ---          9,550

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

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

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

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

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

The Companys shipping
line customers utilize international containers in world trade over many varied
and changing trade routes. In addition, most large shipping lines have many
offices in various countries involved in container operations. The
Companys revenue from international containers is earned while the
containers are used in service carrying cargo around the world, while certain
other equipment is utilized in the United States. Accordingly, the international
information presented below represents our international container leasing
operation conducted through Interpool Limited, a Barbados corporation, while the
United States information presented below represents our domestic intermodal
equipment leasing segment, as well as those revenues and assets relative to CAI
which is headquartered in the United States of America. Such presentation is
consistent with industry practice.

Geographic Information:

`EQUIPMENT LEASING REVENUE                                2004                2003               2002
                                                            ----                ----               ----
   United States                                            $251,019            $236,126           $205,923
   International                                             137,164             138,161            119,157
                                                             -------             -------            -------
                                                            $388,183            $374,287           $325,080
                                                            ========            ========           ========

   LEASING EQUIPMENT, NET:
   United States                                          $1,034,212          $1,049,875
   International                                             544,984             586,841
                                                             -------             -------
                                                          $1,579,196          $1,636,716
                                                          ==========          ==========

   ASSETS:
   United States                                          $1,477,714          $1,354,921
   International                                             926,372           1,018,115
                                                             =======           =========
                                                          $2,404,086          $2,373,036
                                                          ==========          ==========`

(14)     Capital stock:

The Companys 2004
Stock Option Plan for Key Employees and Directors (the "2004 Plan"),
was adopted by the Board of Directors, and approved by the stockholders at the
Companys Annual Meeting of Stockholders, on December 15, 2004. A total of
1,500,000 shares of common stock have been reserved for issuance under the 2004
Plan. Options may be granted under the 2004 Plan, at the discretion of the
Compensation Committee of the Board of Directors (the "Compensation
Committee"), to key employees and directors (whether or not they are
employees) of Interpool, Inc. and its subsidiaries. The number of shares that
may be the subject of options granted during any calendar year to any one
individual cannot exceed 250,000 shares. No options were granted under this plan
during 2004.

Previously, the Company
maintained a 1993 Stock Option Plan for Executive Officers and Directors (the
"1993 Stock Option Plan"). A total of 3,803,063 options are currently
outstanding under the 1993 Stock Option Plan. No further options may be granted
under the 1993 Stock Option Plan.

The Companys 1993
Stock Option Plan was adopted by the Companys Board of Directors and
approved by the stockholders in March 1993. A total of 6,000,000 shares of
common stock had been reserved for issuance under the Stock Option Plan. Options
were granted under the Stock Option Plan to executive officers and directors of
the Company or a subsidiary (including any executive consultant of the Company
and its subsidiaries), whether or not they were employees. These options vested
six months from date of grant and expired ten years from the date of grant.

The Companys 2004
Nonqualified Stock Option Plan for Non-Employee, Non-Officer Directors (the
"2004 Directors Plan"), was also adopted by the Board of Directors,
and approved by the stockholders at the Companys 2004 Annual Meeting of
Stockholders on December 15, 2004. A total of 250,000 shares of common stock
have been reserved for issuance under the 2004 Directors Plan. The exercise
price per share is the fair market value of the Companys common stock on
the date on which the option was granted. The options granted pursuant to the
2004 Directors Plan may be exercised at the rate of one-third of the shares on
the first anniversary of the options grant date and one-third of the
shares on the second anniversary of the options grant date and one-third
of the shares on the third anniversary of the options grant date, subject
to applicable holding periods required under rules of the Securities and
Exchange Commission. Options granted pursuant to the 2004 Directors Plan expire
ten years from their grant date.

The 2004 Directors Plan
provides for the automatic grant of nonqualified options to non-employee
non-officer directors. Under the 2004 Directors Plan, each person who is not an
employee or officer and who serves as a member of the Board of Directors
received a grant of options for 15,000 shares of common stock on the business
day following the annual meeting. As a result, options for 90,000 shares of
common stock were granted on December 16, 2004 to six non-employee, non-officer
directors at an exercise price of $22.05. In addition, each person who becomes a
non-employee non-officer director following the 2004 Annual Meeting will
automatically receive a grant of options for 15,000 shares on the first business
day after becoming a director. The 2004 Directors Plan also provides for
additional automatic grants of options for 5,000 shares on an annual basis to
each continuing director, other than an employee or officer, on the first
business day following each future annual meeting, beginning with the annual
meeting to be held during 2005.

Previously, the Company
maintained the 1993 Non-Qualified Stock Option Plan for Non-Employee,
Non-Consultant Directors (the "1993 Directors Plan"). A total of
45,000 options are currently outstanding under the 1993 Directors Plan. No
further options may be granted under the 1993 Directors Plan.

The Companys 1993
Directors Plan was adopted by the Board of Directors and approved by the
stockholders in March 1993. The 1993 Directors Plan is administered by the
Compensation Committee of the Board of Directors. Under the 1993 Directors
Plan a nonqualified stock option to purchase 15,000 shares of common stock was
automatically granted to each non-employee, non-consultant director of the
Company, in a single grant at the time the director first joined the Board of
Directors. The 1993 Directors Plan authorized grants of options up to an
aggregate of 150,000 shares of common stock. The exercise price per share is the
fair market value of the Companys common stock on the date on which the
option was granted (the "Grant Date"). The options granted pursuant to
the 1993 Directors Plan vested at the rate of 1/3 of the shares on the
first anniversary of the directors Grant Date, 1/3 of the shares on the
second anniversary of the directors Grant Date, and 1/3 of the shares on
the third anniversary of the directors Grant Date, subject to certain
holding periods required under rules of the Securities and Exchange Commission.
Options granted pursuant to the 1993 Directors Plan expire ten years from
their Grant Date.

Through September 16, 1998,
options to purchase 4,408,501 shares under the Companys 1993 Stock Option
Plan for Executive Officers and Directors had been granted, 22,500 of which
expired due to failure to exercise and 22,500 of which were exercised. Options
to purchase 90,000 shares were granted under the Companys 1993
Nonqualified Stock Option Plan for Non-employee, Non-consultant Directors,
45,000 of which expired due to failure to exercise and 15,000 of which were
exercised.

On September 16, 1998 the
Company canceled all but 22,500 of the 4,393,501 options then outstanding under
its 1993 Stock Option Plan for Executive Officers and Directors and the
Companys Nonqualified Stock Option Plan for Non-employee, Non-consultant
Directors and issued 4,371,001 new options in their place. The newly issued
options were granted with an exercise price equal to the closing market price of
the Companys stock as of September 16, 1998 (the "date of
grant"). This resulted in a new measurement date whereby the newly issued
options vested six months from date of grant and expire ten years from date of
grant. All other terms and conditions of the newly issued options were similar
to the canceled options.

In connection with the
resignation of Raoul Witteveen, the Company entered into a separation agreement
that allows for Mr. Witteveens outstanding stock options, all of which
were fully vested as of the date of his resignation, to be exercisable until
October 9, 2005, rather than ten business days after the termination of his
employment as required by the 1993 Stock Option Plan. This modification resulted
in the recognition of compensation expense of $7,091. (See Note 1(B),
Restatement to the Consolidated Financial Statements) Mr. Witteveens
future sale of common stock will be subject to certain volume restrictions and a
right of first refusal on the part of the Company and its affiliates.

On September 5, 2002,
options to purchase 50,000 shares of the Companys common stock were
granted to Mitchell I. Gordon. The newly issued options were granted under the
1993 Stock Option Plan for Executive Officers and Directors with an exercise
price equal to the closing market price of the Companys stock as of the
grant date. The options were to vest 20% per year beginning January 1, 2003 and
expire ten years from the grant date. In connection with the resignation of
Mitchell I. Gordon, the Company entered into a separation agreement that
provided for the immediate vesting of the options. The compensation cost
recognized by the Company in July 2003, as a result of the immediate vesting of
these options was $496 ($298 net of tax) and is included in administrative
expenses in the accompanying Consolidated Statement of Income.

As of December 31, 2004,
there were 1,750,000 shares of common stock reserved for issuance under the 2004
stock option plans. No options may be granted under the 1993 Plans which expired
in March 2003.

Changes during 2004, 2003
and 2002 in options outstanding for the combined plans were as follows:

`2004                        2003                        2002
                                    ------------------------    ------------------------    -------------------------
                                                 Weighted                    Weighted                     Weighted
                                                 average                     average                      average
                                    Shares    exercise price    Shares    exercise price    Shares     exercise price
                                    ------    --------------    ------    --------------    ------     --------------
Outstanding at January 1,          4,516,501          10.31    4,539,001        $10.34     4,489,001          $10.30

Granted                               90,000          22.05          ---           ---        50,000           13.73
Exercised                            668,438          10.25       22,500         15.58           ---             ---

                                  --------------------------- --------------------------- ---------------------------
Outstanding at December 31,        3,938,063          10.59    4,516,501        $10.31     4,539,001          $10.34

Exercisable at December 31,        3,798,063          10.30    4,466,501        $10.29     4,384,001          $10.27`

`Options Outstanding                                           Options Exercisable
                                 -------------------                                           -------------------
                                             Weighted Average
                             Number             Remaining                                  Number
                           Outstanding         Contractual       Weighted Average        Exercisable       Weighted Average
   Exercise Prices        December 31,         Life (Years)       Exercise Price        December 31,        Exercise Price
   ---------------        ------------       -----------------   ----------------       -------------      ----------------
     $6.375                    15,000               5.2                $6.375                15,000              $6.375

     10.25                  3,683,063               2.8                 10.25             3,683,063               10.25

     11.9375                  100,000               5.8               11.9375                50,000             11.9375

     13.73                     50,000               7.7                 13.73                50,000               13.73

     22.05                     90,000              9.95                 22.05                     0               22.05
-----------------------------------------------------------------------------------------------------------------------------

     $6.375-22.05           3,938,063               3.1                $10.59             3,798,063              $10.30`

In connection with the Company's delayed SEC filings and the receipt of waivers
from its lenders necessitated by the delayed filings, beginning in January 2004,
the members of the Company's Board of Directors and certain affiliates who own
shares of the Company's common stock agreed to defer their receipt of any
dividend payments, until the Company was in compliance with all SEC filing
requirements. As of December 27, 2004, the Company was no longer delinquent with
regard to its SEC filings, and the deferred dividends described above were paid
prior to December 31, 2004.

Common stock dividends declared and unpaid at December 31, 2004 and 2003
amounted to $1,741 and $2,516, respectively, and are included in accounts
payable and accrued expenses in the accompanying Consolidated Balance Sheet.

Deferred Bonus Plan

In November 2002, the Company's Board of Directors approved a Deferred Bonus
Plan (the "Plan") under which employees of the Company and its affiliates who
received discretionary year-end bonuses of greater than $50 received such
bonuses partly in cash and partly in the form of an award of Interpool common
stock. Under the Plan, the first $50 of a participant's bonus amount was paid in
cash. Any amount which exceeded $50 but was less than $150 was paid 50% in cash
and 50% in stock. Any bonus amount which exceeded $150 was paid 100% in stock.
Bonus stock awards under this Plan cliff vest in equal installments over a
five-year period, unless the recipient elected to have the award vest over a
ten-year period or the Board of Directors specified another period. The unvested
portion of any bonus stock award will vest immediately if a change in control of
Interpool occurs, if the employee is terminated without cause, if the employee
resigns for a good reason, if the employee dies or becomes permanently disabled,
or in any other circumstance deemed appropriate by the Board of Directors. If a
recipient resigns voluntarily without a good reason or is terminated for cause
the employee will forfeit any unvested portion of any bonus stock award.

The number of shares of stock awarded was calculated by dividing the dollar
value of the stock portion of the bonus by the average stock price for the last
ten trading days ending on December 31 of the grant year.

Additional stock was awarded based on the vesting period selected by the
employee. If a five year vesting period was selected, the shares were increased
by 10%. If a ten year vesting period was selected the shares awarded were
increased by 30%. Under the Plan, each employee granted a bonus stock award has
a right from time to time to require the Company to purchase a total number of
shares of stock equal to the number of shares of stock underlying the
Participant's Bonus Stock Award. The shares may be vested shares or shares which
were otherwise acquired by the participant providing that all shares were
beneficially owned by the participant for at least 6 months. The purchase price
shall be equal to the fair market value of a share of stock on the trading day
preceding the date of such purchase.

On January 2, 2003, under this Plan, the Company granted to eligible employees
139,067 shares of restricted stock that had a fair value of $16.83 per share at
the grant date. At the date of grant, $2,342 of deferred compensation was
credited to paid-in-capital with an offset to unamortized deferred
compensation-stock grant in the equity section of the Consolidated Balance
Sheet. Compensation costs are recognized ratably over the vesting periods during
which the related employee service is rendered. During the fourth quarter 2003,
in accordance with the terms of the separation agreement with the Company's
previous President and Chief Operating Officer, 60,407 unvested shares with a
value of $1,018 were forfeited. This forfeiture resulted in the reversal of
$1,018 of previously recorded unamortized deferred compensation, as well as the
reversal of previously recorded compensation expense of $102. For the year ended
December 31, 2003 compensation expense was $140 and 60,407 shares with a value
of $1,018 lapsed. The unamortized deferred compensation remaining in
stockholders equity was $1,184 at December 31, 2003.

On January 2, 2004, under the Company's Deferred Bonus Plan, the Company granted
to eligible employees 27,259 shares of restricted stock that had a fair value of
$13.60 per share at the grant date. At the date of grant, $371 of deferred
compensation was credited to paid-in capital with an offset to unamortized
deferred compensation-stock grant in the equity section of the Consolidated
Balance Sheet. During the first quarter of 2004, our Chief Executive Officer
elected to voluntarily relinquish his entire 2002 bonus. This resulted in the
forfeiture of 60,407 unvested shares of restricted stock valued at $1,017. This
forfeiture resulted in the reversal of $916 of previously recorded unamortized
deferred compensation expense, as well as the reversal of previously recorded
compensation expense of $101. Excluding the reversal of previously recorded
compensation related to this forfeiture, compensation expense for the year ended
December 31, 2004 was $85. The unamortized deferred compensation remaining in
stockholders equity was $554 at December 31, 2004. In September 2004, the Board
of Directors terminated the Deferred Bonus Plan. All stock previously granted
under this Plan will continue to be subject to the terms of the Plan. However,
future bonuses will not be subject to the terms of the Deferred Bonus Plan.

Stock Appreciation Rights

On July 1, 2004, in connection with employment agreements with certain executive
officers, the Company granted common stock appreciation rights ("SARS") that
provide for the grantees to receive cash payments measured by any appreciation
in the market price of the common stock over a specified base price. The Company
granted such stock appreciation rights with respect to a total of 275,000 share
units at a base price of $14.05. The $14.05 base price reflected the price on
the over-the-counter market on February 20, 2004, the business day before the
date on which the terms of the stock appreciation rights were fixed. The grant
of stock appreciation rights was subsequently ratified by the Board of Directors
on March 30, 2004, by which time the closing price of the Company's common stock
had increased to $15.00. At July 1, 2004, the date the employment agreements
became effective, the most recent closing stock price of the Company's common
stock was $16.55. Under the terms of the employment agreements, a total of
260,000 of these stock appreciation rights vest in 2005 with the remaining
15,000 rights vesting in three equal installments on December 31, 2006, 2007 and
2008. Any unvested stock appreciation rights will vest immediately upon a change
in control. Upon vesting, these stock appreciation rights may be exercisable at
any time prior to the expiration of the earlier of 10 days following the
termination of the employee or June 30, 2014.

FASB Interpretation No. 28, Accounting for Stock Appreciation
Rights and Other Variable Stock Option or Award Plans, requires interim
calculations of the amount of compensation expense inherent in the SARS
(variable plan accounting). This amount is equal to the increase in the quoted
market price since date of grant or award multiplied by the total number of
rights outstanding. Compensation expense is recognized ratably over the vesting
periods during which the related employee service is rendered. At December 31,
2004, the quoted market price of the Company's common stock was $24.00.
Compensation expense for the year ended December 31, 2004 was $2,120 and is
included in administrative expense on the Consolidated Statements of
Income.

Share Repurchases

In December 2004, Warren L. Serenbetz (a former member of the
Company's Board of Directors) advised the Company that he intended to exercise
668,438 stock options which represented the remaining options issued to him
under the terms of the 1993 Stock Option Plan. In addition, Mr. Serenbetz
requested, and the Compensation Committee of the Board of Directors allowed him,
to exercise these options on a cashless basis. While the cashless exercise of
options is allowed under the terms of the 1993 Stock Option Plan with Board of
Directors approval, it is not the intent of the Company to allow this in most
cases. The Board of Directors considered Mr. Serenbetz's request in light of the
limited period of time he had to exercise these options having resigned as a
Board member, and approved his request at a meeting held on December 15, 2004.
These options had an exercise price of $10.25 per share and the market value at
the date he exercised his options was $22.05 per share.

In connection with the cashless exercise feature, the Company withheld 310,725
shares with a market value of $6,852 representing the cost to Mr. Serenbetz of
exercising these options. In addition, the Company withheld 110,086 shares with
a market value of $2,427 representing the amounts advanced to Mr. Serenbetz for
the payment of his minimum taxes related to the exercise. The remaining 247,627
shares were issued to Mr. Serenbetz.

The 420,811 shares withheld by the Company for the exercise price of the options
and Mr. Serenbetz's minimum taxes have been recorded as treasury shares, at
their market value at the date of exercise on the accompanying Consolidated
Balance Sheets. The exercise also resulted in the issuance of 668,438 shares at
a par value of $.001 and increased additional paid-in-capital by $6,852. In
addition, since these options were granted to Mr. Serenbetz as compensation for
services rendered, the Company is entitled to claim a tax deduction for
non-employee compensation on its 2004 federal tax return. Since the Company did
not recognize compensation expense on the grant or exercise of these options,
the tax benefit (amounting to $3,154) has been recorded in additional
paid-in-capital at the time these options were exercised.

No shares were repurchased in 2003. During 2002, the Company purchased 9,300
shares for an aggregate purchase price of $130.

(15)     Gain on Sale of Land:

In April 2002, the Company sold an industrial property and recorded a gain of
$4,766, which is included in other (income)/expense, net for the year ended
December 31, 2002 in the accompanying Consolidated Statements of Income.

(16)     Settled Insurance Litigation:

In connection with an insurance claim related to the default of a South Korean
customer and a subsequent lawsuit filed by the insurance carriers against the
Company, on June 17, 2004 the Company signed an agreement settling the lawsuit
and its claims under the policy. Under the terms of the settlement agreement,
the insurance carriers paid the Company a total of $26,400 during 2004. In
addition, the Company received the right to retain any of the equipment it had
recovered since the date of the claim. The Company recognized a pre-tax gain of
$6,267 related to the $26,400 settlement, which is recorded in gain on insurance
settlement on the Consolidated Statements of Income.

(17)     Subsequent Events:

July 2004 Protocol to the United States and Barbados Tax Treaty

Through December 31, 2004 Interpool Limited claimed treaty benefits under the
United States and Barbados income tax treaty ("pre-2005 Treaty"). The pre-2005
Treaty contained a limitation on benefits provision which denies treaty benefits
under certain circumstances. However, Interpool Limited did not fall within the
pre-2005 Treaty's limitation on benefits provision.

On July 14, 2004, the United States and Barbados signed a protocol to the
pre-2005 Treaty which was ratified on December 20, 2004 ("post-2004 Treaty")
that contains a more restrictive limitation on benefits provision than the
pre-2005 Treaty. The post-2004 Treaty took effect on January 1, 2005 following
its ratification by the United States Senate and the government of Barbados on
December 20, 2004. Under the post-2004 Treaty, Interpool Limited is only
eligible for Treaty benefits with respect to its container rental and sales
income if, among other things, Interpool, Inc., is listed on a "recognized stock
exchange" and Interpool, Inc.'s stock is "primarily" and "regularly" traded on
such exchange.

During April 2004, the Company was de-listed by the New York Stock Exchange.
During this de-listing, its common stock was traded on the over-the-counter
market under the symbol IPLI. In December 2004, after making all delinquent SEC
filings, the Company applied for re-listing on the New York Stock Exchange. On
January 13, 2005 Interpool, Inc. was again listed, and began trading, on the New
York Stock Exchange. Interpool believes this listing and its current trading
volume satisfies the "primarily" and "regularly" traded requirements of the
post-2004 Treaty, and Interpool Limited qualified for benefits under the
post-2004 Treaty on January 13, 2005. We have estimated there should be no U.S.
current tax expense for the period from January 1, 2005 to January 12, 2005.

Financing Activities

During the first quarter of 2005 the Company received an additional $223,000 in
net financing commitments. Commitments were received totaling $248,000 under a
financing facility established on November 1, 2004 from six financial
institutions while the Company cancelled a financing commitment for $25,000 that
existed as of December 31, 2004. This commitment was cancelled to allow the
financial institution involved to provide a larger commitment to a facility
already established during December 2004. As of the date this Form 10-K was
filed, none of these additional commitments had been utilized.

During February 2005, the Company entered into a lease arrangement with a
Japanese lessor involving $29,922 of equipment previously financed with a
financial institution during December 2003 and May 2004. The Company expects to
close in two approximately equal traunches, the first of which occurred on
February 28, 2005, and the second of which is expected to close by March 31,
2005. The lease ends in December 2008, and we have a fixed purchase option at
that time for $19,449 that we expect to exercise. The aggregate fixed rate of
interest on the lease is 7.44%. The company received additional cash proceeds
totaling $4,210 at the February closing and expects to receive a comparable
amount at the March closing.

Relisting by the New York Stock Exchange

On January 13, 2005, our common stock was listed on the New York Stock Exchange
under the symbol "IPX."

Rating Agency Actions

On December 17, 2004, Moody's placed the Company's ratings on review for
possible upgrade. At that time, Moody's indicated that an increase in the
Company's ratings of several "notches" could result in the near-term based on
the pace at which our credit profile has improved. Subsequently, on March 4,
2005, Moody's revised its outlook for the Company from "possible upgrade" to
"positive", and raised their rating for our senior implied debt to B2 from Caa2,
their rating for our senior unsecured debt to B3 from Caa3, and their rating for
our preferred stock to Caa2 from Ca. On February 11, 2005, Standard & Poor's
Rating Services affirmed Interpool's ratings, removed us from CreditWatch, and
increased their outlook for the Company from "negative" to "stable."

Amendment to Separation Agreement

In January 2005, in response to a recent change in United States tax laws
potentially affecting future payments to be made to the Company's former
President and Chief Operating Officer under his separation agreement, the
Company and the Company's former President and Chief Operating Officer entered
into a modification to his separation agreement pursuant to which, in lieu of
the remaining monthly payments through October 2005 and other amounts to which
the Company's former President and Chief Operating Officer would have been
entitled under his original separation agreement, the Company paid him a lump
sum of $467. To secure the performance of his future obligations to the Company
under the separation agreement, the Company's former President and Chief
Operating Officer pledged a total of 22,114 shares of the Company's common stock
(having a market value at that time of approximately $520). Such pledged shares
will be released to the Company's former President and Chief Operating Officer
in installments through October 2005, subject to his continued compliance with
his obligations under the modified separation agreement.

Mortgage Refinancing

During February 2005, the Company re-financed the mortgage on its offices on the
27th floor at 633 Third Avenue, New York, NY. The proceeds of the new mortgage
were $3,550, and were used to repay the previous mortgage ($3,480) plus related
fees and expenses. The interest rate on the new mortgage is fixed at 5.75%.
Amortization is based on a 30 year term, and the mortgage matures in five years
with one five year extension available at the Company's option. Such extension
would be at an interest rate of 2.50% above the Federal Home Loan Bank borrowing
rate for member banks at that time, but not less than the current rate, and
would require payment of a 1.0% fee.

Notes Receivable

In 1997, the Company acquired a 37% equity interest in a company that supplies
clinical trial materials management to the pharmaceutical industry. This
investment has been accounted for under the equity method of accounting. At
December 31, 2004, the carrying value of the Company's investment of $1,814 is
included in other assets on the accompanying Consolidated Balance Sheets.

During 1999 and 2001, the Company lent a total of $1,946 to this equity investee
at an interest rate of 12%. The investee requested and received multiple
extensions for the repayment of these notes. As a result, the Company treated
these notes as non-performing and stopped recording interest income.

On February 2, 2005 the Company received a payment of $3,497 from the investee
representing payment in full of the notes receivable and all accrued interest
amounting to $1,551. This interest will be recognized in earnings during the
three months ended March 31, 2005.

(18)     Quarterly financial data (unaudited)

| | A. | Restatement of previously reported quarterly results related
to hedging transaction
| | -- | -----------------------------------------------------------------------------------

In April 2003, the Company had re-designated certain swap agreements to a number
of its debt instruments. The documentation of these hedging relationships did
not meet the criteria of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities ("SFAS 133") to achieve hedge accounting treatment. Thus,
because the hedge documentation requirement of SFAS 133 was not met, beginning
in April 2003 when the hedge documentation was changed, hedge accounting is
precluded on the five then existing interest rate swaps. In addition, two
additional swap agreements were entered into by the Company after April 2003.
The documentation of these swap agreements was the same.

Because the Company no longer qualifies for hedge accounting on these swap
agreements, the amounts previously recorded in accumulated other comprehensive
loss through March 31, 2003 (amounting to $3,037) have been amortized over the
remaining life of the associated debt (using the effective interest method) and
the change in the value of the derivatives from March 31, 2003 have been
recorded as a fair value adjustment for derivative instruments in the
accompanying Consolidated Financial Statements. These debt instruments were
fully repaid by the Company in December 2004 at which time the remaining amount
in accumulated other comprehensive loss was recorded as fair value adjustment
for derivative instruments in the accompanying Consolidated Statement of Income.
In addition, the swap agreements have been treated as speculative hedges for the
period from April 1, 2003 until December 31, 2004. As a result, the quarterly
changes to the market value of these swap agreements have been recorded as fair
value adjustment for derivative instruments in the Consolidated Financial
Statements. See Note 1(B) for further discussion of the accounting for these
derivatives for the period from April 1, 2003 to December 31, 2003.

The Company had previously determined that the effect of this error for the
period from April 1, 2003 to December 31, 2003 was immaterial to the 2003
consolidated financial statements and, therefore, recorded an entry to correct
this error during the fourth quarter of 2004. This adjustment has been properly
reflected in the 2003 and 2004 quarterly data included below and in the
Consolidated Financial Statements included in this Form 10-K/A Amendment No. 2.

| | B. | Restatement of previously reported quarterly results related
to the modification of a stock option award granted to the former
President
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------

During the third quarter of 2005, the Company determined that it had not
recorded the full amount of compensation expense required by U.S. generally
accepted accounting principles ("GAAP") with respect to a separation agreement
with Mr. Raoul Witteveen, its former President, which was entered into in
connection with Mr. Witteveen's resignation in October 2003. When originally
preparing the consolidated financial statements for the year ended December 31,
2003, the Company recorded compensation expense related to the cash separation
payments it agreed to make to Mr. Witteveen. However, the separation agreement
between the Company and Mr. Witteveen also contained a provision under which Mr.
Witteveen's fully vested stock options, which had a five year remaining term at
the time of his resignation, would instead expire two years after his
resignation and therefore would not be subject to a provision of the 1993 Stock
Option Plan under which vested options terminate if not exercised within ten
business days after termination of employment. In the 2003 Consolidated
Financial Statements, the Company should have re-measured the intrinsic value of
the options (the difference between the market price of the underlying common
stock and the exercise price of the options) at the date of modification and
recorded the intrinsic value of the options at the modification date as
additional compensation expense (non-cash) in the fourth quarter of 2003. As a
result, the Company should have recorded additional compensation expense and
additional paid-in capital of $7,091 for the year ended December 31, 2003
resulting from the option modification. In addition, the Company should have
recorded a deferred tax asset of $2,837 for the tax benefit to be derived in the
future related to the additional compensation expense. This adjustment would
have resulted in an increase in stockholders' equity of $2,837 and a reduction
to net income for the year ended December 31, 2003 of approximately $4,254.

The Consolidated Financial Statements included in this Form
10-K/A Amendment No. 2 and the quarterly tables below include the effect of the
adjustments required to correct this error.

`2004
                                                                   As Restated
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd             4th(b)
                                             ---               ---              ---             ------
Equipment leasing revenue                 $94,937            $95,712          $98,353            $99,181
Net income/(loss)                         $10,207            $21,205          $15,036           $(38,579)
Basic income/(loss)  per share              $0.37              $0.77            $0.55             $(1.41)
Diluted income/(loss) per share             $0.35              $0.71            $0.50             $(1.41)


                                                                       2004
                                                                   As Reported
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd             4th(b)
                                             ---               ---              ---             ------
Equipment leasing revenue                 $94,937            $95,712          $98,353         $99,181
Net income                                $10,207            $21,205          $15,036        $(38,019)
Basic income per share                      $0.37              $0.77            $0.55          $(1.39)
Diluted income per share                    $0.35              $0.71            $0.50          $(1.39)

                                                                       2003
                                                                   As Restated
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd              4th
                                             ---               ---              ---             ------
Equipment leasing revenue                 $89,868            $91,549          $95,119          $97,751
Net income                                $11,769            $11,778           $6,700           $7,249
Basic income per share                      $0.43              $0.43            $0.24            $0.26
Diluted income per share                    $0.41              $0.40            $0.23            $0.25

                                                                       2003
                                                                   As Reported
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd              4th
                                             ---               ---              ---             ------
Equipment leasing revenue                 $89,868            $91,549          $95,119           $97,751
Net income                                $11,769            $12,336           $6,546           $10,539
Basic income per share                      $0.43              $0.45            $0.24             $0.38
Diluted income per share                    $0.41              $0.42            $0.23             $0.36

                                                                       2002
                                                                   As Reported
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd             4th(a)
                                             ---               ---              ---             ------
Equipment leasing revenue                  $74,483          $75,598          $86,028             $88,971
Net income/(loss)                           $6,190           $4,265           $3,032            $(9,098)
Basic income/(loss) per share                $0.23            $0.16            $0.11             $(0.33)
Diluted income/(loss) per share              $0.21            $0.14            $0.10             $(0.32)`

|(a) | The net (loss) during the fourth quarter of 2002 was principally due to pre-tax
impairment losses of $5,715 relating to idle equipment, $3,417 of pre-tax losses
resulting from the Company's share of equity losses and write-downs for certain
investments accounted for under the equity method and $9,678 of pre-tax losses
recognized as a result of the deteriorating financial condition of PCR.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | The net (loss) during the fourth quarter of 2004 was primarily due to a non-cash
expense of $49,222 resulting from the change in fair value of warrants issued by
us in connection with a Securities Purchase Agreement pursuant to which the
Company sold $150,000 of 6.0% notes due in 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| | (a) | Exhibits
| | --- | --------

| | 31.1
31.2
32.1
32.2 | 


 | Certification of Martin Tuchman.
Certification of James F. Walsh.
Certification of Martin Tuchman.
Certification of James F. Walsh.
| | ------------------- | ------- | -----------------------------------------------------------------------------------------------------------------------------------

| | (b) | Financial Statement Schedules
| | --- | -----------------------------

| |  | Report of Independent Registered Public
Accounting Firm on Supplementary
Information.
| | - | -------------------------------------------------------------------------------------

Report of Independent Registered Public Accounting
Firm on Supplementary Information

The Board of Directors
Interpool, Inc.:

We have audited and
reported separately herein on the consolidated balance sheets of Interpool, Inc.
and subsidiaries as of December 31, 2004 and 2003 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the three year period ended December 31, 2004. In connection with
our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement Schedule II included in
this Annual Report on Form 10-K/A. This consolidated financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this consolidated financial statement schedule based on
our audits.

In our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

As discussed in Note 1 to
the consolidated financial statements, in 2002 the Company changed its method of
accounting for (i) goodwill and (ii) the impairment or disposal of long-lived
assets.

As discussed in Note 1(B)
to the consolidated financial statements, the Company has restated its
consolidated balance sheets as of December 31, 2004 and 2003, and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the years in the two year period ended December 31, 2004.

(Signed) KPMG LLP
Short Hills, N.J.
March 28, 2005, except for Note 1(B) which is as of November 8, 2005

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.

| | INTERPOOL, INC.
(Registrant)
| | ----------------------------

|November 8, 2005 | By /s/ Martin
Tuchman
Martin Tuchman
Chairman of the Board, Chief Executive Officer,
President, Chief Operating Officer, and Director
(Principal Executive Officer)
|---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|November 8, 2005 | By /s/ Martin
Tuchman
Martin Tuchman
Chairman of the Board of Directors, Chief
Executive Officer, President, Chief Operating
Officer and Director
|---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------

|November 8, 2005 | By /s/ Warren L. Serenbetz, Jr.
Warren L. Serenbetz, Jr.
Director
|---------------- | -----------------------------------------------------------------

|November 8, 2005 | By /s/ Arthur L. Burns
Arthur L. Burns
Executive Vice President, General Counsel
and Director
|---------------- | ---------------------------------------------------------------------------------------------

|November 8, 2005 | By /s/ Peter D. Halstead
Peter D. Halstead
Director
|---------------- | ---------------------------------------------------

|November 8, 2005 | By /s/ Joseph J. Whalen
Joseph J. Whalen
Director
|---------------- | -------------------------------------------------

|November 8, 2005 | By /s/ Clifton H. W. Maloney
Clifton H. W. Maloney
Director
|---------------- | -----------------------------------------------------------

|November 8, 2005 | By /s/ James F. Walsh
James F. Walsh
Executive Vice President and Chief Financial
Officer
|---------------- | -----------------------------------------------------------------------------------------

|November 8, 2005 | By /s/ Brian Tracey
Brian Tracey
Senior Vice President (Chief Accounting Officer)
|---------------- | ---------------------------------------------------------------------------------

|November 8, 2005 | By /s/ Michael S. Mathews
Michael S. Mathews
Director
|---------------- | -----------------------------------------------------

|November 8, 2005 | By /s/ William J. Shea, Jr.
William J. Shea, Jr.
Director
|---------------- | ---------------------------------------------------------

INDEX TO EXHIBITS

Filed with Interpool, Inc. Report on Form 10-K/A

| | 31.1
31.2
32.1
32.2 | 


 | Certification of Martin Tuchman.
Certification of James F. Walsh.
Certification of Martin Tuchman.
Certification of James F. Walsh.
| | ------------------- | ------- | -----------------------------------------------------------------------------------------------------------------------------------