• Equipment trading - we purchase containers from shipping line customers, and other sellers of containers, and resell these containers to container traders and users of containers for storage or one-way shipment.

Operations
Our operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis. As of June 30, 2009, our total fleet consisted of 726,736 containers and chassis, including 32,493 containers under management for third parties, representing 1,178,826 twenty-foot equivalent units (TEUs). We have an extensive global presence, offering leasing services through 19 offices in 11 countries and 198 third party container depot facilities in 37 countries as of June 30, 2009. Our customers are among the largest shipping lines in the world. For the six months ended June 30, 2009, our twenty largest customers accounted for 77% of our leasing revenues, our five largest customers accounted for 52% of our leasing revenues, and our largest customer accounted for 17% of our leasing revenues. We primarily lease three principal types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples, electronics and apparel, (2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, and
(3) special containers, which are used for heavy and oversized cargo such as marble slabs, building products and machinery. We also lease chassis, which are generally used for the transportation of containers domestically, and tank containers, which are used to transport bulk liquid products such as chemicals. We also finance port equipment, which includes container cranes, reach stackers and other related equipment. Our in-house equipment sales group manages the sale process for our used containers and chassis from our equipment leasing fleet and buys and sells used and new containers and chassis acquired from third parties. The following tables provide the composition of our equipment fleet as of the dates indicated below (in both units and TEUs):

                                                                                   Equipment Fleet in Units
                                          June 30, 2009                                December 31, 2008                                June 30, 2008
                              Owned          Managed         Total           Owned          Managed         Total           Owned          Managed         Total
Dry                          588,718         29,212         617,930         610,759         30,079         640,838         567,884         24,834         592,718
Refrigerated                  37,526            525          38,051          37,119            621          37,740          37,804            722          38,526
Special                       46,757          2,756          49,513          48,054          2,839          50,893          45,345          2,864          48,209
Tank                           1,350              -           1,350           1,319              -           1,319             799              -             799
Chassis                        8,787              -           8,787           8,796              -           8,796           8,852              -           8,852

Equipment leasing fleet      683,138         32,493         715,631         706,047         33,539         739,586         660,684         28,420         689,104
Equipment trading fleet       11,105              -          11,105          16,735              -          16,735          22,115              -          22,115

Total                        694,243         32,493         726,736         722,782         33,539         756,321         682,799         28,420         711,219

Percentage                      95.5 %          4.5 %         100.0 %          95.6 %          4.4 %         100.0 %          96.0 %          4.0 %         100.0 %




                                                                                                        Equipment Fleet in TEUs
                                                 June 30, 2009                                             December 31, 2008                                             June 30, 2008
                                 Owned              Managed             Total                Owned              Managed             Total                Owned              Managed             Total
Dry                              936,082            52,298              988,380              968,772            53,692            1,022,464              917,347            43,527              960,874
Refrigerated                      69,158               863               70,021               68,270             1,022               69,292               69,293             1,188               70,481
Special                           80,113             4,485               84,598               82,322             4,624               86,946               76,297             4,655               80,952
Tank                               1,400                 -                1,400                1,369                 -                1,369                  799                 -                  799
Chassis                           15,628                 -               15,628               15,645                 -               15,645               15,718                 -               15,718

Equipment leasing fleet        1,102,381            57,646            1,160,027            1,136,378            59,338            1,195,716            1,079,454            49,370            1,128,824
Equipment trading fleet           18,799                 -               18,799               28,736                 -               28,736               36,564                 -               36,564

Total                          1,121,180            57,646            1,178,826            1,165,114            59,338            1,224,452            1,116,018            49,370            1,165,388

Percentage                          95.1 %             4.9 %              100.0 %               95.2 %             4.8 %              100.0 %               95.8 %             4.2 %              100.0 %

We generally lease our equipment on a per diem basis to our customers under three types of leases: long-term leases, finance leases and service leases. Long-term leases, typically with initial contractual terms of three to eight years, provide us with stable cash flow and low transaction costs by requiring customers to maintain specific units on-hire for the duration of the lease. Finance leases, which are typically structured as full payout leases, provide for a predictable recurring revenue stream with the lowest daily cost to the customer because customers are generally required to retain the equipment for the duration of its useful life. Service leases command a premium per diem rate in exchange for providing customers with a greater level of operational flexibility by allowing the pick-up and drop-off of units during the lease term. We also have expired long-term leases whose fixed terms have ended but for which the related units remain on-hire and for which we continue to receive rental payments pursuant to the terms of the initial contract. Some leases have contractual terms that have features reflective of both long-term and service leases. We classify such leases as either long-term or service leases, depending upon which features we believe are more predominant.
As of June 30, 2009, approximately 84.0% of our containers and chassis were on-hire to customers, down from 90.0% at December 31, 2008 and 91.7% at June 30, 2008.
The following table provides a summary of our lease portfolio, based on the number of units in our total fleet as of the dates indicated below:

                                                June 30,     December 31,     June 30,
    Lease Portfolio                               2009           2008           2008
    Long-term leases                               55.8 %           54.3 %       48.7 %
    Finance leases                                  9.7              8.9         10.2
    Service leases                                 11.0             18.3         21.6
    Expired long-term leases (units on hire)        7.5              8.5         11.2

    Total leased                                   84.0             90.0         91.7
    Used units available for lease                  8.6              4.3          2.1
    New units not yet leased                        2.2              2.5          3.9
    Available for sale                              5.2              3.2          2.3

    Total fleet                                   100.0 %          100.0 %      100.0 %

In March 2009, we reached agreement with one of our largest customers that limited the total number of containers that could be returned from expired leases through February 28, 2010. We have included the maximum number of containers that can be returned during the previously described limitation period as expired term leases, while the balance of the affected units are included in current term leases. As of June 30, 2009, our long-term leases had an average remaining contract term of approximately 47 months, assuming no leases are renewed. The increase in average remaining contract term in the second quarter was primarily due to the effect of lease extension transactions completed in the second quarter.
Operating Performance
Our profitability is primarily determined by the extent to which our leasing and other revenues exceed our ownership, operating and administrative expenses. Our profitability is also impacted by the gain or loss that we realize on the sale of our used equipment and the net sales margins on our equipment trading activities.
Our leasing revenue is primarily driven by our owned fleet size, utilization and average rental rates. Our leasing revenue is also impacted by the mix of leases in our portfolio.
As of June 30, 2009, our owned fleet included 1,121,180 TEUs, a decrease of 3.8% from December 31, 2008 and an increase of 0.5 % from June 30, 2008. The decrease in fleet size in 2009 relative to the end of 2008 was mainly due to the small amount of new containers purchased in the first two quarters of 2009 combined with our normal disposal of used containers. Global containerized trade volumes have been exceptionally weak since the fourth quarter of 2008, and our shipping line customers have been decreasing the number of containers in their fleets. As a result, we have experienced weak leasing demand and we have significantly reduced our investment in new equipment.
The increase in fleet size in 2009 relative to the second quarter of 2008 was mainly due to the delivery of a large number of containers during the second half of 2008, as well as the purchase lease-back of approximately 53,000 TEUs of containers with one of our largest customers in the fourth quarter of 2008. Leasing demand was strong in the first three quarters of 2008 due to ongoing trade growth (through October 2008) and reduced direct purchases of new containers by our shipping line customers.
As of June 30, 2009, our revenue earning assets (leasing equipment, net investment in finance leases, and equipment held for sale) totaled approximately $1.7 billion, a decrease of $66 million, or 3.7% from December 31, 2008, but an increase of $44 million, or 2.6% over June 30, 2008. Our revenue earning assets decreased in the first half of 2009 due to our limited purchases of new containers during the first and second quarters.
In the second quarter of 2009, we sold approximately 20,000 TEUs of our owned containers, or 1.8% of our owned equipment leasing fleet as of the beginning of the quarter. This annualized disposal rate of approximately 7.2% is similar to the 6 to 8% annual disposal rate we have been experiencing for the last few years, and is

generally consistent with our expected long-term average disposal rate given the 12 - 14 year expected useful life of our containers. However, the rate of our disposals in 2009 has not kept pace with the rate at which older units are being returned off lease and being designated as available for sale. As a result, the portion of our fleet designated as available for sale has increased from 3.2% as of December 31, 2008 to 5.2% as of June 30, 2009. Based on our increased inventory of containers available for sale, the age profile of our leasing fleet, scheduled lease expirations and the prospects for continued weak leasing demand due to reduced trade growth, we expect that our rate of disposals will increase and remain at an above-average level for several years before decreasing significantly for several years thereafter. During years of above-average disposals, our TEU growth rate and leasing revenue may be constrained if we are unable to generate a sufficient number of attractive lease transactions for an expanded level of new container investment.
The following table sets forth our average equipment fleet utilization for the periods indicated below:

                          June 30,      March 31,     December 31,     September 30,     June 30,
                            2009          2009            2008             2008            2008
                          3 months      3 months        3 months         3 months        3 months
Average Utilization(1)        85.1 %        88.1 %          91.6 %             92.0 %        90.7 %

(1) Utilization is computed by dividing our total units on lease by the total units in our fleet (which includes leased units, new and used units available for lease and units available for sale).

The following tables set forth our ending fleet utilization for the dates indicated below:

                        June 30,      March 31,     December 31,     September 30,     June 30,
                          2009          2009            2008             2008            2008
  Ending Utilization        84.0 %        86.5 %          90.0 %             92.7 %        91.7 %



                                        June 30,         March 31,         December 31,        September 30,          June 30,
                                          2009              2009               2008                 2008                2008
Ending Utilization (excluding
new units not yet leased)                  85.9 %            88.5 %              92.4 %                95.8 %            95.4 %

Our average utilization was 85.1% in the second quarter of 2009, a decrease of 5.6% from the second quarter of 2008, and a decrease of 3.0% from the first quarter of 2009. Ending utilization decreased 2.5% from 86.5% as of March 31, 2009 to 84.0% as of June 30, 2009, while ending utilization excluding new units not yet leased decreased 2.6% in the second quarter of 2009 to 85.9%. The decrease in our utilization in the second quarter of 2009 was mainly the result of ongoing exceptional weakness in global trade. Since the fourth quarter of 2008, global containerized trade volumes have been running 15% or more below the previous year's level, which has resulted in excess container capacity and exceptionally low leasing demand, especially for dry containers. We expect dry container drop-offs to remain high and dry container pick-ups low, and expect utilization to decrease as long as containerized trade volumes remain well below the 2008 level.
Leasing demand for our refrigerated containers remained relatively healthy in the second quarter of 2009. The utilization of our refrigerated containers does not heavily influence our overall utilization since they represent only approximately 5.2% of the units in our fleet. However, these container types are significantly more expensive than dry containers, generate higher per diem lease rates and currently represent approximately 24% of our leasing revenue. While we expect that demand for refrigerated containers will be negatively impacted by the global recession in 2009, the impact so far has not been as severe as it has been for dry containers.

Leasing demand for special containers weakened in the second quarter of 2009. Leasing demand for our chassis product line remained weak during the second quarter of 2009 due to ongoing weakness in U.S. containerized imports and an oversupply of chassis in the marketplace.
Average lease rates for our dry container product line in the second quarter of 2009 were 4.5% lower compared to the average level of the second quarter of 2008 and 3.8% lower than the first quarter of 2009. The decrease in average lease rates in the second quarter of 2009 primarily reflects the more rapid return of our higher per diem short term leases as well as lease rate concessions provided to certain customers for extending leases and reducing drop-off volumes. Average lease rates for refrigerated containers in the second quarter of 2009 were 4.7% lower compared to the second quarter of 2008, and 3.0% lower than the first quarter of 2009, while average rental rates for our special containers were 2.1% lower during the second quarter of 2009 compared to the second quarter of 2008, and 1.7% lower compared to the first quarter of 2009. Market leasing rates for new refrigerated containers are still below our portfolio average rates, so we generally expect our average rates for refrigerated containers to continue to trend down. In addition, our refrigerated container leasing rates in the second quarter of 2009 were impacted by rate concessions provided to certain customers for lease extension transactions. The decrease in average leasing rates for special containers was primarily due to discounts associated with lease extension transactions and weaker demand.
During the second quarter of 2009, we recognized a $2.4 million gain on the sale of our used containers compared to a $6.2 million gain in the second quarter of 2008. The decrease compared to the second quarter of 2008 mainly resulted from a decrease in selling prices. Looking forward, we expect our results from used container disposals in 2009 to increasingly lag the results we achieved in 2008. During 2008, our gains on disposals trended up throughout the year as leasing demand and new container prices provided strong support for disposal prices in the second and third quarters of the year. This year, it seems likely that our used container sale prices and disposal gains will be increasingly pressured by the build-up of idle used container inventories until trade volumes improve. During the second quarter of 2009, we recognized a net equipment trading margin of $0.2 million on the sale of equipment purchased for resale, compared to a $3.8 million margin in the second quarter of 2008. In 2009, we expect that our trading volume will be considerably lower than in 2008 due to the weaker disposal environment and our intention to focus our efforts on the sale of our owned equipment. In addition, our per unit trading margin has been pressured by decreasing used container selling prices in 2009. Approximately 50% of the units in our equipment trading fleet were acquired in 2008 in purchase / leaseback transactions, and these units were generally purchased at prices that are high compared to the current market level. As these units are returned by our customers and sold by us at current market prices, we are realizing a reduced selling margin.
Our ownership expenses, principally depreciation and interest expense increased by $3.3 million, or 7.7% in the second quarter of 2009 from the second quarter of 2008. The percentage increase in ownership expense was higher than the 2.6% increase in the net book value of our revenue earning assets. Depreciation expense increased 7.3% in the second quarter of 2009 compared to the second quarter of 2008, while interest expense increased 8.3% in the second quarter of 2009 compared to the second quarter of 2008. Interest expense and related average debt balances increased more rapidly than our revenue earning assets in the second quarter of 2009 primarily due to the way our containers are purchased. Because new containers are typically accepted into our fleet before payment is made to the manufacturer, our debt balances and related interest expense will lag fleet growth. This difference can be material in periods of rapid growth such as the second quarter 2008 when $80.7 million of the second quarter's 2008 container purchases were funded by Equipment purchases payable at the end of the quarter. At June 30, 2009 only $2.4 million of container purchases were funded by Equipment purchases payable.

Our provision for doubtful accounts was $0.1 million for the quarter ended June 30, 2009, down from $0.2 million in the quarter ended June 30, 2008, and down from $2.4 million in the fourth quarter of 2008. During the third and fourth quarters of 2008, we recorded sizable credit provisions primarily due to the default on a finance lease by one of our customers, and we recorded additional provisions to increase the loss reserves for the remaining leases in the finance lease portfolio.
We remain concerned that we may see an increase in the number and size of customer defaults in 2009 due to the deteriorating financial performance of our shipping line customers combined with the constrained capital markets that could make it difficult for our customers to finance the operating losses they are incurring as well as their vessel orders and other expansion commitments. Many of our customers were in the middle of major expansion programs when trade volumes began to decrease at the end of 2008, and vessel capacity is expected to grow ten percent or more annually for the next several years despite the recent sharp reduction in trade volumes. This combination of reduced trade volumes and increasing vessel capacity has led to a substantial decrease in freight rates on the major trade lanes. Many shipping lines have reported large first quarter losses, and while our collections performance in 2009 has so far been generally strong, a number of customers, including major shipping lines, have missed contractual payment dates.
If one of our major customers defaulted on our leases and ceased operations because of deterioration in its financial performance, we would face reduced revenue and we would likely incur significant write-offs due to lost units and recovery expenses. We do not maintain an equipment reserve for units on lease to performing customers, so a major customer default would have a significant impact on our financial statements at the time the major customer defaulted. Our direct operating expenses increased to $9.6 million in the second quarter of 2009, compared to $7.3 million in the second quarter of 2008. We typically experience an increase in our direct operating expenses during periods of weak leasing demand. During the second quarter of 2009, we incurred increased repair expenses due to the increase in the volume of containers dropped off by our customers, and we incurred increased storage costs due to the increase in the number of idle used containers. We expect our direct operating expenses to continue to increase as long as trade volumes and leasing demand remain extremely weak.
In April 2009, we repurchased approximately $35.0 million of our Series 2006-1 Term Notes and recorded a gain on debt extinguishment of approximately $14.1 million, net of the write-off of deferred financing costs of approximately $0.2 million.
Treasury Stock
The Company repurchased the following amounts of its outstanding common stock in the open market during the six months ended June 30, 2009 and June 30, 2008:

                                               Shares        $ in Millions
             Quarter ended March 31, 2009     1,021,918       $       8.2
             Quarter ended June 30, 2009        355,915               3.1

             Total                            1,377,833       $      11.3


             Quarter ended March 31 2008        362,100       $       8.0
             Quarter ended June 30, 2008              -                 -

             Total                              362,100       $       8.0

Dividends
The company paid the following quarterly dividends during the six months ended
June 30, 2009 and 2008 on its issued and outstanding common stock:

       Record Date        Payment Date      Aggregate Payment      Per Share Payment
       June 2, 2009      June 23, 2009         $0.3 million         $ 0.01
       March 12, 2009    March 26, 2009        $0.3 million         $ 0.01
       May 22, 2008      June 12, 2008        $13.4 million         $ 0.4125
       March 20, 2008    April 10, 2008       $12.2 million         $ 0.375

Results of Operations
The following table summarizes our results of operations for the three months
and six months ended June 30, 2009 and 2008 in thousands of dollars and as a
percentage of total revenues:

                                  Three Months Ended June 30,                                Six Months Ended June 30,
                               2009                         2008                         2009                         2008
                       Dollars       Percent        Dollars       Percent        Dollars       Percent        Dollars       Percent
Leasing revenues      $  79,350          88.1 %    $  77,894          75.5 %    $ 162,452          85.4 %    $ 155,282          76.0 %
Equipment trading
revenue                   9,747          10.8         24,050          23.3         25,835          13.6         46,704          22.9
. . .