SecProbe.io

CORRESP
1
filename1.htm

Correspondence

VIA FAX

March 7, 2005

Ms. Pamela A. Long

Assistant Director

Division of Corporation Finance

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C.  20549

Re:
Interpool, Inc.

Schedule 14A filed January 26, 2005

Form 10-Q for the period ended September 30, 2004

Form 10-K for the year ended December 31, 2003

     File No. 001-11862

Dear Ms. Long:

          We
have received the staff's comment letter dated February 24, 2005 regarding
Interpool, Inc.‘s Schedule 14A, filed January 26, 2005 (the "Proxy
Statement"), Form 10-Q for the period ended September 30, 2004 (the "September
2004 Form 10-Q") and Form 10-K for the year ended December 31, 2003 (the "2003
Form 10-K").

          We
are preparing a revised version of the Proxy Statement which reflects our
responses to the staff's comments on the Proxy Statement. We will file this
revised Proxy Statement as soon as it is available. At that time, to facilitate
the staff's review, we will also submit a letter which describes the various
changes we are making to the Proxy Statement, and to our other filings with the
Commission, in response to each of the comments in the staff's February 24, 2005
letter.

          With
respect to the staff's comments relating to our September 2004 Form 10-Q and
2003 Form 10-K, we are incorporating our responses to these comments in our Form
10-K for the year ended December 31, 2004 (the "2004 Form 10-K"), which we are
currently preparing. Once our 2004 Form 10-K is filed, we will, to the extent
the staff deems it necessary, amend the September 2004 Form 10-Q and the 2003
Form 10-K to make conforming changes.

          In
connection with our review of the staff's comments, we noted comment 23, in
which you requested supplemental support for our accounting treatment for
damaged equipment at the end of an operating lease. The text of this specific
comment reads as follows:

23.
You have indicated that when accounting for damaged equipment at the end of an
operating lease, amounts billed to customers "are not recorded in revenue when
invoiced; rather, they are used to establish a liability to cover the repair of
the equipment." Please supplementally tell us how you support this accounting
treatment (i.e., accounting literature) versus recording the revenue and then
separately recording an expense and the related liability for the cost of the
repairs.

          In
response to this comment, after consultation with our independent auditors, KPMG
LLP, we have prepared a memorandum which we believe justifies our accounting
treatment for damaged equipment and provides support in the relevant accounting
literature. This memorandum is attached as Annex A to this letter.

          As
we are currently working to finalize our financial statements and 2004 Form
10-K, we would very much appreciate hearing from the staff as quickly as
possible whether, based on the attached memorandum, the staff has any further
questions or comments regarding our accounting treatment for damaged equipment.
Toward that end, we would respectfully ask, if possible, that the staff respond
to our memorandum by the close of business on Wednesday, March 9, 2005.

          In
connection with our response to the staff's comments, we acknowledge that (i) we
are responsible for the adequacy and accuracy of the disclosure in our filings;
(ii) staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to the filing;
and (iii) we may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws of
the United States.

          Once
you have had an opportunity to review this response, please contact the
undersigned at (609) 452-8900 or our counsel, Jeffrey Lowenthal, Esq. of Stroock
& Stroock & Lavan LLP at (212) 806-5509.

Thank you very much for your prompt attention to this matter.

Very truly yours,

/s/ James F. Walsh

James F. Walsh

Executive Vice President and

Chief Financial Officer

ANNEX A

March 7, 2005

MEMORANDUM FROM INTERPOOL, INC.

Accounting for
Damaged Equipment At the End of An Operating Lease

          Background

Interpool, Inc. leases transportation equipment (both shipping containers and
chassis) to shipping companies throughout the world and to railroads within the
United States. We offer our customers both operating leases and direct financing
leases to satisfy customer preference and demand. In most cases, a direct
financing lease provides the customer the opportunity to acquire ownership of
the equipment through the exercise of a bargain purchase option. Our operating
leases are generally long term in nature (generally for a minimum term of five
years) and we have a high rate of renewal by the same customer at the end of the
initial lease term. Under the terms of our operating lease agreements, the
customer has sole use of the equipment during the lease term and, in return, is
responsible for the payment of rental charges and for the maintenance of the
equipment. Prior to the return of the equipment, the lessee can have the
equipment repaired at its expense or it can return the equipment in a damaged
condition.

          At
the end of an operating lease, the lessee returns the equipment to a third party
depot that we have engaged for the storage and repair of all of our idle
equipment in that location. Upon receipt of the terminated equipment, the third
party depot is responsible for determining the repairs that need to be made to
the equipment, if any, and the related cost. Utilizing industry guidelines, the
depot determines the portion of the repairs for which the former lessee is
responsible and those that are the responsibility of the owner of the equipment.
In general, the lessee is responsible for any damage caused by the lessee's use
(for example, holes in the exterior of a container or bent frames on a chassis)
while the owner is generally responsible for costs of normal wear and tear (for
example, tire and brake wear on chassis).

          To
the extent that the former lessee is responsible for damage to the equipment,
the lessee is provided an estimate of the cost to repair the equipment. The
lessee has the right to inspect the equipment and can deny responsibility or
seek to negotiate reductions to the cost estimate, if appropriate. The lessee
also has the option of moving the equipment to another repair facility of its
choice to have the equipment repaired as long as the equipment is subsequently
moved back to our depot at the lessee's expense. If the work is to be performed
by our depot, we act as an agent for our lessee in getting the repair work
completed. Once the parties have agreed to the amount for which the lessee is
responsible, an invoice is created and issued to the customer by the Company.
While this amount is due from the customer under the terms of the lease, unless
the lessee makes its own arrangements to repair the equipment, the determination
as to whether or not the repair will actually be performed is at the discretion
of the Company. This decision is generally based on the condition and age of the
equipment, potential sale value of the equipment and the equipment's future
marketability. The majority of equipment is repaired and returned to service
Once the Company makes a decision to repair the equipment, we authorize the
repairs to be performed by the depot.

Since the billing to the former lessee has already taken place when the
equipment is repaired, the Company is responsible for the payment to the depot
when the repairs are performed and completed. This payment covers the total
repair cost for the equipment, including the cost borne by the former lessee
(which has been invoiced by the Company to the customer) and that portion for
the account of the Company (normal wear items). The Company is at risk for the
collection from the customer of the amounts invoiced. These maintenance services
are not designed to be a revenue earning activity of the Company. Rather, the
Company provides this service to its customers in order to facilitate their
return of the equipment while holding the customer accountable for the damage to
the equipment which the customer caused. As noted above, the customer has the
option to have the equipment repaired prior to the redelivery of the equipment
to our depot. By arranging with depots to perform this repair activity for many
containers and chassis, the Company is able to obtain preferred pricing for the
repair of the equipment and can also insist on quality repair standards in order
to make certain that its equipment is maintained in the best possible condition
for re-lease.

Current Accounting Treatment

When a customer is billed for damage they caused to our equipment, the amounts
are recorded as a receivable from the customer and a liability to the depot in
an equal amount. If the equipment is repaired, the depot bills the Company for
the entire amount of the repair. At that point, assuming a portion of the repair
is the responsibility of the Company, the Company records the expense for its
portion of the repair and pays the vendor for the entire amount of the repair,
including the portion for which the customer is responsible. If the Company
elects to sell or otherwise dispose of the equipment in lieu of repairing the
equipment, the liability to the depot related to the customer damage is reversed
and is recorded as a reduction to lease operating expenses (net).

Support for Accounting Treatment

There is a vast amount of accounting literature that addresses the issue of
revenue recognition and whether income should be recorded by a company on a
gross basis as a principal or on a net basis as an agent. Among these are
Concepts Statement No. 5, SAB 101 and EITF 99-19. We believe that the accounting
method used by the Company related to the invoicing of customers for repair
activities is correct and represents the most transparent disclosure to readers
of our financial statements for the following reasons:

1.
Concepts Statement No 5. paragraph 83(b) states that an entity's revenue-earning
activities involve delivering or producing goods, rendering services, or other
activities that constitute its ongoing major or central operations, and revenues
are considered to be earned when the entity has substantially accomplished what
it must do to be entitled to the benefits represented by the revenues. The
process of billing customers for damage they caused to our equipment, which the
lessee could have repaired prior to the return of the equipment, is a by-product
of our main activity, which is the leasing of transportation equipment. The
Company merely acts as an agent between the party that is responsible for the
repair and the third party depot that has been asked to repair the equipment.
The Company does not operate any repair facilities and, as a result, is not able
to provide repair services on its own. In addition, it is not the Company's
intent to provide these services on a profitable basis. Given this, the repair
activities do not constitute "ongoing major or central operations" of the
Company and should not be considered as revenue-earning activities.

2.
EITF 99-19 and SAB 101 provide certain criteria for determining if revenue
should be recorded on a gross or net basis. Since we do not believe that these
activities meet the definition of revenue earning activities as described in -1-
above, we do not feel that the criteria in this literature are relevant.

3.
The billings to our customers for damage amount to approximately $8 million per
year or approximately 2% of reported revenues on a gross basis, and on a net
basis, would be less than 1% of reported revenue.

Given the reasons described above, we believe the accounting treatment for these
transactions is in accordance with GAAP and the SEC's guidance.

          We
would be happy to discuss this accounting treatment should any additional
clarification be required.