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EXHIBIT INDEX ON PAGE 21

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

OR

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

For the transition period from_________________________ to___________________________

Commission File Number 001-14525

VORNADO OPERATING COMPANY

(212) 894-7000

N/A

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.

[X] Yes [  ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[  ] Yes [X] No

As of August 6, 2003, there were 4,068,924 shares of the registrant’s common stock, par value $.01 per share, outstanding.

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INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VORNADO OPERATING COMPANY
CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

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VORNADO OPERATING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See notes to consolidated financial statements.

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VORNADO OPERATING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See notes to consolidated financial statements.

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VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.

ORGANIZATION

     Vornado Operating Company (the “Company”) holds its assets and conducts its business through Vornado Operating L.P., a Delaware limited partnership (“Company L.P.”). The Company is the sole general partner of, and as of June 30, 2003, owned a 90.1% partnership interest in, Company L.P. All references to the “Company” refer to Vornado Operating Company and its subsidiaries including Company L.P.

2.

BASIS OF PRESENTATION

     The consolidated balance sheet as of June 30, 2003, the consolidated statements of operations for the three and six months ended June 30, 2003 and 2002, and the consolidated statements of cash flows for the six months ended June 30, 2003 and 2002 are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 as filed with the Securities and Exchange Commission. The results of operations for the six months ended June 30, 2003 are not necessarily indicative of the operating results for the full year.

     The accompanying consolidated financial statements include the accounts of the Company and Company L.P. All significant intercompany amounts have been eliminated. The Company’s 60% interest in AmeriCold Logistics is accounted for under the equity method of accounting as Crescent Operating, Inc., the Company’s partner in AmeriCold Logistics, has substantive participating rights. The investments in and advances to AmeriCold Logistics are recorded initially at cost and subsequently adjusted for the Company’s share of comprehensive income or loss and cash distributions or principal repayments from AmeriCold Logistics. The interest earned on the advances to AmeriCold Logistics is recorded as a component of income or loss from AmeriCold Logistics. The Company does not record comprehensive losses in excess of the cost of its investments in and advances to AmeriCold Logistics, as the Company is not liable for the obligations of, or otherwise committed to provide additional financial support to, AmeriCold Logistics. The Company did not record its 60% share of AmeriCold Logistics’ net loss for the six months ended June 30, 2003 as the Company’s investments in and advances to AmeriCold Logistics were fully absorbed by the Company’s share of the comprehensive losses of AmeriCold Logistics at December 31, 2002. The Company will consolidate AmeriCold Logistics beginning July 1, 2003 (see Note 6).

     Management has made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

     Certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current year presentation.

3.

INVESTMENTS IN AND ADVANCES TO AMERICOLD LOGISTICS

     At June 30, 2003, $7,942,000 was outstanding under the Company’s secured loans to AmeriCold Logistics, which mature on December 31, 2004. These loans are carried at zero in the accompanying consolidated balance sheet as they have been fully absorbed by the Company’s share of comprehensive losses of AmeriCold Logistics. AmeriCold Logistics is required to make loan payments approximating $159,000 per month. The portions of the loan payments made during the three and six months ended June 30, 2003 that represented the repayment of principal are $223,000 and $428,000, respectively, and are reflected as income from AmeriCold Logistics as this principal was previously reduced to zero by equity in losses of AmeriCold Logistics.

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VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(UNAUDITED)

     The following condensed balance sheet data represents 100% of AmeriCold Logistics, in which the Company holds a 60% interest:

     The following represents the components of the Company’s income (loss) from AmeriCold Logistics:

(1) The Company did not record $7,141 and $11,251, its 60% share of AmeriCold Logistics’ net losses of $11,902 and $18,752, respectively, for the three and six months ended June 30, 2003, as the Company’s investments in and advances to AmeriCold Logistics were fully absorbed by the Company’s share of the comprehensive losses of AmeriCold Logistics at December 31, 2002.

     The following condensed operating and cash flow data represents 100% of AmeriCold Logistics, in which the Company holds a 60% interest:

(1) The Company did not record $7,141 and $11,251, its 60% share of AmeriCold Logistics’ net losses of $11,902 and $18,752, respectively, for the three and six months ended June 30, 2003, as the Company’s investments in and advances to AmeriCold Logistics were fully absorbed by the Company’s share of the comprehensive losses of AmeriCold Logistics at December 31, 2002.

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VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(UNAUDITED)

     AmeriCold Logistics has reported losses since its inception and, at June 30, 2003, the Company’s 60% share of AmeriCold Logistics’ partners’ deficit was $36,231,000, which includes $35,452,000 of deferred rent (rent recognized as expense but not paid in cash) to the Vornado REIT/Crescent REIT Partnership (the “Landlord”). On March 7, 2003, AmeriCold Logistics and the Landlord extended the deferred rent period in AmeriCold Logistics’ leases with the Landlord to December 31, 2004 from December 31, 2003. Based on its right to defer rent, the management of AmeriCold Logistics anticipates it will have sufficient cash flows to operate at least through June 30, 2004. AmeriCold Logistics anticipates that in 2003 the Landlord will restructure the leases to provide additional cash flow to AmeriCold Logistics. Further, the management of AmeriCold Logistics is also considering the financing of certain trade receivables and equipment and the sale of certain warehouse operations. In the absence of such financings and sales and the anticipated lease restructuring, AmeriCold Logistics will not have the ability to distribute funds to the Company and in turn, the Company will not have resources sufficient to repay its $24,615,000 loan from Vornado Realty Trust due December 31, 2004.

     During the six months ended June 30, 2003, AmeriCold Logistics exercised its right, pursuant to the terms of its leases with the Landlord, to defer the payment of rent. AmeriCold Logistics’ deferred rent liability at June 30, 2003 is as follows:

(1) The Company does not guarantee AmeriCold Logistics’ deferred rent liability.

     On March 28, 2003, AmeriCold Logistics sold, without recourse, accounts receivable of $6,640,000 to a joint venture owned 44% by Vornado Realty Trust and 56% by Crescent Real Estate Equities Company, the owners of the Landlord, for $6,500,000 in cash. AmeriCold Logistics recognized a loss of $140,000 on the sale. AmeriCold Logistics also agreed to act as agent to collect the accounts receivable. The accounts receivable have been collected in full.

4.

COMMITMENTS AND CONTINGENCIES

     The Company is from time to time involved in legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material effect on the Company’s financial condition, results of operations or cash flows.

5.

LOSS PER SHARE

     The following table sets forth the computation of basic and diluted loss per share:

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VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(UNAUDITED)

     The Company’s stock options (358,569 outstanding and exercisable at June 30, 2003) are not dilutive in the reporting periods as the average market prices of the Company’s common stock did not exceed the option exercise prices and as the Company reported net losses. The rights issued pursuant to the Company’s Stockholder Protection Rights Plan are not dilutive in the reporting periods as the rights were not exercisable or outstanding. The limited partnership units of Company L.P. not owned by the Company (447,017 at June 30, 2003) are not dilutive in the reporting periods as the Company reported net losses.

6.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123. SFAS No. 148 provides alternative methods of transition for entities that voluntarily change to the fair value method of accounting for stock-based employee compensation. The Company voluntarily adopted the fair value provisions of SFAS No. 123, Accounting for Stock-Based Compensation, prospectively for all employee awards granted, modified, or settled in 2003 and thereafter. The Company will utilize an option-pricing model and appropriate market assumptions to determine the value of such grants. Compensation expense will be recognized on a straight-line basis over the vesting periods of the grants. None of the Company’s stock options accounted for under the intrinsic value method (i.e., the difference between the price per share at the grant date and the option exercise price) prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, would have increased net losses for the three and six months ended June 30, 2003 and 2002 had they been accounted for under the fair value method.

     In January 2003, FASB issued FASB Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. FIN No. 46 requires the consolidation of an entity by an enterprise if (i) that enterprise, known as a “primary beneficiary,” has a variable interest that will absorb a majority of the entity’s expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur, or both and (ii) the entity is a variable interest entity. An entity is a variable interest entity if (a) the total equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or (b) the equity investors do not have the characteristics of a controlling financial interest in the entity. FIN No. 46 applies immediately to all variable interest entities created after January 31, 2003. For variable interest entities created by public companies before February 1, 2003, FIN No. 46 must be applied no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003. The initial determination of whether an entity is a variable interest entity shall be made as of the date at which a primary beneficiary becomes involved with the entity and reconsidered as of the date that one of three triggering events described in FIN No. 46 occurs.

     The Company has evaluated the impact of this interpretation on its investment in AmeriCold Logistics and has concluded that consolidation of AmeriCold Logistics will be required beginning July 1, 2003. The Company made its determination based on facts and circumstances existing at November 5, 2002, the date on which the Company’s $6,000,000 special equity contribution to AmeriCold Logistics was converted into a loan collateralized by trade receivables effective March 11, 2002 (a triggering event as described in FIN No. 46.) The Company also considered the implementation alternatives permitted under FIN No. 46 and has chosen to restate its prior period consolidated financial statements beginning with those included in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. The restatement will increase the Company’s accumulated deficit at June 30, 2003 by $37,571,000 to $81,549,000 and accumulated other comprehensive loss at June 30, 2003 by $14,886,000 to $17,222,000.

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     The following condensed consolidated balance sheet data represents the Company’s consolidated balance sheet as if the Company had consolidated AmeriCold Logistics as of June 30, 2003:

     The impact of the restatement on the Company’s net loss and net loss per share – basic and diluted for the three and six months ended June 30, 2003 and 2002 are summarized below:

⁽¹⁾This amount differs from the sum as a result of rounding.

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INDEPENDENT ACCOUNTANTS’ REPORT

Stockholders and Board of Directors
Vornado Operating Company
New York, New York

     We have reviewed the accompanying condensed consolidated balance sheet of Vornado Operating Company as of June 30, 2003, and the related condensed consolidated statements of operations for the three and six month periods ended June 30, 2003 and 2002, and the cash flows for the six month periods ended June 30, 2003 and 2002. These financial statements are the responsibility of the Company’s management.

     We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

     Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

     We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Vornado Operating Company as of December 31, 2002, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended (not presented herein); and in our report dated March 7, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey
August 7, 2003

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “intends,” “plans” or similar expressions in this Quarterly Report on Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond the Company’s ability to control or predict. Factors that might cause such a material difference include, but are not limited to: (a) the Company’s limited operating history; (b) restrictions on the Company’s business and future opportunities; (c) dependence upon Vornado Realty Trust; (d) the substantial influence of the Company’s controlling stockholders and conflicts of interest; (e) the bankruptcy of the Company’s joint venture partner in AmeriCold Logistics, Crescent Operating, Inc. (“COPI”); (f) risks associated with potential investments and the ability to manage those investments; (g) competition; (h) the Company’s obligations under the Revolving Credit Agreement with Vornado Realty Trust; (i) AmeriCold Logistics’ obligations under the lease agreements with the Vornado REIT/Crescent REIT Partnership (the “Landlord”); (j) the Company’s limited financial resources; (k) dependence on key personnel; (l) potential anti-takeover effects of the Company’s charter documents and Stockholder Protection Rights Plan and applicable law; (m) dependence on distributions from subsidiaries; (n) potential costs of compliance with environmental laws; (o) changes in the general economic climate; and (p) government regulations. See “Item 1. Business – Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

     For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this paragraph. The Company does not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Overview

     Management’s Discussion and Analysis of Financial Condition and Results of Operations considers the Company’s consolidated financial statements for the three and six months ended June 30, 2003 and 2002.

Critical Accounting Policies

     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 and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. The summary should be read in conjunction with the more complete discussion of the Company’s significant accounting policies included in Note 2 to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Investments in and Advances to AmeriCold Logistics

     The Company’s 60% interest in AmeriCold Logistics is accounted for under the equity method of accounting as COPI, the Company’s partner in AmeriCold Logistics, has substantive participating rights. The investments in and advances to AmeriCold Logistics are recorded initially at cost and subsequently adjusted for the Company’s share of comprehensive income or loss and cash distributions or principal repayments from AmeriCold Logistics. The interest earned on the advances to AmeriCold Logistics is recorded as a component of income or loss from AmeriCold Logistics. The Company does not record comprehensive losses in excess of the cost of its investments in and advances to AmeriCold Logistics, as the Company is not liable for the obligations of, or otherwise committed to provide additional financial support to, AmeriCold Logistics. The Company did not record its 60% share of AmeriCold Logistics’ net loss for the six months ended June 30, 2003 as the Company’s investments in and

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advances to AmeriCold Logistics were fully absorbed by the Company’s share of the comprehensive losses of AmeriCold Logistics at December 31, 2002. The Company will consolidate AmeriCold Logistics beginning July 1, 2003 (see below).

Recently Issued Accounting Standards

     In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123. SFAS No. 148 provides alternative methods of transition for entities that voluntarily change to the fair value method of accounting for stock-based employee compensation. The Company voluntarily adopted the fair value provisions of SFAS No. 123, Accounting for Stock-Based Compensation, prospectively for all employee awards granted, modified, or settled in 2003 and thereafter. The Company will utilize an option-pricing model and appropriate market assumptions to determine the value of such grants. Compensation expense will be recognized on a straight-line basis over the vesting periods of the grants. None of the Company’s stock options accounted for under the intrinsic value method (i.e., the difference between the price per share at the grant date and the option exercise price) prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, would have increased net losses for the three and six months ended June 30, 2003 and 2002 had they been accounted for under the fair value method.

     In January 2003, FASB issued FASB Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. FIN No. 46 requires the consolidation of an entity by an enterprise if (i) that enterprise, known as a “primary beneficiary,” has a variable interest that will absorb a majority of the entity’s expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur, or both and (ii) the entity is a variable interest entity. An entity is a variable interest entity if (a) the total equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or (b) the equity investors do not have the characteristics of a controlling financial interest in the entity. FIN No. 46 applies immediately to all variable interest entities created after January 31, 2003. For variable interest entities created by public companies before February 1, 2003, FIN No. 46 must be applied no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003. The initial determination of whether an entity is a variable interest entity shall be made as of the date at which a primary beneficiary becomes involved with the entity and reconsidered as of the date that one of three triggering events described in FIN No. 46 occurs.

     The Company has evaluated the impact of this interpretation on its investment in AmeriCold Logistics and has concluded that consolidation of AmeriCold Logistics will be required beginning July 1, 2003. The Company made its determination based on facts and circumstances existing at November 5, 2002, the date on which the Company’s $6,000,000 special equity contribution to AmeriCold Logistics was converted into a loan collateralized by trade receivables effective March 11, 2002 (a triggering event as described in FIN No. 46.) The Company also considered the implementation alternatives permitted under FIN No. 46 and has chosen to restate its prior period consolidated financial statements beginning with those included in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. The restatement will increase the Company’s accumulated deficit at June 30, 2003 by $37,571,000 to $81,549,000 and accumulated other comprehensive loss at June 30, 2003 by $14,886,000 to $17,222,000.

     The following condensed consolidated balance sheet data represents the Company’s consolidated balance sheet as if the Company had consolidated AmeriCold Logistics as of June 30, 2003:

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     The impact of the restatement on the Company’s net loss and net loss per share – basic and diluted for the three and six months ended June 30, 2003 and 2002 are summarized below:

(1) This amount differs from the sum as a result of rounding.

Results of Operations

     The Company had a net loss of $173,000 for the three months ended June 30, 2003, compared to $4,723,000 for the three months ended June 30, 2002, a decrease of $4,550,000, and $378,000 for the six months ended June 30, 2003, compared to $8,797,000 for the six months ended June 30, 2002, a decrease of $8,419,000.

     General and administrative expenses were $257,000 for the three months ended June 30, 2003, compared to $300,000 for the three months ended June 30, 2002, a decrease of $43,000. General and administrative expenses were $535,000 for the six months ended June 30, 2003, compared to $573,000 for the six months ended June 30, 2002, a decrease of $38,000. These decreases resulted primarily from lower franchise taxes due to the decline in the book value of the Company’s investments in and advances to AmeriCold Logistics, partially offset by higher corporate insurance costs and professional fees.

     Interest and debt expense to Vornado Realty Trust was $392,000 for the three months ended June 30, 2003, compared to $496,000 for the three months ended June 30, 2002, a decrease of $104,000, and $780,000 for the six months ended June 30, 2003, compared to $986,000 for the six months ended June 30, 2002, a decrease of $206,000. These decreases resulted primarily from lower average balances outstanding and lower LIBOR rates under the Revolving Credit Agreement with Vornado Realty Trust during the current year’s periods.

     The following represents the components of the Company’s income (loss) from AmeriCold Logistics:

     The Company did not record $7,141,000 and $11,251,000, its 60% share of AmeriCold Logistics’ net losses of $11,902,000 and $18,752,000, respectively, for the three and six months ended June 30, 2003, as the Company’s investments in and advances to AmeriCold Logistics were fully absorbed by the Company’s share of the comprehensive losses of AmeriCold Logistics at December 31, 2002 and as the Company is not liable for the obligations of, or otherwise committed to provide additional financial support to, AmeriCold Logistics. In the three and six months ended June 30, 2002, the Company recorded its 60% share of AmeriCold Logistics’ net losses of $7,167,000 and $13,307,000 for those periods, or $4,300,000 and $7,984,000, respectively. The decreases in interest earned on the Company’s loans to AmeriCold Logistics of $121,000 and $239,000 are attributable to lower

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average loans outstanding in the current year’s periods. The $223,000 and $428,000 recognized as income in the current year’s periods represents repayments from AmeriCold Logistics of its loans from the Company that were previously reduced to zero by equity in losses of AmeriCold Logistics.

     To keep the Company’s stockholders knowledgeable about the Company’s sole investment, a discussion of AmeriCold Logistics’ results of operations is included below. The amounts discussed below in “AmeriCold Logistics’ Results of Operations for the Three and Six Months Ended June 30, 2003 and 2002” exclude the interest income and the $223,000 and $428,000 gains recorded by the Company during the three and six month periods ended June 30, 2003.

  AmeriCold Logistics’ Results of Operations for the Three and Six Months Ended June 30, 2003 and 2002

     The following is a discussion of the results of operations of AmeriCold Logistics, the Company’s investee in the temperature controlled logistics business. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 for a discussion of this business and see Note 3 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for condensed balance sheet data and condensed operating data of AmeriCold Logistics. The data below represents 100% of this business in which the Company holds a 60% interest. For the purpose of the discussion below, “Leased Operations” refer to operations at warehouses leased by AmeriCold Logistics and “Other Operations” refer to (i) warehouses managed by AmeriCold Logistics for the accounts of customers (“Managed Warehouses”), (ii) Transportation Management Services, which includes freight routing, dispatching, freight rate negotiation, backhaul coordination, and distribution channel assessments, and (iii) Quarry Operations. In December 2002, AmeriCold Logistics sold its quarries to a joint venture owned 44% by Vornado Realty Trust and 56% by Crescent Real Estate Equities Company, the owners of the Landlord. Additionally, AmeriCold Logistics agreed to manage and operate the quarries for an annual management fee of approximately $200,000 plus all direct expenses incurred as the operator.

	Certain prior period amounts in this discussion were reclassified to conform to the current period presentation.

Revenues were $154,158,000 for the three months ended June 30, 2003, compared to $154,862,000 for the three months ended June 30, 2002, a decrease of $704,000 and $313,880,000 for the six months ended June 30, 2003, compared to $309,490,000 for the six months ended June 30, 2002, an increase of $4,390,000. Revenues from Leased Operations were $102,507,000 for the three months ended June 30, 2003, compared to $106,441,000 for the three months ended June 30, 2002, a decrease of $3,934,000, and $207,587,000 for the six months ended June 30, 2003, compared to $212,202,000 for the six months ended June 30, 2002, a decrease of $4,615,000. Revenues from Other Operations were $51,651,000 for the three months ended June 30, 2003, compared to $48,421,000 for the three months ended June 30, 2002, an increase of $3,230,000, and $106,293,000 for the six months ended June 30, 2003, compared to $97,288,000 for the six months ended June 30, 2002, an increase of $9,005,000.

	The revenue decreases in Leased Operations for both the three and six months ended June 30, 2003 were primarily the result of lower storage revenues due to lower occupancy rates in the current year.

	The increases in revenues from Other Operations were largely due to new Managed Warehouse contracts that commenced after the first quarter of 2002 and increased volume from two significant customers, partially offset by the discontinuation of Transportation Management Services business with lower margin customers and the effect of the December 2002 quarry sale noted above.

	The gross margin for Leased Operations was $36,493,000, or 35.6%, for the three months ended June 30, 2003, compared to $37,574,000, or 35.3%, for the three months ended June 30, 2002, a decrease of $1,081,000, and $76,216,000, or 36.7%, for the six months ended June 30, 2003, compared to $77,789,000, or 36.7%, for the six months ended June 30, 2002, a decrease of $1,573,000.

Operating income from Other Operations was $4,250,000 for the three months ended June 30, 2003, compared to $3,392,000 for the three months ended June 30, 2002, an increase of $858,000, and $8,412,000 for the six months ended June 30, 2003, compared to $6,753,000 for the six months ended June 30, 2002, an increase of $1,659,000. These increases resulted primarily from the new Managed Warehouse contracts noted above, partially offset by the effect of the December 2002 quarry sale noted above.

	Rent expense was $41,799,000 for the three months ended June 30, 2003, compared to $36,346,000 for the three months ended June 30, 2002, an increase of $5,453,000, and $81,304,000 for the

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	six months ended June 30, 2003, compared to $73,888,000 for the six months ended June 30, 2002, an increase of $7,416,000. These increases resulted from higher percentage rent in the current year as the lease amendment with the Landlord that reduced percentage rent for the 2002 lease year expired.

General and administrative expenses were $7,759,000 for the three months ended June 30, 2003, compared to $8,481,000 for the three months ended June 30, 2002, a decrease of $722,000, and $15,819,000 for the six months ended June 30, 2003, compared to $16,819,000 for the six months ended June 30, 2002, a decrease of $1,000,000. These decreases were primarily due to reduced administrative expenses such as travel costs and corporate office rent for the Portland, Oregon office that was closed in 2002.

Depreciation and amortization expense was $2,456,000 for the three months ended June 30, 2003, compared to $2,395,000 for the three months ended June 30, 2002, an increase of $61,000, and $4,858,000 for the six months ended June 30, 2003, compared to $5,268,000 for the six months ended June 30, 2002, a decrease of $410,000. The decrease for the current year’s six month period was primarily attributable to the December 2002 quarry sale noted above. This decrease was offset in the current year’s quarter by the effect of an adjustment to quarry depletion in the second quarter of 2002.

Interest expense was $823,000 for the three months ended June 30, 2003, compared to $1,026,000 for the three months ended June 30, 2002, a decrease of $203,000, and $1,654,000 for the six months ended June 30, 2003, compared to $2,118,000 for the six months ended June 30, 2002, a decrease of $464,000. These decreases resulted from lower average borrowings outstanding in the current year, partially offset by the interest on higher average deferred rent balances in the current year.

Other income was $192,000 for the three months ended June 30, 2003, compared to $115,000 for the three months ended June 30, 2002, an increase of $77,000, and $255,000 for the six months ended June 30, 2003, compared to $244,000 for the six months ended June 30, 2002, an increase of $11,000. These increases resulted primarily from foreign currency translation gains at AmeriCold Logistics’ warehouse in Ontario, Canada, partially offset by a $140,000 loss on the March 2003 accounts receivable sale, discussed on page 17, and lower interest rates on lower cash balances in the current year.

Liquidity and Capital Resources

     The Company has a $75,000,000 unsecured Revolving Credit Agreement with Vornado Realty Trust which expires on December 31, 2004. Borrowings under this facility bear interest at LIBOR plus 3% (4.12% at June 30, 2003). The Company pays Vornado Realty Trust a commitment fee equal to 1% per annum on the average daily unused portion of the facility pursuant thereto; such commitment fees were $256,000 and $221,000 for the six months ended June 30, 2003 and 2002, respectively. Amounts may be borrowed under the Revolving Credit Agreement, repaid and reborrowed from time to time on a revolving basis (so long as the principal amount outstanding at any time does not exceed $75,000,000). Principal payments are not required under the Revolving Credit Agreement during its term. The Revolving Credit Agreement prohibits the Company from incurring indebtedness to third parties (other than certain purchase money debt and certain other exceptions) and prohibits the Company from paying any dividends. The Company currently has no external sources of financing except this facility. At June 30, 2003, $811,000 of interest and commitment fees were unpaid, which reduces the availability under the Revolving Credit Agreement to $50,385,000.

     At June 30, 2003, $7,942,000 was outstanding under the Company’s secured loans to AmeriCold Logistics, which mature on December 31, 2004. These loans are carried at zero in the Company’s consolidated balance sheet as they have been fully absorbed by the Company’s share of comprehensive losses of AmeriCold Logistics. AmeriCold Logistics is required to make loan payments approximating $159,000 per month. The portions of the loan payments made during the three and six months ended June 30, 2003 that represented the repayment of principal are $223,000 and $428,000, respectively, and are reflected as income from AmeriCold Logistics as this principal was previously reduced to zero by equity in losses of AmeriCold Logistics.

     AmeriCold Logistics has reported losses since its inception and, at June 30, 2003, the Company’s 60% share of AmeriCold Logistics’ partners’ deficit was $36,231,000, which includes $35,452,000 of deferred rent (rent recognized as expense but not paid in cash) to the Landlord. On March 7, 2003, AmeriCold Logistics and the Landlord extended the deferred rent period in AmeriCold Logistics’ leases with the Landlord to December 31, 2004 from December 31, 2003. Based on its right to defer rent, the management of AmeriCold Logistics anticipates it will have sufficient cash flows to operate at least through June 30, 2004. AmeriCold Logistics anticipates that in 2003 the Landlord will restructure the leases to provide additional cash flow to AmeriCold Logistics. Further, the

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management of AmeriCold Logistics is also considering the financing of certain trade receivables and equipment and the sale of certain warehouse operations. In the absence of such financings and sales and the anticipated lease restructuring, AmeriCold Logistics will not have the ability to distribute funds to the Company and in turn, the Company will not have resources sufficient to repay its $24,615,000 loan from Vornado Realty Trust due December 31, 2004, as described above.

     During the six months ended June 30, 2003, AmeriCold Logistics exercised its right, pursuant to the terms of its leases with the Landlord, to defer the payment of rent. AmeriCold Logistics’ deferred rent liability at June 30, 2003 is as follows: