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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

-------------------------

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: 1-6732

DANIELSON HOLDING CORPORATION
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 95-6021257
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

TWO NORTH RIVERSIDE PLAZA, SUITE 600
CHICAGO, IL 60606
(Address of Principal Executive Offices) (Zip Code)

(312) 466-4030
(Registrant's Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Indicate by check mark whether 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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes (X) No ( )

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

Yes (X) No ( )

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

CLASS OUTSTANDING AT AUGUST 14, 2003
----- ------------------------------
Common Stock, $0.10 par value 30,817,297 shares



DANIELSON HOLDING CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED JUNE 30, 2003



PART I

Item 1. Financial Statements

Condensed Consolidated Statements of Operations for the Quarter and Six Months Ended
June 30, 2003 and June 30, 2002 (Unaudited)............................................................ 1

Condensed Consolidated Statements of Financial Position as of June 30, 2003 (Unaudited)
and December 27, 2002.................................................................................. 2-3

Condensed Consolidated Statement of Stockholders' Equity for the Six Months Ended
June 30, 2003 (Unaudited).............................................................................. 4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003
and June 30, 2002 (Unaudited).......................................................................... 5

Notes to Condensed Consolidated Financial Statements (Unaudited)....................................... 6-11

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................. 12-18

Item 3. Quantitative and Qualitative Disclosures about Market Risk........................................ 19

Item 4. Controls and Procedures........................................................................... 19

PART II. OTHER INFORMATION

Item 3. Defaults Upon Senior Securities................................................................... 20

Item 6. Exhibits and Reports on Form 8-K.................................................................. 20

OTHER

Signatures................................................................................................. 21

Exhibit 31.1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002................... 22

Exhibit 31.2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002................... 23

Exhibit 32.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.................................................. 24

Exhibit 32.2 CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.................................................. 25




DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)



QUARTERS ENDED SIX MONTHS ENDED
--------------------- ---------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
--------- --------- --------- ---------

INSURANCE SERVICES:
OPERATING REVENUES:
Gross Premiums Earned $ 10,652 $ 18,718 $ 21,748 $ 39,332
Ceded Premiums Earned (796) (1,168) (1,540) (2,744)
-------- -------- -------- --------
Net Premiums Earned 9,856 17,550 20,208 36,588

Net Investment Income 1,036 1,453 2,198 2,939
Net Realized Investment Gains 844 3,976 296 3,976
Other Income 101 170 211 365
-------- -------- -------- --------
Total Insurance Services' Operating Revenues 11,837 23,149 22,913 43,868
-------- -------- -------- --------

OPERATING EXPENSES:
Gross Losses and Loss Adjustment Expenses 14,318 17,557 24,734 32,933
Ceded Losses and Loss Adjustment Expenses (1,948) (890) (3,175) (1,534)
-------- -------- -------- --------
Net Losses and Loss Adjustment Expenses 12,370 16,667 21,559 31,399

Policy Acquisitions Expenses 2,096 4,305 4,732 8,362
General and Administrative 1,272 1,307 2,306 2,787
-------- -------- -------- --------
Total Insurance Services' Operating Expenses 15,738 22,279 28,597 42,548
-------- -------- -------- --------

Operating (Loss) Income from Insurance Services (3,901) 870 (5,684) 1,320
-------- -------- -------- --------

MARINE SERVICES:
OPERATING REVENUES:
Marine Revenues - 60,937 - 60,937
-------- -------- -------- --------

OPERATING EXPENSES:
Materials, Supplies and Other - 24,728 - 24,728
Restructuring Costs - 134 - 134
Rent - 4,929 - 4,929
Labor and Fringe Benefits - 13,664 - 13,664
Fuel - 6,978 - 6,978
Depreciation and Amortization - 6,132 - 6,132
Gain on Property Dispositions - (89) - (89)
Taxes, Other than Income - 2,349 - 2,349
-------- -------- -------- --------
Total Marine Sevices' Operating Expenses - 58,825 - 58,825
-------- -------- -------- --------

Operating Income from Marine Services - 2,112 - 2,112
-------- -------- -------- --------

PARENT COMPANY:
Net Investment Income 92 289 226 352
Net Realized Investment Gains 157 100 687 100
Investment Income Related to ACL Debt - 8,402 - 8,402
Administrative Expenses (926) (1,596) (2,457) (2,146)
-------- -------- -------- --------

Operating (Loss) Income from Parent Company (677) 7,195 (1,544) 6,708
-------- -------- -------- --------

Operating (Loss) Income (4,578) 10,177 (7,228) 10,140

OTHER EXPENSES:
Interest Expense - 4,989 - 4,989
Other, Net - 702 - 702
Equity in Net (Income) Loss of Unconsolidated
Marine Services Subsidiaries (77) - 55,097 -


Total Other Expenses (77) 5,691 55,097 5,691
-------- -------- -------- --------

(Loss) Income before Provision for Income Taxes (4,501) 4,486 (62,325) 4,449

Income Tax Provision - 145 12 162
-------- -------- -------- --------
Net (Loss) Income $ (4,501) $ 4,341 $(62,337) $ 4,287
======== ======== ======== ========

(LOSS) INCOME PER SHARE OF COMMON STOCK - BASIC $ (0.15) $ 0.18 $ (2.02) $ 0.20
======== ======== ======== ========

(LOSS) INCOME PER SHARE OF COMMON STOCK - DILUTED $ (0.15) $ 0.18 $ (2.02) $ 0.19
======== ======== ======== ========


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

1



DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)



(UNAUDITED)
JUNE 30, DECEMBER 27,
2003 2002
----------- ------------

ASSETS

PARENT COMPANY'S AND INSURANCE SERVICES' ASSETS:
Cash and Cash Equivalents $ 15,261 $ 9,939
Investments:
Fixed Maturities, Available for Sale at Fair Value (Cost: $74,441 and $84,161) 77,144 88,499
Equity Securities, Available for Sale at Fair Value (Cost: $3,795 and $6,620) 3,536 5,247
Accrued Investment Income 996 1,143
Premium and Consulting Receivables, Net of
Allowances of $941 and $1,623 7,306 7,638
Reinsurance Recoverable on Paid Losses, Net of
Allowances of $767 and $780 3,405 3,124
Reinsurance Recoverable on Unpaid Losses, Net of
Allowances of $236 and $206 22,133 22,057
Ceded Unearned Premiums 1,480 1,091
Properties, Net 240 382
Investments in Unconsolidated Marine Services Subsidiaries 4,206 -
Other Assets 3,374 4,370
---------- ----------
Total Parent Company's and Insurance Services' Assets 139,081 143,490
---------- ----------

PREVIOUSLY CONSOLIDATED MARINE SERVICES SUBSIDIARIES' ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents - 15,244
Restricted Cash - 6,328
Accounts Receivable - 50,630
Accounts Receivable - Related Parties - 6,571
Materials and Supplies - 34,774
Other Current Assets - 27,342
---------- ----------
Total Current Assets - 140,889

PROPERTIES - Net - 654,193
PENSION ASSETS - 20,806
INVESTMENT IN UABL - 48,627
OTHER ASSETS - 26,893
---------- ----------
Total Previously Consolidated Marine Services Subsidiaries' Assets - 891,408
---------- ----------

Total Assets $ 139,081 $1,034,898
========== ==========


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

2



DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)



(UNAUDITED)
JUNE 30, DECEMBER 27,
2003 2002
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

PARENT COMPANY'S AND INSURANCE SERVICES' LIABILITIES:
Unpaid Losses and Loss Adjustment Expenses $ 92,489 $ 101,249
Unearned Premiums 12,227 10,622
Other Liabilities 5,010 3,874
----------- -----------
Total Parent Company's and Insurance Services' Liabilities 109,726 115,745
----------- -----------

PREVIOUSLY CONSOLIDATED MARINE SERVICES SUBSIDIARIES' LIABILITIES:
CURRENT LIABILITIES
Accounts Payable - 36,437
Accrued Payroll and Fringe Benefits - 16,686
Deferred Revenue - 10,835
Accrued Claims and Insurance Premiums - 26,695
Accrued Interest - 16,761
Short-Term Debt - 43,873
Current Portion of Long-Term Debt - 590,731
Other Current Liabilities - 38,768
----------- -----------
Total Current Liabilities - 780,786

LONG-TERM DEBT - 8,468
PENSION LIABILITY - 15,072
OTHER LONG-TERM LIABILITIES - 37,467
----------- -----------
Total Previously Consolidated Marine Services Subsidiaries' Liabilities - 841,793
----------- -----------
Total Liabilities 109,726 957,538
----------- -----------

STOCKHOLDERS' EQUITY:
Preferred Stock ($0.10 par value; authorized 10,000,000 shares; none issued - -
and outstanding)
Common Stock ($0.10 par value; authorized 150,000,000 shares; issued 3,083 3,083
30,828,093 shares; outstanding 30,817,297 shares)
Additional Paid-in Capital 117,047 117,148
Unearned Compensation (737) (1,132)
Accumulated Other Comprehensive Income (Loss) 1,574 (12,464)
Accumulated Deficit (91,546) (29,209)
Treasury Stock (Cost of 10,796 shares) (66) (66)
----------- -----------
Total Stockholders' Equity 29,355 77,360
----------- -----------
Total Liabilities and Stockholders' Equity $ 139,081 $ 1,034,898
=========== ===========


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

3



DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
(DOLLARS IN THOUSANDS)



ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------- PAID-IN UNEARNED COMPREHENSIVE
SHARES AMOUNT CAPITAL COMPENSATION (LOSS) INCOME
---------- ------- ----------- ------------- --------------

Balance at December 27, 2002 30,828,093 $ 3,083 $ 117,148 $ (1,132) $ (12,464)
Stock Option Compensation Expense 49
Amortization of Unearned Compensation 245
Adjustment of Unearned Compensation for
Terminated Employees (150) 150
Comprehensive Loss:
Net Loss
Net Unrealized Loss on Available for
Sale Securities (537)
Reclassification Adjustment for Net
Realized Gain on Available for Sale
Securities Included in Net Loss (747)
Net Reclassification Adjustment for
Amount Included in Equity in
Net Loss of Unconsolidated
Marine Services Subsidiaries 15,322
-------------
Total Comprehensive Income (Loss) 14,038
---------- ------- ---------- ------------ -------------
Balance at June 30, 2003 30,828,093 $ 3,083 $ 117,047 $ (737) $ 1,574
========== ======= ========== ============ =============





TREASURY STOCK
ACCUMULATED -----------------
DEFICIT SHARES AMOUNT TOTAL
------------ ------- -------- ---------

Balance at December 27, 2002 $ (29,209) 10,796 $ (66) $ 77,360
Stock Option Compensation Expense 49
Amortization of Unearned Compensation 245
Adjustment of Unearned Compensation for
Terminated Employees -
Comprehensive Loss:
Net Loss (62,337) (62,337)
Net Unrealized Loss on Available for
Sale Securities (537)
Reclassification Adjustment for Net
Realized Gain on Available for Sale
Securities Included in Net Loss (747)
Net Reclassification Adjustment for
Amount Included in Equity in
Net Loss of Unconsolidated
Marine Services Subsidiaries 15,322
----------- --------
Total Comprehensive Income (Loss) (62,337) (48,299)
----------- ------- ------- --------
Balance at June 30, 2003 $ (91,546) 10,796 $ (66) $ 29,355
=========== ======= ======= ========


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

4



DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)



SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
2003 2002
--------- --------

OPERATING ACTIVITIES
Net (Loss) Income $(62,337) $ 4,287
Adjustments to Reconcile Net (Loss) Income to Net Cash Used in
Operating Activities:
Net Gain on Investment Securities (2,423) -
Other than Temporary Decline in Fair Value of Investment -
Securities 1,440 -
Gain Related to ACL Debt Contributed in Acquisisiton of ACL - (12,478)
Gain on Property Dispostions - (89)
Other Operating Activities - 495
Depreciation and Amortization 164 6,132
Stock Option and Unearned Compensation Expense 294 -
Interest Accretion and Amortization 100 798
Equity in Net Loss of Unconsolidated Marine Services Subsidiaries 55,097 -
Change in Operating Assets and Liabilities:
Accounts Receivable - (11,004)
Materials and Supplies - (4,248)
Accrued Interest - 3,647
Accrued Investment Income 147 162
Premium and Consulting Receivables 332 2,015
Reinsurance Recoverable on Paid Losses (281) (652)
Reinsurance Recoverable on Unpaid Losses (76) 2,582
Prepaid Reinsurance Premiums - 426
Ceded Unearned Premiums (389) -
Other Assets 577 4,861
Unpaid Losses and Loss Adjustment Expenses (8,760) (5,128)
Unearned Premiums 1,605 (4,220)
Other Liabilities 1,032 (82)
Other, Net 26 1,026
-------- --------
Net Cash Used in Operating Activities (13,452) (11,470)
-------- --------

INVESTING ACTIVITIES
Property Additions (22) (2,072)
Collection of Notes Receivable from Affiliate 6,036 -
Proceeds from the Sale of Investment Securities 35,251 11,355
Proceeds from the Sale of Property and Equipment - 409
Distribution Received from Unconsolidated Marine Services Subsidiary 58 -
Purchase of ACL, GMS, and Vessel Leasing - (42,665)
Purchase of Investment Securities (22,549) (5,783)
Net Change in Restricted Cash - 687
Other Investing Activities - (278)
-------- --------
Net Cash Provided by (Used in) Investing Activities 18,774 (38,347)
-------- --------

FINANCING ACTIVITIES
Long-Term Debt Issued - 3,206
Long-Term Debt Repaid - (1,246)
Cash Overdrafts - (2,900)
Proceeds from Rights Offering, Net of Expenses - 42,228
Proceeds from Exercise of Warrants for Common Stock - 9,500
Proceeds from Exercise of Options for Common Stock - 1,088
-------- --------
Net Cash Provided by Financing Activities - 51,876
-------- --------

Net Increase in Cash and Cash Equivalents 5,322 2,059
Cash and Cash Equivalents at Beginning of Period 9,939 39,693
-------- --------
Cash and Cash Equivalents at End of Period $ 15,261 $ 41,752
======== ========


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

5



DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2003
(DOLLARS IN THOUSANDS)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
of Danielson Holding Corporation ("DHC") have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals, except for
the other than temporary impairment charges discussed in Notes 3 and 9)
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
thereto included in DHC's Annual Report on Form 10-K for the year ended December
27, 2002. Operating results for the interim period are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 2003.

DHC is a holding company whose subsidiaries consist principally of
insurance operations in the western United States, primarily California, and
American Commercial Lines LLC ("ACL"), an integrated marine transportation and
service company. ACL provides barge transportation and ancillary services
throughout the inland United States and Gulf Intracoastal Waterway Systems,
which include the Mississippi, Ohio and Illinois Rivers and their tributaries
and the Intracoastal canals that parallel the Gulf Coast. In addition, ACL
provides barge transportation services on the Orinoco River in Venezuela and the
Parana/Paraguay River System serving Argentina, Brazil, Paraguay, Uruguay and
Bolivia.

DHC holds all of the voting stock of Danielson Indemnity Company
("DIND"). DIND owns 100% of the common stock of National American Insurance
Company of California, DHC's principal operating insurance subsidiary, which
owns 100% of the common stock of Valor Insurance Company, Incorporated
("Valor"). National American Insurance Company of California and its
subsidiaries are collectively referred to herein as "NAICC". The operations of
NAICC are in property and casualty insurance. NAICC writes non-standard private
passenger insurance in the western United States, primarily California.
Effective July 7, 2003, NAICC discontinued writing new commercial automobile
insurance.

As more fully disclosed in Note 2, ACL, which was acquired on May 29,
2002, and certain of its subsidiaries filed a petition on January 31, 2003 with
the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany
Division to reorganize under Chapter 11 of the U.S. Bankruptcy Code. As a result
of this filing, while DHC continues to exercise significant influence over the
operating and financial policies of ACL, it no longer maintains control of the
activities of ACL. Accordingly, DHC no longer includes ACL and its subsidiaries
as consolidated subsidiaries in DHC's financial statements. DHC's investments in
these entities are presented using the equity method effective as of the
beginning of the year ending December 31, 2003. DHC has direct ownership
interest in two 50% owned subsidiaries of ACL. It owns 5.4% of the remaining 50%
interest in Global Materials Services, LLC ("GMS") and the remaining 50%
interest in Vessel Leasing, LLC ("Vessel Leasing"). These direct ownership
interests are also reported using the equity method of accounting since DHC has
the ability to exercise significant influence over the operating and financial
policies of these companies. Under the equity method of accounting, DHC reports
its share of ACL's, GMS's, and Vessel Leasing's ("Investees") income and loss
for the period based on its ownership interest. DHC, GMS and Vessel Leasing are
not guarantors of ACL's debt nor are they liable for any of ACL's liabilities.

ACL, GMS and Vessel Leasing are together referenced to herein as
"Marine Services". DHC's insurance subsidiaries are referenced to herein as
"Insurance Services".

The December 27, 2002 consolidated financial statements include the
accounts of DHC, ACL and its consolidated subsidiaries, GMS, Vessel Leasing and
DIND and its consolidated subsidiaries. The June 30, 2003 consolidated financial
statements include the accounts of DHC and DIND and its consolidated
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. As previously mentioned, DHC's investments in ACL and its
consolidated subsidiaries, GMS and Vessel Leasing are included in the six months
ended June 30, 2003 consolidated financial statements using the equity method of
accounting.

The accompanying consolidated statement of financial position at
December 27, 2002 has been derived from the audited consolidated financial
statements at that date but does not include all of the information and
footnotes required by accounting principals generally accepted in the United
States of America for complete financial statements. Amounts on this statement
have been reclassified to conform to the June 30, 2003 presentation.

6



DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2003
(DOLLARS IN THOUSANDS)

NOTE 1. BASIS OF PRESENTATION (CONTINUED)

Through June 30, 2002, DHC's reporting periods were calendar month ends
while ACL's reporting periods ended on the last Friday of the month. In the
third quarter of 2002, DHC conformed its reporting periods to ACL's. Effective
with the quarter ended June 30, 2003, DHC is again reporting on a calendar month
end basis to conform with DIND and its consolidated subsidiaries' reporting
periods. The transition period activity is included in the consolidated
financial statements for the quarter ended June 30, 2003 and is considered
immaterial.

NOTE 2. CHAPTER 11 FILING

During 2002 and 2003, ACL experienced a decline in barging rates,
reduced shipping volumes and excess barging capacity during a period of slow
economic growth and a global economic recession. Due to these factors, ACL's
revenues and earnings did not meet expectations and ACL's liquidity was
significantly impaired and debt covenant violations occurred. As a result, ACL
was unable to meet its financial obligations as they became due. On January 31,
2003 (the "Petition Date"), ACL filed a petition with the U.S. Bankruptcy Court
for the Southern District of Indiana, New Albany Division (the "Bankruptcy
Court") to reorganize under Chapter 11 of the U.S. Bankruptcy Code (the
"Bankruptcy Code" or "Chapter 11") under case number 03-90305. Included in the
filing are ACL, ACL's direct parent (American Commercial Lines Holdings LLC),
American Commercial Barge Line LLC, Jeffboat LLC, Louisiana Dock Company LLC and
ten other U.S. subsidiaries of ACL (collectively with ACL, the "Debtors") under
case numbers 03-90306 through 03-90319. These cases are jointly administered for
procedural purposes before the Bankruptcy Court under case number 03-90305. The
Chapter 11 petitions do not cover any of ACL's foreign subsidiaries or certain
of its U.S. subsidiaries. Neither DHC, GMS nor Vessel Leasing filed for Chapter
11 protection and are not a party to any proceedings under the Bankruptcy Code.

ACL and the other Debtors are continuing to operate their businesses as
debtors-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court. As debtors-in-possession, the Debtors may not engage in
transactions outside of the ordinary course of business without approval, after
notice and hearing, of the Bankruptcy Court. As part of the Chapter 11 cases,
the Debtors intend to develop and propose for confirmation pursuant to Chapter
11 a plan of reorganization that will restructure the operations and liabilities
of the Debtors to the extent necessary to result in the continuing viability of
ACL. A filing date for such a plan has not been determined; however, the Debtors
had the exclusive right to file a plan of reorganization at any time during the
120 day period following January 31, 2003. The Debtors filed a motion to extend
such time period 120 days, and the deadline was extended on May 30, 2003 until
September 29, 2003. If the exclusive filing period were to expire, other
parties, such as ACL creditors, would have the right to propose alternative
plans of reorganization.

The Debtors have entered into a debtor-in-possession Credit Facility
(the "DIP Credit Facility") that provides up to $75 million of financing. As of
June 30, 2003, the Debtors have drawn $50 million, which was used to retire
ACL's Pre-Petition Receivables Facility and which continues to be used to fund
the Debtors' day-to-day cash needs. The DIP Credit Facility is secured by the
same and additional assets that collateralized ACL's Senior Credit Facilities
and Pre-Petition Receivables Facility, and bears interest, at ACL's option, at
LIBOR plus four percent or an Alternate Base Rate (as defined in the DIP Credit
Facility) plus three percent. There are also certain interest rates in the event
of a default under the facility.

The DIP Credit Facility also contains certain restrictive covenants
that, among other things, restrict the Debtors' ability to incur additional
indebtedness or guarantee the obligations of others. ACL is also required to
maintain minimum cumulative EBITDA, as defined in the DIP Credit Facility, and
limit its capital expenditures.

Certain events of default under ACL's Senior Credit Facilities, Senior
Notes, PIK Notes and Old Senior Notes occurred subsequent to December 27, 2002,
the effects of which are stayed pursuant to certain provisions of the Bankruptcy
Code.

7



DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2003
(DOLLARS IN THOUSANDS)

NOTE 2. CHAPTER 11 FILING (CONTINUED)

Under Chapter 11, actions by creditors to collect claims in existence
at the filing date are stayed or deferred absent specific Bankruptcy Court
authorization to pay such pre-petition claims while the Debtors continue to
manage their businesses as debtors-in-possession and act to develop a plan of
reorganization for the purpose of emerging from these proceedings. A claims bar
date has not yet been established. The Debtors have received approval from the
Bankruptcy Court to pay or otherwise honor certain of their pre-petition
obligations, including but not limited to employee wages and certain employee
benefits, certain critical vendor payments, certain insurance and claim
obligations and certain tax obligations as a plan of reorganization is
developed.

The amount of the claims to be filed against the Debtors by their
creditors could be significantly different than the amount of the liabilities
recorded by the Debtors. The Debtors also have numerous executory contracts and
other agreements that could be assumed or rejected during the Chapter 11
proceedings. Parties affected by these rejections may file claims with the
Bankruptcy Court in accordance with the reorganization process. Under these
Chapter 11 proceedings, the rights of and ultimate payments to pre-petition
creditors, rejection damage claimants and ACL's equity investor may be
substantially altered. This could result in claims being liquidated in the
Chapter 11 proceedings at less (possibly substantially less) than 100% of their
face value, and the membership interests of ACL's equity investor, DHC, being
diluted or cancelled. The Debtors have not yet proposed a plan of
reorganization. The Debtors' pre-petition creditors and DHC will each have a
vote in the plan of reorganization.

The United States Trustee appointed an unsecured creditors' committee.
The official committee and its legal representatives have a right to be heard on
all matters that come before the Bankruptcy Court.

The Chapter 11 process presents inherent material uncertainty; it is
not possible to determine the additional amount of claims that may arise or
ultimately be filed, or predict the length of time that the Debtors will
continue to operate under the protection of Chapter 11, the outcome of the
Chapter 11 proceedings in general, whether the Debtors will continue to operate
in their present organizational structure, or the effects of the proceedings on
the business of ACL, the other Debtors and its non-filing subsidiaries and
affiliates, or on the interests of the various creditors and equity holder. The
ultimate recovery, if any, by creditors and DHC will not be determined until
confirmation of a plan or plans of reorganization. No assurance can be given as
to what value will be ascribed in the bankruptcy proceedings to each of these
constituencies. While it cannot presently be determined, DHC believes it will
receive little or no value with respect to its equity interest in ACL.
Accordingly, after recognizing its equity in ACL's net loss for the quarter
ended March 28, 2003, DHC wrote off its remaining investment in ACL as an other
than temporary asset impairment (see Note 3).

NOTE 3. EQUITY IN INCOME AND LOSSES OF MARINE SERVICES INVESTEES

As discussed in Note 2, DHC wrote off its investment in ACL during the
quarter ended March 28, 2003. The GMS and Vessel Leasing investments are not
considered by DHC to be impaired. The 2003 reported net loss for the periods
indicated includes, under the caption "Equity in Net Income (Loss) of
Unconsolidated Marine Services Subsidiaries", the following components:



Quarter Six Months
Ended Ended
June 30,2003 June 30,2003
------------ ------------

ACL's Reported Loss for the Three Months
Ended March 28, 2003 $ - $ (46,998)
Other Than Temporary Impairment of Remaining
Investment in ACL as of March 28, 2003 - (8,205)
----------- ------------
Total ACL (Loss) - (55,203)
GMS Income (Loss) 8 (26)
Vessel Leasing Income 69 132
----------- ------------
Equity in Net Income (Loss) of Unconsolidated
Marine Services Subsidiaries $ 77 $ (55,097)
=========== ============


8



DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2003
(DOLLARS IN THOUSANDS)

NOTE 3. EQUITY IN INCOME AND LOSSES OF MARINE SERVICES INVESTEES (CONTINUED)

Activity in these subsidiaries for the quarter ended June 30, 2003 is as
follows:



Vessel
ACL GMS Leasing
---------- --------- ---------

Net Revenue $ 158,326 $ 12,732 $ 1,151
Operating (Loss) Income (1,596) 1,414 676
Net (Loss) Income (15,699) 150 138


Activity in these subsidiaries for the six months ended June 30, 2003 is as
follows:



Vessel
ACL GMS Leasing
---------- ---------- ---------

Net Revenue $ 297,479 $ 25,882 $ 2,303
Operating (Loss) Income (29,387) 2,032 1,356
Net (Loss) Income (62,697) (474) 264


NOTE 4. PER SHARE DATA

Per share data is based on the weighted average number of shares of
common stock of DHC, par value $0.10 per share ("Common Stock"), outstanding
during the relevant period. Diluted earnings per share computations, as
calculated under the treasury stock method, include the average number of shares
of additional outstanding Common Stock issuable for stock options and warrants,
whether or not currently exercisable. Basic and fully diluted earnings per share
data have been calculated using the average number of outstanding shares of
Common Stock. Average shares were 30,817,297 for the quarter and six months
ended June 30, 2003 and 23,918,145 and 21,724,888 for the quarter and six months
ended June 30, 2002. Diluted earnings per share do not include shares related to
stock options and warrants because their effect is anti-dilutive.

NOTE 5. REINSURANCE

NAICC cedes reinsurance on an excess of loss basis for workers'
compensation risks in excess of $500 prior to April 2000 and $200 thereafter.
For all other lines, NAICC cedes reinsurance on an excess of loss basis for
exposure in excess of $250.

NOTE 6. INCOME TAXES

DHC files a Federal consolidated income tax return with its
subsidiaries. DHC's Federal consolidated return includes the taxable results of
certain grantor trusts established pursuant to a prior court approved
reorganization to assume various liabilities of certain present and former
subsidiaries of DHC. These trusts are not consolidated with DHC for financial
statement purposes. DHC records its interim tax provisions based upon estimated
effective tax rates for the year.

DHC's provision for income taxes in the condensed consolidated
statements of operations consists of certain state and other taxes. Tax filings
for these jurisdictions do not consolidate the activity of the trusts referred
to above, and reflect preparation on a separate company basis. For further
information, reference is made to Note 14 of the Notes to the Consolidated
Financial Statements included in DHC's Annual Report on Form 10-K for the year
ended December 27, 2002.

9



DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2003
(DOLLARS IN THOUSANDS)

NOTE 7. STOCKHOLDERS' EQUITY

In connection with efforts to preserve DHC's net operating tax loss
carryforwards, DHC has imposed restrictions on the ability of holders of five
percent or more of DHC Common Stock to transfer the Common Stock owned by them
and to acquire additional Common Stock, as well as the ability of others to
become five percent stockholders as a result of transfers of Common Stock.

NOTE 8. BUSINESS SEGMENTS



Insurance Marine Corporate Total
--------- --------- --------- ---------

Quarter Ended June 30, 2003:
Operating Revenues $ 11,837 $ --- $ --- $ 11,837
Segment Earnings (Loss), Including (3,901) 77 (677) (4,501)
Equity in Net Income of Unconsolidated
Marine Services Subsidiaries ---

Quarter Ended June 30, 2002:
Operating Revenues $ 23,149 $60,937 $ --- $ 84,086
Segment Earnings (Loss) 870 2,112 7,195 10,177
Equity in Net (Loss) of Unconsolidated

Six Months Ended June 30, 2003:
Operating Revenues $ 22,913 $ --- $ --- $ 22,913
Segment (Loss), Including (5,684) (55,097) (1,544) (62,325)
Marine Services Subsidiaries

Six Months Ended June 30, 2002:
Operating Revenues $ 43,868 $60,937 $ --- $104,805
Segment Earnings (Loss) 1,320 2,112 6,708 10,140


Total Assets decreased from December 27, 2002 compared to June 30, 2003
due to the change in reporting for the Marine Services Subsidiaries from
consolidation to the equity method, as described in Note 1. Additionally, the
investment in ACL was written off during the quarter ended March 28, 2003, as
described in Note 3.

The following is a reconciliation of segment (loss) earnings to pre-tax
consolidated totals:



Quarter Ended Quarter Ended Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------- ------------- ---------------- ----------------

Total Segment (Loss) Earnings .......... $(4,501) $10,177 $(62,325) $10,140
Unallocated Amounts:
Interest Expense .................. --- 4,989 --- 4,989
Other, Net ........................ --- 702 --- 702
------- ------- ------- -------
(Loss) Income before Provision
for Income Taxes ................... $(4,501) $ 4,486 $(62,325) $ 4,449
======= ======= ======= =======


10



DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2003
(DOLLARS IN THOUSANDS)

NOTE 9. INVESTMENTS

DHC's fixed maturity and equity securities portfolio is classified as
"available for sale" and is carried at fair value. Changes in fair value are
credited or charged directly to stockholders' equity as unrealized gains or
losses, respectively. "Other than temporary" declines in fair value are recorded
as realized losses in the statement of operations and the cost basis of the
security is reduced. DHC recorded an "other than temporary" decline in fair
value of its securities portfolio of $598 and $1,439 for the quarter and six
months ended June 30, 2003, respectively.

NOTE 10. INCENTIVE COMPENSATION PLANS

Stock-based compensation cost is measured using the intrinsic value
based method of accounting prescribed by Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" ("APB 25") for DHC directors and
employees. The fair value based method of accounting prescribed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") is used to measure stock-based compensation for DHC
contractors. Pro forma net loss and loss per share are disclosed below as if the
fair value based method of accounting under SFAS 123 had been applied to all
stock-based compensation awards.



Quarter Ended Quarter Ended Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------- ------------- ------------- -------------

Stock Option Expense Recorded..................... $ (24) $ - $ (49) $ -
======== ======== ======== ========

Net (Loss) Income As Reported..................... $ (4,501) $ 4,341 $(62,337) $ 4,287
Pro Forma Compensation Expense .................... (553) (185) (1,106) (334)
-------- -------- -------- --------
Pro Forma Net (Loss) Income ..................... $ (5,054) $ 4,156 $(63,443) $ 3,953
======== ======== ======== ========

Diluted (Loss) Income Per Share:
As Reported.................................. $ (.15) $ .18 $ (2.02) $ .19
Pro Forma .................................... (.16) .17 (2.06) .18


NOTE 11. COMPREHENSIVE INCOME (LOSS)



Quarter Ended Quarter Ended Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------- ------------- ------------- -------------

Net (Loss) Income ............................ $ (4,501) $ 4,341 $(62,337) $ 4,287
Unrealized Holding Gains (Losses)
Arising During the Period .................... 588 207 (537) 11,132
Reclassification Adjustments:
Net Realized Gains on Available for sale
Securities Included in Net (Loss)............. (216) (12,478) (747) (12,478)
Amount Included in Equity in Net Loss of
Unconsolidated Marine Services Subsidiaries --- --- 15,322 ---
-------- -------- -------- --------

Total Comprehensive (Loss) Income ............ $ (4,129) $ (7,930) $(48,299) $ 2,941
======== ======== ======== ========


11



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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in the Quarterly Report on Form 10-Q may constitute
"forward-looking" statements as defined in Section 27A of the Securities Act of
1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the
"PSLRA") or in releases made by the Securities and Exchange Commission, all as
may be amended from time to time. Such forward looking statements involve known
and unknown risks, uncertainties and other important factors that could cause
the actual results, performance or achievements of Danielson Holding Corporation
("DHC") and its subsidiaries, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Statements that are not historical fact are
forward-looking statements. Forward looking statements can be identified by,
among other things, the use of forward-looking language, such as the words
"plan", "believe", "expect", "anticipate", "intend", "estimate", "project",
"may", "will", "would", "could", "should", "seeks", or "scheduled to", or other
similar words, or the negative of these terms or other variations of these terms
or comparable language, or by discussion of strategy or intentions. These
cautionary statements are being made pursuant to the Securities Act, the
Exchange Act and the PLSRA with the intention of obtaining the benefits of the
"safe harbor" provisions of such laws. DHC cautions investors that any
forward-looking statements made by DHC are not guarantees or indicative of
future performance. Important assumptions and other important factors that could
cause actual results to differ materially from those forward-looking statements
with respect to DHC, include, but are not limited to, the risks and
uncertainties affecting their businesses described in Item 1 of DHC's Annual
Report on Form 10-K for the year ended December 27, 2002 and in other securities
filings by DHC.

Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable,
actual results could differ materially from a projection or assumption in any of
our forward-looking statements. Our future financial condition and results of
operations, as well as any forward-looking statements, are subject to change and
inherent risks and uncertainties. The forward-looking statements contained in
this Quarterly Report on Form 10-Q are made only as of the date hereof and DHC
does not have or undertake any obligation to update or revise any
forward-looking statements whether as a result of new information, subsequent
events or otherwise, unless otherwise required by law.

OVERVIEW AND SIGNIFICANT EVENTS

DHC is organized as a holding company with substantially all of its
current operations conducted in the Insurance Services industry. DHC also has
investments in companies engaged in the Marine Services industry which,
beginning in 2003, are accounted for under the equity method.

DHC, on a parent-only basis, has continuing expenditures for
administrative expenses and derives revenues primarily from investment returns
on portfolio securities. Therefore, the analysis of DHC's financial condition is
generally done on an operating subsidiary basis. DHC possesses approximately
$605 million in tax net operating loss carryforwards. DHC's strategic and
business plan is to acquire businesses that will allow DHC to earn an attractive
return on its investments.

In May 2002, as part of DHC's implementation of its strategic plan, DHC
acquired a 100% ownership interest in American Commercial Lines, LLC ("ACL")
thereby entering into the marine transportation, construction and related
service provider businesses.

On January 31, 2003, ACL and certain of its subsidiaries and its
immediate direct parent entity, American Commercial Lines Holdings, LLC ("ACL
Holdings"), filed a petition with the U.S. Bankruptcy Court to reorganize under
Chapter 11 of the U.S. Bankruptcy Code. For additional information see Note 2 in
the accompanying financial statements and DHC's Annual Report on Form 10-K for
the year ended December 27, 2002.

12



DHC owns a direct 5.4% interest in Global Materials Services, LLC
("GMS") and a direct 50% interest in Vessel Leasing, LLC ("Vessel Leasing"). ACL
owns 50% of GMS and the remaining 50% of Vessel Leasing. Neither of these two
companies filed for Chapter 11 protection. GMS is an owner and operator of
marine terminals and warehouse operations, and Vessel Leasing leases barges to
ACL's barge transportation operations, which are in Chapter 11. DHC, GMS and
Vessel Leasing are not guarantors of ACL's debt nor are they liable for any of
ACL's liabilities.

As a result of the bankruptcy filing, while DHC continues to exercise
significant influence over the operating and financial policies of ACL, it no
longer maintains control of ACL. Accordingly, for the six months ended June 30,
2003, DHC has accounted for its investments in ACL, GMS and Vessel Leasing using
the equity method of accounting. Under the equity method of accounting, DHC
reports its share of the equity investees' income or loss based on its ownership
interest.

In conjunction with the uncertainty of the outcome of the ACL
bankruptcy, DHC evaluated the carrying values of its investments in ACL, GMS and
Vessel Leasing and recorded an impairment loss for its remaining original
investment in ACL during the quarter ended March 28, 2003 as described in Note 3
of the accompanying financial statements. No impairment loss adjustments have
been made to the carrying values of GMS and Vessel Leasing. The carrying values
of the investments in GMS and Vessel Leasing at June 30, 2003 were $1.2 million
and $3.0 million, respectively.

INSURANCE OPERATIONS

The operations of DHC's insurance subsidiary, National American
Insurance Company of California ("NAICC"), are primarily property and casualty
insurance. Effective July 2003, the decision was made to focus exclusively on
the California non-standard personal automobile insurance market. Effective July
7, 2003, NAICC ceased quoting new policy applications for commercial automobile
insurance and began the process of providing the required statutory notice of
its intention not to renew existing policies. It is expected that by September
2004 NAICC will have completely exited the commercial automobile marketplace.

QUARTER ENDED JUNE 30, 2003 COMPARED WITH QUARTER ENDED JUNE 30, 2002

RESULTS OF INSURANCE OPERATIONS

Net premiums earned were $9.9 million and $17.6 million for the
quarters ended June 30, 2003 and June 30, 2002, respectively. The change in net
premiums earned during those periods was directly related to the change in net
premiums written. Net written premiums were $10.0 million and $17.0 million for
the quarters ended June 30, 2003 and June 30, 2002, respectively.

The $7.0 million decrease in net written premiums for 2003 was
attributable to a reduction in commercial and private passenger automobile
policies written and the expiration of all in force workers' compensation
policies.

Net written premiums in workers' compensation decreased by $2.2 million
for the quarter ended June 30, 2003 as compared to the quarter ended June 30,
2002. Net written premiums for non-standard private passenger automobile were
$4.8 million for the quarter ended June 30, 2003, a decrease of $2.7 million
from the comparable period in 2002. The decrease in non-standard private
passenger automobile net written premiums was primarily due to underwriting
criteria tightening in 2003. Net written premiums for commercial automobile were
$5.2 million for the quarter ended June 30, 2003, a decrease over the comparable
period in 2002 of $2.1 million. NAICC implemented rate increases of 13%
in commercial automobile effective April 1, 2003 on new business and June 1,
2003 on renewal business. NAICC's overall price position in the market reduced
its competitiveness resulting in a decline in production.

13



Net investment income was $1.0 million and $1.5 million for the
quarters ended June 30, 2003 and June 30, 2002, respectively. The decrease was
attributable to reductions in both the overall portfolio yield and the cash and
invested asset base. Realized gains were $0.8 million in the quarter ended June
30, 2003 and were due to gains on the sale of equity securities of $0.5 million
and fixed income securities of $0.94 million offset by the impairment loss on
one equity security of $0.6 million. Realized gains recorded for the comparable
period in 2002 were $4.0 million and included a $5.2 million gain related to the
conversion of ACL notes to equity as a result of ACL's reorganization in May
2002, offset by other realized losses related to the sale of equity securities.

Net losses and loss adjustment expenses ("LAE") were $12.4 million and
$16.7 million for the quarters ended June 30, 2003 and June 30, 2002,
respectively. The resulting loss and LAE ratios for the corresponding periods
were 125.5% and 95.0%, respectively. The loss and LAE ratio increased in the
quarter ended June 30, 2003 over the comparable period in 2002 due primarily to
recording $3.0 million in adverse development of 2002 and prior accident years
in the commercial automobile line and $1.7 million in adverse development in the
Valor workers' compensation line.

Policy acquisition costs were $2.1 million and $4.3 million for the
quarters ended June 30, 2003 and June 30, 2002, respectively. As a percentage of
net premiums earned, policy acquisition expenses were 21.3% and 24.5% for the
quarters ended June 30, 2003 and June 30, 2002, respectively. The decrease in
the policy acquisition expense ratio in 2003 reflects a higher deferral rate for
the commercial automobile line, which was being written in 2003, but was under a
production moratorium during the same period in 2002. It also reflects a change
in the recording agents' balances written-off in 2003. This change reclassified
the year-to-date balances written-off from acquisition expense to general and
administrative expense.

General and administrative expenses were $1.3 million for both of the
quarters ended June 30, 2003 and June 30, 2002.

Combined underwriting ratios were 159.7% and 127.3% for the quarters
ended June 30, 2003 and June 30, 2002, respectively. Underwriting ratios measure
the level of loss and loss expenses to earned premiums as well as level of
expenses to written premiums.

SIX MONTHS ENDED JUNE 30, 2003 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2002

RESULTS OF INSURANCE OPERATIONS

Net premiums earned were $20.2 million and $36.6 million for the six
months ended June 30, 2003 and June 30, 2002, respectively. The change in net
premiums earned during those periods was directly related to the change in net
written premiums. Net written premiums were $21.4 million and $32.8 million for
the six months ended June 30, 2003 and June 30, 2002, respectively.

The $11.4 million decrease in net written premiums for 2003 was
attributable to a reduction in commercial and private passenger automobile
policies written and the expiration of all in force workers' compensation
policies.

Net written premiums in workers' compensation decreased by $5.8 million
during 2003 over the comparable period in 2002. The final workers' compensation
policy expired in January 2003. Net written premiums for non-standard private
passenger automobile were $9.9 million in 2003, a decrease of $4.0 million from
the comparable period in 2002. The decrease in non-standard private passenger
automobile net written premiums was due to underwriting criteria tightening. Net
written premiums for commercial automobile were $11.2 million in 2003, a
decrease over the comparable period in 2002 by $1.6 million. Although NAICC
implemented rate increases of 13% in commercial automobile effective April 1,
2003 on new business and June 1, 2003 on renewal business, NAICC's overall price
position in the market reduced its competitiveness resulting in a decline in
production. Effective July 7, 2003, NAICC cancelled the commercial automobile
program and began providing the required statutory notice of its intention not
to renew existing policies.

14



Net investment income was $2.2 million and $2.9 million for the six
months ended June 30, 2003 and June 30, 2002, respectively. The decrease was
attributable to reductions in both the overall portfolio yield and the cash and
invested asset base. Average fixed income portfolio yield on bonds was 5.26%
during the six months ended June 30, 2003 compared to 6.20% for the six months
ended June 30, 2002. Average cash and invested assets earning interest,
exclusive of its investments in ACL, decreased by $18.1 million from the
comparable period in 2002 with an ending asset base of $88.9 million as of June
30, 2003. Realized gains were $0.3 million in the six months ended June 30, 2003
and were due to gains on the sale of equity securities of $0.8 million and fixed
income securities of $0.9 million offset by the impairment loss on two equity
securities of $1.4 million. Realized gains recorded for the comparable period in
2002 were $4.0 million and included a $5.2 million gain related to the
conversion of ACL notes to equity as a result of ACL's reorganization in May
2002, offset by other realized losses related to the sale of equity securities.

Net losses and LAE were $21.6 million and $31.4 million for the six
months ended June 30, 2003 and June 30, 2002, respectively. The resulting loss
and LAE ratios for the corresponding periods were 106.7% and 85.8%,
respectively. The loss and LAE ratio increased in 2003 over 2002 due primarily
to recording $4.3 million in adverse development of 2002 and prior accident
years in the commercial automobile line and $2.0 million in adverse development
in the Valor workers' compensation line. In 2002, $4.1 million of adverse
development was recognized in workers' compensation and private passenger
automobile lines. Excluding the effects of adverse development in both periods,
the loss and LAE ratio was 76.3% and 74.6% for 2003 and 2002, respectively.

Policy acquisition costs were $4.7 million and $8.4 million for the six
months ended June 30, 2003 and June 30, 2002, respectively. As a percentage of
net premiums earned, policy acquisition expenses were 23.4% and 22.9% for the
six months ended June 30, 2003 and June 30, 2002, respectively. The increase in
the policy acquisition expense ratio in 2003 was due primarily to earned
premiums decreasing at a greater rate than NAICC was able to reduce its variable
and fixed acquisition costs.

General and administrative expenses were $2.3 million and $2.8 million
for the six months ended June 30, 2003 and June 30, 2002, respectively. General
and administrative expenses decreased in 2003 compared to 2002 due to the
relationship of expenses supporting claims.

Combined underwriting ratios were 141.5% and 116.6% for the six months
ended June 30, 2003 and June 30, 2002, respectively. Underwriting ratios measure
the level of loss and loss expenses to earned premiums as well as level of
expenses to written premiums.

CASH FLOW FROM INSURANCE OPERATIONS

Cash used in operations was $13.1 million and $7.2 million for the six
months ended June 30, 2003 and June 30, 2002, respectively. The increase in cash
used in operations was due to NAICC experiencing a condition in which claim
payments related to the lines and territories placed into run-off exceeded
premium receipts from existing lines. Such negative cash flow required the sale
of invested assets to meet obligations as they arose. Cash provided by investing
activities was $10.2 million and $7.7 million for the six months ended June 30,
2003 and June 30, 2002, respectively. The $2.5 million increase in cash provided
by investing activities was primarily due to the sale of fixed income
securities. The primary source of cash for investment in fixed income securities
in 2003 resulted from a $4.0 million capital contribution by DHC and early
repayment of a $4.0 million promissory note that was due to NAICC in May 2004.
Overall cash and invested assets at June 30, 2003 were $92.4 million compared to
$97.3 million at December 27, 2002.

LIQUIDITY AND CAPITAL RESOURCES - INSURANCE OPERATIONS

NAICC requires both readily liquid assets and adequate capital to meet
ongoing obligations to policyholders and claimants, as well as to pay ordinary
operating expenses. NAICC meets both its short-term and long-term liquidity
requirements through operating cash flows that include premium receipts,
investment income and reinsurance recoveries. To the extent operating cash flows
do not provide sufficient cash flow, NAICC relies on the sale of invested
assets. NAICC's investment policy guidelines require that all loss and LAE
liabilities be matched by a comparable amount of investment grade assets. DHC
believes that NAICC has both adequate capital resources and sufficient
reinsurance to meet any unforeseen events such as natural catastrophes,
reinsurer insolvencies, or possible reserve deficiencies.

15



The National Association of Insurance Commissioners provides minimum
solvency standards in the form of risk based capital requirements ("RBC"). The
RBC model for property and casualty insurance companies requires that carriers
report their RBC ratios based on their statutory annual statements as filed with
the regulatory authorities. As noted above, ACL filed for protection under
Chapter 11 of the Bankruptcy Code. As a result, it was determined for statutory
insurance accounting purposes that NAICC's investment in ACL was fully impaired.
At December 31, 2002, NAICC recognized a statutory charge to its surplus of $7.4
million. This charge, when combined with NAICC's underwriting results and
investment losses reduced its statutory surplus level below the Company Action
Level of NAICC's RBC calculation. In response to the above statutory condition,
DHC repaid the $4 million note due May 2004 to NAICC, and further contributed $4
million to NAICC to increase its statutory capital during February 2003. With
permission from the California Department of Insurance, these transactions were
recorded at December 31, 2002. As a condition to granting such permission, the
Department will require NAICC to obtain permission prior to entering into any
future loans with an affiliate. Including the $8 million contribution noted
above, NAICC's reported capital and surplus as of December 31, 2002 was above
the Company Action Level of NAICC's RBC calculation. NAICC has projected its RBC
requirement as of June 30, 2003 under the RBC model and believes that it is
above the Company Action Level of NAICC's RBC calculation.

Two other common measures of capital adequacy for insurance companies
are premium-to-surplus ratios (which measure current operating risk) and
reserves-to-surplus ratios (which measure financial risk related to possible
changes in the level of loss and LAE reserves). A commonly accepted standard for
net written premium-to-surplus ratio is 3 to 1, although this varies with
different lines of business. NAICC's annualized premium-to-statutory surplus
ratio of 2.2 to 1 and 1.8 to 1 for the six months ended June 30, 2003 and June
30, 2002, respectively, remains well under current industry standards. A
commonly accepted standard for the ratio of losses and LAE reserves-to-statutory
surplus is 5 to 1, compared with NAICC's ratio of 3.6 to 1 at June 30, 2003.

RESULTS OF PARENT OPERATIONS

General and administrative expenses were approximately $0.7 million
lower during the quarter ended June 30, 2003 compared to the quarter ended June
30, 2002. For the six months ended June 30, 2003 and 2002, general and
administrative expenses were approximately $0.3 million higher than the
comparable period in 2002. This is primarily attributable to increased
professional fees incurred concerning the ACL bankruptcy as well as increased
insurance costs.

CASH FLOW FROM PARENT-ONLY OPERATIONS

Operating cash flow of DHC, on a parent-only basis, is primarily
dependent on the rate of return achieved on its investment portfolio and the
payment of general and administrative expenses incurred in the normal course of
business. For the six months ended June 30, 2003 and June 30, 2002, cash used in
parent-only operating activities was $0.4 million and $1.3 million,
respectively.

During the six months ended June 30, 2003, DHC, on a parent-only basis,
had net cash provided by investing and financing activities of approximately
$0.6 million. An investment in an available-for-sale security was sold for
proceeds of $2.5 million and a note receivable from ACLines LLC, in the amount
of $6.0 million, was repaid. DHC made an additional capital contribution of $4
million to NAICC. Additionally, a loan due to NAICC in the amount of $4 million,
plus accrued interest was repaid.

During the six months ended June 30, 2002, DHC, on a parent-only basis,
had net cash provided by investing and financing activities of approximately
$8.0 million. This is primarily due to the excess of the amount of capital
raised in 2002 over the acquisition price of ACL.

LIQUIDITY AND CAPITAL RESOURCES - PARENT-ONLY OPERATIONS

On a parent-only basis, DHC's sources of funds are its investments as
well as dividends received from its subsidiaries. Various state insurance
requirements restrict the amounts that may be transferred to DHC in the form of
dividends or loans from its insurance subsidiaries without prior regulatory
approval.

16



At June 30, 2003 and June 30, 2002, cash and marketable security
investments of DHC, on a parent-only basis, were approximately $3.6 million and
$9.8 million, respectively. This decrease is primarily attributable to DHC
liquidating investment assets to contribute $4 million of capital to NAICC and
fund general and administrative expenses.

OTHER EXPENSES
INTEREST EXPENSE AND OTHER, NET IN THE QUARTER AND SIX MONTHS ENDED
JUNE 30, 2002 RELATES TO THE MARINE SERVICES SUBSIDIARIES.

As noted above, DHC accounts for its investments in Marine Services
subsidiaries under the equity method. The equity in net loss of unconsolidated
Marine Services subsidiaries includes DHC's share of the subsidiaries' reported
net loss of $46.9 million, as well as an other than temporary impairment charge
of $8.2 million related to the investment in ACL.

CASH FLOW INFORMATION

Cash flow information for each of DHC's business segments for the six
months ended June 30, 2003 and 2002 reconciles to the condensed consolidated
statements of cash flows as follows:



JUNE 30, 2003
Insurance Marine Corporate Total
--------- ------ --------- -----

Net Cash Used In Operating Activities $(13,075) $ --- $ (377) $(13,452)
Net Cash Provided By
Investing Activities 10,181 --- 8,593 18,774
Net Cash Provided by (Used In)
Financing Activities 8,000 --- (8,000) ---
-------- ------- -------- --------
Net Increase In Cash and
Cash Equivalents $ 5,106 $ --- $ 216 $ 5,322
======== ======= ======== ========




JUNE 30, 2002
Insurance Marine Corporate Total
--------- ------ --------- -----

Net Cash Used in Operating Activities $ (7,218) $ (2,995) $ (1,257) $(11,470)
Net Cash Provided By (Used In)
Investing Activities 7,717 (1,236) (44,828) (38,347)
Net Cash (Used In) Provided By
Financing Activities --- (940) 52,816 51,876
-------- -------- -------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents $ 499 $ (5,171) $ 6,731 $ 2,059
======== ======== ======== ========


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RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

As noted above, the foregoing discussion may include forward-looking
statements that involve risks and uncertainties. In addition to other factors
and matters discussed elsewhere herein, some of the important factors that, in
the view of DHC, could cause actual results to differ materially from those
discussed in the forward-looking statements include the following:

1. The insurance products sold by NAICC are subject to intense
competition from many competitors, many of whom have
substantially greater resources than NAICC. There can be no
assurance that NAICC will be able to successfully compete and
generate sufficient premium volume at attractive prices to be
profitable.

2. The insurance industry is highly regulated and it is not
possible to predict the impact of future state and federal
regulation on the operations of NAICC.

3. Unpaid losses and LAE are based on estimates of reported
losses, historical experience of losses reported by reinsured
companies for insurance assumed from such insurers, and
estimates based on historical and industry experience for
unreported claims. Such liability is, by necessity, based upon
estimates which may change in the near term, and there can be
no assurance that the ultimate liability will not exceed, or
even materially exceed, such estimates.

4. NAICC is subject to certain regulatory RBC requirements.
Depending on its calculated RBC, NAICC could be subject to
four levels of increasing regulatory intervention ranging from
company action to mandatory control. NAICC's capital is also
one factor used to determine its ability to distribute or loan
funds to DHC.

5. In order to implement its business plan, DHC has been seeking
to enter into strategic partnerships and/or make acquisitions
of businesses that would enable DHC to earn an attractive
return on investment. Restrictions on DHC's ability to issue
additional equity in order to finance any such transactions
exist which could significantly affect DHC's ability to
finance any such transaction. DHC may have limited other
resources with which to implement its strategy and there can
be no assurance that any transaction will be successfully
consummated.

6. One of DHC's potentially significant assets is its net
operating loss carryforwards for income tax reporting
purposes. In order to utilize the loss carryforwards, DHC must
generate taxable income which can offset such carryforwards.
The loss carryforwards are also utilized by income from
certain grantor trusts that were established as part of the
Mission Insurance Group Inc. reorganization. The loss
carryforwards will expire if not used. The loss carryforwards
would be further substantially reduced if DHC were to undergo
an "ownership change" within the meaning of Section 382(g)(1)
of Internal Revenue Code. DHC will be treated as having had an
"ownership change" if there is more than a 50% increase in
stock ownership during a three year "testing period" by "5%
stockholders".

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

DHC's objectives in managing its investment portfolio are to maximize
investment income and investment returns while minimizing overall credit risk.
Investment strategies are developed based on many factors including underwriting
results, overall tax position, regulatory requirements, and fluctuations in
interest rates. Market risk represents the potential for loss due to adverse
changes in the fair value of securities. The market risks related to DHC's fixed
maturity portfolio are primarily interest rate risk and prepayment risk. The
market risks related to DHC's equity portfolio are primarily equity price risk.
There have been no material changes to DHC's market risk for the six months
ended June 30, 2003. For further information, reference is made to Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in DHC's Annual Report on Form 10-K for the year ended December 27,
2002.

ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this Quarterly Report on Form 10-Q,
DHC carried out an evaluation, under supervision and with the participation of
DHC's management, including DHC's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of DHC's disclosure
controls and procedures as defined in Exchange Act Rules 13a-14(c) and
15d-14(c). Based upon and as of the date of that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that DHC's disclosure controls and
procedures were effective, in all material respects, to ensure that information
required to be disclosed in this Quarterly Report on Form 10-Q and DHC's other
periodic filings is recorded, processed, summarized and reported as and when
required.

There have been no significant changes in DHC's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date DHC completed its evaluation. Therefore, no corrective actions were
taken.

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

19



PART II
OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On December 31, 2002, American Commercial Lines LLC ("ACL") elected to
utilize the 30-day grace period with respect to the $7.7 million interest
payment due on its approximately $137.1 million in outstanding 11.25% ACL senior
notes due January 1, 2008 ("Senior Notes"), and the $0.3 million interest
payment due on its approximately $6.5 million in principal outstanding 10.25%
ACL senior notes due June 2008 ("Old Senior Notes"). This non-payment resulted
in an event of default under ACL's $335 million secured credit facility with
JPMorgan Chase Bank ("Senior Credit Facilities") and under ACL's receivables
facility ("Receivables Facility").

Prior to the commencement of business on January 31, 2003, and the
expiration of the 30-day grace period under the Senior Notes and Old Senior
Notes, ACL filed for protection under Chapter 11 of the U.S. Bankruptcy Code
("Bankruptcy Code"). The ACL bankruptcy filing caused additional defaults under
the Senior Credit Facilities, Senior Notes, Old Senior Notes and caused a
default under the approximately $123.1 million outstanding 12% ACL pay-in-kind
senior subordinated notes due July 1, 2008 ("PIK Notes"). The Receivables
Facility was retired on January 31, 2003 with the proceeds from a
debtor-in-possession financing arrangement and any defaults under the
Receivables Facility were extinguished. The effects of all defaults under the
Senior Credit Facilities, Senior Notes, Old Senior Notes and PIK Notes are
stayed pursuant to certain provisions of the Bankruptcy Code.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit 31.1 Certification Pursuant to Section 302 of Sarbanes-Oxley
Act of 2002 from CEO and Exhibit 31.2 Certification Pursuant to Section
302 of Sarbanes-Oxley Act of 2002 from CFO

(b) Exhibit 32.1 Certification of Periodic Financial Report Pursuant to
Section 906 of Sarbanes-Oxley Act of 2002 from CEO and Exhibit 32.2
Certification of Periodic Financial Report Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002 from CFO

(c) Reports on Form 8-K:

DHC filed Current Reports on Form 8-K as follows:



Date Description
- ------------ ---------------------------------------------------------------

May 12, 2003 Relating to change of reporting periods to calendar year basis.


20



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Danielson
Holding Corporation has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

DANIELSON HOLDING CORPORATION
(Danielson Holding Corporation)

By: /s/ PHILIP G. TINKLER
-------------------------
Philip G. Tinkler
Chief Financial Officer
August 14, 2003

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