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As filed with the Securities and Exchange Commission on October 12, 2010

Registration No. 333-165752

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 5
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933



SeaCube Container Leasing Ltd.
(Exact name of registrant as specified in its charter)

Bermuda
(State or Other Jurisdiction of
Incorporation or Organization)
  7359
(Primary Standard Industrial
Classification Code Number)
  98-0655416
(I.R.S. Employer
Identification No.)

1 Maynard Drive
Park Ridge, New Jersey 07656
(201) 391-0800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

Joseph Kwok
Chief Executive Officer
SeaCube Container Leasing Ltd.
1 Maynard Drive
Park Ridge, New Jersey 07656
(201) 391-0800
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)

Copies to:
Joseph A. Coco, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
  David B. Harms, Esq.
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004-2498
(212) 558-4000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:    o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a smaller
reporting company)
  Smaller reporting company o

         The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


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Subject to completion, dated October 12, 2010

The information in this prospectus is not complete and may be changed. Neither we nor the Initial Shareholder may sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and neither we nor the Initial Shareholder are soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Prospectus

7,500,000 shares

SeaCube Container Leasing Ltd.

Common shares

$             per share

This is the initial public offering of our common shares. We are selling 2,500,000 common shares and the Initial Shareholder identified in this prospectus is selling an additional 5,000,000 common shares in this offering. We will not receive any proceeds from the sale of our common shares by the Initial Shareholder. After this offering, our Initial Shareholder will own approximately 58% of our common shares. Our Initial Shareholder, Seacastle Operating Company Ltd., is indirectly owned by private equity funds that are managed by an affiliate of Fortress Investment Group LLC.

We currently expect the initial public offering price to be between $16.00 and $18.00 per share. Our common shares have been authorized for listing on the New York Stock Exchange under the symbol "BOX", subject to official notice of issuance.

Investing in our common shares involves risks. See "Risk Factors" beginning on page 16.

None of the Securities and Exchange Commission, any state securities commission, the Minister of Finance and the Registrar of Companies in Bermuda or the Bermuda Monetary Authority have approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

   

    Per share     Total  
   

Public offering price

  $                 $                

Underwriting discount

 
$

             
 
$

             
 

Proceeds to us (before expenses)

 
$

             
 
$

             
 

Proceeds to the Initial Shareholder (before expenses)

 
$

             
 
$

             
 
   

We have granted the underwriters an option to purchase up to 375,000 additional common shares, and the Initial Shareholder has granted the underwriters an option to purchase up to 750,000 additional common shares, in each case at the public offering price less underwriting discounts and commissions, for the purpose of covering over-allotments.

The underwriters expect to deliver the shares to purchasers on or about                           , 2010.


J.P. Morgan

 

Citi

 

Deutsche Bank Securities

 

Wells Fargo Securities


Credit Suisse

 

Dahlman Rose & Company

 

DnB NOR Markets

 

DVB Capital Markets

 

Nomura

                           , 2010


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        We are responsible for the information contained in this prospectus and in any free writing prospectus we may authorize to be delivered to you. We have not, and the Initial Shareholder and the underwriters have not, authorized anyone to give you any other information, and take no responsibility for any other information that others may give you. We are not, and the Initial Shareholder and underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

        Consent under the Exchange Control Act 1972 (and its related regulations) has been obtained from the Bermuda Monetary Authority for the issue and transfer of our common shares to and between persons resident and non-resident of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes the New York Stock Exchange (the "NYSE"). This prospectus will be filed with the Registrar of Companies in Bermuda in accordance with Bermuda law. In granting such consent and in accepting this prospectus for filing, neither the Bermuda Monetary Authority nor the Registrar of Companies in Bermuda accepts any responsibility for our financial soundness or the correctness of any of the statements made or opinions expressed in this prospectus.



TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    16  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    39  

USE OF PROCEEDS

    41  

DIVIDEND POLICY

    42  

CAPITALIZATION

    43  

DILUTION

    44  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

    46  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    48  

INDUSTRY

    80  

BUSINESS

    89  

MANAGEMENT

    99  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    114  

PRINCIPAL AND SELLING SHAREHOLDERS

    118  

DESCRIPTION OF CERTAIN INDEBTEDNESS

    120  

DESCRIPTION OF SHARE CAPITAL

    130  

SHARES ELIGIBLE FOR FUTURE SALE

    142  

MATERIAL TAX CONSIDERATIONS

    144  

UNDERWRITING (Conflicts of Interest)

    150  

LEGAL MATTERS

    157  

EXPERTS

    157  

MARKET AND INDUSTRY DATA AND FORECASTS

    157  

WHERE YOU CAN FIND MORE INFORMATION

    158  

INDEX OF FINANCIAL STATEMENTS

    F-1  



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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the section entitled "Risk Factors" and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision to purchase our common shares. Unless otherwise indicated or the context otherwise requires, references in this prospectus to "SeaCube" the "Company," "we," "us," and "our" refer to SeaCube Container Leasing Ltd. and its subsidiaries. References in this prospectus to "Fortress" refer to Fortress Investment Group LLC. We use the term "twenty foot equivalent unit," or "TEU," the international standard measure of containers, in describing certain quantities of our containers. All amounts in this prospectus are expressed in U.S. dollars and the financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP").

Our Company

        We are one of the world's largest container leasing companies based on total assets. Containers are the primary means by which products are shipped internationally because they facilitate the secure and efficient movement of goods via multiple transportation modes, including ships, rail and trucks. The principal activities of our business include the acquisition, leasing, re-leasing and subsequent sale of refrigerated and dry containers and generator sets. We lease our containers primarily under long-term contracts to a diverse group of the world's leading shipping lines. As of June 30, 2010, we employed 75 people in seven offices in four countries and had total assets of $1.0 billion.

        We own or manage a fleet of 507,013 units, representing 795,039 TEUs of containers and generator sets. According to Harrison Consulting, a recognized industry consultant, we are the world's largest lessor of refrigerated containers with approximately 28% market share based on TEUs. As of June 30, 2010, our total utilization was 98%, as measured in units. We plan to grow our business by maximizing the profitability of our existing fleet and making additional investments in new containers. We plan to pay quarterly dividends.

        We lease three types of assets:

        We lease these assets on a per diem basis on two principal lease types under which the lessee is responsible for all operating costs including taxes, insurance and maintenance:

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        As of June 30, 2010, approximately 53% of our owned assets were reefers and approximately 89% of our owned assets were on long-term or direct finance lease. The following charts show the percentages of our owned assets by equipment type and by lease type as of June 30, 2010:

 
   
Net Book Value by Equipment Type   Net Book Value by Lease Type

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        We expect to benefit from the size and growth of the container leasing market and to increase our revenues and earnings by acquiring additional containers. As containerized trade continues to recover, we believe that we will be able to play a significant role in providing new containers to the world's shipping lines. In our view, increased demand for containers, limited supply of existing containers and current capital constraints of our customers due to significant newbuild ship orders should make them more inclined to lease containers to meet their equipment needs.

        For the six months ended June 30, 2010, we generated total revenue of $66.8 million, net income of $14.5 million, Adjusted net income of $16.8 million and Adjusted EBITDA of $105.1 million. For a definition of Adjusted net income and Adjusted EBITDA and a reconciliation of net income to Adjusted net income and Adjusted EBITDA, see "—Summary Historical Consolidated Financial Data."

Competitive Strengths

        We believe that the key competitive strengths that will enable us to execute our strategy include:

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Growth Strategy

        We plan to leverage our competitive strengths to grow our fleet and earnings by employing the following business strategies:

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Industry Trends

        The market for container leasing is characterized by the following key trends:

Recent Developments

        While we do not yet have final results for the third quarter of 2010, based on our preliminary review, we estimate that our total revenues will be between $34 million and $35 million and that our operating expenses and adjusted net income will be substantially consistent with the two previous quarters. We are currently performing our regular quarterly internal review procedures for the third quarter of 2010, prior to our independent public accounting firm's commencement of its interim review of the quarter. As a result, our actual results could differ from these preliminary estimates. You should consider this additional information in conjunction with the audited consolidated financial statements for the three-year period ended December 31, 2009 and the unaudited consolidated financial statements for the six months ended June 30, 2009 and 2010, as well as the sections in this prospectus entitled "Risk Factors," "Special Note Regarding Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

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Formation and Corporate History

        We were incorporated by Seacastle Operating Company Ltd. (our "Initial Shareholder") in Bermuda in March 2010. Our Initial Shareholder is a subsidiary of Seacastle Inc. ("Seacastle"). Seacastle is owned by private equity funds that are managed by an affiliate of Fortress Investment Group LLC ("Fortress") and by employees of Seacastle and other shareholders. Container Leasing International, LLC (d/b/a Carlisle Leasing International, LLC and/or Seacastle Container Leasing, LLC), the entity through which we conduct all of our operations ("CLI"), was founded in 1993 and was acquired by an affiliate of our Initial Shareholder in 2006.

        In March 2010, in preparation of this offering, we and our Initial Shareholder formed SeaCube Container Holdings Ltd., SeaCube Container Investment LLC and SeaCube Operating Company Ltd. and entered into a series of intercompany transactions to finalize the separation of our container leasing business from the other businesses of Seacastle and to establish the appropriate organizational structure for us (the "Structure Formation"). Among other things, the formation of SeaCube Container Holdings Ltd. and SeaCube Container Investment LLC helps to simplify certain tax reporting obligations and to eliminate the need for public shareholders to make certain additional tax elections that might otherwise need to be made when SeaCube formed a new subsidiary. In April 2010, certain employees of SeaCube and Seacastle exchanged an aggregate of 826,914 shares of Seacastle common stock for 477,812 of our common shares. As a result of this exchange, the Initial Shareholder currently owns 97.1% of our issued and outstanding common shares and the remaining 2.9% is owned by SeaCube and Seacastle employees. The diagrams below depict our organizational structure immediately prior to the Structure Formation and immediately after the Structure Formation and the completion of this offering. Following the Structure Formation and the completion of this offering, we will continue to conduct all of our operations through CLI and its operating subsidiaries.


Pre-Structure Formation

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Post-Structure Formation and Offering

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Our Principal Shareholder

        Following the completion of this offering, our Initial Shareholder will own approximately 57.8% of our outstanding common shares, or 52.8% if the underwriters' over-allotment option is fully exercised. After this offering, the Initial Shareholder will own shares sufficient for the election of our directors and the majority vote over fundamental and significant corporate matters and transactions. See "Risk Factors—Risks Related to Our Organization and Structure."

Shareholders Agreement

        Prior to the completion of this offering, we will enter into a shareholders agreement (the "Shareholders Agreement") with the Initial Shareholder. The Shareholders Agreement will provide certain rights to the Initial Shareholder with respect to the designation of directors for nomination and election to our board of directors, as well as registration rights, at any time after 180 days following the consummation of this offering (subject to limited exceptions), for certain of our securities owned by the

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Initial Shareholder and certain other affiliates of Fortress and permitted transferees (referred to in this prospectus, collectively, as the "Fortress Shareholders").

        The Shareholders Agreement will also provide that the parties thereto will use their respective reasonable efforts (including voting or causing to be voted all of our voting shares beneficially owned by each) so that no amendment is made to our memorandum of association or bye-laws in effect as of the date of the Shareholders Agreement that would add restrictions to the transferability of our shares by the Initial Shareholder or its permitted transferees which are beyond those provided for in our memorandum of association, bye-laws, the Shareholders Agreement or applicable securities laws, or that nullify the rights set out in the Shareholders Agreement of the Initial Shareholder or its permitted transferees unless such amendment is approved by the Initial Shareholder. See "Certain Relationships and Related Party Transactions—Shareholders Agreement."

Additional Information

        We are a Bermuda exempted company and were incorporated in March 2010 under the provisions of Section 14 of the Companies Act 1981 of Bermuda (the "Companies Act"). Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, and our principal executive offices are located at 1 Maynard Drive, Park Ridge, New Jersey 07656. Our main telephone number is (201) 391-0800. Our internet address is www.seacubecontainer.com. Information on, or accessible through, our website is not part of this prospectus.

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THE OFFERING

Common shares offered by us

  2,500,000 shares

Common shares offered by the Initial Shareholder

 

5,000,000 shares

Common shares to be issued and outstanding after this offering

 

19,030,753 shares

Use of proceeds by us

 

We estimate that the net proceeds to us from the sale of shares in this offering, after deducting underwriting discounts and commissions and offering expenses payable by us, will be approximately $34.9 million (assuming a per share price equal to the midpoint of the price range set forth on the cover of this prospectus). Our net proceeds will increase by approximately $5.9 million if the underwriters' over-allotment option is exercised in full. We intend to use the net proceeds to us from this offering for working capital, investment in new containers and other general corporate purposes, which may include the repayment or refinancing of a portion of outstanding indebtedness, as well as potential strategic investments and acquisitions. See "Use of Proceeds."

Use of proceeds by the Initial Shareholder

 

We will not receive any proceeds from the sale of our common shares by the Initial Shareholder, including any proceeds the Initial Shareholder may receive from the exercise by the underwriters of their over-allotment option. The Initial Shareholder plans to use the net proceeds from the sale of shares in this offering to repay $74.0 million of indebtedness owed to affiliates of some of the underwriters.

Dividend policy

 

Our board of directors has adopted a dividend policy which reflects its judgment that our shareholders would be better served if we distributed to them, as quarterly dividends payable at the discretion of our board of directors, a portion of the cash generated by our business in excess of our expected cash needs, including cash needs for potential acquisitions or other growth opportunities, rather than retaining such excess cash or using such cash for other purposes. In accordance with our dividend policy, we currently intend to pay an initial dividend of $0.20 per share on or about January 2011 in respect of the fourth quarter of 2010.

 

We are not required to pay dividends, and our shareholders will not be guaranteed, or have contractual or other rights, to receive dividends. Our board of directors may decide, in its discretion, at any time, to decrease the amount of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends. In addition, our ability to pay dividends is and will be restricted by current and future arrangements governing our debt and by Bermuda law. Furthermore, since we are a holding company, substantially all of the assets shown on our consolidated balance sheet are held by our subsidiaries. Accordingly, our earnings and cash

   

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flow and our ability to pay dividends are largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of such earnings to us in the form of dividends. See "Dividend Policy."

Proposed New York Stock Exchange symbol

 

BOX

Risk factors

 

Please read the section entitled "Risk Factors" beginning on page 16 for a discussion of some of the factors you should carefully consider before deciding to invest in our common shares.

Tax

 

We expect to be treated as a passive foreign investment company. In general, if you are a U.S. person and do not make certain elections with respect to your investment, you may be subject to special deferred tax and interest charges and other consequences. See "Material Tax Considerations—Material United States Federal Income Tax Considerations."

        The number of common shares to be issued and outstanding after the completion of this offering is based on 16,477,812 common shares issued and outstanding as of October 12, 2010, and excludes an additional 1,000,000 shares reserved for issuance under our equity incentive plan, all of which remain available for grant.

        Except as otherwise indicated, all information in this prospectus:


CONFLICTS OF INTEREST

        J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. have conflicts of interest as defined in Financial Industry Regulatory Authority ("FINRA") Rule 2720(f)(5)(C)(i), as they or their affiliates will be receiving 5% or more of the net offering proceeds. Nomura Securities North America, LLC has a conflict of interest as defined in FINRA Rule 2720(f)(5), as its affiliate owns certain equity securities of Fortress. Consequently, this offering will be made in compliance with FINRA Rule 2720. No underwriter having a Rule 2720 conflict of interest will be permitted by that rule to confirm sales to any account over which the underwriter exercises discretionary authority without the specific written approval of the accountholder. When a FINRA member with a conflict of interest participates as an underwriter in a public offering, that rule requires that the initial public offering price may be no higher than that recommended by a "qualified independent underwriter," as defined by FINRA. In accordance with this rule, Wells Fargo Securities, LLC has assumed the responsibilities of acting as a qualified independent underwriter. In its role as a qualified independent underwriter, Wells Fargo Securities, LLC has performed a due diligence investigation and participated in the preparation of this prospectus and the registration statement of which this prospectus is a part.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

        The summary historical consolidated financial data presented below have been derived from the audited consolidated financial statements, at the dates and for the periods indicated, for SeaCube Container Leasing Ltd. (formerly Container Leasing International, LLC and subsidiaries ("CLI")) ("SeaCube").

        In March 2010, all of the equity interests in CLI were transferred from Seacastle Operating Company Ltd. (our "Initial Shareholder") to an indirect wholly owned subsidiary of SeaCube Container Leasing Ltd.

        The summary historical consolidated financial data presented as of December 31, 2005 and for the period from January 1, 2006 through February 14, 2006 (the predecessor period) have been derived from the audited consolidated financial statements of CLI prior to the acquisition by the Initial Shareholder. The summary historical consolidated financial data as of and for the remainder of the year ended December 31, 2006 and the years ended December 31, 2007, 2008, and 2009 (the successor period), have been derived from the audited consolidated financial statements of SeaCube subsequent to the acquisition by the Initial Shareholder.

        Historical consolidated statement of operations data and historical consolidated statement of cash flows data as of and for the six months ended June 30, 2009 and 2010 were derived from the unaudited consolidated financial statements of SeaCube included elsewhere in this prospectus. The unaudited summary historical consolidated financial statements have been prepared on substantially the same basis as our audited summary historical consolidated financial statements.

        The following tables summarize the historical consolidated financial information for our business. You should read these tables along with "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and our consolidated historical financial statements and the related notes included elsewhere in this prospectus. All actual common share and per share data have been retroactively adjusted to reflect the additional 15,000,000 share issuance that occurred on April 22, 2010.

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  Predecessor   Successor  
 
   
  Period from
January 1,
2006
through
February 14,
2006
  Period from
February 15,
2006
through
December 31,
2006
   
   
   
   
   
 
 
   
  Year Ended
December 31,
  Six Months
Ended
June 30,
 
 
  Year Ended
December 31,
2005
 
 
  2007   2008   2009   2009   2010  
 
  (dollars in thousands, except for share information)
   
   
 

Consolidated Statements of Operations Data:

                                                 

Total revenue

  $ 150,689   $ 18,205   $ 138,422   $ 208,907   $ 238,819   $ 141,873   $ 75,574   $ 66,843  

Direct operating expenses

    7,934     790     5,889     9,133     13,780     9,073     4,502     4,059  

Selling, general and administrative expenses

    37,390     3,627     20,021     26,339     26,215     21,983     10,870     10,238  

Depreciation expenses

    48,461     6,812     55,723     75,179     79,491     37,769     20,215     16,798  

Provision for doubtful accounts

                1,256     1,468     4,678     1,791     (356 )

Fair value adjustment for derivative instruments

    (10,434 )   (3,527 )                        

Goodwill impairment

    38,900                              

Interest expense

    36,920     5,196     39,490     63,353     81,114     51,922     27,367     21,655  

Loss on terminations and modification of derivative instruments(1)

                        37,922     37,922      

Gain on 2009 Sale(1)

                        15,583     (15,583 )    

Loss on retirement of debt(1)

            7,631         413     1,330     1,330      

Provision for income taxes

            38             248     200     571  

Net (loss) income

  $ (4,631 ) $ 4,806   $ 3,614   $ 30,766   $ 30,036   $ (15,004 ) $ (16,962 ) $ 14,531  

Net income (loss) per common share:

                                                 

Basic and diluted

                  $ 1.92   $ 1.88   $ (0.94 ) $ (1.06 ) $ 0.90  
 

Common shares used in computing net income (loss) per common share

                                                 
 

Basic and diluted

                    16,000,000     16,000,000     16,000,000     16,000,000     16,156,675  

Adjusted net income per common share:(2)

                                                 

Basic and diluted

                  $ 2.23     2.43     1.07     (1.06 )   1.04  
 

Common shares used in computing adjusted net income per common share

                                                 
 

Basic and diluted

                    16,000,000     16,000,000     16,000,000     16,000,000     16,156,675  

Consolidated Balance Sheet Data (at end of period):

                                                 

Cash and cash equivalents

  $ 15,697         $ 12,088   $ 11,146   $ 30,567   $ 8,014         $ 13,814  

Restricted cash

    7,869           15,962     36,459     30,056     22,060           18,833  

Net investment in direct finance leases

    177,062           171,714     604,303     582,320     555,990           524,571  

Leasing equipment, net of accumulated depreciation

    593,035           843,401     1,003,183     863,730     360,847           386,831  

Total assets

    857,861           1,098,407     1,738,322     1,581,386     1,097,229           1,001,204  

Deferred income taxes

              38     38     38     120           2,776  

Debt, current

    71,002           68,500     247,199     506,777     131,270           148,532  

Debt, long-term

    546,633           720,667     1,121,573     709,437     666,994           601,516  
 

Total liabilities

    638,613           855,111     1,457,547     1,327,783     862,875           859,447  
 

Total members' interest/shareholders' equity

  $ 219,248         $ 243,296   $ 280,775   $ 253,603   $ 234,354         $ 141,757  

Other Operating Data:

                                                 

Adjusted net income(2)

  $ 26,743   $ 1,676   $ 12,526   $ 35,737   $ 38,867   $ 17,174   $ 11,134   $ 16,844  

Adjusted EBITDA(3)

    128,706     13,810     124,017     235,798     312,869     206,442     107,704     105,059  

Distribution to members and Initial Shareholder

    4,500                     60,000     60,000      

Dividends paid

                                2,800  

Contribution from Initial Shareholder

                50,000                  

Non-cash distribution to Initial Shareholder

                                97,675  

Consolidated Statement of Cash Flows Data:

                                                 

Cash flows provided by operating activities

  $ 66,130   $ 5,839   $ 69,821   $ 96,667   $ 127,392   $ 50,966   $ 28,249     44,178  

Capital expenditures

    148,735     4,533     127,300     326,793     108,472     55,304     2,273     41,133  

Selected Fleet Data:

                                                 

Average container units(4)

    648,517     658,257     611,360     640,305     604,434     550,688     555,955     520,498  

Average utilization

    97.0%     95.9%     95.6%     96.1%     97.5%     96.5%     97.1%     97.5%  

(1)
Refer to the 2009 Sale described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. As it pertains to the Loss on retirement of debt, the 2009 Sale only relates to the year ended December 31, 2009 and the six months ended June 30, 2009.

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(2)
Adjusted net income is a measure of financial and operating performance that is not defined by U.S. GAAP and should not be considered a substitute for net income, income from operations or cash flow from operations, as determined in accordance with U.S. GAAP. Adjusted net income is a measure of our operating and financial performance used by management to focus on consolidated financial and operating performance exclusive of income and expenses that relate to non-routine or significant non-cash items of the business.

We define adjusted net income (loss) as net income before non-cash interest expense related to terminations and modifications of derivative instruments, losses on retirement of debt, fair value adjustments on derivative instruments, loss on swap terminations, write-offs of goodwill and gain on the 2009 Sale (refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus). We use adjusted net income to assess our consolidated financial and operating performance, and we believe this non-GAAP measure is helpful to management and investors in identifying trends in our performance. This measure helps management make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. Adjusted net income provides us with a measure of financial performance of the business based on operational factors including the profitability of assets on an economic basis net of operating expenses and the capital costs of the business on a consistent basis as it removes the impact of certain non-routine and non-cash items from our operating results. Adjusted net income is a key metric used by senior management and our board of directors to review the consolidated financial performance of the business.

Adjusted net income has limitations as an analytical tool and is not a presentation made in accordance with U.S. GAAP and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP, including net income, or net cash from operating activities. For example, adjusted net income does not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments, or (ii) changes in or cash requirements for our working capital needs. In addition, our calculation of Adjusted net income may differ from the adjusted net income or analogous calculations of other companies in our industry, limiting its usefulness as a comparative measure. Because of these limitations, adjusted net income should not be considered a measure of discretionary cash available to us to invest in the growth of our business or to pay dividends. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted net income only supplementally.

The following table shows the reconciliation of net income (loss), the most directly comparable U.S. GAAP measure to adjusted net income, for the period ended December 31, 2005 and for the period from January 1, 2006 to February 14, 2006, for the period from February 15, 2006 through December 31, 2006, for the periods ended December 31, 2007, 2008 and 2009, and for the six months ended June 30, 2009 and 2010:

 
  Predecessor   Successor  
 
   
  Period from
January 1,
2006
through
February 14,
2006
  Period from
February 15,
2006
through
December 31,
2006
   
   
   
   
   
 
 
   
   
   
   
  Six Months Ended
June 30,
 
 
   
  Year Ended December 31,  
 
  Year Ended
December 31,
2005
 
 
  2007   2008   2009   2009   2010  
 
  (dollars in thousands)
 

Net (loss) income

  $ (4,631 ) $ 4,806   $ 3,614   $ 30,766   $ 30,036   $ (15,004 ) $ (16,962 ) $ 14,531  

Non-cash interest expense, net of tax

    2,908     397     1,281     4,971     8,418     8,366     4,242     2,313  

Loss on retirement of debt, net of tax

            7,631         413     1,317     1,313      

Loss on terminations and modification of derivative instruments, net of tax

                        37,922     37,922      

Fair value adjustment for derivative instruments, net of tax

    (10,434 )   (3,527 )                        

Goodwill impairment, net of tax

    38,900                              

Gain on 2009 Sale, net of tax

                        (15,427 )   (15,381 )    
                                   

Adjusted net income

  $ 26,743   $ 1,676   $ 12,526   $ 35,737   $ 38,867   $ 17,174   $ 11,134   $ 16,844  
                                   
(3)
Adjusted EBITDA is a measure of both operating performance and liquidity that is not defined by U.S. GAAP and should not be considered a substitute for net income, income from operations or cash flow from operations, as determined in accordance with U.S. GAAP.

We define Adjusted EBITDA as income (loss) from continuing operations before income taxes, interest expenses including loss on retirement of debt, depreciation and amortization, fair value adjustments on derivative instruments, loss on terminations and modification of derivative instruments, gain on sale of assets, and write-offs of goodwill plus principal collections on direct finance lease receivables.

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  Predecessor   Successor  
 
   
  Period from
January 1,
2006
through
February 14,
2006
  Period from
February 15,
2006
through
December 31,
2006
   
   
   
   
   
 
 
   
  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  Year Ended
December 31,
2005
 
 
  2007   2008   2009   2009   2010  
 
  (dollars in thousands)
 

Cash flows from operating activities to Adjusted EBITDA reconciliation:

                                                 

Net cash provided by operating activities

  $ 66,130   $ 5,839   $ 69,821   $ 96,667   $ 127,392   $ 50,966   $ 28,249   $ 44,178  

Depreciation and amortization

    (51,369 )   (7,208 )   (57,492 )   (76,718 )   (81,130 )   (38,989 )   (20,886 )   (17,385 )

Provision for doubtful accounts

                (1,256 )   (1,468 )   (4,678 )   (1,791 )   356  

Loss on sale of leasing equipment

    (898 )   2     (3,134 )   (3,611 )   (585 )   (4,822 )   (1,504 )   (1,122 )

Stock based compensation

                                (64 )

Derivative loss reclassified into earnings

                (37 )   (4,587 )   (9,978 )   (5,177 )   (3,474 )

Ineffective portion of cash flow hedges

                (1,722 )   (2,373 )   2,840     1,611     1,688  

Loss on terminations and modification of derivative instruments

                        (37,922 )   (37,922 )    

Gain on 2009 Sale

                        15,583     15,583      

Impairment of leasing equipment held for sale

    (557 )         (3,912 )   (1,039 )   (6,688 )   (5,974 )   (3,508 )   (782 )

Loss on retirement of debt

            (7,631 )       (413 )   (1,330 )   (1,330 )    

Deferred income taxes

            (47 )           (82 )        

Changes in operating assets and liabilities:

                                                 
 

Accounts receivable

    2,826     501     397     9,989     (1,291 )   12,547     27     (4,621 )
 

Other assets

    1,303     131     6,367     2,142     1,007     (444 )   87     3,069  
 

Accounts payable, accrued expenses and other liabilities

    6,400     2,014     (755 )   12,047     (2,993 )   8,786     9,140     (8,394 )

Deferred income

                (5,696 )   3,165     (1,507 )   459     1,082  

Provision for income taxes

            38             248     200     571  

Depreciation expenses

    48,461     6,812     55,723     75,179     79,491     37,769     20,215     16,798  

Interest expense, net of interest income

    36,581     5,116     38,628     61,694     80,059     49,232     26,220     20,748  

Loss on terminations and modification of derivative instruments

                        37,922     37,922      

Gain on 2009 Sale

                        (15,583 )   (15,583 )    

Loss on retirement of debt

            7,631         413     1,330     1,330      

Collections on net investment in direct financing leases, net of interest earned

    19,829     603     18,383     68,159     122,870     110,528     54,362     52,411  
                                   

Adjusted EBITDA

  $ 128,706   $ 13,810   $ 124,017   $ 235,798   $ 312,869   $ 206,442   $ 107,704   $ 105,059  
                                   

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  Predecessor   Successor  
 
   
  Period from
January 1,
2006
through
February 14,
2006
  Period from
February 15,
2006
through
December 31,
2006
   
   
   
   
   
 
 
   
  Year ended
December 31,
  Six Months Ended
June 30,
 
 
  Year Ended
December 31,
2005
 
 
  2007   2008   2009   2009   2010  
 
  (dollars in thousands)
 

Net income (loss) to Adjusted EBITDA reconciliation:

                                                 

Net income (loss)

  $ (4,631 ) $ 4,806   $ 3,614   $ 30,766   $ 30,036   $ (15,004 ) $ (16,962 ) $ 14,531  

Provision for income taxes

            38             248     200     571  

Depreciation expenses

    48,461     6,812     55,723     75,179     79,491     37,769     20,215     16,798  

Interest expense, net of interest income

    36,581     5,116     38,628     61,694     80,059     49,232     26,220     20,748  

Loss on terminations and modification of derivative instruments

                        37,922     37,922      

Gain on 2009 Sale

                        (15,583 )   (15,583 )    

Loss on retirement of debt

            7,631         413     1,330     1,330      

Fair value adjustments for derivative instruments

    (10,434 )   (3,527 )                        

Goodwill impairment

    38,900                              

Collections on net investment in direct financing leases, net of interest earned

    19,829     603     18,383     68,159     122,870     110,528     54,362     52,411  
                                   

Adjusted EBITDA

  $ 128,706   $ 13,810   $ 124,017   $ 235,798   $ 312,869   $ 206,442   $ 107,704   $ 105,059  
                                   
(4)
Includes our operating fleet (which comprises our owned and managed fleet), the fleet of Interpool Limited for all periods presented and units under finance leases.

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RISK FACTORS

        Investing in our common shares involves a high degree of risk. You should carefully consider the following risk factors, as well as other information contained in this prospectus, before deciding to invest in our common shares. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, results of operations and cash flow, in which case the trading price of our common shares could decline and you could lose all or part of your investment.

Risks Related to Our Business

Global economic growth and the volume of world trade are critical factors affecting demand for containerized leasing, and a decline in world trade can adversely affect our business.

        Demand for leasing our containers depends largely on the extent of world trade and economic growth, with U.S. consumer demand being the most critical factor affecting this growth. Economic downturns in one or more countries, particularly in the United States, the European Union, Asia and other countries and regions with consumer-oriented economies, have in the past, and in the future could, reduce world trade volume and/or demand by container shipping, rail and trucking lines for leased containers. Cyclical recessions can negatively affect lessors' operating results because during economic downturns or periods of reduced trade, shipping lines tend to lease fewer containers and related assets or lease containers only at reduced rates, and tend to rely more on their own equipment and fleets to satisfy a greater percentage of their requirements. Thus, decreases in the volume of world trade may adversely affect our leased asset utilization and lease rates and lead to reduced revenue, reduced capital investment, increased operating expenses (such as storage and positioning) and reduced financial performance.

        The current global recession, which began in 2008 and deepened in 2009, has demonstrated the negative impact that an economic downturn can have on our business. As a result of the current downturn, container trade decreased by approximately 7% during the year ended December 31, 2009, which led to reduced demand for containers, lower utilization and lease rates and adversely affected our results of operations. During this time we reported a net loss. Although the containerized trade market has begun to show signs of recovery, we cannot assure you that any recovery will continue, and further cannot predict whether, or when, any future economic downturns will occur. For example, the recent eurozone sovereign debt crisis could negatively impact the recovery of global trade. If demand for container shipping does not continue to recover or recovers more slowly than we anticipate, or if demand starts to decrease again, our financial performance may be adversely affected, and the impact to our financial results could be significant.

The demand for leased containers depends on many economic, political and other factors beyond our control and these factors may adversely affect our business.

        We believe that a substantial amount of our leasing business involves shipments of goods exported from Asia. As a result, a negative change in economic conditions in any Asia Pacific country, particularly in China or Japan, may have an adverse affect on our business and results of operations, as well as our future prospects. In particular, in recent years, China has been one of the world's fastest growing economies in terms of gross domestic product and has become one of the world's largest and fastest growing exporters. We cannot assure you that such growth will be sustained or that the Chinese economy will not experience slower or negative growth in the future, or that trade relations with China will not deteriorate. Moreover, if changes in exchange rates between the Chinese yuan and other currencies were to occur, the growth of Chinese exports could be affected. In addition, from time to time, there have been other disruptions in Asia, such as health scares, including SARS and avian flu, financial markets turmoil, natural disasters and political instability in certain countries. If these events were to occur in the future, they could adversely affect our lessees, a number of whom are entities

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domiciled in Asian countries, and the general demand for shipping and lead to reduced demand for leased containers or otherwise adversely affect us.

        Other general factors affecting demand, utilization and per diem rates for leased containers include the following:

        All of these factors are inherently unpredictable and beyond our control. These factors will vary over time, often quickly and unpredictably, and any change in one or more of these factors may have a material adverse effect on our business and results of operations. Many of these factors also influence the decision by current and potential customers to lease our containers. Should one or more of these factors influence current and potential customers to buy a larger percentage of the container assets they operate, our utilization rate could decrease, resulting in decreased revenue, increased storage and repositioning costs, and as a result, lower operating cash flow.

Our ability to grow our business depends on a continuing recovery of global demand for containers.

        Our ability to grow our business depends on a continuing recovery of global demand for containers. Although we began to see signs of recovery in containerized trade volume and our utilization rate at the end of 2009, this recovery may not continue as rapidly and strongly as anticipated or at all. If demand for container shipping does not continue to recover as we expect, or if demand

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starts to decrease again, it is possible we may not be able to grow our business and our results of operations may be adversely affected for several years.

Adverse developments in the global economy restricting the credit markets may materially and negatively impact our business.

        The recent downturn in the world's major economies and the constraints in the credit markets have heightened or could continue to heighten a number of material risks to our business, cash flows and financial condition, as well as our future prospects. Continued issues involving liquidity and capital adequacy affecting lenders could affect our ability to fully access our credit facilities or obtain additional debt and could affect the ability of our lenders to meet their funding requirements when we need to borrow. Further, the volatility in the equity markets may make it difficult in the future for us to access the equity markets for additional capital at attractive prices, if at all. The recent credit crisis in Greece, for example, and concerns over debt levels of certain other European Union member states, increased volatility in global credit and equity markets. If we are unable to access existing credit, obtain new credit or access the capital markets, our business could be negatively impacted, as could our ability to pay dividends. See "We intend to incur substantial additional debt and issue substantial additional equity in order to expand our business and pay dividends."

        We further believe that many of our customers are reliant on liquidity from global credit markets and, in some cases, require external financing to fund a portion of their operations. As a consequence, if our customers lack liquidity, it would likely negatively impact their ability to pay amounts due to us.

        These and other factors affecting the container industry are inherently unpredictable and beyond our control.

Equipment prices and lease rates may decrease, which may adversely affect our earnings.

        Container lease rates depend on the cost of the container, the type and length of the lease, the type and age of the container equipment, competition, the location of the container being leased, and other factors more fully discussed herein. Because steel is the major component used in the construction of new containers, the price for new containers, as well as prevailing lease rates, are both highly correlated with the price of steel. In the late 1990s, new equipment prices and lease rates declined due to, among other factors, a drop in worldwide steel prices and a shift in container manufacturing from Taiwan and Korea to areas with lower labor costs in mainland China. Such factors, among others, may cause container prices and leasing rates to fall again. In 2009, new equipment prices and lease rates declined due to a lack of demand for containerized cargo. In 2010, new equipment prices and lease rates have increased due to a shortage of production capacity and increased demand for containers.

        In addition, lease rates can be negatively impacted by the entrance of new leasing companies, overproduction of new containers by factories and over-buying by shipping lines and leasing competitors. For example, during 2001 and again in the second quarter of 2005, overproduction of new containers, coupled with a build-up of container inventories in Asia by leasing companies and shipping lines, led to decreasing prices and utilization rates. In the event that the container shipping industry were to be characterized by over-capacity in the future, or if available supply of intermodal assets were to increase significantly as a result of, among other factors, new companies entering the business of leasing and selling intermodal equipment, both utilization and lease rates can be expected to decrease, thereby adversely affecting the revenues generated by our container leasing business.

We face extensive competition in the container leasing industry, and if we are not able to compete successfully, our business will be harmed.

        We may be unable to compete favorably in the highly competitive container leasing business after completion of this offering. We compete with many domestic and foreign container leasing companies,

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many smaller lessors, financial institutions such as banks, promoters of container ownership, shipping lines, which sometimes lease their excess container stocks, and suppliers of alternative types of equipment for freight transport. Some of these competitors may have large, underutilized inventories of containers, which could lead to significant downward pressure on lease rates, asset utilization and operating margins.

        Competition among container leasing companies depends upon many factors, including, among others, lease rates, lease terms (including lease duration, drop-off restrictions and repair provisions), customer service, and the location, availability, quality and individual characteristics of equipment as well as quality and experience of an equipment manager. New entrants into the leasing business have been attracted by the high rate of containerized trade growth in recent years, and new entrants have generally been less disciplined, in our opinion, than we are in pricing and structuring leases. As a result, the entry of new market participants together with the already highly competitive nature of our industry, may undermine our ability to maintain a high level of asset utilization or, alternatively, could force us to reduce our pricing and accept lower revenue and profit margins in order to achieve our growth plans.

Our customers may decide to buy rather than lease containers, which would adversely affect our earnings.

        We, like other suppliers of leased containers, are dependent upon decisions by shipping lines to lease rather than buy their containers. Should shipping lines decide to buy a larger percentage of the containers they operate, our utilization rates would decrease, resulting in decreased leasing revenue, increased storage and repositioning costs and lower operating cash flow. Most of the factors affecting the decisions of our customers, including whether to lease or buy their equipment, are outside our control. See "The demand for leased containers depends on many economic, political and other factors beyond our control and these factors may adversely affect our business."

        While the percentage of containers leased compared with the percentage of containers owned by shipping companies has been fairly steady historically, several factors may cause the percentage of leased containers to decrease in the future. These factors include, among other things, access of shipping lines to lower-cost bank financing, the consolidation of the shipping industry and improvements in information technology. The materialization of any of such trends could negatively affect our business.

Lessee defaults and terminations of agreements by our customers may adversely affect our financial condition, results of operation and cash flow by decreasing revenue and increasing storage, positioning, repair, collection and recovery expenses.

        Our containers are leased to numerous customers. Lease payments and other compensation, as well as indemnification for damage to or loss of leased containers, is generally payable by the end users under leases and other arrangements. Inherent in the nature of the leases and other arrangements for use of the containers is the risk that once a lease is consummated, we may not receive, or may experience delay in realizing, all of the compensation and other amounts to be paid in respect of the leased containers. Furthermore, not all of our customers provide detailed financial information regarding their operations. As a result, customer risk is in part assessed on the basis of our customers' reputation in the market, and there can be no assurance that they can or will fulfill their obligations under the contracts we enter into with them. Our customers could incur financial difficulties, or otherwise have difficulty making payments to us when due for any number of factors which may be out of our control and which we may be unable to anticipate. If a sufficient number of our customers were to default or were to terminate or restructure their agreements with us, in particular one or more of our largest customers, it could have a material adverse effect on our results of operation. We do not maintain any credit insurance with respect to non-payment of receivables by our lessees. A delay or diminution in amounts received under the leases and other arrangements could adversely affect our

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business and financial prospects and our ability to make payments on our debt or to pay dividends to our shareholders.

        In general, the profitability of our shipping line customers deteriorated significantly in 2008 due to decreasing freight rates caused by excess vessel capacity and most major shipping lines recorded large financial losses in 2009. These adverse conditions may continue for some time. These losses increased the risk of default by our customers. While several of our customers have reported improving financial performance and productivity in 2010, we cannot be assured this will continue in the future.

        The cash flow from our containers, principally lease rentals, management fees, and proceeds from the sale of owned containers, is affected significantly by the ability to collect payments under leases and other arrangements for the use of the leased equipment and the ability to replace cash flows from terminating leases by re-leasing or selling leased equipment on favorable terms. All of these factors are subject to external economic conditions and the performance by lessees and service providers that will not fully be within our control.

        When lessees default, we may fail to recover all of our leased containers, and the containers we do recover may be returned in damaged condition or to locations where we will not be able to efficiently re-lease or sell them. We may have to repair and reposition such recovered containers to other places where we can re-lease or sell them, which could be expensive depending on the locations and distances involved. As a result, we may lose lease or management revenues and incur additional operating expenses in repossessing, repositioning, repairing and storing the equipment.

We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in revenue resulting from a default by, any key customer could significantly reduce our revenue.

        A significant portion of our revenue is derived from a relatively small number of customers. For each of the six months ended June 30, 2009 and 2010, our ten largest customers accounted for 61% of our revenue. Although each individual lease covers a distinct group of containers and no single lease with any customer contributed more than 5% of our revenue for the six months ended June 30, 2010, the aggregate revenue from CSAV, our single largest customer, accounted for approximately 16% of our revenue for the six months ended June 30, 2010. In addition, Mediterranean Shipping accounted for approximately 15% of our revenue for the six months ended June 30, 2010. Our operating results in the foreseeable future will continue to depend on our ability to enter into agreements with these customers. In addition, several of our largest customers have gone through or are currently undertaking significant financial restructurings as a result of large financial losses incurred in 2009. We cannot be certain that they will be successful, and we expect the financial performance and financial condition of these customers will continue to be challenged due to existing market conditions. The loss of, or a significant reduction in revenue from, any of our key customers, or a default by any key customers on its obligations under any contract with us, or the restructuring of lease agreements due to economic circumstances facing our customers would significantly reduce our revenue and adversely affect our business.

        In addition, some of the contracts under which we lease our containers contain early termination provisions. Although in the past we have experienced minimal early returns due in part to penalties including early termination fees and costs associated with repairs and repositioning upon return borne by lessees, we cannot assure you that the number of leases that our customers terminate early will not increase in the future. This increase could happen due to any number of factors that are outside of our control, such as financial difficulty or a business downturn experienced by any of our customers. We may also elect to terminate leases with a customer and demand the immediate redelivery of our containers due to non-payment or other defaults, which would significantly reduce our revenue and adversely impact our business.

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The volatility of the residual value of containers upon expiration of their leases or at the time of their sale could adversely affect our operating results.

        Although our operating results primarily depend upon equipment leasing, profitability is also affected by the residual values (either for sale or re-leasing) of the containers upon expiration of their leases or at the time of their sale. These values, which can vary substantially, depend upon, among other factors:

        Most of these factors are outside of our control. Operating leases, under which we derived 51% of our revenue for the six months ended June 30, 2010, are subject to greater residual risk than direct finance leases because we own the containers at the expiration of an operating lease term. If the residual value of our assets during any period proves lower than anticipated, our operating results may be adversely affected. Furthermore, we base our decision to invest in new containers in part on our expectations of our ability to sell or re-lease existing assets. To the extent we fail to anticipate the degree to which we need to replace existing assets, we may not have sufficient assets to meet demand and would therefore forgo revenues.

Changes in market price, availability or transportation costs of equipment manufactured in China could adversely affect our ability to maintain our supply of containers.

        Changes in the political, economic or financial conditions of China, which would increase the market price, availability or transportation costs of containers, could adversely affect our ability to maintain our supply of equipment. China is currently the largest container producing nation in the world. We currently purchase the vast majority of our containers from manufacturers in China. In the event that it were to become more expensive for us to procure containers in China or to transport these containers at a low cost from China to the locations where they are needed, because of changes in exchange rates between the U.S. Dollar and Chinese Yuan, further consolidation among container suppliers, a shift in United States trade policy towards China, increased tariffs imposed by the United States or other governments, increased fuel costs, a significant downturn in the political, economic or financial conditions in China, or for any other reason, we would have to seek alternative sources of supply. We may not be able to make alternative arrangements quickly enough to meet our equipment needs, and any alternative arrangements may increase our costs.

We depend on key personnel, and we may not be able to operate and grow our business effectively if we lose the services of any of our key personnel or are unable to attract qualified personnel in the future.

        The success of our business is heavily dependent on our ability to retain our current management and other key personnel and to attract and retain qualified personnel in the future. In particular, we are dependent upon the management and leadership of Joseph Kwok. Competition for senior

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management personnel is intense, and we may not be able to retain our personnel. The loss of key personnel could affect our ability to run our business effectively. Although we have entered into at will employment agreements with certain of our key personnel, these agreements do not ensure that our key personnel will continue in their present capacity with us for any particular period of time. Although Mr. Kwok also serves as the Chairman of Seacastle Inc., the parent company of our Initial Shareholder, and as the Chairman of Seacastle Holdings LLC, a wholly owned subsidiary of our Initial Shareholder, he is required to devote 80% or more of his time and attention to our business. We do not have key man insurance for any of our current management or other key personnel. The loss of any key personnel requires the remaining key personnel to divert immediate and substantial attention to seeking a replacement. An inability to find a suitable replacement for any departing executive officer on a timely basis could adversely affect our ability to operate and grow our business.

The international nature of the industry exposes us to numerous risks.

        Our ability to enforce lessees' obligations under our leases for use of our containers will be subject to applicable law in the jurisdictions in which enforcement is sought or the country of domicile of the lessee. Our containers are manufactured primarily in China and are predominantly used on international waterways, and our lessees are domiciled in many different countries. It is not possible to predict, with any degree of certainty, the jurisdictions in which enforcement proceedings may be commenced. For example, repossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same security interests and rights to creditors and lessors as those in the United States and in jurisdictions where recovery of equipment from the defaulting lessee is more cumbersome. As a result, the relative success and expedience of enforcement proceedings with respect to the containers in various jurisdictions also cannot be predicted. As more of our business shifts to areas outside of the United States and Europe, such as China, it may become more difficult and expensive to enforce our rights and recover our containers. If the number and size of defaults increases in the future, and if a large percentage of the defaulted containers are located in countries with less developed legal systems, losses resulting from recovery payments and unrecovered containers could be large and could negatively impact our profitability.

        We are also subject to risks inherent in conducting business across national boundaries, any one of which could adversely impact our business. These risks include:

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        Any one of these factors could impair our current or future international operations and, as a result, harm our overall business, financial condition and results of operations.

We may incur costs and business disruptions associated with new security regulations regarding our containers.

        We are, and will likely continue to be, subject to regulations promulgated in various countries, including the United States, seeking to protect the integrity of international commerce and prevent the use of containers for international terrorism or other illicit activities. For example, the Container Security Initiative, the Customs-Trade Partnership Against Terrorism and Operation Safe Commerce are among the programs administered by the U.S. Department of Homeland Security that are designed to enhance security for cargo moving throughout the international transportation system by identifying existing vulnerabilities in the supply chain and developing improved methods for ensuring the security of containerized cargo entering and leaving the United States, including pre-screening containers that pose a risk at the port of departure prior to arrival at U.S. ports and/or the use of conveyance security devices. Moreover, the International Convention for Safe Containers, 1972 (CSC), as amended, adopted by the International Maritime Organization, applies to new and existing containers and seeks to maintain a high level of safety of human life in the transport and handling of containers by providing uniform international safety regulations. Inspection procedures can result in the seizure of contents of our containers, delays in the loading, offloading or delivery and, in some instances, the levying of customs duties, fines or other penalties against container operators and owners. Changes to inspection procedures could also impose additional costs and obligations on our lessees and may, in certain cases, render the shipment of certain types of cargo uneconomic or impractical.

        As these regulations develop and change, we may incur increased compliance costs due to the acquisition of new, compliant containers and/or the adaptation of existing containers to meet any new requirements imposed by such regulations. Additionally, certain companies are currently developing or may in the future develop products designed to enhance the security of containers transported in international commerce. Regardless of the existence of current or future government regulations mandating the safety standards of intermodal shipping containers, our competitors may adopt such products or our customers may require that we adopt such products in the conduct of our container leasing business. In responding to such market pressures, we may incur increased costs, which could have a material adverse effect on our financial condition and results of operations.

Terrorist attacks could negatively impact our operations and our profitability and may expose us to liability and reputational damage.

        Terrorist attacks may negatively affect our operations and your investment. Such attacks in the past have caused uncertainty in the world financial markets and economic instability in the United States and elsewhere, and further acts of terrorism, violence or war could similarly affect world financial markets and trade, as well as the industries in which we and our customers operate. In addition,

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terrorist attacks or hostilities may directly impact ports our containers come in and out of, depots, our physical facilities or those of our suppliers or customers and could impact our sales and our supply chain. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. A severe disruption to the worldwide ports system and flow of goods could result in a reduction in the level of international trade in which our containers are involved and lower demand for containers. The consequences of any terrorist attacks or hostilities are unpredictable, and we may not be able to foresee events that could have an adverse effect on our operations or your investment.

        It is also possible that our containers could be involved in a terrorist attack. Although our lease agreements require our lessees to indemnify us against all damages arising out of the use of our containers, and we carry insurance to potentially offset any costs in the event that our customer indemnifications prove to be insufficient, we may not be fully protected from liability arising from a terrorist attack which utilizes our containers. In addition, any terrorist attack involving any of our containers may cause reputational damage, or other losses, which could be catastrophic to our business.

Environmental liability may adversely affect our business and financial condition.

        Like other companies, we are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those regulating discharges to air and water, health and safety and the use and disposal of hazardous substances. We and the third party equipment owners could incur substantial costs, including cleanup costs, fines and third-party claims for property damage and personal injury, as a result of violations of or liabilities under environmental laws and regulations in connection with our current or historical operations. Under some environmental laws in the United States and certain other countries, the owner of a leased container may be liable for environmental damage, cleanup or other costs in the event of a spill or discharge of material from a container without regard to the owner's fault. While we maintain insurance and require lessees to indemnify us against certain losses, such insurance and indemnities may not cover or be sufficient to protect us and our third party equipment owners against losses arising from environmental damage.

        Moreover, environmental laws are subject to frequent change and have tended to become more stringent over time. For example, the refrigerant specified by virtually all reefer box operators and used in substantially all of our reefers is R134a (also known as HFC134a). R134a, like other refrigerants used before R134a became the industry standard, may, at some point, become due for replacement and phase-out. Market pressure or government regulation of refrigerants and synthetic insulation materials may require reefers using non-conforming substances to be retrofitted with refrigerants deemed to be less destructive to atmosphere ozone at substantial cost to us. Regulatory initiatives in the European Union and California to phase out R134a in automotive cooling systems may in the future increase pressure on the continued use of R134a in reefers. In addition, reefers that are not retrofitted may command lower prices in the market for used containers once we retire these containers from our fleet.

        Increased concerns over climate change and current and future regulation of greenhouse gas emissions could have a material effect on our business. Regulatory initiatives at international, national and local levels to reduce the emission of greenhouse gasses could increase the cost of container shipping and the demand for our containers. Concerns over climate change could also favor competing local products over products shipped over long distances. In addition, the effects of climate change may produce more variable or severe weather events that can adversely affect marine shipping. Each of these events could increase our cost of operations or affect our profitability.

        These or other additional environmental laws and regulations may be adopted that could limit our ability to conduct business or increase the cost of our doing business, which may have a materially negative impact on our business, results of operation and financial condition. New regulations could diminish the resale value or useful lives of our containers, require us to retrofit our assets for continued use, or other operational changes or restrictions. For example, restrictions could be imposed

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on the use of certain woods in container flooring. Additionally, environmental-related laws and regulations may prohibit or restrict shipment of certain cargos that could impact the use of our containers. For example, the Lacey Act prohibits the importation of certain protected woods into the United States.

Certain liens may arise on our equipment.

        Substantially all of our container assets currently are subject to liens relating to existing financing arrangements and, in the event of a default under any of those arrangements, the lenders thereunder would be permitted to take possession of or sell our container assets. See "Description of Certain Indebtedness."

        In addition, depot operators, repairmen, transporters, vessel mortgagees and other parties may come into possession of our containers from time to time and have sums due to them from the lessees or sublessees of the containers. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a containership through foreclosure proceedings. In the event of nonpayment of those charges by the lessees or sublessees, we may be delayed in, or entirely barred from, repossessing the containers or be required to make payments or incur expenses to discharge such liens on the equipment.

The lack of an international title registry for containers increases the risk of ownership disputes.

        Although the Bureau International des Containers registers and allocates a unique four letter prefix to every container in accordance with ISO standard 6346 (Freight container coding, identification and marking) there is no internationally recognized system of recordation or filing to evidence our title to containers nor is there an internationally recognized system for filing security interest in containers. While this has not historically been an issue, the lack of a title recordation system with respect to containers could result in disputes with lessees, end-users, or third parties, such as creditors of end-users, who may improperly claim ownership of the containers, especially in countries with less developed legal systems.

Container investors may elect not to have us manage their containers, which could adversely affect our business, results of operations and financial condition.

        A percentage of our revenue is attributable to management fees earned on services related to the leasing of containers owned by container investors. Our ability to continue to retain and attract management contracts depends upon a number of factors, including our ability to lease and release containers on attractive lease terms, to maintain a high utilization rate for our owned and managed fleets, to efficiently manage the billing, collection, repositioning, maintenance and repair, storage and disposition of containers and the management fees that we charge. In the event container investors believe another container leasing company can better provide stable and attractive rates of return on their investment, we may lose management contract opportunities in the future, which could adversely affect our business, results of operations and financial condition.

We could face litigation involving our management of containers for container investors.

        We manage containers for third-party container owners under management agreements that are negotiated with each container investor. We make no assurances to container investors that they will make any amount of profit on their investment or that our management activities will result in any particular level of income or return of their initial capital, although some of these agreements do contain provisions that permit owners to terminate them if certain performance metrics are not met during relevant time periods. As the number of containers that we manage for container investors increases, the possibility that we may be drawn into litigation and/or arbitration relating to these managed containers may also increase. Although our management agreements contain contractual protections and indemnities that are designed to limit our exposure to such litigation, such provisions may not be effective and we may be subject to a significant loss in a successful litigation by a container investor.

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Manufacturers of our equipment may be unwilling or unable to honor manufacturer warranties covering defects in our equipment.

        We obtain warranties from the manufacturers of our equipment. When defects in the containers occur, we work with the manufacturers to identify and rectify the problem. However, there is no assurance that manufacturers will be willing or able to honor warranty obligations. If defects are discovered in containers that are not covered by manufacturer warranties, we could be required to expend significant amounts of money to repair the containers and/or the useful life of the containers could be shortened and the value of the containers reduced, all of which could adversely affect our results of operations.

We rely on our information technology systems to conduct our business. If these systems fail to adequately perform these functions, or if we experience an interruption in their operation, our business and financial results could be adversely affected.

        The efficient operation of our business is highly dependent on equipment tracking and billing systems. We rely on such systems to track transactions, such as container pick-ups and drop-offs, repairs, and to bill our customers for the use of and damage to our equipment. We also use the information provided by these systems in our day-to-day business decisions in order to effectively manage our lease portfolio and improve customer service. The failure of this system to perform as we anticipate could disrupt our business and results of operation and cause our relationships with our customers to suffer. In addition, our information technology systems are vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power loss and computer systems failures and viruses. Any such interruption could negatively affect our business.

Increases in the cost of or the lack of availability of insurance could increase our risk exposure and reduce our profitability.

        Our lessees and depots are required to maintain all risks physical damage insurance, comprehensive general liability insurance and to indemnify us against loss. We also maintain our own contingent liability insurance and off-hire physical damage insurance. Nevertheless, lessees' and depots' insurance or indemnities and our insurance may not fully protect us. The cost of such insurance may increase or become prohibitively expensive for us and our customers, and such insurance may not continue to be available. Other types of industry insurance that we have maintained from time to time based on our evaluation of risk, such as default insurance providing coverage for the cost to recover our containers due to a customer's insolvency, bankruptcy or default may not be available, which could increase our risk. This is the case currently with credit insurance for our lessee's non-payment of receivables, which is not currently available in today's insurance market for our fleet.

Our future business prospects could be adversely affected by consolidation within the container shipping industry.

        We primarily lease containers to shipping lines. Over the last several years, there have been several large shipping line acquisitions that have resulted in some consolidation within the container shipping industry, including among some of our customers. This consolidation has reduced the number of large shipping lines and also increased the concentration of business in a smaller number of larger customers. Our future business prospects could be adversely affected if there is a continued reduction in the number of shipping lines in the world. Due to concentration risk and resulting impact on credit risk, we might decide to limit the amount of business exposure we have with any single customer if the exposure were deemed unacceptable, which could negatively impact the volume of equipment we lease and the revenues we would otherwise earn if we had leased assets despite the concentration risk or had the previously separate customers not combined.

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Our strategy to pursue acquisition opportunities may subject us to considerable business and financial risk, and unforeseen integration obstacles or risks.

        In order to grow our business, we expect to employ various strategies, including consummating strategic and complementary acquisitions and joint ventures from time to time. We may not be successful in identifying acquisition opportunities, assessing the value, strengths and weaknesses of these opportunities and consummating acquisitions on acceptable terms. Furthermore, suitable acquisition opportunities may not be made available or known to us. Unanticipated issues may arise in the implementation of these contemplated strategies, which could impair our ability to expand our business as expected. For example:

        Any of the above risks could adversely affect our financial position and results of operations and could cause us to abandon some or all of our growth strategies. Furthermore, any acquisitions or joint ventures may expose us to particular business and financial risks that include, but are not limited to:

        We may not be able to successfully manage acquired businesses or increase our cash flow from these operations. If we are unable to successfully implement our acquisition strategy or address the risks associated with acquisitions, or if we encounter unforeseen expenses, difficulties, complications or delays frequently encountered in connection with the integration of acquired entities and the expansion of operations, our growth and ability to compete may be impaired, we may fail to achieve acquisition synergies, and we may be required to focus resources on integration of operations rather than on other

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profitable areas. We anticipate that we may finance acquisitions through cash provided by operating activities, borrowings under our credit facilities and other indebtedness, which would reduce our cash available for other purposes, including the repayment of indebtedness and payment of dividends.

If we are unable to enter into interest rate swaps on reasonable commercial terms or if a counterparty under our interest rate swap agreements defaults, our exposure associated with our variable rate debt could increase.

        We have typically funded a significant portion of the purchase price of new containers through borrowings under our revolving credit facility and our secured debt facilities. We intend to use borrowings under our revolving credit facility and our secured debt facility for such funding purposes in the future. The amounts outstanding under these facilities are subject to variable interest rates. We have entered into various interest rate swap agreements to mitigate our exposure associated with this variable rate debt. There can be no assurance that these interest rate swaps will be available in the future, or if available, will be available on terms satisfactory to us. If we are unable to obtain such interest rate swaps or if a counterparty under our interest rate swap agreements defaults, our exposure associated with our variable rate debt could increase.

Storage space for containers may become limited, increasing depot costs for the storage of containers.

        Land in and around many port areas is limited, and nearby depot space could become difficult to find and more costly with limited space and fewer depots in the area. In addition, local communities in port areas may impose regulations that prohibit the storage of containers near their communities, further limiting the availability of storage facilities, and increasing storage, repair costs, and transportation charges relating to the use of our containers. Additionally, depots in prime locations may become filled to capacity based on market conditions, and may refuse additional redeliveries due to space restraints. This could require us to enter into higher cost storage agreements with depot operators in order to accommodate our customers' redelivery requirements, and could result in increased costs and expenses for us.

Because we are a newly formed company with a limited separate operating history, our historical financial and operating data may not be representative of our future results.

        We are a newly incorporated company with limited separate operating history. Our results of operations, financial condition and cash flows reflected in our consolidated financial statements may not be indicative of the results we would have achieved had we operated as a stand-alone or public entity for all periods presented or of the future results that we may achieve as a publicly traded company.

Our loan agreements contain restrictive covenants that may limit our liquidity and corporate activities.

        Our loan agreements impose operating and financial restrictions on us. These restrictions may limit our ability to, among other things:

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        Specifically, as described in "Description of Certain Indebtedness" below, we are required to maintain certain financial ratios. If we are unable to maintain these ratios, our creditors could accelerate our debt, which could materially harm our financial condition and business. Therefore, we may need to seek permission from our lenders in order to engage in certain corporate actions. Our lenders' interests may be different from ours, and we cannot guarantee that we will be able to obtain our lenders' permission when needed. This restriction may prevent us from taking actions that are in our best interest.

We intend to incur substantial additional debt and may issue substantial additional equity in order to expand our business and pay dividends.

        We plan to expand our business substantially by continuing to acquire containers each year. We intend to fund a portion of this growth with additional borrowings from time to time, which will increase our indebtedness and interest expense. We may also fund a portion of this growth with sales of additional equity securities, and such sales may be significant, which could have a significant dilutive effect on our shareholders. There is no assurance that we will continue to be able to access the debt and equity markets to the extent necessary to fund our plans, or that our cash flow will increase sufficiently to enable us to cover our increased borrowing costs and dividend payments. If our cash flow is insufficient to meet our needs, we may need to restrict our growth or dividend payments, or both, and we could face an increased risk of default. Our ability to fund our plans will depend on market conditions in our industry and in the financial markets as well as on our operating performance, each of which, to a significant extent, is out of our control. The downturn in the world's major economies, constraints in the credit markets and turbulence in the financial markets generally underscore the uncertainty concerning our ability to achieve our plans for growth and dividend payments. In addition, our ability to draw funds under our existing credit facility is subject to our compliance with various covenants and requirements under the facility. See "Description of Certain Indebtedness—Container Revolving Credit Facility".

Our inability to service our debt obligations or to obtain additional financing as needed would have a material adverse effect on our business, financial condition and results of operations.

        Our ability to meet our debt obligations will depend upon, among other things, our financial and operating performance, which will be affected by prevailing economic conditions and by financial, business, regulatory and other factors affecting our operations. Many of these factors are beyond our control. If our cash flow is insufficient to service our current and future indebtedness and to meet our other obligations and commitments, or if we are unable to obtain new financing on a timely basis, we will be required to adopt one or more alternatives, such as reducing or delaying our business activities, acquisitions, investments, capital expenditures, the payment of dividends or the implementation of our other strategies, refinancing or restructuring our debt obligations, selling intermodal assets, seeking to raise additional debt or equity capital or seeking bankruptcy protection. However, we may not be able to effect any of these remedies or alternatives on a timely basis, on satisfactory terms or at all.

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Risks Related to Our Organization and Structure

If the ownership of our common shares continues to be highly concentrated, it may prevent you and other minority shareholders from influencing significant corporate decisions and may result in conflicts of interest.

        Following the completion of this offering, the Initial Shareholder, an entity primarily owned by certain private equity funds managed by an affiliate of Fortress, will beneficially own approximately 57.8% of our outstanding common shares or 52.8% if the underwriters' over-allotment option is fully exercised. As a result, the Initial Shareholder will own shares sufficient for the majority vote over all matters requiring a shareholder vote, including: the election of directors; amalgamations, consolidations or acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our memorandum of association and our bye-laws, and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other shareholders. The interests of the Initial Shareholder may not always coincide with our interests or the interests of our other shareholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us. Also, the Initial Shareholder may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders, including investors in this offering. As a result, the market price of our common shares could decline or shareholders might not receive a premium over the then-current market price of our common shares upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common shares because investors may perceive disadvantages in owning shares in a company with significant shareholders. See "Principal and Selling Shareholders" and "Description of Share Capital—Anti-Takeover Provisions."

We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations and to pay dividends.

        We are a holding company with no material direct operations. Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries, which own our operating assets. As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends on our common shares. Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions. If we are unable to obtain funds from our subsidiaries, we may be unable to, or our board may exercise its discretion not to, pay dividends.

We are a Bermuda exempted company, and it may be difficult for you to enforce judgments against us or our directors and executive officers.

        We are a Bermuda exempted company and, as such, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. A substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. Uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

Our bye-laws restrict shareholders from bringing legal action against our officers and directors.

        Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action

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taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.

Certain provisions of the Shareholders Agreement and our bye-laws could hinder, delay or prevent a change in control of our company, which could adversely affect the price of our common shares.

        Certain provisions of the Shareholders Agreement and our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors or the Initial Shareholder. These provisions provide for:

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        In addition, these provisions may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by our Initial Shareholder, our management and/or our board of directors. Public shareholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is considered favorable to shareholders. These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium. See "Description of Share Capital—Anti-Takeover Provisions."

Certain of our shareholders have the right to engage or invest in the same or similar businesses as us.

        The Fortress Shareholders have other investments and business activities in addition to their ownership of us. Under our bye-laws, the Fortress Shareholders have the right, and have no duty to abstain from exercising such right, to engage or invest in the same or similar businesses as us, do business with any of our clients, customers, lessors or vendors or employ or otherwise engage any of our officers, directors or employees. In particular, Joseph Kwok, our Chief Executive Officer, served as Chief Executive Officer of Seacastle Inc., the parent company of our Initial Shareholder, until our incorporation in March 2010, and continues to serve as Chairman of Seacastle Inc. and Seacastle Holdings LLC. Mr. Kwok will receive additional compensation from a subsidiary of Seacastle Holdings LLC. Two of our directors are individuals affiliated with Fortress, one of whom also serves on the board of directors of Seacastle Inc. Seacastle Inc. is a holding company that owns businesses that are engaged in the business of acquiring and leasing chassis and containerships, two other types of intermodal equipment that are used in global containerized cargo trade. Mr. Kwok will continue to hold restricted common shares in Seacastle Inc. following the completion of this offering. If the Fortress Shareholders or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty, to the fullest extent permitted by law, to offer such corporate opportunity to us, our shareholders or our affiliates.

        In the event that any of our directors and officers who is also a director, officer or employee of any of the Fortress Shareholders acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person's capacity as a director or officer of SeaCube and such person acts in good faith, then to the fullest extent permitted by law such person is deemed to have fully satisfied such person's duties owed to us and is not liable to us, if the Fortress Shareholder pursues or acquires the corporate opportunity or if the Fortress Shareholder does not present the corporate opportunity to us.

Risks Related to this Offering

An active trading market for our common shares may never develop or be sustained.

        Our common shares have been authorized for listing on the NYSE under the symbol "BOX", subject to official notice of issuance. However, we cannot assure you that an active trading market of our common shares will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our

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common shares will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of common shares when desired, or the prices that you may obtain for your shares.

The market price and trading volume of our common shares may be volatile, which could result in rapid and substantial losses for our shareholders.

        Even if an active trading market develops, the market price of our common shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our common shares may fluctuate and cause significant price variations to occur. The initial public offering price of our common shares will be determined by negotiation between us, the Initial Shareholder and the representatives of the underwriters based on a number of factors and may not be indicative of prices that will prevail in the open market following completion of this offering. If the market price of our common shares declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. We cannot assure you that the market price of our common shares will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common shares include:

        These broad market and industry factors may decrease the market price of our common shares, regardless of our actual operating performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including periods of sharp decline, as in late 2008 and early 2009. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

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Future offerings of debt or equity securities by us may adversely affect the market price of our common shares.

        In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional common shares or offering debt or additional equity securities, including commercial paper, medium-term notes, senior or subordinated notes or preference shares. Issuing additional common shares or other additional equity offerings may dilute the economic and voting rights of our existing shareholders or reduce the market price of our common shares, or both. Upon liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other borrowings, would receive a distribution of our available assets prior to the holders of our common shares. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common shares. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common shares bear the risk of our future offerings reducing the market price of our common shares and diluting their share holdings in us. See "Description of Share Capital."

The market price of our common shares could be negatively affected by sales of substantial amounts of our common shares in the public markets.

        After this offering, there will be 19,030,753 common shares issued and outstanding. There will be 19,405,753 shares issued and outstanding if the underwriters exercise their over-allotment option in full. Of our issued and outstanding shares, all the common shares sold in this offering will be freely transferable, except for any shares held by our "affiliates," as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). Following completion of the offering, approximately 60.6% of our issued and outstanding common shares (or 55.6% if the underwriters' over-allotment option is exercised in full) will be held by the Initial Shareholder and members of our management, directors and employees, and can be resold into the public markets in the future in accordance with the requirements of Rule 144. See "Shares Eligible For Future Sale."

        We and our executive officers, directors and the Initial Shareholder (who will hold in the aggregate approximately 59.7% of our issued and outstanding common shares immediately after the completion of this offering) have agreed with the underwriters that, subject to limited exceptions, for a period of 180 days after the date of this prospectus, we and they will not directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase or otherwise dispose of any common shares or any securities convertible into or exercisable or exchangeable for common shares, or in any manner transfer all or a portion of the economic consequences associated with the ownership of common shares, or cause a registration statement covering any common shares to be filed, without the prior written consent of J.P. Morgan Securities LLC. J.P. Morgan Securities LLC may waive these restrictions at its discretion. Common shares held by our employees, other than our officers who are subject to the lockup provisions, are not subject to these restrictions and may be sold without restriction at any time.

        Pursuant to our Shareholders Agreement that we will enter into prior to completion of this offering, the Initial Shareholder and certain of its affiliates and permitted third-party transferees will have the right, in certain circumstances, to require us to register their approximately 11,000,000 common shares that they will own immediately following this offering and any common shares that they acquire after this offering under the Securities Act for sale into the public markets. Upon the effectiveness of such a registration statement, all shares covered by the registration statement will be freely transferable. See "Certain Relationships and Related Party Transactions—Shareholders Agreement."

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        In addition, following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register an aggregate of 1,000,000 common shares reserved for issuance under our incentive plans. We may increase the number of shares registered for this purpose at any time. Subject to any restrictions imposed on the shares and options granted under our incentive plans, shares registered under the registration statement on Form S-8 will be available for sale into the public markets subject to the 180-day lock-up agreements referred to above.

        The market price of our common shares may decline significantly when the restrictions on resale by our existing shareholders lapse. A decline in the price of our common shares might impede our ability to raise capital through the issuance of additional common shares or other equity securities.

The future issuance of additional common shares in connection with our incentive plans, acquisitions or otherwise will dilute all other shareholdings.

        After this offering, assuming the exercise in full by the underwriters of their over-allotment option, we will have an aggregate of 379,647,188 common shares authorized but unissued and not reserved for issuance under our incentive plans. We may issue all of these common shares without any action or approval by our shareholders, subject to certain exceptions. We also intend to continue to actively pursue acquisitions of containers and container businesses and may issue common shares in connection with these acquisitions. Any common shares issued in connection with our incentive plans, our acquisitions, the exercise of outstanding share options or otherwise would dilute the percentage ownership held by the investors who purchase common shares in this offering.

We may not be able to pay or maintain dividends, or we may choose not to pay dividends, and the failure to pay or maintain dividends may adversely affect our share price.

        We intend to pay regular quarterly dividends to the holders of our common shares. Our ability to pay dividends, if any, will depend on, among other things, our cash flows, our cash requirements, our financial condition, cash available under our existing credit facilities, contractual restrictions binding on us, legal restrictions on the payment of dividends, including a statutory dividend test and other limitations under Bermuda law, and other factors that our board of directors may deem relevant. See "Description of Share Capital—Dividend Rights" for a description of related Bermuda law. Because we intend to use funds available under our existing credit facilities from time to time as an efficient source to pay a portion of any future dividends, our ability to pay dividends will depend, in part, on our ability to maintain credit facilities or other external sources of financing with favorable terms. In addition, our loan agreements contain certain restrictions on our ability to make dividend payments if an event of default under a loan agreement has occurred and is continuing, or would result therefrom, or upon the occurrence of specified amortization events. See "Description of Certain Indebtedness" for a description of these covenants. There can be no assurance that we will generate sufficient cash from continuing operations or external sources of financing in the future, or have sufficient surplus or net profits, as the case may be, under the laws of Bermuda or jurisdictions where our subsidiaries are located, to pay dividends on our common shares. Our dividend policy is based upon our directors' current assessment of our business and the environment in which we operate and that assessment could change based on a number of factors, including competitive developments (which could, for example, increase our need for capital expenditures), market conditions or new growth opportunities. Our board of directors may, in its discretion, amend or repeal this dividend policy to decrease the level of dividends or entirely discontinue the payment of dividends. The reduction or elimination of declaring and paying dividends may negatively affect the market price of our common shares.

        Under Bermuda law a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realizable value of its assets would thereby be less than the sum of its liabilities and its issued share capital (par value) and share premium accounts (share premium being

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the amount of consideration paid for the subscription of shares in excess of the par value of those shares). As a result, in future years, if the realizable value of our assets decreases, our ability to pay dividends may require our shareholders to approve resolutions reducing our share premium account by transferring an amount to our contributed surplus account.

Investors in this offering will suffer immediate and substantial dilution.

        The initial public offering price of our common shares will be substantially higher than the as adjusted net tangible book value per share issued and outstanding immediately after this offering. Our net tangible book value per share as of June 30, 2010 was approximately $7.24 and represents the amount of book value of our total tangible assets minus the book value of our total liabilities, excluding deferred gains, divided by the number of our common shares then issued and outstanding. Investors who purchase common shares in this offering will pay a price per share that substantially exceeds the net tangible book value per common share. If you purchase common shares in this offering, you will experience immediate and substantial dilution of $8.88 in the net tangible book value per share, based upon the initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover of this prospectus). Investors who purchase common shares in this offering will have purchased 39.4% of the shares issued and outstanding immediately after the offering, but will have paid 49.4% of the total consideration for those shares.

We will have broad discretion in the use of a significant part of the net proceeds from this offering and may not use them effectively.

        Our management currently intends to use the net proceeds from this offering in the manner described in "Use of Proceeds" and will have broad discretion in the application of a significant part of the net proceeds from this offering. The failure by our management to apply these funds effectively could affect our ability to operate and grow our business.

As a public company we will incur additional costs and face increased demands on our management.

        As a public company with shares listed on a U.S. exchange, we will need to comply with an extensive body of regulations that did not apply to us previously, including provisions of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), regulations of the U.S. Securities and Exchange Commission (the "SEC"), and requirements of the NYSE. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, as a result of becoming a public company, we intend to add independent directors, create additional board committees and adopt certain policies regarding internal controls and disclosure controls and procedures. In addition, we will incur additional costs associated with our public company reporting requirements and maintaining directors' and officers' liability insurance. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. Furthermore, our management will have increased demands on its time in order to ensure we comply with public company reporting requirements and the compliance requirements of the Sarbanes-Oxley Act, as well as the rules subsequently implemented by the SEC and the applicable stock exchange requirements of the NYSE.

We will be required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls by the end of fiscal 2011, and we cannot predict the outcome of that effort.

        As a U.S.-listed public company, we will be required to comply with Section 404 of the Sarbanes-Oxley Act by December 31, 2011. Section 404 will require that we evaluate our internal control over financial reporting to enable management to report on, and our independent auditors to audit as of the end of the next fiscal year, the effectiveness of those controls. While we have begun the lengthy process of evaluating our internal controls, we are in the early phases of our review and will not complete our

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review until well after this offering is completed. We cannot predict the outcome of our review at this time. During the course of our review, we may identify control deficiencies of varying degrees of severity, and we may incur significant costs to remediate those deficiencies or otherwise improve our internal controls. As a public company, we will be required to report control deficiencies that constitute a "material weakness" in our internal control over financial reporting. We would also be required to obtain an audit report from our independent auditors regarding the effectiveness of our internal controls over financial reporting. If we fail to implement the requirements of Section 404 in a timely manner, we may be subject to sanctions or investigation by regulatory authorities, including the SEC or the NYSE. Furthermore, if we discover a material weakness or our auditor does not provide an unqualified audit report, our share price could decline, our reputation could be significantly harmed and our ability to raise capital could be impaired.

Risks Related to Taxation

We expect to be a passive foreign investment company ("PFIC") and may be a controlled foreign corporation ("CFC") for U.S. federal income tax purposes.

        We expect to be treated as a PFIC and may be a CFC for U.S. federal income tax purposes. If you are a U.S. person and do not make certain elections with respect to your investment, unless we are a CFC and you own 10% of our voting shares, you would be subject to special deferred tax and interest charges with respect to certain distributions on our common shares, any gain realized on a disposition of our common shares and certain other events. The effect of these deferred tax and interest charges could be materially adverse to you. Alternatively, if you are such a shareholder and make one of such elections, or if we are a CFC and you own 10% or more of our voting shares, you will not be subject to those charges, but could recognize taxable income in a taxable year with respect to our common shares in excess of any distributions that we make to you in that year, thus giving rise to so-called "phantom income" and to a potential out-of-pocket tax liability.

        Distributions made to a U.S. person that is an individual will not be eligible for taxation at reduced tax rates generally applicable to dividends paid by certain United States corporations and "qualified foreign corporations" on or prior to December 31, 2010. The more favorable rates applicable to regular corporate dividends could cause individuals to perceive investment in our shares to be relatively less attractive than investment in the shares of other corporations, which could adversely affect the value of our shares.

We may become subject to unanticipated tax liabilities that may have a material adverse effect on our results of operations.

        We may be subject to income, withholding or other taxes in other jurisdictions by reason of our activities and operations, where our containers are used, or where the lessees of our containers (or others in possession of our containers) are located, and it is also possible that taxing authorities in any such jurisdictions could assert that we are subject to greater taxation than we currently anticipate. A portion of our income is treated as effectively connected with our conduct of a trade or business within the U.S., and is accordingly subject to U.S. federal income tax. It is possible that the U.S. Internal Revenue Service could assert that a greater portion of our income is effectively connected income that should be subject to U.S. federal income tax. If we become subject to a significant amount of unanticipated tax liabilities, our business would be adversely affected and decreased earnings would be available for distribution to our shareholders.

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Our exemption from certain Bermuda taxes is effective until March 28, 2016, and if it is not extended our results of operations and your investment could be adversely affected.

        The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, has given us an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to us or any of our operations, shares, debentures or other obligations, except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property leased by us in Bermuda. See "Material Tax Considerations- Bermuda Tax Considerations".

        This assurance by the Bermuda Minister of Finance expires on March 28, 2016. There is no guarantee that we will receive a renewed assurance from the Bermuda Minister of Finance, or that the Bermuda Government will not take action to impose taxes on our business. If the Bermuda Government imposed significant taxes on our business, our earnings could decline significantly.

We are incorporated in Bermuda, and we expect several of our directors and a significant portion of their and our assets will be located outside the United States. As a result, it may not be possible for shareholders to enforce civil liability provisions of the U.S. federal or state securities laws.

        We are incorporated under the laws of Bermuda and a significant portion of our assets are located outside the United States. In addition, we expect that some of our directors will not be citizens or residents of the United States and that a significant portion of and the assets of our non-U.S. directors will be located outside the United States. Consequently, it may be difficult to serve legal process within the United States upon any of our non-U.S. directors. In addition, it may not be possible to enforce court judgments obtained in the United States against us in Bermuda or against our non-U.S. directors in their home countries, or in countries other than the United States where we or they have assets, particularly if the judgments are based on the civil liability provisions of the federal or state securities laws of the United States. There is some doubt as to whether the courts of Bermuda and other countries would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the federal or state securities laws of the United States or would hear actions against us or those persons based on those laws. We have been advised by our legal advisors in Bermuda that the United States and Bermuda do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters.

        Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Bermuda. Similarly, those judgments may not be enforceable in countries, other than the United States, where we or our non-U.S. directors have assets.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Industry," "Business" and elsewhere in this prospectus may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," "target," "projects," "contemplates" or the negative version of those words or other comparable words.

        These forward-looking statements include, without limitation, statements about the following matters:

        Any forward-looking statements contained in this prospectus are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, Fortress, the Initial Shareholder, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking

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statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, a decrease in the overall demand for leased container assets, the economic condition of the global container asset leasing industry and the ability of our lessees and potential lessees to make operating lease payments to us, the condition of the global economy and world financial markets, changes in the values of our assets, acquisition risks, competitive pressures within the industry, risks related to the geographic markets in which we and our lessees operate, our ability to retain key personnel, the impact of new or existing regulations, whether we are replaced as manager of any containers that we manage for third parties and other factors described in the section entitled "Risk Factors" beginning on page 16 of this prospectus. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

        If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision to purchase our common shares. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

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USE OF PROCEEDS

        The net proceeds to us from the sale of common shares by us in this offering are estimated to be approximately $34.9 million, assuming an initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. Our net proceeds will increase by approximately $5.9 million if the underwriters' over-allotment option is exercised in full. We intend to use the net proceeds to us from this offering for investment in new containers, working capital, and other general corporate purposes, as well as potential strategic investments and acquisitions. We have not identified, or entered into negotiations regarding, any specific strategic investments or acquisitions, but generally plan to pursue strategic acquisitions of container fleets and container leasing companies, as more fully described in "Business—Growth Strategy."

        We will not receive any proceeds from the sale of our common shares by the Initial Shareholder, including any shares sold by the Initial Shareholder pursuant to the underwriters' over-allotment option. The Initial Shareholder plans to use the net proceeds from the sale of shares in this offering to repay $74.0 million of indebtedness owed to affiliates of some of the underwriters under the Amended Seacastle Credit Facility. Upon such repayment in full, CLI's and SeaCube Operating Company Ltd.'s guaranty thereunder, and the pledge of certain collateral by the Initial Shareholder and SeaCube Operating Company Ltd. (which pledges include the beneficial equity interests in CLI) to the lenders thereunder, will terminate.

        A $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by $2.3 million, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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DIVIDEND POLICY

        We intend to pay regular quarterly dividends to our shareholders. We currently intend to pay an initial dividend of $0.20 per share on or about January 2011 in respect of the fourth quarter of 2010. We expect to pay these dividends with cash generated from net operating cash flows and, if necessary, with funds available from existing lines of credit. By paying dividends to our shareholders, rather than investing our earnings in future growth, we risk slowing the pace of our growth or not having a sufficient amount of cash on hand to fund unanticipated capital expenditures, should they arise.

        Our dividend policy is subject to certain risks and limitations. Because we are a holding company substantially all of the assets shown on our consolidated balance sheet are held by our subsidiaries. Accordingly, our ability to pay dividends is largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of such earnings to us in the form of dividends. Moreover, our ability to pay dividends, if any, will depend on, among other things, our cash flows, our cash requirements (including requirements to service or repay our indebtedness), cash available under our credit facilities, general economic and business conditions, our strategic plans and prospects, our financial results and condition, contractual restrictions binding on us, legal restrictions on the payment of dividends, including a statutory dividend test and other limitations under Bermuda law and regulations and other factors that our board of directors considers to be relevant. Because we intend to use funds available under our credit facilities from time to time as an efficient source to pay a portion of any future dividends, our ability to pay dividends will depend, in part, on our ability to maintain credit facilities or other external sources of financing with favorable terms. In addition, our loan agreements contain certain restrictions on our ability to make dividend payments if an event of default under a loan agreement has occurred and is continuing, or would result therefrom, or upon the occurrence of specified amortization events. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Description of Certain Indebtedness" for more information. There can be no assurance that we will generate sufficient cash from continuing operations or external sources of financing in the future, or have sufficient surplus or net profits, as the case may be, under the laws of Bermuda or other jurisdictions where our subsidiaries are located, to pay dividends on our common shares.

        We are not required to pay dividends, and our shareholders will not be guaranteed, or have contractual or other rights, to receive dividends. Rather, our dividend policy is based upon our directors' current assessment of our business and the environment in which we operate and that assessment could change based on the factors discussed above. Our board of directors may decide, in its discretion, at any time, to decrease the amount of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends. The reduction or elimination of dividends may negatively affect the market price of our common shares.

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CAPITALIZATION

        The following table sets forth our capitalization as of June 30, 2010:

        This table contains unaudited information and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements and the accompanying notes that appear elsewhere in this prospectus.

 
  As of
June 30, 2010
 
 
  Actual   As adjusted  
 
  (in thousands except per share amounts)
 

Cash and cash equivalents (1)

  $ 32,647   $ 68,814  
           

Container Asset-Backed Securitizations:

             

Series 2006-1 Notes

  $ 383,384   $ 383,384  

CLI Funding III Credit Facility

    346,664     346,664  

Container Revolving Credit Facility

    20,000     20,000  
           

Total debt

    750,048     750,048  

Shareholders' equity:

             

Preferred shares, $0.01 par value, 100,000,000 shares authorized, and no shares issued or outstanding

         

Common shares, $0.01 par value, 400,000,000 shares authorized, 16,477,812 shares issued and outstanding, actual (2)

    165     190  

Additional paid in capital

    189,410     224,295  

Retained earnings

    945     945  

Accumulated other comprehensive income (loss)

    (48,763 )   (48,763 )
           

Total shareholders' equity

    141,757     176,667  
           

Total capitalization

  $ 891,805   $ 926,715  
           

(1)
Includes restricted cash of $18,833.

(2)
Excludes common shares to be issued to certain of our directors prior to the completion of this offering.

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DILUTION

        If you invest in our common shares, your ownership interest will be diluted to the extent of the difference between the initial public offering price in this offering per share and the pro forma as adjusted net tangible book value per share upon consummation of this offering. Net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of common shares then issued and outstanding.

        Our net tangible book value as of June 30, 2010, was approximately $119.3 million, or approximately $7.24 per share, based on the 16,477,812 common shares issued and outstanding as of such date. After giving effect to our sale of common shares in this offering at the initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and estimated expenses related to this offering, our pro forma as adjusted net tangible book value as of June 30, 2010 would have been $154.2 million, or $8.12 per share (assuming no exercise of the underwriters' over-allotment option). This represents an immediate and substantial dilution of $8.88 per share to new investors purchasing common shares in this offering. Sales of shares by the Initial Shareholder in this offering do not effect our net tangible book value. The following table illustrates this dilution per share:

 
  per share  

Assumed initial public offering price per share

  $ 17.00        

Net tangible book value per share as of June 30, 2010

    7.24        

Increase in net tangible book value per share attributable to this offering

    0.89        
             

Pro forma as adjusted net tangible book value per share after giving effect to this offering

          8.12  
             

Dilution per share to new investors in this offering

        $ 8.88  
             

        A $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) our net tangible book value by $2.3 million, the pro forma net tangible book value per share after this offering by $0.13 per share and the net tangible book value to new investors in this offering by $1.01 per share, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering and other expenses payable by us.

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        The following table summarizes, on a pro forma basis as of June 30, 2010, the differences between the number of common shares purchased from us, the total price and the average price per share paid by existing shareholders and by the new investors in this offering, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us, at an assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus).

 
  Shares Purchased   Total Contribution   Average
Price
Per
Share
 
 
  Number   Percent   Amount   Percent  
 
  (In thousands)
   
  (In thousands)
   
   
 

Existing Shareholders

    16,478     86.8 % $ 189,575     81.7 % $ 11.50  

New Investors

    2,500     13.2     42,500     18.3     17.00  
                         
 

Total

    18,978     100 % $ 232,075     100 %      
                         

        The percentage of shares purchased from us by existing shareholders is based on 16,477,812 of our common shares outstanding as of June 30, 2010. This number excludes:

        A $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) total consideration paid by new investors in this offering and the average price per share paid by new investors by $2.5 million and $1.00 per share, respectively, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering and other expenses.

        If the underwriters' option to purchase additional shares is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $8.27 per share and the dilution to new investors per share after this offering would be $8.73 per share.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The selected historical consolidated financial data presented below have been derived from the audited consolidated financial statements, at the dates and for the periods indicated, for SeaCube Container Leasing Ltd. (formerly Container Leasing International, LLC and subsidiaries ("CLI")) ("SeaCube").

        In March 2010, all of the equity interests in CLI were transferred from Seacastle Operating Company Ltd. (our "Initial Shareholder") to an indirect wholly owned subsidiary of SeaCube Container Leasing Ltd.

        The selected historical consolidated financial data presented as of December 31, 2005 and for the period from January 1, 2006 through February 14, 2006 (the predecessor period) have been derived from the audited consolidated financial statements of CLI prior to the acquisition by the Initial Shareholder. The selected historical consolidated financial data for the period from February 15, 2006 through December 31, 2006, as of and the years ended December 31, 2007, 2008, and 2009 (the successor period), have been derived from the audited consolidated financial statements of SeaCube subsequent to the acquisition by the Initial Shareholder.

        Historical consolidated statement of operations data and historical consolidated statement of cash flows data as of and for the six months ended June 30, 2009 and 2010 were derived from the unaudited consolidated financial statements of SeaCube included elsewhere in this prospectus. The unaudited selected historical consolidated financial statements have been prepared on substantially the same basis as our audited historical consolidated financial statements.

        The following tables summarize the historical consolidated financial information for our business. You should read these tables along with "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and our consolidated historical financial statements and the related notes included elsewhere in this prospectus.

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  Predecessor   Successor    
   
 
 
   
  Period from
January 1,
2006
through
February 14,
2006
  Period from
February 15,
2006
through
December 31,
2006
   
   
   
   
   
 
 
  Year Ended
December 31,
  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2005   2007   2008   2009   2009   2010  
 
  (dollars in thousands, except for share and per share amounts)
 

Consolidated Statements of Operations Data:

                                                 

Total revenue

  $ 150,689   $ 18,205   $ 138,422   $ 208,907   $ 238,819   $ 141,873   $ 75,574   $ 66,843  

Direct operating expenses

    7,934     790     5,889     9,133     13,780     9,073     4,502     4,059  

Selling, general and administrative expenses

    37,390     3,627     20,021     26,339     26,215     21,983     10,870     10,238  

Depreciation expenses

    48,461     6,812     55,723     75,179     79,491     37,769     20,215     16,798  

Provision for doubtful accounts

                1,256     1,468     4,678     1,791     (356 )

Fair value adjustment for derivative instruments

    (10,434 )   (3,527 )                        

Goodwill impairment

    38,900                              

Interest expense

    36,920     5,196     39,490     63,353     81,114     51,922     27,367     21,655  

Loss on terminations and modification of derivative instruments(1)

                        37,922     37,922      

Gain on 2009 Sale(1)

                        15,583     (15,583 )    

Loss on retirement of debt(1)

            7,631         413     1,330     1,330      

Provision for income taxes

            38             248     200     571  

Net (loss) income

  $ (4,631 ) $ 4,806   $ 3,614   $ 30,766   $ 30,036   $ (15,004 ) $ (16,962 ) $ 14,531  

Net income (loss) per share of common stock:

                                                 

Basic and diluted

                    $ 1.92   $ 1.88   $ (0.94 ) $ (1.06 ) $ 0.90  
 

Common shares used in computing net income (loss) per common share

                                                 
 

Basic and diluted

                      16,000,000     16,000,000     16,000,000     16,000,000     16,156,675  

Consolidated Balance Sheet Data (at end of period):

                                                 

Cash and cash equivalents

  $ 15,697         $ 12,088   $ 11,146   $ 30,567   $ 8,014         $ 13,814  

Restricted cash

    7,869           15,962     36,459     30,056     22,060           18,833  

Net investment in direct finance leases

    177,062           171,714     604,303     582,320     555,990           524,571  

Leasing equipment, net of accumulated depreciation

    593,035           843,401     1,003,183     863,730     360,847           386,831  

Total assets

    857,861           1,098,407     1,738,322     1,581,386     1,097,229           1,001,204  

Deferred income taxes

              38     38     38     120           2,776  

Debt, current

    71,002           68,500     247,199     506,777     131,270           148,532  

Debt, long-term

    546,633           720,667     1,121,573     709,437     666,994           601,516  
 

Total liabilities

    638,613           855,111     1,457,547     1,327,783     862,875           859,447  
 

Total shareholders' equity/members' interest

    219,248           243,296     280,775     253,603     234,354           141,757  

Other Operating Data:

                                                 

Distribution to members and Initial Shareholder

    4,500                     60,000     60,000      

Dividends paid

                                2,800  

Contribution from Initial Shareholder

                50,000                    

Non-cash distribution to Initial Shareholder

                                              97,675  

Consolidated Statement of Cash Flows Data:

                                                 

Cash flows provided by operating activities

  $ 66,130   $ 5,839   $ 69,821   $ 96,667   $ 127,392   $ 50,966   $ 28,249   $ 44,178  

Capital expenditures

  $ 148,735   $ 4,533   $ 127,300   $ 326,793   $ 108,472   $ 55,304     2,273     41,133  

Selected Fleet Data:

                                                 

Average container units(2)

    648,517     658,257     611,360     640,305     604,434     550,688     555,955     520,498  

Average utilization

    97.0 %   95.9 %   95.6 %   96.1 %   97.5 %   96.5 %   97.1 %   97.5 %

(1)
Refer to the 2009 Sale described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. As it pertains to the Loss on retirement of debt, the 2009 Sale only relates to the year ended December 31, 2009 and the six months ended June 30, 2009.

(2)
Includes our operating fleet (which comprises our owned and managed fleet), the fleet of Interpool Limited for all periods presented and units under finance leases.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This management's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see "Special Note Regarding Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this prospectus as well as the rest of the information in this prospectus, including "Capitalization," "Summary Historical Consolidated Financial Data" and "Selected Historical Consolidated Financial Data." The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those listed under "Risk Factors" and included elsewhere in this prospectus.

Overview

        We are one of the world's largest container leasing companies based on total assets. Containers are the primary means by which products are shipped internationally because they facilitate efficient movement of goods via multiple transportation modes including ships, rail and trucks. The principal activities of our business include the acquisition, leasing, re-leasing and subsequent sale of refrigerated and dry containers and generator sets. We lease our containers primarily under long-term contracts to a diverse group of the world's leading shipping lines. As of June 30, 2010, we employed 75 people in seven offices in four countries and had total assets of $1.0 billion.

        We were incorporated by our Initial Shareholder in Bermuda in March 2010. Our Initial Shareholder is a subsidiary of Seacastle Inc. ("Seacastle"). Seacastle is owned by private equity funds that are managed by an affiliate of Fortress and by employees of Seacastle and other shareholders. Container Leasing International, LLC (d/b/a Carlisle Leasing International, LLC and/or Seacastle Container Leasing, LLC), the entity through which we conduct all of our operations ("CLI"), was founded in 1993 and was acquired by an affiliate of our Initial Shareholder in 2006. In March 2010, all of the equity interests in CLI were transferred to one of our wholly owned subsidiaries in connection with the Structure Formation described in "Prospectus Summary—Formation and Corporate History."

Assets

        Our fleet of equipment consists of three types of assets: refrigerated and dry containers and generator sets. These assets are either owned or managed by us on behalf of other third party owners. As of June 30, 2010, we owned or managed a fleet of 507,013 containers and generator sets, representing 795,039 TEUs. As of June 30, 2010, the average age of our owned container fleet was 5.3 years.

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Our Business

        We generate revenues by leasing our equipment to a diversified customer base of the world's leading shipping lines. The vast majority of our revenues are generated from the per diem lease rates that we charge our customers for the units that are on hire at any given time. We also generate certain other revenues including service revenues from on- and off-hire fees, income earned from maintenance and repair fees charged to our lessees, and management fees earned for the management of units by us on behalf of third-party owners.

        Approximately 89% of our owned units are subject to long-term and direct finance leases, typically with initial lease terms of five to eight years. Long-term leases provide us with stable cash flows and minimize direct operating expenses associated with shorter-term operating leases. As of June 30, 2010, approximately 51.7% of our total units on lease were classified as operating leases and 48.3% were classified as direct finance leases. Our long-term operating leases may contain an early termination provision allowing the lessee to return equipment prior to the expiration of the lease upon payment of an early termination fee or a retroactively applied increase in per diem lease payments. We have experienced minimal early returns of our equipment under our long-term leases, primarily because of the penalties involved.

        Our lease terms generally require that operating costs including maintenance, insurance and other specified costs be paid by the lessee. All of our leases require the lessee to maintain the equipment in good operating condition, defend and indemnify us from liabilities relating to container contents and handling and return the containers to specified drop-off locations.

        Our operating costs generally consist of direct operating costs, selling, general and administrative costs, capital costs associated with our equipment (depreciation and interest expense) as well as other costs. Our direct operating costs include costs paid to container depots including on- and off-hire fees, maintenance and repair expenses, storage charges and other miscellaneous costs. As noted above, a number of these costs are charged back to our lessees including the on- and off-hire fees and a portion of the maintenance and repair expenses. Our selling, general and administrative expenses reflect the cost of our personnel including our senior management, sales, operations, finance and accounting staff as well as our information technology infrastructure. Our capital costs include depreciation of our equipment and the interest expense on the debt we have borrowed to finance the acquisition of such equipment.

Primary Operating Performance Metrics

        Revenue growth for our business is driven by the size of our fleet, utilization of our equipment and average lease rates. We plan to grow our fleet by investing in new container assets. Our utilization rates are determined by the percentage of our total fleet that is on hire excluding assets held for sale and production units at the factory. As of December 31, 2008 and 2009, our utilization rates were 97.6% and 96.7%, respectively. As of June 30, 2009 and June 30, 2010, our utilization rates were 96.1% and 98.0%, respectively. Equipment lease rates are a function of several factors, including new equipment prices, which are primarily influenced by the price of steel, interest rates and the number of available container units in the market. Average lease rates will gradually change as lease terms expire and new rates are set.

        Our direct operating costs are a function of our leasing activity and utilization. As more units are turned in and leased out, our on- and off-hire costs increase. Maintenance and repair expenses increase or decrease depending on the volume of repairs that we authorize. Storage charges for our units increase as our utilization declines and decrease as our utilization increases. Our selling, general and administrative expenses are driven by the size of our fleet and the complexity of our operations. Since our systems can handle significantly more units than they do today, we believe that we can significantly increase the size of our fleet and our operations without materially increasing our overhead costs. Our

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capital costs are primarily driven by the size of our fleet, the price we pay for our assets and the cost of the debt associated with the purchase of those assets.

Industry Trends

        The demand for containers is principally a function of the growth in worldwide containerized trade and the growth in containership supply. According to Harrison Consulting, worldwide container trade has grown at an annual rate of more than 8% for over 30 years. In the last 10 years growth has been underpinned by globalization and the emergence of China as the world's leading manufacturing base, and has grown at approximately three times the world GDP growth rate. For the first time in its history, container trade declined in 2009 by approximately 7%, but Harrison Consulting estimates that volumes have already begun to recover and container trade growth will revert to historical levels in the coming years.

        Similar to containerized trade, refrigerated container trade has benefited from the increasing affluence of consumers globally, along with their increased preference for a variety of fresh foods year-round. This, along with the shift of refrigerated cargos from the older conventional (non-containerized) refrigerated vessels to containerized refrigerated vessels and the infrastructural developments in the global transportation network, all have contributed to and promoted intermodal transport and containerized trade. In contrast to dry cargo trades, refrigerated trades have a higher tendency to run in north-south trades due to the reversal of seasons in the Southern versus Northern Hemispheres enabling countries such as Chile and South Africa to supply a variety of fresh produce to Northern Hemisphere consumer markets in their winter season. The North-South seasonality factor, as well as demand during the holiday season, tends to drive refrigerated trade upwards starting in the fourth quarter and running through Chinese New Year in Asia, creating a higher demand for both new and existing units in the first and fourth quarters of the year.

        The dry container market is affected by GDP growth as well as other factors. The dry container market is also subject to macroeconomic trends over time. As much of this cargo consists of consumer goods, the demand for transportation of these goods is propelled by the need for manufacturers to supply stock to retailers in time for holiday demand. As just-in-time inventory management techniques have improved, the supply of cargo flows has tended to start later in summer and fall months, although stress on congested port facilities and inland transportation modes such as railroad lines, has restricted the shippers' ability to push this schedule further back in the year.

        According to Harrison Consulting, the size of the world container fleet as of December 31, 2009, was approximately 26 million TEU, approximately 45% of which was owned or managed by container lessors. It is common for the shipping lines to utilize several container leasing companies to meet their container equipment needs.

Segment Reporting

        Prior to the acquisition of CLI by an affiliate of our Initial Shareholder, and currently, CLI manages the business through a single set of product metrics and profitability measures that did not seek to allocate costs amongst the individual products. CLI employed a single sales force that sold each product and the back office functions were not allocable in total or in part to a single product. We expect to continue to operate our business as a single reportable segment.

Interpool Container Acquisition (the "Interpool Acqusition")

        On July 19, 2007, we acquired substantially all of the assets and liabilities of Interpool Limited's business (the "Interpool Containers"). Interpool Containers and its subsidiaries were in the business of leasing intermodal dry freight containers. The results of operations of Interpool Containers from July 19, 2007 through December 31, 2007 are included in our consolidated financial statements. The acquisition of Interpool Containers was accounted for in accordance with Financial Accounting

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Standards Board ("FASB") Topic 805, using the purchase method of accounting. Under the purchase method of accounting, the assets acquired and liabilities assumed from Interpool Containers were recorded at the date of acquisition, at their respective fair values. The purchase price plus acquisition costs exceeded the fair values of acquired assets and assumed liabilities resulting in the recognition of goodwill in the amount of $7.2 million, which is not tax deductible. The factors that contributed to a purchase price that resulted in the recognition of goodwill include (i) a growing global perishable and dry goods market and (ii) consumer demand to have access to these goods regardless of the season.

2009 Sale of Containers (the "2009 Sale")

        On January 20, 2009, we entered into sale agreements with an unrelated third party investor group for the sale of approximately 65,000 containers and gensets for cash consideration of $454.2 million. The leasing assets sold had a book value of approximately $427.7 million, and we also sold accounts receivable with a carrying value of $10.9 million. This transaction resulted in a gain of approximately $15.6 million which was recorded in our 2009 consolidated financial statements. In conjunction with the sale of these assets, CLI entered into administrative services agreements, whereby, for a ten-year term subject to a maximum 3 year extension at the option of the container owner, CLI has agreed to operate, lease and re-lease the containers and to act on the owners' behalf as so directed. Under the agreements, CLI does not retain any risk of ownership. The administrative services agreements are subject to an early termination right of the container owner if certain performance targets are not met as well as the requirement that CLI maintain a minimum consolidated tangible net worth of $75.0 million. Management fees will be paid by the owners to CLI depending upon the type of lease that the equipment is under (term, master lease or direct finance lease). CLI will collect lease receivables on behalf of the owners and remit amounts to the owners after deducting the applicable management fees. These fees are recorded in other revenue in the consolidated statements of operations.

        The containers and gensets and associated lease interests that were sold in the 2009 Sale were a representative sample of our total operating lease fleet with regard to equipment type, customer mix, age, and utilization. The principal reasons why we entered into the 2009 Sale were (i) to provide us with an opportunity to establish a new relationship with a third-party capital provider, (ii) to allow us to mitigate some customer credit and residual risk of ownership to a third party, thereby reducing our aggregate risk exposure to several customers, and (iii) to provide us with additional revenue in the form of management fees from the long-term administrative services agreements that CLI entered into at the time of the sale.

        In June 2010, the container owners informed us that they had requested that their lenders (two of whom are underwriters in this offering) approve a third party to replace CLI as manager of the containers subject to the administrative services agreements because CLI had not met certain performance targets under those agreements during a three-month period in 2009. We disputed their ability to terminate the agreements. Thereafter, the container owners informed us that they had withdrawn their request to their lenders to approve a third party as replacement manager. Under the administrative services agreements, either party can seek arbitration to resolve a dispute. An adverse outcome from this dispute could result in a decrease of revenues, net income and the number of containers under management. The administrative service agreements contributed $4.9 million and $2.7 million of revenue for the year ended December 31, 2009 and the six months ended June 30, 2010, respectively, covering 59,551 total container units as of June 30, 2010. We expect that these figures will decline gradually over time as the container owners' fleet matures. We believe the revenues from these agreements could be more profitable than our other revenues.

        On October 11, 2010, we and the container owners entered into an agreement that releases all parties from claims with respect to this prior dispute. The agreement lowers a performance

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requirement that applies to us as the manager and otherwise continues the existing agreements with certain modifications that we do not expect will materially affect our revenues.

Basis of Presentation

        Our consolidated statements of operations are presented for the years ended December 31, 2007, 2008 and 2009, and for the six months ended June 30, 2009 and 2010. The 2007 results of operations include the results of the Interpool Acquisition for the period from July 19, 2007 through December 31, 2007.

Results of Operations

Comparison of the Six Months Ended June 30, 2009 to the Six Months Ended June 30, 2010

 
   
   
  Prior Period Change  
 
  Six Months
Ended
June 30, 2009
  Six Months
Ended
June 30, 2010
 
 
  $ Change   % Change  
 
  (dollars in thousands)
 

Revenues:

                         

Equipment leasing revenue

  $ 40,961   $ 34,181   $ (6,780 )   -17%  

Finance revenue

    27,794     26,329     (1,465 )   -5%  

Other revenue

    6,819     6,333     (486 )   -7%  
                   

Total revenues

    75,574     66,843     (8,731 )   -12%  
                   

Expenses:

                         

Direct operating expenses

    4,502     4,059     (443 )   -10%  

Selling, general and administrative expenses

    10,870     10,238     (632 )   -6%  

Depreciation expenses

    20,215     16,798     (3,417 )   -17%  

Provision for doubtful accounts

    1,791     (356 )   (2,147 )   *  

Impairment of leasing equipment held for sale

    3,508     782     (2,726 )   -78%  

Interest expense

    27,367     21,655     (5,712 )   -21%  

Interest income

    (1,147 )   (907 )   240     21%  

Loss on terminations and modifications of derivative instruments

    37,922         (37,922 )   *  

Gain on 2009 Sale

    (15,583 )       15,583     *  

Loss on retirement of debt

    1,330         (1,330 )   *  

Other expenses (income), net

    1,561     (528 )   (2,089 )   *  
                   

Total expenses (c)

    92,336     51,741     (40,595 )   -44%  
                   

Income (loss) before income taxes

    (16,762 )   15,102     31,864     *  

Provision for income taxes

    200     571     371     *  
                   

Net (loss) income (d)

  $ (16,962 ) $ 14,531   $ 31,493     *  
                   

Non-cash interest expense, net of tax

    4,242     2,313     (1,929 )   -45%  

Loss on retirement of debt, net of tax

    1,313         (1,313 )   *  

Loss on terminations and modifications of derivative instruments, net of tax

    37,922         (37,922 )   *  

Gain on 2009 Sale, net of tax

    (15,381 )       15,381     *  
                   

Adjusted net income** (e)

  $ 11,134   $ 16,844   $ 5,710     51%  
                   

*
Not meaningful.

**
Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP. See Note 2 in the "Prospectus Summary—Summary Historical Consolidated Financial Data" for a discussion of Adjusted net income as a non-GAAP measure and a reconciliation of it to net income.

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We have provided adjusted results below that illustrate the impact of the 2009 Sale on total revenues, direct operating expenses, total expenses, net income (loss) and adjusted net income as if it had occurred as of January 1, 2009. We made adjustments to equipment leasing revenue, finance revenue, other revenue, depreciation and direct operating expenses. These adjustments were based upon actual data for each container that was sold in the 2009 Sale. We estimated management fees for the 19 day period of January 1 through January 19, 2009 based upon the actual results of the managed assets in 2009. Interest expense associated with the sold units was estimated based upon proceeds available to reduce outstanding debt.

The adjusted results provided below are not a presentation made in accordance with U.S. GAAP, and they should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. The adjusted results are a measure of our operating performance used by management to focus on the consolidated performance exclusive of income and expenses relating to the 2009 Sale. We believe this non-GAAP measure provides additional insight and understanding to management and investors of our results of operations on a comparative basis in identifying trends in our performance by removing the operational impact of the containers that were subject to the 2009 Sale.

Our calculation of the adjusted results may differ from analogous calculations of other companies in our industry, limiting its usefulness as a comparative measure. Because of these limitations, the adjusted results should not be considered a measure of our consolidated results. We compensate for these limitations by relying primarily on our U.S. GAAP results and using the adjusted results only supplementally.

        The following presents the adjusted results as if the 2009 Sale had occurred as of January 1, 2009:

 
  June 30, 2009   June 30, 2010  
 
  Historical   2009 Sale
Adjustments
  As Adjusted
for 2009 Sale
  Historical  
 
  (dollars in thousands)
 

Total revenues

  $ 75,574   $ (4,084 ) $ 71,490   $ 66,843  

 
  June 30, 2009   June 30, 2010  
 
  Historical   2009 Sale
Adjustments
  As Adjusted
for 2009 Sale
  Historical  
 
  (dollars in thousands)
 

Direct operating expenses

  $ 4,502   $ (19 ) $ 4,483   $ 4,059  

 
  June 30, 2009   June 30, 2010  
 
  Historical   2009 Sale
Adjustments
  As Adjusted
for 2009 Sale
  Historical  
 
  (dollars in thousands)
 

Total expenses

  $ 92,336   $ (26,726 ) $ 65,610   $ 51,741  

 
  June 30, 2009   June 30, 2010  
 
  Historical   2009 Sale
Adjustments
  As Adjusted
for 2009 Sale
  Historical  
 
  (dollars in thousands)
 

Net (loss) income

  $ (16,962 ) $ 22,795   $ 5,833   $ 14,531  

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  June 30, 2009   June 30, 2010  
 
  Historical   2009 Sale
Adjustments
  As Adjusted
for 2009 Sale
  Historical  
 
  (dollars in thousands)
 

Adjusted net income

  $ 11,134   $ (1,017 ) $ 10,117   $ 16,844  

Revenue

        Total revenue was $75.6 million for the six months ended June 30, 2009 compared to $66.8 million for the six months ended June 30, 2010, a decrease of $8.7 million or 12%.

        Equipment leasing revenue decreased from $41.0 million to $34.2 million for the six months ended June 30, 2009 to June 30, 2010, a decrease of $6.8 million or 17%, primarily due to the sale of operating container units. As part of the 2009 Sale, we sold 55,000 container units which were classified as operating leases to our lessees, which represented 43% of our total units subject to operating leases at the time. The leased equipment that was sold had a book value of $415.4 million, which represented 48% of the book value of our leased equipment at the time. These units generated approximately $4.0 million in equipment leasing revenue during the first 19 days of 2009. The remainder of the average on-hire fleet decreased by approximately 8,700 units (of which an average of 5,600 were renewed and reclassified as direct finance leases during the period) and, as a result, equipment leasing revenue decreased by $2.8 million.

        Finance revenue decreased from $27.8 million to $26.3 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2010, a decrease of $1.5 million or 5%. During the current year, amortization of the Company's current lease portfolio exceeded new investments resulting in lower finance revenue of $1.4 million. Additionally, as part of the 2009 Sale, we sold $12.5 million in direct finance receivables, which accounted for the remaining $0.1 million.

        Other revenue, which includes management fee revenues and re-billable costs to our lessees, decreased from $6.8 million to $6.3 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2010, a decrease of $0.5 million or 7%. This decrease was due to lower rebillable costs of $0.3 million as well as lower management fee revenues of $0.2 million.

Direct Operating Expenses

        Direct operating expenses were $4.5 million for the six months ended June 30, 2009, compared to $4.1 million for the six months ended June 30, 2010, a decrease of $0.4 million. The primary reason for the decrease in direct operating costs was lower storage fees, which is attributable to higher utilization (and thus fewer units stored).

Selling, General and Administrative Expenses

        Selling, general and administrative expenses were $10.9 million for the six months ended June 30, 2009, compared to $10.2 million for the six months ended June 30, 2010, a decrease of $0.6 million or 6%. We instituted several cost reduction measures in 2009 which led to reductions in staff and staff-related spending in 2010.

Depreciation Expenses

        Depreciation of leasing equipment was $20.2 million for the six months ended June 30, 2009 compared to $16.8 million for the six months ended June 30, 2010, a decrease of $3.4 million or 17%. The reduction of leasing equipment attributed to the 2009 Sale reduced depreciation expense by

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$1.9 million. Additionally, $1.5 million of the decrease was related to equipment reaching the end of their depreciable lives and the sales of equipment in the normal course of business.

Provision for Doubtful Accounts

        Provision for doubtful accounts decreased by $2.1 million to ($0.4) million for the six months ended June 30, 2010. The decrease in the provision was primarily a result of collections on accounts that had previously been included in the provision.

Impairment of Leasing Equipment Held for Sale

        We recorded an impairment of leasing equipment held for sale of $3.5 million for the six months ended June 30, 2009 as compared to $0.8 million for the six months ended June 30, 2010, a decrease of $2.7 million or 78%. We evaluate the recovery of our containers and gensets designated for sale and record a loss if the ultimate sales value is expected to be below the current carrying cost. The evaluation of the expected ultimate sales price is performed on a quarterly basis. The majority of our impairments occur at the conclusion of an operating lease when our equipment is older and has incurred a certain amount of damage that the lessee is responsible for. The decision to sell the container is based upon a discounted cash flow model which includes rebillable costs. These rebillable costs are recorded as other revenues and are not recorded as a reduction in the impairment of leasing equipment held for sale. In 2010, we designated fewer units for sale in recognition of stronger market demand. Reefer impairments recorded in 2009 accounted for $2.4 million of the decrease while gensets and dry container impairments accounted for $0.3 million of the decrease.

Interest Expense

        Interest expense was $27.4 million for the six months ended June 30, 2009, compared to $21.7 million for the six months ended June 30, 2010, a decrease of $5.7 million or 21%. In connection with the 2009 Sale, we repaid the outstanding amount of $365.6 million on our container asset-backed securitization Series 2006-2 Notes, and reduced our Series 2006-1 Notes by $48.0 million. In addition, we paid swap related termination and modification fees of $37.9 million. This repayment, along with regularly scheduled debt amortization, reduced our weighted average debt balance for the first half of 2010 by $121.1 million resulting in a $3.4 million reduction in interest expense. We also benefited from lower average interest rates on our floating rate debt which reduced interest by $0.4 million. The remaining decrease of $1.9 million is primarily due to lower amortization resulting from terminated interest rate swaps.

Interest Income

        Interest income was $1.1 million for the six months ended June 30, 2009, compared to $0.9 million for the six months ended June 30, 2010, a decrease of $0.2 million. The decrease is primarily attributable to a $0.2 million decrease in the interest received from the $94.8 million promissory note dated January 27, 2009 from the Initial Shareholder to CLI ("Shareholder Note"). On March 31, 2010, in connection with the Structure Formation, SeaCube Operating Company Ltd. assumed the obligations of the Initial Shareholder under the Shareholder Note and the Initial Shareholder entered into a guarantee in respect of such obligations under the Shareholder Note in favor of CLI (which guarantee will be released upon completion of this offering).

Loss on Terminations and Modification of Derivative Instruments

        In January 2009, we incurred a one-time loss of $37.9 million on swap terminations and modification of derivative instruments. Upon completion of the 2009 Sale, we extinguished the Series 2006-2 Notes of our container asset-backed securitization for our containers sold, and terminated and modified the related swap agreements. The one-time terminations and modification of derivative

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instruments required us to recognize previously deferred losses in the value of the swaps. For the six months ended June 30, 2010, we did not terminate or modify any of our existing derivative instruments.

Gain on 2009 Sale

        In January 2009, we received net proceeds of $454.2 million related to the 2009 Sale. The leasing assets sold had a total net book value of approximately $427.7 million, and we also sold accounts receivable at the amount of $10.9 million. This transaction resulted in a gain of approximately $15.6 million (or $15.4 million net of tax).

Loss on Retirement of Debt

        Loss on retirement of debt obligations were $1.3 million for the six months ended June 30, 2009. These losses occurred when we paid off the Series 2006-2 Notes of our container asset-backed securitization in January 2009. We did not retire any outstanding debt other than normal amortization for the six months ended June 30, 2010.

Other Expense (Income), Net

        Other expense, net, was $1.6 million for the six months ended June 30, 2009, compared to $(0.5) million for the six months ended June 30, 2010, a decrease of $2.1 million. The decrease in net expense is primarily due to a default insurance recovery of $1.7 million received in the six months ended June 30, 2010, as well as a decrease of $0.4 million in losses from equipment sales.

Provision for Income Taxes

        Provision for income taxes was $0.2 million for the six months ended June 30, 2009 and $0.6 million for the six months ended June 30, 2010. The increase in the effective tax rate from the six months ended June 30, 2009 to the six months ended June 30, 2010 is primarily due to net operating loss and capital loss carryforwards existing in prior years that are no longer available to the Company.

Net (Loss) Income

        Net loss was $17.0 million for the six months ended June 30, 2009 as compared to net income of $14.5 million for the six months ended June 30, 2010. The increase in net income was attributable to the items above. Specifically, the 2009 Sale and the overall weaker demand for containers in 2009 relative to 2010.

Adjusted Net Income

        Adjusted net income increased from $11.1 million for the six months ended June 30, 2009 to $16.8 million for the six months ended June 30, 2010, an increase of $5.7 million or 51%. In addition to the changes in net income noted above, the adjustments include lower non-cash interest expense of $1.9 million in the current year.

        Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP. See Note 2 in the "Summary Historical Consolidated Financial Data." for a discussion of Adjusted net income as a non-GAAP measure and a reconciliation of it to net income included elsewhere in this prospectus.

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Results of Operations

Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2009

 
   
   
  Prior Period Change  
 
  Year ended
December 31, 2008
  Year ended
December 31, 2009
 
 
  Change   %  

Revenues:

                         

Equipment leasing revenue

  $ 168,868   $ 74,268   $ (94,600 )   -56 %

Finance revenue

    58,803     54,198     (4,605 )   -8 %

Other revenue

    11,148     13,407     2,259     20 %
                   

Total revenues (a)

    238,819     141,873     (96,946 )   -41 %
                   

Expenses:

                         

Direct operating expenses (b)

    13,780     9,073     (4,707 )   -34 %

Selling, general and administrative expenses

    26,215     21,983     (4,232 )   -16 %

Depreciation expenses

    79,491     37,769     (41,722 )   -52 %

Provision for doubtful accounts

    1,468     4,678     3,210     219 %

Impairment of leasing equipment held for sale

    6,688     5,974     (714 )   -11 %

Interest expense

    81,114     51,922     (29,192 )   -36 %

Interest income

    (1,055 )   (2,690 )   (1,635 )   155 %

Loss on terminations and modification of derivative instruments

        37,922     37,922     *  

Gain on 2009 Sale

        (15,583 )   (15,583 )   *  

Loss on retirement of debt

    413     1,330     917     222 %

Other expenses

    669     4,251     3,582     535 %
                   

Total expenses (c)

    208,783     156,629     (52,154 )   -25 %
                   

Income (loss) before income tax

  $ 30,036   $ (14,756 ) $ (44,792 )   -149 %

Provision for income taxes

        248     248     *  
                   

Net income (loss) (d)

  $ 30,036   $ (15,004 ) $ (45,040 )   -150 %
                   

Non-cash interest expense, net of tax

    8,418     8,366     (52 )   -1 %

Loss on retirement of debt, net of tax

    413     1,317     904     219 %

Loss on terminations and modification of derivative instruments, net of tax

        37,922     37,922     *  

Gain on the 2009 Sale, net of tax

        (15,427 )   (15,427 )   *  
                   

Adjusted net income** (e)

  $ 38,867   $ 17,174   $ (21,693 )   -56 %
                   

*
Not meaningful.

**
Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP. See Note (1) in "Prospectus Summary—Summary Historical Consolidated Financial Data" for a discussion of Adjusted net income as a non-GAAP measure and a reconciliation of it to net income.

We have provided adjusted results below that illustrate the impact of the 2009 Sale on total revenues, direct operating expenses, total expenses, net income (loss) and Adjusted net income as if it had occurred as of January 1, 2008. We made adjustments to equipment leasing revenue, finance revenue, depreciation and direct operating expenses. These adjustments were based upon actual data for each container that was sold in 2009. We estimated management fee revenue, which is included in other revenue, for 2008 and for the 19 day period of January 1 through January 19, 2009 based upon the actual results of the managed assets in 2009. Interest expense associated with the sold units was estimated based upon proceeds available to reduce outstanding debt.

The adjusted results provided below are not a presentation made in accordance with U.S. GAAP, and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. The adjusted results are a measure of our operating performance used by management to focus on the consolidated performance exclusive of

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income and expenses relating to the 2009 Sale. We believe this non-GAAP measure provides additional insight and understanding to management and investors of our results of operations on a comparative basis in identifying trends in our performance by removing the operational impact of the containers that were subject to the 2009 Sale.

Our calculation of the adjusted results may differ from analogous calculations of other companies in our industry, limiting its usefulness as a comparative measure. Because of these limitations, the adjusted results should not be considered a measure of our consolidated results. We compensate for these limitations by relying primarily on our U.S. GAAP results and using the adjusted results only supplementally.

        The following presents the adjusted results as if the 2009 Sale had occurred as of January 1, 2008:

 
  December 31, 2008   December 31, 2009  
 
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
 
 
  (dollars in thousands)
 

Total revenues

  $ 238,819   $ (80,370 ) $ 158,449   $ 141,873   $ (4,084 ) $ 137,789  
                           

 
  December 31, 2008   December 31, 2009  
 
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
 
 
  (dollars in thousands)
 

Direct operating expenses

  $ 13,780   $ (2,216 ) $ 11,564   $ 9,073   $ (19 ) $ 9,054  

 
  December 31, 2008   December 31, 2009  
 
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
 
 
  (dollars in thousands)
 

Total expenses

  $ 208,783   $ (60,586 ) $ 148,197   $ 156,629   $ (26,726 ) $ 129,903  
                             

 
  December 31, 2008   December 31, 2009  
 
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
 
 
  (dollars in thousands)
 

Net income (loss)

  $ 30,036   $ (19,784 ) $ 10,252   $ (15,004 ) $ 22,795   $ 7,791  
                           

 
  December 31, 2008   December 31, 2009  
 
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
  Historical   2009 Sale
Adjustments
  As Adjusted for
2009 Sale
 
 
  (dollars in thousands)
 

Adjusted net income

  $ 38,867   $ (19,974 ) $ 18,893   $ 17,174   $ (1,017 ) $ 16,157  
                           

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Revenues

        Total revenue was $238.8 million for the year ended December 31, 2008 compared to $141.9 million for the year ended December 31, 2009, a decrease of $96.9 million or 41%. Equipment leasing revenue decreased $94.6 million or 56%, finance revenue decreased $4.6 million or 8% and other revenue increased $2.3 million or 20%.

        Equipment leasing revenue decreased due to the sale of operating container units. As part of the 2009 Sale, we sold 55,000 container units which were classified as operating leases to our lessees, which represented 43% of our total units subject to operating leases at the time. The leased equipment that was sold had a book value of $415.4 million, which represented 48% of the book value of our leased equipment at the time. In 2008, the units sold generated approximately $82.5 million of equipment leasing revenue. In 2009, the units sold generated $4.0 million in equipment leasing revenue before the sale and therefore the 2009 Sale accounted for $78.5 million of the decrease in equipment leasing revenue. The remainder of the average on-hire fleet decreased by approximately 32,000 units (of which an average of 19,000 units were renewed and reclassified as direct finance leases during the year) and, as a result, equipment leasing revenue decreased by $16.1 million. Of the decline in on-hire units, approximately 29,000 were dry containers and approximately 2,800 were refrigerated containers. Of the $16.1 million in revenue decline, approximately 52% was related to revenue from dry units and 43% was related to revenue from refrigerated units and gensets. The revenue related to the refrigerated containers, dry containers and gensets are based on acquisition cost of the leased equipment. Since reefers, dry freight containers and gensets all have different acquisition costs, they have corresponding different lease rates (per diems). We experienced overall weak demand for containers and gensets due to poor worldwide economic conditions throughout the entire year in 2009.

        Finance revenue decreased by $4.6 million or 8% as a result of a lower average investment of $42.8 million in direct finance leases. As part of the 2009 Sale, we sold $12.5 million in direct finance receivables (approximately 10,000 containers). The impact of this transaction on finance revenue was a decrease of $1.5 million in 2008 and $1.4 million year over year. The remaining $3.2 million decrease in finance revenue was due to the amortization of the current portfolio in excess of new investments made in 2009 including amounts reclassified from operating leases.

        Other revenue, which includes Management fee revenue and rebillable costs, primarily for repairs and maintenance to our lessees, increased by $2.3 million or 20%. The increase is primarily related to the increase in management fee revenue of $4.3 million due to increased management services related to the 2009 Sale which was partially offset by a $2.0 million reduction in service revenues. The decrease in service revenue is primarily due to the 2009 Sale as the sale of containers and gensets led to a decrease of $1.1 million in service revenues as 16% less units were returned in 2009 as compared to 2008. The remaining decrease of $0.9 million is primarily due to a lower average cost of repairs rebilled to our lessees.

Direct Operating Expenses

        Direct operating expenses were $13.8 million for the year ended December 31, 2008 compared to $9.1 million for the year ended December 31, 2009, a decrease of $4.7 million, or 34%. There are two primary reasons for the decrease in costs. The first is the 2009 Sale which led to a 16% decrease in the number of owned units turned in by our lessees. We estimate that the sale of approximately 55,000 units reduced our operating costs by approximately $2.2 million in 2008 and year over year. Secondly, costs decreased due to a reduced level of container recovery activity which resulted from fewer lessee defaults and lower costs relating to recovery of our equipment. These costs decreased by $2.5 million year over year.

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Selling, General and Administrative Expenses

        Selling, general and administrative expenses were $26.2 million for the year ended December 31, 2008 compared to $22.0 million for the year ended December 31, 2009, a decrease of $4.2 million or 16%. We instituted several cost reduction measures in 2009. Reductions in staff and staff-related spending caused a year over year decrease of $1.6 million. We also decreased consulting and professional fees by $1.7 million through either renegotiation of fees or by reducing our reliance upon outside consultants. Facilities costs decreased by $0.6 million as we reduced the size of our office in San Francisco and general expense levels decreased by $0.3 million.

Depreciation Expenses

        Depreciation of leasing equipment was $79.5 million for the year ended December 31, 2008 compared to $37.8 million for the year ended December 31, 2009, a decrease of $41.7 million or 52%. The reduction of leasing equipment attributed to the 2009 Sale reduced depreciation expenses by $37.6 million in 2008 and $1.9 million in 2009, which together contributed $35.7 million to the overall decrease in depreciation expense year over year, approximately in line with the overall reduction in the magnitude of book value sold. Also, during the year we reclassified $34.0 million of book value of equipment to a direct finance lease receivable thereby decreasing depreciation expense by $1.8 million. The remaining reduction in expense of $4.2 million was related to equipment reaching the end of their depreciable lives and the sales of equipment in the normal course of business.

Provision for Doubtful Accounts

        Provision for doubtful accounts increased by $3.2 million from $1.5 million for the year ended December 31, 2008 to $4.7 million for the year ended December 31, 2009 as one of our key customers experienced financial difficulties which resulted in the increase of delinquent and past due accounts.

Impairment of Leasing Equipment Held for Sale

        We recorded an impairment of leasing equipment held for sale of $6.7 million for the year ended December 31, 2008 as compared to $6.0 million for the year ended December 31, 2009, a decrease of $0.7 million or 11%. We evaluate the recovery of our containers and gensets designated for sale and record a loss if the ultimate sales value is expected to be below the current carrying cost. The evaluation of the expected ultimate sales price is performed on a quarterly basis. The majority of our impairments occur at the conclusion of an operating lease when our equipment is older and has incurred a certain amount of damage that the lessee is responsible for. The decision to sell the container is based upon a discounted cash flow model which includes rebillable costs. These rebillable costs are recorded as other revenues and are not recorded as a reduction in the impairment of leasing equipment held for sale. In 2009, we designated fewer reefer units for sale in anticipation of a future shortage in the market due to a lack of production. Reefer impairments accounted for $0.9 million of the decrease. Impairments on dry containers increased by $0.2 million due to a greater volume of units designated for sale due to the oversupply in the marketplace in 2009.

Interest Expense

        Interest expense was $81.1 million for the year ended December 31, 2008 compared to $51.9 million for the year ended December 31, 2009, a decrease of $29.2 million or 36%. In connection with the 2009 Sale, we repaid the outstanding amount of $365.6 million on our Container asset-backed securitization Series 2006-2 note, reduced our Series 2006-1 note by $48.0 million, and paid swap related termination and modification fees of $37.9 million. This had a year over year impact of reducing interest costs by $19.7 million. The remainder of the $9.5 million decrease is primarily related to further repayments of our Series 2006-1 notes offset by additional borrowings in our

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CLI Funding III credit facility. The weighted average debt outstanding decreased by $493.1 million and the average interest rate increased from 6.17% to 6.32%.

Interest Income

        Interest income was $1.1 million for the year ended December 31, 2008 compared to $2.7 million for the year ended December 31, 2009, an increase of $1.6 million. The increase is primarily attributable to the $89.1 million Shareholder Note with our Initial Shareholder in 2009, which is separately disclosed as a Shareholder Note in the Consolidated Balance Sheet of CLI included in this prospectus. The loan bears interest at the annual rate of 4% and is payable upon demand. A total of $2.6 million of interest income was recorded on this note. The offsetting decrease of $1.0 million in interest income was attributable to lower average interest rates and lower average outstanding cash balances.

Loss on Terminations and Modification of Derivative Instruments

        In January 2009, we incurred $37.9 million of one time losses on swap terminations and modification. Upon completion of the 2009 Sale, we extinguished the debt related to the containers sold and accordingly terminated and modified related swap agreements. Those one time terminations and modification required us to recognize previously deferred losses in the value of the swaps.

Gain on 2009 Sale

        In January 2009, we received net proceeds of $454.2 million related to the 2009 Sale. The leasing assets sold had a book value of approximately $427.7 million, and we also sold accounts receivable at the amount of $10.9 million. This transaction resulted in a gain of approximately $15.6 million (or $15.4 million net of tax).

Loss on Retirement of Debt

        Losses on retirements of debt obligations were $0.4 million in 2008 and $1.3 million in 2009. These losses occurred when we wrote off previously capitalized debt issuance costs related to the pay off of the CLI Funding II Credit Facility in July 2008 and the pay off of our 2006-2 asset-backed securitization in January 2009.

Other Expense, Net

        Other expense, net, was $0.7 million for the year ended December 31, 2008 compared to $4.3 million for the year ended December 31, 2009, an increase in net expense of $3.6 million. The increase in expense is due to a $3.3 million write off of equipment that has not been recovered from defaulted lessees and other losses on sales of equipment of $1.0 million offset by a default insurance recovery of $0.7 million.

Provision for Income Taxes

        Provision for income taxes was $0.2 million in 2009. No provision was recorded in 2008. The increase in Provision for income taxes is due to an increase in liabilities in foreign jurisdictions.

Net Income

        Net income was $30.0 million for the year ended December 31, 2008 as compared to a $15.0 million net loss for the year ended December 31, 2009, a decrease of $45.0 million or 150%. The decrease in net income was attributable to the items above and specifically the 2009 Sale and the overall weaker demand for containers in 2009. On an adjusted basis for the effects of the 2009 Sale,

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net income would have been $10.3 million for the year ended December 31, 2008 as compared to $7.8 million, a decrease of $2.5 million or 24%.

Adjusted Net Income

        Adjusted net income decreased from $38.9 million for the year ended December 31, 2008 to $17.2 million for the year ended December 31, 2009, a decrease of $21.7 million or 56%. This change was due to all of the items listed above and in 2008, the add back of $8.4 million of non-cash interest. The 2009 adjustments included the after tax add back to 2009 income of $1.3 million of loss on retirement of debt, $37.9 million for losses on terminations and modification of derivative instruments, $8.4 million of non-cash interest and the subtraction of the $15.4 million gain on the 2009 Sale. On an adjusted basis for the effects of the 2009 Sale, Adjusted net income would have decreased from $18.9 million in 2008 to $16.2 million in 2009, a decrease of 14%.

        Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP. See Note 1 in the "Summary Historical Consolidated Financial Data." for a discussion of Adjusted net income as a non-GAAP measure and a reconciliation of it to net income included elsewhere in this prospectus.

Comparison of the Year Ended December 31, 2007 to the Year Ended December 31, 2008

 
   
   
  Prior Period
Change
 
 
  Year Ended
December 31,
2007
  Year Ended
December 31,
2008
  $
Change
  %
Change
 
 
  (dollars in thousands)
 

Revenue:

                         

Equipment leasing revenue

  $ 166,362   $ 168,868   $ 2,506     2 %

Finance revenue

    34,211     58,803     24,592     72 %

Other revenue

    8,334     11,148     2,814     34 %
                   

Total revenue

  $ 208,907   $ 238,819   $ 29,912     14 %
                   

Expenses:

                         

Direct operating expenses

    9,133     13,780     4,647     51 %

Selling, general and administrative expenses

    26,339     26,215     (124 )   0 %

Depreciation expenses

    75,179     79,491     4,312     6 %

Provision for doubtful accounts

    1,256     1,468     212     17 %

Impairment of leasing equipment held for sale

    1,039     6,688     5,649     544 %

Interest expense

    63,353     81,114     17,761     28 %

Interest income

    (1,659 )   (1,055 )   604     -36 %

Loss on retirement of debt

        413     413     N/A  

Other expense/(income), net

    3,501     669     (2,832 )   -81 %
                   

Total expenses

    178,141     208,783     30,642     17 %
                   

Income before income taxes

  $ 30,766   $ 30,036   $ (730 )   (2 )%

Provision for income taxes

                N/A  
                   

Net income

  $ 30,766   $ 30,036   $ (730 )   (2 )%
                   

Loss on retirement of debt, net of tax

        413     413     N/A  

Non-cash interest, net of tax

    4,971     8,418     3,447     70 %
                   

Adjusted net income

  $ 35,737   $ 38,867   $ 3,130     9 %
                   

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Revenues

        Total revenue was $208.9 million for year ended December 31, 2007 compared to $238.8 million for the year ended December 31, 2008, an increase of $29.9 million or 14%. Equipment leasing revenue increased $2.5 million or 2% while finance revenue increased $24.6 million or 72%, and Other revenue increased $2.8 million or 34%.

        Equipment leasing revenue increased from $166.4 million in 2007 to $168.9 million in 2008, an increase of $2.5 million or 2%. The increase in equipment leasing revenue was primarily attributable to the full year impact of the Interpool Acquisition. The Interpool Acquisition closed on July 19, 2007 and the related revenues were included in the remainder of the year ended December 31, 2007 as opposed to the full year-ended December 31, 2008. We acquired a fleet of approximately 537,000 units of which approximately 52,000 were on operating lease, approximately 275,000 were on direct finance leases, approximately 190,000 were managed containers and approximately 20,000 were in inventory. The impact was an approximately $8.1 million increase in equipment leasing revenues. In addition to the impact of the Interpool Acquisition, there was a net increase in the remainder of the average on-hire fleet of approximately 11,300 units. The net increase in the number of units on hire did not impact revenue as an increase in dry boxes and generator sets were offset by a decrease in reefers. Per diem rates declined for reefers, dry containers and gensets. The per diem decreases led to a decrease in equipment leasing revenue of $5.6 million.

        Finance revenue increased from $34.2 million in 2007 to $58.8 million in 2008, a $24.6 million increase or 72%. The Interpool Acquisition added 275,000 containers on direct finance leases. The direct finance receivable related to the Interpool Acquisition was $385.8 million. The full year impact of this investment accounted for $20.1 million of the increase in Finance revenue. The remainder of the increase of $4.5 million was due to the additional investment of $101.3 million during 2008.

        Other revenue increased from $8.3 million in 2007 to $11.1 million in 2008, a $2.8 million increase or 34%. The primary causes of the increase were due to the full year impact of management fee revenues attributable to the Interpool Acquisition of $1.7 million and the $1.1 million increase in rebillable maintenance and repair costs.

Direct Operating Expenses

        Direct operating expenses were $9.1 million in 2007 compared to $13.8 million in 2008, an increase of $4.7 million or 51%. The increase is primarily attributable to $4.0 million of recovery costs of containers that were on lease to lessees that have defaulted on payment terms. The remainder of the increase of $0.7 million is related to the off-hire and on-hire activities related to the increase in our overall fleet due to the Interpool Acquisition and capital investments made throughout 2008.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses were $26.3 million in 2007 compared to $26.2 million in 2008, a decrease of $0.1 million. The decrease was driven by a decrease of $1.2 million in professional fees, employee related costs and miscellaneous other expenses partially offset by a $0.5 million increase in facilities costs related to larger offices in San Francisco and a $0.6 million increase in insurance costs.

Depreciation Expenses

        Depreciation expenses were $75.2 million in 2007 compared to $79.5 million in 2008. The increase of $4.3 million or 6% was driven by the full year impact of a net increase of $136.0 million in leasing equipment acquired due to the Interpool Acquisition which contributed approximately $3.8 million to

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the increase. The remainder of the $0.5 million increase is due to the additional capital spent throughout 2008, offset by assets reaching the end of their depreciable life.

Provision for Doubtful Accounts

        Provision for doubtful accounts increased from $1.3 million in 2007 to $1.5 million in 2008, an increase of $0.2 million or 17%. The increase was due to an increase in defaults in accounts with small amounts of equipment on lease.

Impairment of Leasing Equipment Held for Sale

        Impairments of leasing equipment held for sale in 2007 were $1.0 million compared to $6.7 million in 2008, an increase of $5.7 million. The increase was primarily due to an increase in the number of containers designated for sale in 2008. We began to aggressively market older containers in 2008 due to a decrease in per diems and as a means to limit storage costs. We evaluate the recovery of our containers and gensets designated for sale and record a loss if the ultimate sales value is expected to be below the current carrying cost. The evaluation of the expected ultimate sales price is performed on a quarterly basis.

Interest Expense

        Interest expense was $63.3 million in 2007 compared to $81.1 million in 2008, an increase of $17.8 million or 28%. The increase was primarily due to a $297.9 million increase in the average balance of debt outstanding. This increase led to an increase in interest expense of $18.4 million. Offsetting the increase in total debt outstanding was a slight decrease in the weighted average interest rate from 6.23% in 2007 to 6.17% in 2008. This decrease in rate accounted for a $0.6 million decrease in interest expense. The primary reason for the increase in average debt outstanding was the debt incurred as part of the financing of the assets purchased in the Interpool Acquisition. On July 19, 2007, we, through our wholly owned subsidiary, CLI Funding II LLC, entered into a $405 million term loan credit agreement. The borrowings under this facility were secured by certain of our direct finance leases, most of which were acquired in the Interpool Acquisition. At December 31, 2007, $383.6 million was outstanding under this facility.

Interest Income

        Interest income was $1.7 million in 2007 compared to $1.1 million in 2008, a decrease of $0.6 million, or 36%. The decrease was primarily attributable to a decrease in interest earning cash balances and lower rates of interest earned.

Loss on Retirement of Debt

        Loss on retirements of debt obligations were $0.4 million in 2008. This loss occurred when the Company wrote off previously capitalized debt issuance costs related to the pay off of the CLI Funding II Credit Facility in July 2008. No loss on retirement of debt was incurred in 2007.

Other Expense/(Income), Net

        Other expense/(income), net was $3.5 million in 2007 compared to $0.7 million in 2008, a decrease in net expense of $2.8 million or 81%. The decrease in net expense primarily relates to a reduction in losses on sales of equipment of $2.8 million in 2008 as compared to 2007. In 2008, we sold significantly more dry containers at gains than in the previous year and received higher proceeds on the sale of reefer containers than in 2007.

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Net Income

        Net income was $30.8 million for the year ended December 31, 2007 as compared to $30.0 million for the year ended December 31, 2008, a decrease of $0.8 million or 2%. The decrease in net income was attributable to the items above including the overall increase in outstanding debt and related interest expenses.

Adjusted Net Income

        Adjusted net income increased from $35.7 million for the year ended December 31, 2007 to $38.9 million for the year ended December 31, 2008, an increase of $3.2 million, or 9%. This change was due to all of the items listed above and the addition of $5.0 million of non-cash interest in 2007 and $8.4 million in 2008, respectively.

Liquidity and Capital Resources

        We have historically met our liquidity requirements primarily from the following sources:

        The decline in our revenue and cash provided by operating activities, including principal collections on finance leases in 2009 as a result of the 2009 Sale, coincided with a corresponding reduction in our liquidity requirements, specifically with regard to our debt obligations and cash interest expense. Our total liabilities have decreased by 35% from $1,327.8 million at December 31, 2008 to $862.9 million at December 31, 2009, which is consistent with the decrease in our total assets by 31% from $1,581.4 million to $1,097.2 million during the same period.

        As of December 31, 2009, we had approximately $131.3 million of scheduled debt amortization throughout 2010. These amounts do not include $24.8 million of other contractual obligations existing as of December 31, 2009 maturing by December 31, 2010.

        We expect that our cash flows from our operations, principal collections on direct finance leases, existing credit facilities and sales of older equipment will be sufficient to meet our liquidity needs. Our current projections of cash flows from operations and the availability of funds under our revolving credit agreement are expected to be sufficient to fund our maturing debt and contractual obligations in the next several years. We will need to borrow funds to finance the purchases of new assets we intend to buy to expand our business in the next few years. No assurance can be made that we will be able to meet our financing and other liquidity needs as currently contemplated. See "Risk Factors—Our inability to service our debt obligations or to obtain additional financing as needed would have a material adverse effect on our business, financial condition and results of operations." included elsewhere in this prospectus.

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        On January 26, 2010, we amended the terms of our revolving credit facility agreement to increase the amount available under the revolver from $25 million to $40 million. The revolver will mature on January 25, 2011. Contemporaneous with the completion of this offering, we expect to amend and restate this facility to increase the size and term to $120 million and three years, respectively.

        On May 18, 2010, we entered into a $200 million revolving credit agreement through our indirect wholly owned subsidiary CLI Funding IV LLC to pursue our growth strategy.

Liquidity Needs to Acquire Equipment to be Leased

        The acquisition of leasing assets fuels our growth. As a result, we expect to invest substantial funds to acquire containers and gensets, although there can be no assurances as to the timing and amount of such acquisitions. Since the beginning of 2004, we and our predecessor, including pre-acquisition spending by Interpool, have acquired an average of more than $300 million per year in containers and gensets. Going forward, provided there is sufficient demand, production capacity, appropriate pricing and available financing, we intend to invest in new containers at a level that is consistent with our historical investment activity. Based on our expected equipment retirement levels and the amortization on our existing direct finance lease portfolio, we believe that approximately 40% of our new investment would be to replace our existing fleet and the remainder would be to support growth. Through September 28, 2010, we have committed to buy approximately $195.2 million of new equipment (including $75.1 million of refrigerated containers) for delivery through December 2010. Of this amount, approximately $184.7 million, or 95%, has been committed to long-term leases.

        Over the next several years, we expect that our single largest cash expenditure will be the purchase of containers. In order to finance these expenditures, we will actively seek to enter into new debt facilities with greater borrowing capacity to expand and/or replace our existing facilities, although there can be no assurance that we will be able to obtain any additional facilities. We believe that we will be able to generate or otherwise obtain sufficient capital to support our replacement and growth strategy that will enable us to pay dividends to holders of our common shares as contemplated by our dividend policy. However, deterioration in our performance, the credit markets or our inability to obtain additional financing on attractive terms, or at all, could limit our access to funding or drive the cost of capital higher than our current cost. In addition, any equity financing we may seek could have a dilutive effect on our shareholders. These factors, as well as numerous other factors detailed above in "Risk Factors," could limit our ability to raise funds, further the growth of our business or pay dividends.

Cash Flow

Cash Flow Information for the Years Ended December 31, 2007, 2008 and 2009 and for the Six Months Ended June 30, 2009 and 2010

        The following table sets forth certain historical cash flow information for the years ended December 31, 2007, 2008 and 2009, and for the six months ended June 30, 2009 and 2010.

Cash Flows:
  Year Ended
December 31,
2007
  Year Ended
December 31,
2008
  Year Ended
December 31,
2009
  Six
Months
Ended
June 30,
2009
  Six
Months
Ended
June 30,
2010
 
 
  (dollars in thousands)
 

Net cash provided by operating activities

  $ 96,667   $ 127,392   $ 50,966   $ 28,249   $ 44,178  

Net cash (used in) provided by investing activities

    (663,983 )   50,778     443,058     456,107     15,527  

Net cash provided by (used in) financing activities

    574,077     (159,070 )   (516,541 )   (503,530 )   (53,824 )

Effect of changes in exchange rates on cash and cash equivalents

    59     321     (36 )   27     (81 )
                       

Net increase (decrease) in cash and cash equivalents

  $ 6,820   $ 19,421   $ (22,553 ) $ (19,147 ) $ 5,800  
                       

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Comparison of the Six Months Ended June 30, 2009 to the Six Months Ended June 30, 2010

        Net cash provided by operating activities was $28.2 million and $44.2 million for the six months ended June 30, 2009 and the six months ended June 30, 2010, respectively a $15.9 million increase. The improvement in our working capital from June 30, 2009 to June 30, 2010 was the primary contributor for the increase as we had improved collections for our accounts receivable and for the accounts receivable on our managed accounts.

        Net cash provided by investing activities was $456.1 million and $15.5 million for the six months ended June 30, 2009 and the six months ended June 30, 2010, respectively, a $440.6 million decrease. Cash flows provided by investing activities for the six months ended June 30, 2009 included $454.2 million of cash proceeds from the 2009 Sale. The Shareholder Note bearing interest at 4% per annum increased by $68.3 million in the six months ended June 30, 2009 and increased by $5.7 million in the six months ended June 30, 2010, a reduction of $62.6 million. In connection with the Structure Formation, SeaCube Operating Company Ltd. assumed the obligations of the Initial Shareholder under the Shareholder Note and the Initial Shareholder entered into a guarantee in respect of such obligations under the Shareholder Note. Upon completion of this offering, the guarantee by the Initial Shareholder will be released. No consideration has been or will be paid by the Initial Shareholder to SeaCube Operating Company Ltd. in exchange for the assumption of the Shareholder Note. Our restricted cash balances decreased by $11.1 million in the six months ended June 30, 2009 versus $3.2 million in the six months ended June 30, 2010, due to reduced loan balances and a corresponding reduction in required cash balances. In the six months ended June 30, 2010, our investment in direct finance leases and purchase of leasing equipment increased over the six months ended June 30, 2009 by $38.8 million reflecting the strengthening demand for containers.

        Net cash used by financing activities was $503.5 million and $53.8 million for the six months ended June 30, 2009 and the six months ended June 30, 2010, respectively, a $449.7 million increase to cash flow. We reduced our outstanding debt during both the six months ended June 30, 2009 and the six months ended June 30, 2010. During the six months ended June 30, 2009, we reduced our outstanding debt by $462.2 million more than we reduced our debt during the six months ended June 30, 2010. The greater reduction during the six months ended June 30, 2009 was primarily due to the 2009 Sale. Additionally, in connection with the 2009 Sale and the retirement of the related debt, we terminated certain interest rate swap agreements and modified certain other swap agreements which required us to pay $37.9 million in termination and modification fees. We also paid $60.0 million in dividends to our Initial Shareholder following the 2009 Sale. Dividends for the six months ended June 30, 2010 were $2.8 million.

Comparison of the Year Ended December 31, 2008 to the Combined Year Ended December 31, 2009

        Net cash provided by operating activities was $127.4 million and $51.0 million for the year ended December 31, 2008 and the year ended December 31, 2009, respectively, a $76.4 million decrease. The decrease was primarily due to the 2009 Sale which lowered our gross profits by $74.1 million. Offsetting the lower gross profit amounts was a reduction in cash interest paid of $27.8 million. The remaining decrease in cash from operating activities of $30.1 million is attributable to other changes in working capital caused primarily by additional declines in gross profits, longer collection cycles in accounts receivable and the timing of payments made to owners of equipment that we manage.

        Net cash provided by investing activities was $50.8 million and $443.1 million for the year ended December 31, 2008 and the year ended December 31, 2009, respectively, a $392.3 million increase. Cash flows provided by investing activities for the year ended December 31, 2009 includes $454.2 million of cash proceeds from the 2009 Sale. We also reduced our investment in leasing assets over prior year levels by $52.3 million reflecting the weakening of demand for new containers in 2009 as a result of the general worldwide economic slowdown. We also had reductions in cash flows provided

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by investing activities primarily due to our $89.1 million loan to our Initial Shareholder under a demand note bearing interest at 4% per annum. We received $15.2 million less in proceeds from sales of leasing equipment due to the reduction in the overall size of our fleet after the 2009 Sale. Additionally, we received $12.3 million less in principal repayments on direct finance lease receivables due in part to the 2009 Sale and an increase in our direct finance lease portfolio coming from $34.0 million in lease agreements reclassified from operating leases and new investments of $55.2 million. New investments in direct finance leases amortize the principal balances more slowly than the outstanding receivables in our existing portfolio. The remaining increase of $2.4 million is primarily the result of decreases in our restricted cash balances due to having lower required cash balances as our debt balances were also reduced in 2009.

        Net cash used by financing activities was $159.1 million and $516.5 million for the year ended December 31, 2008 and the year ended December 31, 2009, respectively, a $357.4 million increase to cash flow. Although we reduced our outstanding debt in both 2008 and 2009, debt was reduced by an additional $260.6 million in 2009 over the 2008 reductions. The net reduction was primarily due to the 2009 Sale. Additionally, in connection with the 2009 Sale and the retirement of the related debt, we terminated certain interest rate swap agreements and modified certain other swap agreements thereby requiring us to pay $37.9 million in termination and modification fees. We also paid $60.0 million in dividends to our Initial Shareholder during 2009 following the 2009 Sale. Fees paid for debt issuance cost decreased by $0.5 million from prior year levels.

Comparison of the Year Ended December 31, 2007 to the Year Ended December 31, 2008

        Net cash provided by operating activities was $96.7 million and $127.4 million for the years ended December 31, 2007 and 2008, respectively, a $30.7 million increase. The increase in net cash from operating activities was primarily attributable to a $18.4 million improvement in cash from working capital, including improved collections as we had lower levels of accounts receivable despite an increase of $29.9 million in revenues and improved timing of the payment of expenses.

        Net cash (used in) provided by investing activities was $(664.0) million and $50.8 million for the years ended December 31, 2007 and 2008, respectively, a $714.8 million increase. The primary causes for the increase in net cash (used in) provided by investing activities was the $420.1 million of net cash paid for the Interpool Acquisition in 2007, reduced capital spending of $218.3 million, increased principal repayments of direct finance lease receivables of $54.7 million attributable to the Interpool Acquisition, $19.1 million less cash required to be restricted from reduced debt levels and $2.5 million more cash proceeds from sales of leasing assets.

        Net cash (used for) provided by financing activities was $574.1 million and $(159.1) million for the years ended December 31, 2007 and 2008, respectively, a $733.2 million decrease. The year over year change in net cash flow provided by financing activities was primarily due to $697.9 million less of an increase in overall debt levels. Additionally, we received a $50.0 million contribution from our Initial Shareholder in 2007 while no such contribution was received in 2008. Offsetting these decreases was $11.9 million of swap termination costs incurred in 2007 while only $0.5 million incurred in 2008. The company paid $4.6 million in debt issuance costs in 2007 and $1.2 million in 2008.

Contractual Obligations and Commitments

        The following table summarizes our various contractual obligations in order of their maturity dates as of June 30, 2010. For a discussion of certain financing activities and purchase commitments since June 30, 2010, which affect the amounts shown in the table below, see "—Liquidity and Capital

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Resources" above. The terms of our credit facilities are more fully described under "Description of Certain Indebtedness" elsewhere in this prospectus.

 
   
  Maturity in Years  
 
  As of
June 30,
2010
  Less than
1 Year
  2 Years   3 Years   4 Years   5 Years   Thereafter  
 
  (dollars in thousands)
 

Container Revolving Credit Facility

  $ 20,000   $ 20,000   $   $   $   $   $  

Container Asset-Backed Securitizations

    383,384     62,170     62,170     62,170     62,170     62,170     72,534  

CLI Funding III Credit Facility

    346,664     66,361     59,379     54,312     60,914     50,460     55,238  

Lease Asset Purchase Commitments

    97,080     97,080                      

Interest Payments

    109,505     34,124     26,141     20,143     14,567     9,011     5,519  

Operating Leases

    1,698     358     590     479     227     44      
                               

Total

  $ 958,331   $ 280,093   $ 148,280   $ 137,104   $ 137,878   $ 121,685   $ 133,291  
                               

        During the six months ended June 30, 2010, the Company paid $31.1 million and $37.1 million of debt payments on the Container Asset-Backed Securitization and CLI Funding III Credit Facility, respectively.

        Our contractual obligations consist of principal and interest payments related to our revolving credit facilities and our asset-backed securitizations, container purchase commitments, and operating lease payments for our facilities. Interest payments are based upon the net effect of swapping our variable interest rate payments for fixed rate payments consistently applied and in accordance with our policy. We also had obligations to purchase containers of $97.1 million at June 30, 2010. Through September 28, 2010, SeaCube has committed to buy approximately $195.2 million of new equipment (including $75.1 million of refrigerated containers) for delivery through December 2010. Of this amount, approximately $184.7 million, or 95%, has been committed to long-term leases.

Container Revolving Credit Facility

        CLI had a two-year senior secured revolving credit facility, which it refers to as the Container Revolving Credit Facility, which allowed for maximum borrowings of $100.0 million. The agreement included a $10.0 million sub-limit for letters of credit. On August 19, 2008, the facility was renewed for a term of one year and reduced the total facility size to $50.0 million. On August 19, 2009, this facility was reduced to $25.0 million and renewed for a term of one year. On January 26, 2010, the facility was amended to increase the amounts available to $40.0 million. The terms of the agreement include a declining advance rate and an increased interest rate spread depending upon the amounts drawn. Proceeds of loans under the Container Revolving Credit Facility are available to be used by us for working capital and general corporate purposes. In order to draw funds under this facility we must be in compliance with various financial covenants and requirements as described in "Description of Certain Indebtedness—Container Revolving Credit Facility." The revolver matures on January 25, 2011.

        Contemporaneous with the completion of this offering, we expect to amend and restate the Container Revolving Credit Facility to increase the size and term of the facility to $120 million and three years, respectively (the "Amended and Restated Container Revolving Credit Facility"). Under the Amended and Restated Container Revolving Credit Facility, CLI will be required to comply with a consolidated leverage ratio test that uses Adjusted EBITDA as the basis for calculating covenant compliance.

        CLI pledged certain assets for the benefit of the secured parties as collateral security for the payment and performance of obligations under the facility, under other loan documents and under the

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guaranty. The pledged assets included, among other things, marine and intermodal containers, gensets and equity interests in certain subsidiaries and all proceeds of any and all of the foregoing. As of December 31, 2008, the facility was un-drawn upon. Balances borrowed during 2009 were repaid and there was no balance outstanding at December 31, 2009. The weighted-average interest rate for the years ended December 31, 2008 and 2009 was 4.61% and 4.34% excluding unused fees and the amortization of up-front costs, respectively. As of June 30, 2010, the balance outstanding was $20 million. The weighted average interest rate for the six months ended June 30, 2010 was 3.82% excluding unused fees and the amortization of up-front costs.

Container Asset-Backed Securitizations

        On August 24, 2006, CLI entered into the Container Asset-Backed Securitizations (as defined below). CLI contributed certain eligible containers, together with related leases, to CLI Funding LLC, a special purpose entity ("SPE") whose primary business activity is to issue asset-backed notes. The SPE is one of our wholly owned subsidiaries. These borrowings are an obligation of the SPE, and the lenders' recourse in respect of the borrowings is generally limited to the collections that the 2006 SPE receives on the assets.

        The Series 2006-1 Notes (as defined below) bear interest at the rate of one-month LIBOR plus a margin. The Series 2006-2 Notes (as defined below), which were repaid in full on January 20, 2009 upon the culmination of the 2009 Sale, bore interest at (i) a rate equal to the sum of the commercial paper rate (determined in accordance with the Series 2006-2 Supplement) and a margin, if the advance has been funded through the issuance of commercial paper, (ii) a rate equal to the quotient of (a) LIBOR divided by (b) the Federal Reserve's Eurodollar Reserve Rate plus a margin, if the advance is funded utilizing a source of funds for which interest is determined by reference to LIBOR or (iii) the greater of (a) the prime rate as set forth by the agent under the agreement plus a margin or (b) the Federal Funds Rate plus a margin, if the advance is funded utilizing a source of funds for which interest is determined by reference to some rate other than LIBOR and is not funded with commercial paper. The SPE paid a commitment fee in connection with the Series 2006-2 Notes to each note holder on the total available commitments of such note holder.

        At no time shall the outstanding amount of the Series 2006-1 Notes exceed the asset base, which at any time is the sum in the aggregate of 85% of the net book value of eligible containers that are not then subject to a direct finance lease, plus 85% of the net value of the direct finance lease receivables of all eligible containers that are then subject to a direct finance lease, plus the amount then on deposit in the restricted cash account. If the outstanding loans exceed the asset base at any time, the SPE will be required to repay the excess for application toward repayment of the amount of the Series 2006 Notes. Failure by the SPE to repay such excess amount within 90 days is an event of default. The Container Securitization Documents contain typical representations and covenants for indebtedness of this type. The unpaid principal amount of the Series 2006-1 Notes, together with interest and all other related amounts, is scheduled to be repaid in full by August 2016, and is otherwise due and payable in full by August 2021.

        At December 31, 2008, there was $525.2 million outstanding on the Series 2006-1 Notes and $365.6 million outstanding on the Series 2006-2 Notes. The entire $365.6 million of the Series 2006-2 Notes and $48.0 million of the Series 2006-1 Notes were repaid in conjunction with the 2009 Sale on January 20, 2009. See Note 1 to the audited consolidated financial statements included elsewhere in this prospectus.

        At December 31, 2008 and 2009, the amount outstanding under this facility was $890.8 million and $414.5 million, respectively. The weighted-average interest rate for the years ended December 31, 2008 and 2009 was 5.60% and 5.47%, respectively. At June 30, 2010, the amount outstanding under this facility was $383.4 million. The weighted-average interest rate for the quarters ended June 30, 2009 and 2010 was 5.28% and 6.58%, respectively.

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CLI Funding III Credit Facility

        On October 31, 2007, our wholly owned subsidiary CLI Funding III LLC, a special purpose vehicle incorporated under the laws of Delaware, entered into a $300.0 million senior secured credit facility to finance a portfolio of container finance leases and certain new container finance leases acquired in the future. The facility was amended on April 22, 2008, increasing the facility size to $400.0 million. The facility had a two-year revolving period, during which additional finance leases could be added to the portfolio, followed by a term-out period not to exceed ten years during which the facility amortizes. Borrowings under the facility are limited to a maximum of 85% of the present value of finance lease receivables throughout the facility's 12-year term and bear interest at a rate equal to LIBOR or a Cost of Funds rate (as defined in the agreement) plus a margin. CLI has guaranteed the payment obligations of CLI Funding III LLC.

        At December 31, 2008 and 2009, the amount outstanding under this facility was $325.4 million and $383.8 million, respectively. The weighted-average interest rate for the years ended December 31, 2008 and 2009 was 5.47% and 5.87%, respectively. At June 30, 2009 and 2010, the amount outstanding under this facility was $346.7 million. The weighted-average interest rate for the six months ended June 30, 2009 and 2010 was 6.19% and 4.27%, respectively.

CLI Funding IV Credit Facility

        On May 18, 2010, our indirect wholly owned subsidiary, CLI Funding IV LLC, a special purpose vehicle formed under the laws of Delaware, entered into a $200 million revolving loan credit agreement (the "CLI Funding IV Credit Facility") to finance new container purchases in the future. The facility has a one year revolving period, which expires on May 17, 2011, and may be extended by the lenders, upon the borrower's request, for a subsequent 364 day period from the existing scheduled termination date, during which new containers and leases can be added to the portfolio. After the revolving credit period expires (subject to any extensions), the facility converts to a 5 year amortizing term loan. Borrowings under the facility are limited to a maximum of 80% of the eligible equipment's net book value, 80% of the net present value of eligible finance leases, plus 100% of the restricted cash accounts and borrowings under this facility bear interest at a rate equal to LIBOR plus a margin. See "Description of Certain Indebtedness".

        In connection with the CLI Funding IV Credit Facility, CLI executed a limited guaranty, pursuant to which CLI guaranteed the performance when due by CLI Funding IV LLC of an amount equal to up to 10% of the highest drawn amount from closing until the date the facility supports 10 eligible lessees under the concentration limits as set forth in the facility.

        If the Container Revolving Credit Facility is amended to include a consolidated leverage ratio test, the CLI Funding IV management agreement, which was entered into on May 18, 2010, provides that the same debt covenant will automatically and immediately apply to CLI. In connection with the Amended and Restated Container Revolving Credit Facility that we intend to enter into contemporaneous with the completion of this offering, and which will include a consolidated leverage ratio test, CLI will be required under the CLI Funding IV management agreement to comply with the consolidated leverage ratio test that uses Adjusted EBITDA as the basis for calculating covenant compliance.

Covenants

        Under our debt instruments, we are required to maintain certain financial covenants (as defined in each agreement). As of June 30, 2010, we were in compliance with all covenants. Refer to "Description of Certain Indebtedness" included elsewhere in this prospectus.

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Commitments

        The container purchase commitments are related to purchase orders we place for containers, both refrigerated and dry, and complementary equipment in the normal course of business. We do not bear the risks and rewards of ownership and therefore have not recorded an asset or a liability related to these commitments. We had commitments for the purchase of containers of $97.1 million as of June 30, 2010. Through September 28, 2010, we have committed to buy approximately $195.2 million of new equipment (including $75.1 million of refrigerated containers) for delivery through December 2010. Of this amount, approximately $184.7 million, or 95%, has been committed to long-term leases.

        We are a party to various operating leases relating to office facilities and certain other equipment with various expiration dates through 2014. Minimum rent payments under our material leases were $1.7 million as of June 30, 2010.

        During the third quarter of 2007, certain of Seacastle's shareholders entered into novation agreements with subsidiaries of Seacastle pursuant to which the obligations under nineteen swap agreements to which the Seacastle shareholders were a party were transferred to certain Seacastle subsidiaries. These swaps were originally executed by the Seacastle shareholders for the purpose of hedging variable rate debt. It is consistent with the Seacastle shareholders' risk management policies to hedge debt at the time of commitment rather than at the time of funding which is Seacastle's policy. As such, the novations took place after the Seacastle subsidiaries had received the committed funds under the relevant debt facilities. Each of the novated swap agreements was directly related to obligations of certain Seacastle subsidiaries. In certain of the swap agreements, the Seacastle shareholders had access to derivative markets that would likely not have been available to Seacastle or its subsidiaries at that time. At the time of these novations, the value of the swaps was $3.0 million of liabilities. No consideration was paid by the Seacastle shareholders for the assumption by the Seacastle subsidiaries of these liabilities. Seacastle also recorded a corresponding reduction of retained earnings.

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

Critical Accounting Policies

        Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements. We base our estimates on historical experiences and assumptions believed to be reasonable under the circumstances and re-evaluate them on an ongoing basis. Those estimates form the basis for our judgments that affect the amounts reported in the financial statements. Actual results could differ from our estimates under different assumptions or conditions. Our significant accounting policies, which may be affected by our estimates and assumptions, are more fully described in Note 2 "Summary of Significant Accounting Policies" to our audited consolidated financial statements that appear elsewhere in this prospectus.

        An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.

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        Although we believe the policies summarized below to be the most critical, other accounting policies also have significant effect on our financial statements and certain of these policies also require the use of estimates and assumptions.

Revenue Recognition

        Our primary sources of equipment leasing revenue are derived from operating leases and revenue earned on direct finance leases.

Revenue Recognition—Equipment Leasing Revenue

        We generate equipment leasing revenue through short-term and long-term leases with shipping lines and ocean carriers. In the majority of our transactions, we act as the lessor of leasing equipment for a specified period of time and at a specified per diem rate. Revenue is recognized on a straight-line basis over the life of the respective lease.

Revenue Recognition—Direct Finance Revenue

        We enter into direct finance leases as lessor of equipment that we own. In most instances, the leases include a bargain purchase option to purchase the leased equipment at the end of the lease term. The Net investment in direct finance leases represents the receivables due from lessees, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest basis over the life of the lease term and is recorded as finance revenue in the Consolidated Statements of Operations. The principal component of the lease payment is reflected as a reduction to the Net investment in finance leases.

Revenue Recognition—Other Revenue

        Other revenue includes fees that our customers are contractually obligated to pay to return equipment to a leasable condition as well as fees for third party positioning of equipment. When a lessee leases equipment from us, the lessee is contractually obligated to return the equipment in a leasable condition according to predetermined standards. Upon redelivery of the units, we bill the lessee for the expected cost to repair the equipment based on a repair survey performed at the depot. When the equipment comes off lease, estimates of the cost to repair the equipment are prepared. We bill the lessee based on this estimate and record maintenance and repair revenue at that time. In accordance with Revenue-Revenue Recognition—Principal Agent Considerations Topic 605 of the FASB Accounting Standards Codification (the "Codification"), we recognize billings to customers for damages incurred and certain other pass-through costs as revenue. We recognize gross revenues from these pass-through costs as we are the primary obligor with respect to purchasing goods and services from third parties; we generally have the discretion in selection of the repair service provider; and we generally have the credit risk because the services are purchased prior to reimbursement being received.

        Other revenue includes fees earned on the management of container equipment for third party owners.

Leasing Equipment

        Leasing equipment includes refrigerated and dry containers and gensets, which are stated at cost less accumulated depreciation. Residual values are evaluated annually or sooner if market conditions cause our estimates to change significantly. We estimate residual values based on fair market values and prior history. We account for initial direct costs in the acquisition of leases in accordance with the Leases FASB Topic 840. In certain circumstances, we will prepay commissions to sales agents when they have closed equipment lease transactions. For both operating and direct finance leases, we capitalize those commission payments and amortize them over the initial lease term or the earliest date that the lease may be terminated.

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        Containers are recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life of the equipment. The estimated useful life for our reefers is 15 years from the date of service and 12.5 years for dry containers. Residual values for reefers are estimated to be 10% of their original cost and dry containers residual values are estimated to be 37% of their original cost. Cost incurred to place the new equipment into service, including costs to transport the equipment to its initial on-hire location, are capitalized. We recognize repair and maintenance costs that do not extend the lives of our assets as incurred and include them in Direct operating expenses in the Consolidated Statements of Operations.

        Gensets are recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life of the equipment. Gensets are depreciated over a 12 year life from the date of service. Residual values for gensets are estimated to be 10% of their original cost.

Direct Finance Leases

        Direct finance leases are recorded at the aggregated future minimum lease payments, including any bargain or economically compelled purchase options granted to the customer, less unearned income. Management performs annual reviews of the estimated residual values.

Accounting for Customer Defaults

        We have sought to reduce credit risk by maintaining insurance against loss of equipment (and to a limited extent, loss of lease revenue) due to customer insolvency. We cease the recognition of lease revenues for amounts billable to the lessee after the lease default date at the time we determine that such amounts are not probable of collection from the lessee. In connection with the accounting for the insurance policy, we record a reduction to our expenses in the period when the insurance proceeds are received.

Leasing Equipment Held for Sale

        In accordance with the Property, Plant and Equipment FASB Topic 360, leasing equipment held for sale are stated at the lower of carrying value or fair value less estimated costs to sell. Leasing assets held for sale are not depreciated and related deferred costs are not amortized. Leasing assets held for sale are recorded at the lower of cost or fair market value. The majority of our impairments occur at the conclusion of an operating lease whereby our equipment is of an advanced age with a certain amount of damage that the lessee is responsible for. The decision to categorize the equipment as "held for sale" is based upon a discounted cash flow model which includes costs rebillable to the lessee. These costs are recorded as Other revenues and are not recorded as a reduction of the impairment on leasing assets.

Sales of Leasing Equipment

        We record the gains and losses from the sales of leasing equipment as part of Other expense, net on the Consolidated Statement of Operations. Gains and losses are recognized upon completion of the sale based upon the sales price and the book value of the equipment.

Impairment of Leasing Equipment

        In accordance with the Property, Plant and Equipment FASB Topic 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", we review our leasing equipment for impairment when events or changes in circumstances indicate that the carrying amount of the asset group as a whole may not be recoverable. Impairment exists when the carrying value of leasing assets taken as a whole exceeds the sum of the related undiscounted cash flows. Our review for impairment includes

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considering the existence of impairment indicators including third party appraisals of our equipment, adverse changes in market conditions for specific long-lived assets and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of our equipment. When indicators of impairment suggest that the carrying value of our leasing assets may not be recoverable, we determine whether the impairment recognition criteria have been met by evaluating whether the carrying value of the leasing assets taken as a whole exceeds the related undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. The preparation of the related undiscounted cash flows requires the use of assumptions and estimates, including the level of future rents, the residual value expected to be realized upon disposition of the assets estimated downtime between re-leasing events and the amount of re-leasing costs.

        In 2009, we determined that market conditions warranted testing our equipment under lease for impairment. This test was completed by equipment type and showed that that the future undiscounted cash flows substantially exceeded our carrying value for all equipment types.

        Additionally, we test our equipment for impairment when equipment comes off lease and a determination is made as to whether the carrying value of the equipment exceeds its estimated future undiscounted cash flows.

        If we determine that the carrying value may not be recoverable, we will assess the fair values of the assets. In determining the fair value of the assets, we consider market trends, published values for similar assets, recent transactions of similar assets and quotes from third party appraisers. If the carrying amount of the equipment coming off lease exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value.

Provision for Doubtful Accounts

        Our allowance for doubtful accounts is based upon a periodic review of the collectability of our receivables on a customer-by-customer basis for those accounts which we believe may be experiencing difficulties in meeting their payment terms or have had such difficulties in the past. The determination of the amount of the allowance for the doubtful account for each of these customers is based upon several factors including: their credit rating, their prior payment history, discussions with the customers' management, and current events we are involved in that could have financial implications. For all remaining accounts, we apply a delinquency factor based upon prior history to the total amount due in order to determine the allowance for doubtful accounts. The delinquency factor represents the best estimate of those accounts that will become uncollectible. Changes in economic conditions may require a reassessment of the risk and could result in additions or deductions to the allowance for doubtful accounts. We believe our allowance for doubtful accounts is adequate to provide for credit losses inherent in our existing receivables. However, actual losses could exceed the amounts provided for in certain periods.

Income Taxes

        As a newly-formed corporation, we provide for income taxes for our taxable subsidiaries, under the provisions of FASB Topic 740 Accounting for Income Taxes. FASB Topic 740 requires an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the U.S. GAAP and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount we estimated to be realizable.

Business Combinations

        A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with FASB Topic 805. Under FASB Topic 805, we allocate the purchase price of acquired companies to the tangible and

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intangible assets acquired and liabilities assumed based upon their estimated fair value at the date of purchase. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

        The fair value of acquired businesses is determined based on valuations performed by independent valuation specialists under management's supervision, if necessary. We believe the estimated fair values determined for our acquisitions and allocated to assets acquired and liabilities assumed are based on reasonable assumptions. Such assumptions are not certain and may not be indicative of actual performance. Therefore, actual results could differ from those estimates.

Goodwill

        Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with Intangibles—Goodwill and Other Topic of the FASB Topic 805, goodwill is not amortized, but instead is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We evaluate the recoverability of goodwill using a two-step impairment test approach. Management has determined that we have one reporting unit.

        In the first step, the fair value is compared to its carrying value including goodwill. Fair value is estimated using a discounted free cash flow analysis which is based on current operating budgets and long range projections. The assumptions for the projections are based on management's historical experience as well as their future expectations of market conditions. Free cash flow is discounted based on market comparable weighted-average cost of capital rates derived from the capital asset pricing model. The inputs to the model were primarily derived from publicly available market data.

        If the fair value is less than the carrying value, a second step is performed which compares the implied fair value of the goodwill to the carrying value of the goodwill. The implied fair value of the goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities. If the implied fair value of the goodwill is less than the carrying value, the difference is recognized as an impairment charge.

        We performed our impairment assessment of goodwill using consistent methodologies and concluded that fair value substantially exceeded carrying value and no impairment existed for the years ended December 31, 2007, 2008 and 2009.

Derivatives Instruments and Hedging Activities

        We account for derivative instruments in accordance with the Derivatives and Hedging FASB Topic 815, which requires that all derivative instruments be recorded on the balance sheet at their fair value and establishes criteria for both the designation and effectiveness of hedging activities.

        In order to reduce interest rate risk, we have and may enter into interest rate swap agreements from time to time where we would receive floating rate payments in exchange for fixed rate payments, effectively converting a floating rate borrowing to fixed rate. We intend to hedge only the risk related to changes in the benchmark interest rate (LIBOR). We do not enter into other derivative financial instruments for trading or speculative purposes.

        We face credit risk if the counterparties to these transactions are unable to perform their obligations. However, we seek to minimize this risk by entering into transactions with counterparties that are major financial institutions with high credit ratings.

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New Accounting Pronouncements

        Effective June 30, 2009, we adopted the interim disclosure provisions about the fair value of financial instruments as required by the Fair Value Measurement and Disclosures Topic 820 of the FASB ASC. The adoption had no impact on our consolidated financial statements besides certain additional disclosures. See Note 2—Nature of Operations and Summary of Significant Accounting Policies—Fair Value of Financial Instruments in our audited consolidated financial statements.

        Effective June 30, 2009, we adopted the subsequent event provisions as required by the Subsequent Events FASB Topic 855. The adoption had no impact on our audited consolidated financial statements besides the additional disclosure of the date through which we evaluated subsequent events.

        Effective January 1, 2009, we adopted enhanced disclosures about how and why we use derivative instruments, how they are accounted for, and how they affect our financial performance as required by the Derivative and Hedging FASB Topic 815. The adoption had no impact on our consolidated financial statements besides certain additional disclosures. See Note 6—Derivatives and Hedging Activities in our audited consolidated financial statements.

Pending Adoption

        In June 2009, the FASB issued authoritative guidance on the accounting for transfers of financial assets, which is effective for reporting periods beginning after November 15, 2009. The new requirement eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. We do not expect the adoption of this update to the accounting standards to our consolidated financial position or results to have a material impact.

        In October 2009, the FASB issued Accounting Standards Update No. 2009-13, Multiple Deliverable Revenue Arrangements ("ASU 2009-13"), which amends ASC 605-25, Revenue Recognition—Multiple Element Arrangements, to require the use of management's best estimate of selling price for individual elements of an arrangement when vendor-specific objective evidence or third-party evidence is unavailable. Additionally, it eliminates the residual method of revenue recognition in accounting for multiple deliverable arrangements and significantly expands the disclosures required for multiple deliverable arrangements. The revised guidance provides entities with the option of adopting the revisions retrospectively for all periods presented or prospectively for all revenue arrangements entered into or materially modified after the date of adoption. The Company will apply ASU 2009-13 prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company does not expect ASU 2009-13 to have a material impact on the Company's Consolidated Financial Statements.

        In January 2010, the FASB issued authoritative guidance on accounting for the Fair Value Measurements and Disclosure; Improving Disclosures about Fair Value Measurements FASB Topic 820. This pronouncement requires additional information to be disclosed principally with respect to Level 3 fair value measurements and transfers to and from Level 1 and Level 2 measurements. In addition, enhanced disclosure is required concerning inputs and valuation techniques used to determine Level 2 and Level 3 fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Earlier application is permitted. We are currently assessing the potential impact of adoption, if any, on our consolidated financial statements.

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        No other new accounting pronouncements issued or effective during 2010 had or is expected to have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

        In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction such as an assignment and assumption agreement. These indemnifications might include claims related to any of the following: tax matters and governmental regulations, and contractual relationships. Performance under these indemnities would generally be triggered by a breach of terms of the contract or by a third party claim. We regularly evaluate the probability of having to incur costs associated with these indemnifications and have concluded that none are probable. The principal types of indemnifications for which payment are possible are as follows:

        In the ordinary course of business, we provide various tax-related indemnifications as part of transactions. The indemnified party typically is protected from certain events that result in a tax treatment different from that originally anticipated. Our liability typically is fixed when a final determination of the indemnified party's tax liability is made. In some cases, a payment under a tax indemnification may be offset in whole or in part by refunds from the applicable governmental taxing authority. We are party to numerous tax indemnifications and many of these indemnities do not limit potential payment; therefore, we are unable to estimate a maximum amount of potential future payments that could result from claims made under these indemnities.

Quantitative and Qualitative Disclosures about Market Risk

        While our leasing per diems are billed and paid to us in U.S. dollars, we are subject to exchange gains and losses for local currency expenditures. We record the effect of non-U.S. dollar currency transactions when we translate the non-U.S. subsidiaries' financial statements into U.S. dollars using exchange rates as they exist at the end of each month.

        We have a division located in Denmark, with the functional currency of the Danish Krone. The effect of fluctuations in Danish Krone was not material in any period presented.

        We have long-term debt obligations that accrue interest at variable rates. Interest rate changes may therefore impact the amount of interest payments, future earnings and cash flows. We have entered into interest rate swap agreements to mitigate the impact of changes in interest rates that may result from fluctuations in the variable rates of interest accrued by our long-term debt obligations. Based on the debt obligation payable as of June 30, 2010, we estimate that cash flows from interest expense relating to variable rate debt and the relevant interest rate swap agreement would increase (decrease) by $0.03 million on an annual basis in the event interest rates were to increase (decrease) by 10%.

        We are subject to concentrations of credit risk with respect to amounts due from customers. We seek to limit our credit risk by performing ongoing credit evaluations and, when deemed necessary, require letters of credit, guarantees or collateral. Our credit policy sets different maximum exposure guidelines for each customer. Credit criteria may include, but are not limited to, customer trade route,

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country, social and political climate, assessments of net worth, asset ownership, bank and trade credit references, credit bureau reports, operational history and financial strength.

        We seek to reduce credit risk by maintaining insurance coverage against customer insolvency and related equipment losses. We maintain contingent physical damage, recovery and loss of revenue insurance, which provides coverage in the event of a customer's insolvency, bankruptcy or default giving rise to our demand for return of all of our equipment. Subject to the policy's deductible and other terms and conditions, it covers the cost of recovering our equipment, damage to the equipment, loss of equipment and, to a limited extent, lost revenues. This coverage automatically renews for one additional one-year term on the anniversary of the commencement date subject to maintaining a certain claim experience rate.

        Our hedging transactions using derivative instruments have counterparty credit risk. The counterparties to our derivative arrangements and repurchase agreements are major financial institutions with high credit ratings. As a result, we do not anticipate that any of these counterparties will fail to meet their obligations. However, there can be no assurance that we will be able to adequately protect against this risk and will ultimately realize an economic benefit from our hedging strategies or recover the full value of the securities underlying our repurchase agreements in the event of a default by a counterparty.

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

        The adequacy of our provision for doubtful accounts is provided based upon a monthly review of the collectability of our receivables. This review is based on the risk profile of the receivables, credit quality indicators such as the level of past-due amounts and economic conditions, as well as the value of underlying collateral in the case of direct financing lease receivables.

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INDUSTRY

        This section entitled "Industry," including all statistical and other information set forth below, has been prepared by Harrison Consulting and has been included in this prospectus in reliance on the authority of Harrison Consulting as an expert in statistical and other analysis of the container leasing industry. See "Experts." Harrison Consulting has informed us that it has derived the information set forth in this section from publicly available data, and that its estimates of future container trade growth are based on assumptions about the world economy and trade flows as of September 2010.

Containerization

        Since its beginnings in the late 1960s, containerization has become an integral part of the global economy. The use of containers in global trade has resulted in considerable productivity and efficiency gains. The primary benefits of containerization are improved productivity, security and efficiency. Figure 1 below describes these benefits in more detail.

Figure 1 Benefits of Containerization

Containerization   Intermodality   Standardization
Loading 20-30 tons of cargo on a ship (a morning's work for a team of dockworkers by conventional means) today takes one crane driver about 45 seconds.   Cargo is loaded at origin and moved by truck, rail, barge and ship to its ultimate destination without the need for intermediate handling, significantly reducing loss, pilferage, and security risks.   Standard-dimension containers can be handled and transported rapidly and safely with standardized handling equipment throughout the world.

        Today over 5,000 container ships transport 1.3 billion tons of containerized cargo a year, accounting for approximately 25% of all dry-cargo shipments and 16% of total seaborne trade. This generates approximately 500 million 20 foot-equivalent ("TEU") container moves through the world's container ports, and yields annual revenues of $200 billion for the container shipping lines.

Containers

        Containers are large standardized steel boxes built to International Standardization Organization (ISO) norms and used for intermodal freight transportation. They are constructed with a steel frame and steel corner castings and are fully or partially enclosed with steel panels and doors. Containers used in international trade are generally 8 feet wide, 8 feet and 6 inches (standard) or 9 feet and 6 inches (high-cube) high, and 20 feet, 40 feet or 45 feet long.

        As of December 31, 2009 the size of the world container fleet was approximately 26 million TEU, 55% of which was owned by the shipping lines and other operators, and 45% of which was owned or managed by the container lessors. For the first time in history, the container fleet shrank by approximately 4% in 2009, but is expected to resume its growth in line with expanding container trade.

Figure 2 World Container Fleet 1977-2009 (Millions of TEU)

GRAPHIC

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Containers can be divided into four main categories:

Figure 3 World Container Fleet by Container Type, 2010

 
  Percentage of
Total Fleet
   
Container Types
  TEU   US$
Replacement
Cost
  Sample Cargos

Dry-freight standard

    89 %   60 % Manufactured goods, furniture, appliances, clothing

Dry-freight special

    4 %   7 % Sheet glass; large machinery, vehicles; grains

Reefer

    6 %   23 % Frozen/chilled meat, fish, fruit and vegetable

Tank

    1 %   10 % Industrial chemicals and potable liquids

Container Trade

        Container trade has grown at an annual rate of more than 8% for over 30 years. In the last 10 years, growth has been underpinned by globalization and the emergence of China as the world's leading manufacturing base, and it has grown at approximately three times the world GDP growth rate over the period. Figure 4 below compares cumulative historical world GDP, seaborne trade and container trade growth.

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Figure 4 Cumulative World GDP, Seaborne Trade and Container Trade Growth (1980-2009)

GRAPHIC

        Figure 5 compares recent year-on-year growth in world GDP with growth in global container trade and shows that container trade has expanded at a multiple of GDP growth. During the period 2001 through 2008, global container trade grew at 3.3 times the rate of global GDP on average. Figure 5 also shows an illustrative scenario for container trade growth in 2010 and 2011. It is not a prediction of growth. Rather it is provided as an illustrative example to show how container trade growth could relate to GDP growth if the former were to increase at a multiple of the latter as it has done in previous years. Under this scenario, if world GDP grew at an annual rate of 4.6% in 2010 and 4.3% in 2011 (figures taken from the International Monetary Fund's World Economic Outlook Update, July 2010), and if container trade grew at a multiple of 2.0x GDP in each of those years, then container trade would grow by approximately 9% in 2010 and 9% in 2011. Global GDP growth depends on many factors and current estimates for such growth in the next two years vary. Similarly, the actual relationship between container trade and GDP growth varies from year to year and could be greater or less than 2.0x in the coming years.

Figure 5 Container Trade Growth vs. GDP (2001-2011)

GRAPHIC


Container trade growth multiple of GDP growth

2001
  2002   2003   2004   2005   2006   2007   2008   2009   2010   2011  
  1.1x     7.0x     4.9x     3.9x     3.0x     2.3x     3.0x     1.1x   n/a     2.0x     2.0x  

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        Expectations of a return to sustained growth are based on the following:

        The figure below compares various container-trade-related indices from January 2008 through June 2010.

Figure 6 Container-Trade-Related Indices, January 2008 - June 2010 (July 2008 = 100%)

GRAPHIC

Container Shipping

        Container shipping has developed in parallel with the growth in container trade to become a sizeable global business. It is dominated by the 20 largest lines who between them account for approximately 80% of total carrying capacity. The five largest lines alone—Maersk Line (Denmark), Mediterranean Shipping (Switzerland), CMA CGM (France), Hapag-Lloyd (Germany) and APL (Singapore)—account for over 40% of capacity.

        Annual container trade growth of 10-15% each year from 2002 to 2007 and long lead times for new vessel deliveries led to an accumulation of new containership orders which, by the end of 2007, amounted to over 60% of the then-deployed vessel fleet. When trade growth slowed in 2008 and then declined in 2009, containership owners and operators faced a chronic over-supply of tonnage, which adversely affected their earnings and led to the virtual cessation of capital investment in container shipping. In 2008, the top 20 lines generated approximately 100 million TEU of loaded container moves and $160 billion of revenues. In 2009, the top 20 lines generated approximately 92 million TEU of loaded container moves and $115 billion of revenues, a year-over-year decline in traffic of approximately 7% and in revenue of approximately 30%.

        In spite of the heavy losses experienced in 2009, container lines were generally supported by their shareholders and/or national governments, and completed capital-raising and debt-restructuring measures enabled all top 20 lines to remain in business.

        Based on first-half 2010 data from 15 selected shipping lines (between them representing more than 50% of the total container shipping market by number of vessels), container trade expanded by

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approximately 15% during the first six months of 2010 compared to the first six months of 2009. This led to a rise in freight rates and a greater than 30% increase in aggregate revenues for these shipping lines during the same period. Figure 7 below shows the change in quarterly net earnings, in the aggregate, of these shipping lines in 2009 and the first half of 2010.

Figure 7 Selected Major Lines' Aggregate Quarterly Net Income, Q1 2009 - Q2 2010 (Millions of US Dollars)

GRAPHIC

Container Leasing

        Approximately 45% of the global container fleet is owned or managed by container lessors with the balance owned directly by container shipping lines and other operators. Operators such as container shipping lines and other freight transport companies lease a significant portion of their container fleets for several reasons:

        The concentration of the 11.5 million TEU leased container fleet in the hands of the top lessors has increased in the last three years as a result of a series of acquisitions and fleet mergers:

        As a result of this acquisition and fleet merger activity, and organic growth by Florens, Dong Fang (DFIL) and Beacon, the top five container lessors now account for 62% of the leased container fleet, and the top 15 for 95% of it. Figure 8 ranks the top lessors by the size of their reefer container fleets, and also shows the total fleet size of each lessor.

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Figure 8 Top 15 Container Lessors' Fleet Size as of December 31, 2009

Lessor
   
  Reefer Fleet (TEU)   Share of Reefer Fleet   Total Fleet (TEU)  

SeaCube

  USA     141,000     28 %   842,570  

GE SeaCo

  Singapore     115,000     23 %   970,000  

Triton

  USA     65,000     13 %   1,425,000  

TAL

  USA     60,000     12 %   1,060,000  

Florens

  Hong Kong     43,000     8 %   1,600,000  

Textainer

  USA     23,000     5 %   2,285,000  

Cronos

  UK     22,000     4 %   650,000  

Beacon

  USA     15,000     3 %   125,000  

Dong Fang

  China     7,000     1 %   350,000  

CAI

  USA     5,000     1 %   770,000  

Gold

  France     0     0 %   500,000  

UES

  Hong Kong     0     0 %   250,000  

Blue Sky

  UK     0     0 %   100,000  

CARU

  Netherlands     0     0 %   90,000  

Waterfront

  USA     0     0 %   70,000  

Other

        10,000     2 %   450,000  

Total

        506,000           11,537,570  

        Figure 9 shows the market share of the top lessors, firstly in terms of their reefer container fleets measured in TEU, secondly in terms of the replacement cost of their total container fleets measured in U.S. dollars.

Figure 9 Market Share of Top 10 Container Lessors as of December 31, 2009

 
   
Top 10 Reefer Lessors
by Fleet Size (TEU)
  Top 10 Lessors
by Replacement Cost of Fleet ($)

GRAPHIC

 

GRAPHIC

        As part of a diversified container leasing portfolio, reefer container fleets have historically been attractive to lessors for several reasons:

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        In addition to the above, future demand for reefer containers will be driven by technological advances making it possible to carry a wider range of food produce over longer distances, by fast-growing populations in food-importing regions such as the Middle East, and by the switching of reefer cargo from conventional reefer ships to reefer containers.

Container Prices and Lease Rates

        The average first-half 2010 price of a 20 foot standard dry-freight container, which serves as a benchmark for other types of dry-freight containers, was $2,360.

        Reefer container prices, which are approximately six to eight times that of a 20 foot dry-freight container (depending on the size of the reefer), have trended downward over the last 20 years. However, because of the greater stability in underlying demand for this equipment type, the combination of a refrigeration machine and the box, average annual reefer prices over the same period have been more stable than dry-freight container prices. Since 1998, reefer prices have not exceeded $19,250 or fallen below $16,500, a variation of less than 15%.

Figure 10 New 20 foot Standard and 40 foot Reefer Container Prices (1990 to 2010)

GRAPHIC

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        Container lessors typically offer new containers to their customers under three to five year fixed-term leases. Per-diem rates on new container leases are typically a function of the container lessor's required rate of return and the then-prevailing new container price. As a result of the price differential between reefers and dry-freight containers, per-diems for reefers are approximately six to eight times that of a dry-freight container. The per-diem rates charged by lessors for used containers at depots are typically a function of several factors such as the location and age of the equipment, the price of new containers and the overall balance of supply and demand of used containers.

        As a result of a shortage of containers in the primary marine fleet, demand for equipment in the secondary (predominantly non-marine) market is strong and has led to a firming of prices for containers, after decreases in 2009. Average prices for 12 to 15 year-old dry-freight containers currently are consistent with long-term historical averages.

Supply and Demand

        The delivery lead time for new containers is 30 to 90 days and is significantly shorter than the two to four year delivery lead time for container ships. As a result, changing market conditions result in changes in the container fleet far more quickly than changes in the containership fleet. When trade demand slowed in the second half of 2008, container lessors and operators ceased ordering new containers, causing a 95% reduction in production of new containers, and essentially no new units were added to the fleet in 2009. Figure 11 below shows 10 years of historical container production volumes.

Figure 11 Historical Production Volume in Millions of TEUs (2000 - 2009)

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        In contrast to this, containership owners and operators are still taking delivery of vessels ordered in the trade boom of 2006-07. Figure 12 illustrates that while the container fleet shrank through normal attrition in 2009, the containership fleet continued to grow. Figure 12 also illustrates that the current container order book is insignificant in comparison with the containership order book.

Figure 12 Comparison of Containership and Container Box Fleet Size and Order Book

 
  Container Ships (TEU Slots)   Container Boxes (TEU)  
Fleet size (December 2008)     12,400,000     27,000,000  
Fleet size (December 2009)     13,150,000     26,000,000  
2008 to 2009 change in fleet size     6 %   (4 )%
Order book (March 2010)     4,500,000     300,000  
Order book as percentage of fleet     34 %   1 %

        While containership over-capacity is likely to persist in the medium term there is now a shortage of containers and utilization is increasing. Figure 13 shows the average quarterly utilization rate for leading container lessors Textainer, TAL International and CAI since the first quarter of 2008. This indicates that lessor fleet utilization has been rising in response to the upturn in trade since mid-2009. In their second-quarter updates, these lessors have reported strong demand for their equipment and some reported record utilization levels.

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Figure 13 Textainer, TAL International and CAI Container Fleet Utilization (Q1 2008 - Q2 2010)

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Outlook for Container Leasing

        The data considered above indicate a favorable outlook for the container leasing industry as a whole over the next several years for the following reasons: