a6507213.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended September 30, 2010 |
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or |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from ________ to ________
Commission File Number 001-34931
SeaCube Container Leasing Ltd.
(Exact name of registrant as specified in its charter)
Bermuda |
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98-0655416 |
(State of other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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1 Maynard Drive |
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Park Ridge, New Jersey |
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07656 |
(Address of principal executive offices) |
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(Zip Code) |
(201) 391-0800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No 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
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Accelerated filer o
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Non-accelerated filer x
(Do not check if a smaller
reporting company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of outstanding shares of the Registrant’s Common Stock as of November 10, 2010 was 20,017,812.
SeaCube Container Leasing Ltd.
FORM 10-Q
Table of Contents
SeaCube Container Leasing Ltd.
(Amounts in thousands, except for share amounts)
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(unaudited)
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Assets
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Cash and cash equivalents
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$ |
16,237 |
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$ |
8,014 |
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Restricted cash
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17,362 |
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22,060 |
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Accounts receivable, net of allowance of $3,129 and $3,199, respectively
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27,287 |
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29,802 |
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Net investment in direct finance leases
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528,968 |
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555,990 |
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Leasing equipment, net of accumulated depreciation of $134,565
and $116,518, respectively
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435,655 |
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360,847 |
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Goodwill
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22,483 |
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22,483 |
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Shareholder note
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8,185 |
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89,116 |
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Other assets
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11,639 |
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8,917 |
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Total assets
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$ |
1,067,816 |
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$ |
1,097,229 |
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Liabilities and shareholders’ equity
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Liabilities:
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Accounts payable
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$ |
3,122 |
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$ |
266 |
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Accrued expenses and other liabilities
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70,067 |
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16,883 |
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Fair value of derivative instruments
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55,840 |
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43,304 |
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Deferred income
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2,465 |
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4,038 |
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Deferred income taxes
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2,726 |
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120 |
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Debt:
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Due within one year
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148,227 |
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131,270 |
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Due after one year
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638,907 |
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666,994 |
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Total debt
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787,134 |
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798,264 |
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Total liabilities
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921,354 |
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862,875 |
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Commitments and contingencies (Note 9)
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Shareholders’ equity:
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Preferred shares, $0.01 par value, 100,000,000 shares authorized
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— |
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— |
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Common shares, $0.01 par value 400,000,000 shares authorized; 16,477,812 shares
issued and outstanding at September 30, 2010; 16,000,000 shares issued and
outstanding at December 31, 2009;
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165 |
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160 |
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Additional paid in capital
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189,538 |
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289,826 |
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Retained earnings (deficit)
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5,772 |
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(13,586 |
) |
Accumulated other comprehensive income (loss)
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(49,013 |
) |
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(42,046 |
) |
Total shareholders’ equity
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146,462 |
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234,354 |
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Total liabilities and shareholders’ equity
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$ |
1,067,816 |
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$ |
1,097,229 |
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SeaCube Container Leasing Ltd.
(Amounts in thousands, except for per share amounts)
(unaudited)
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Three months ended
September 30,
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Nine months ended
September 30,
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Revenues:
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Equipment leasing revenue
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$ |
18,527 |
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$ |
16,612 |
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$ |
52,708 |
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$ |
57,573 |
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Finance revenue
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12,660 |
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12,994 |
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38,989 |
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40,788 |
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Other revenue
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3,286 |
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3,651 |
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9,619 |
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10,470 |
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Total revenues
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34,473 |
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33,257 |
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101,316 |
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108,831 |
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Expenses:
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Direct operating expenses
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1,656 |
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2,681 |
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5,715 |
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7,183 |
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Selling, general and administrative expenses
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5,453 |
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4,566 |
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15,691 |
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15,436 |
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Depreciation expenses
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8,886 |
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8,854 |
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25,684 |
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29,069 |
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Provision for doubtful accounts
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122 |
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1,824 |
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(234 |
) |
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3,615 |
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Impairment of leasing equipment held for sale
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291 |
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1,270 |
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1,073 |
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4,778 |
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Interest expense, including non-cash interest of $3,823,
$2,151, $6,226 and $6,449, respectively
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13,704 |
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12,485 |
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35,359 |
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39,852 |
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Interest income
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(58 |
) |
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(788 |
) |
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(965 |
) |
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(1,935 |
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Loss on terminations and modifications of derivative
instruments
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— |
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— |
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— |
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37,922 |
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Gain on 2009 Sale
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— |
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— |
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— |
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(15,583 |
) |
Loss on retirement of debt
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— |
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— |
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— |
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1,330 |
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Other expenses (income), net
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(417 |
) |
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(317 |
) |
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(945 |
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1,244 |
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Total expenses
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29,637 |
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30,575 |
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81,378 |
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122,911 |
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Income (loss) before provision for income taxes
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4,836 |
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2,682 |
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19,938 |
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(14,080 |
) |
Provision (benefit) for income taxes
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9 |
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69 |
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580 |
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|
269 |
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Net income (loss)
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$ |
4,827 |
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$ |
2,613 |
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$ |
19,358 |
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$ |
(14,349 |
) |
Net Income (loss) per common share
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Basic
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$ |
0.29 |
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$ |
0.16 |
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$ |
1.19 |
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$ |
(0.90 |
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Diluted
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$ |
0.29 |
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$ |
0.16 |
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$ |
1.19 |
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$ |
(0.90 |
) |
Dividend per common shareholder
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$ |
— |
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$ |
— |
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$ |
0.175 |
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$ |
— |
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See accompanying notes.
SeaCube Container Leasing Ltd.
For the Nine Months Ended September 30, 2010
(Amounts in thousands, except for share amounts)
(unaudited)
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Additional |
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Retained |
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Accumulated
Other
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Total |
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Balance, December 31, 2009
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— |
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$ |
— |
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|
16,000,000 |
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|
$ |
160 |
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|
$ |
289,826 |
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$ |
(13,586 |
) |
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$ |
(42,046 |
) |
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$ |
234,354 |
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Issuance of common shares
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477,812 |
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|
5 |
|
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(5 |
) |
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|
|
|
|
|
— |
|
Dividends paid
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|
|
|
|
|
|
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|
|
|
|
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|
(2,800 |
) |
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|
|
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|
(2,800 |
) |
Non-cash distribution to Shareholder
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(97,675 |
) |
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|
|
|
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|
|
|
|
(97,675 |
) |
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
19,358 |
|
|
|
|
|
|
|
19,358 |
|
Other comprehensive (loss) income:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net derivative loss reclassified into earnings
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
4,852 |
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|
4,852 |
|
Unrealized loss on derivative instruments, net of tax of $(262)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,843 |
) |
|
|
(11,843 |
) |
Foreign currency translation
|
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|
|
|
|
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|
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|
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|
|
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|
|
24 |
|
|
|
24 |
|
Comprehensive income
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,391 |
|
Balance, September 30, 2010
|
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|
$ |
— |
|
|
|
16,477,812 |
|
|
$ |
165 |
|
|
$ |
189,538 |
|
|
$ |
5,772 |
|
|
$ |
(49,013 |
) |
|
$ |
146,462 |
|
See accompanying notes.
SeaCube Container Leasing Ltd.
(Amounts in thousands)
(unaudited)
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Nine Months Ended September 30,
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|
|
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|
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Cash flows from operating activities
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|
|
|
|
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|
Net income (loss)
|
|
$ |
19,358 |
|
|
$ |
(14,349 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
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|
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|
Depreciation and amortization
|
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|
26,585 |
|
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|
29,997 |
|
Provision for doubtful accounts
|
|
|
(234 |
) |
|
|
3,615 |
|
Loss on sale of leasing equipment
|
|
|
667 |
|
|
|
1,895 |
|
Stock based compensation
|
|
|
192 |
|
|
|
— |
|
Derivative loss reclassified into earnings
|
|
|
4,852 |
|
|
|
7,722 |
|
Ineffective portion of cash flow hedges
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|
431 |
|
|
|
(2,288 |
) |
Loss on terminations and modification of derivative instruments
|
|
|
— |
|
|
|
37,922 |
|
Gain on 2009 Sale
|
|
|
— |
|
|
|
(15,583 |
) |
Impairment of leasing equipment held for sale
|
|
|
1,073 |
|
|
|
4,778 |
|
Loss on retirement of debt
|
|
|
— |
|
|
|
1,330 |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,970 |
|
|
|
(9,243 |
) |
Other assets
|
|
|
264 |
|
|
|
(379 |
) |
Accounts payable, accrued expenses and other liabilities
|
|
|
5,347 |
|
|
|
(9,243 |
) |
Deferred income
|
|
|
(1,572 |
) |
|
|
1,524 |
|
Net cash provided by operating activities
|
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|
58,933 |
|
|
|
37,698 |
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of leasing equipment
|
|
|
11,137 |
|
|
|
10,693 |
|
Collections on net investment in direct finance leases, net of interest earned
|
|
|
78,202 |
|
|
|
83,843 |
|
Decrease in restricted cash
|
|
|
4,698 |
|
|
|
11,457 |
|
Purchase of fixed assets
|
|
|
(128 |
) |
|
|
(86 |
) |
Purchase of leasing equipment
|
|
|
(62,475 |
) |
|
|
— |
|
Investment in direct financing leases
|
|
|
(51,007 |
) |
|
|
(2,272 |
) |
Net proceeds from 2009 Sale
|
|
|
— |
|
|
|
454,193 |
|
Increase in Shareholder Note
|
|
|
(13,896 |
) |
|
|
(80,299 |
) |
Net cash provided by (used in) investing activities
|
|
|
(33,469 |
) |
|
|
477,529 |
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
137,000 |
|
|
|
129,134 |
|
Repayments of long-term debt
|
|
|
(148,131 |
) |
|
|
(566,045 |
) |
Cash paid for debt issuance fees
|
|
|
(2,485 |
) |
|
|
(543 |
) |
Distributions to shareholder
|
|
|
— |
|
|
|
(60,000 |
) |
Dividends paid
|
|
|
(2,800 |
) |
|
|
— |
|
Payments to terminate derivative instruments
|
|
|
— |
|
|
|
(37,922 |
) |
Other financing activities
|
|
|
(851 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities
|
|
|
(17,267 |
) |
|
|
(535,376 |
) |
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
26 |
|
|
|
32 |
|
Net increase (decrease) in cash and cash equivalents
|
|
|
8,223 |
|
|
|
(20,117 |
) |
Cash and cash equivalents, beginning of period
|
|
|
8,014 |
|
|
|
30,567 |
|
Cash and cash equivalents, end of period
|
|
$ |
16,237 |
|
|
$ |
10,450 |
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
28,738 |
|
|
$ |
34,493 |
|
Cash paid for taxes
|
|
$ |
415 |
|
|
$ |
5 |
|
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements
(Dollars in thousands, except as otherwise noted)
(unaudited)
1. Description of the Business and Basis of Presentation
The accompanying consolidated financial statements of SeaCube Container Leasing Ltd. (the “Company” or “SeaCube”) are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, in our opinion, reflect all adjustments, including normal recurring items, which are necessary to present fairly the results for interim periods. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC; however, we believe that the disclosures are adequate to make information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s consolidated financial statements for the year ended December 31, 2009 included in our prospectus filed with the SEC on October 28, 2010.
The Company purchases intermodal containers and leases them to shipping and transportation companies, both domestically and internationally. Containers include refrigerated and dry freight containers as well as generator sets, which are leased to shipping line customers through a variety of long-term and short-term contractual leasing arrangements. The Company operates in a single segment.
Structure Formation
SeaCube was incorporated by Seacastle Operating Company Ltd. (the “Initial Shareholder” or “Seacastle Operating”) in Bermuda in March 2010. The 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 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 the Initial Shareholder in 2006. As of December 31, 2009, CLI was a wholly owned subsidiary of the Initial Shareholder.
In March 2010, SeaCube and the 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 its container leasing business from the other businesses of Seacastle and to establish the appropriate organizational structure for SeaCube (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. After the Structure Formation, CLI was a wholly owned subsidiary of the Initial Shareholder on an indirect basis. Following the Structure Formation, SeaCube continues to conduct all of its operations through CLI and CLI’s operating subsidiaries. The Structure Formation will not change the taxation of SeaCube compared to the taxation reflected in its historical financial statements.
As a result of the Structure Formation, the organizational structure of SeaCube and its subsidiaries is as follows:
|
•
|
SeaCube is a subsidiary of Seacastle Operating Company Ltd.;
|
|
•
|
SeaCube Container Holdings Ltd. is a wholly owned subsidiary of SeaCube;
|
|
•
|
SeaCube Container Investment LLC is owned by SeaCube Container Holdings Ltd. (1%) and by SeaCube (99%);
|
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
1. Description of the Business and Basis of Presentation (Continued)
|
•
|
SeaCube Operating Company Ltd. is a wholly owned subsidiary of SeaCube Container Investment LLC; and
|
|
•
|
CLI is wholly owned by SeaCube Operating Company Ltd. and an indirect wholly owned subsidiary of SeaCube.
|
On April 22, 2010, the Company increased its authorized share capital to 400,000,000 common shares, par value $0.01 per share, and 100,000,000 preference shares, par value $0.01 per share. In addition, on April 22, 2010, the Company issued 15,000,000 common shares, par value $0.01 per share, to the Initial Shareholder, resulting in the Initial Shareholder owning 16,000,000 of the Company’s common shares. The Company’s capital accounts and corresponding earnings per share amounts have been retroactively adjusted for the issuance of additional common shares to the Initial Shareholder.
In connection with the Structure Formation, SeaCube Operating Company Ltd. assumed the obligations of the Initial Shareholder under the Shareholder Note (see Note 13). The assumption of the Shareholder Note by SeaCube Operating Company Ltd. has been accounted for as a non-cash distribution to the Initial Shareholder. 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.
Share Exchange
In April 2010, certain executives and employees of SeaCube and Seacastle exchanged an aggregate of 826,914 shares of Seacastle common stock for 477,812 SeaCube common shares, at an exchange ratio of 0.577826 of a SeaCube common share for each share of Seacastle common stock. As a result of this exchange, the Initial Shareholder owned 97.1% of SeaCube’s issued and outstanding common shares and the remaining 2.9% was owned by SeaCube and Seacastle employees.
2009 Sale
On January 20, 2009, the Company entered into sale agreements with an unrelated third-party investor group for the sale of approximately 65,000 containers and generator sets for cash consideration of $454,193. The leasing assets sold had a book value of approximately $427,718, and we also sold accounts receivable with a carrying value of $10,892. This transaction resulted in a gain of approximately $15,583 which was recorded in the Company’s 2009 Consolidated Financial Statements.
In conjunction with the sale of these assets, we signed an Administrative Services Agreement, whereby, for a ten-year term subject to a maximum 3 year extension at the option of the container owner, the Company has agreed to operate, lease and re-lease the containers and to act on the owner’s behalf as so directed. Under the agreement, the Company does not retain any risk of ownership. The Administrative Services Agreement is subject to an early termination right of the container owner if certain performance targets are not met. Management fees will be paid by the owners to the Company depending upon the type of lease that the equipment is under (term, master lease or direct finance lease). The Company 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.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
1. Description of the Business and Basis of Presentation (Continued)
The containers and gensets and associated lease interests that were sold in the 2009 Sale were a representative sample of the Company’s total operating lease fleet with regard to equipment type, customer mix, age, and utilization. The principal reasons why the Company entered into the 2009 Sale were (i) to provide the Company with an opportunity to establish a new relationship with a third party capital provider, (ii) to allow the Company to mitigate some customer credit and residual risk of ownership to a third party, thereby reducing its aggregate risk exposure to several customers, and (iii) to provide the Company with additional revenue in the form of management fees from the long-term Administrative Services Agreement that the Company entered into at the time of the sale.
Upon completion of the sale of the containers, the Company repaid $365,625 of indebtedness under the Series 2006-2 Asset-Backed Securitization. In addition, the Company paid $37,922 to terminate and modify derivative instruments directly related to the indebtedness under this facility and paid down $48,000 of the Series 2006-1 Asset-Backed Securitization. The Company also wrote off $1,330 of deferred financing fees related to the Series 2006-2 indebtedness and recognized a $37,922 loss on the derivative instruments modified and terminated due to the sale. These payments were funded by cash on hand, the net proceeds of the container sale and proceeds from a $43,000 borrowing under the Container Revolving Credit Facility.
Recently Adopted and Recently Issued Accounting Standards
Adopted in 2010
In June 2009, the Financial Accounting Standards Board (“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. The adoption had no impact on the Company’s Consolidated Financial Statements.
In January 2010, the FASB issued authoritative guidance on accounting for the Fair Value Measurements and Disclosures; Improving Disclosures about Fair Value Measurements. 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. The adoption had no impact on the Company’s Consolidated Financial Statements.
No other new accounting pronouncements issued or effective during 2010 had or is expected to have a material impact on the Company’s consolidated financial statements.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
2. Leasing Activity
Equipment Leasing Revenue
The Company has noncancelable operating leases for its leasing equipment. As of September 30, 2010, future minimum lease revenue under these agreements was estimated as follows:
|
|
|
|
2010
|
|
$ |
30,014 |
|
2011
|
|
|
53,051 |
|
2012
|
|
|
32,503 |
|
2013
|
|
|
22,292 |
|
2014
|
|
|
12,865 |
|
Thereafter
|
|
|
23,187 |
|
|
|
$ |
173,912 |
|
Finance Revenue
At September 30, 2010, receivables under these direct finance leases are collectible through 2020 as follows:
|
|
|
|
|
|
|
|
|
|
2010
|
|
$ |
36,974 |
|
|
$ |
12,564 |
|
|
$ |
24,410 |
|
2011
|
|
|
138,897 |
|
|
|
44,336 |
|
|
|
94,561 |
|
2012
|
|
|
122,328 |
|
|
|
35,285 |
|
|
|
87,043 |
|
2013
|
|
|
110,605 |
|
|
|
26,964 |
|
|
|
83,641 |
|
2014
|
|
|
124,596 |
|
|
|
17,901 |
|
|
|
106,695 |
|
Thereafter
|
|
|
157,182 |
|
|
|
24,564 |
|
|
|
132,618 |
|
|
|
$ |
690,582 |
|
|
$ |
161,614 |
|
|
$ |
528,968 |
|
As of September 30, 2010 and December 31, 2009, the Company had guaranteed and unguaranteed residual values for leasing equipment on direct finance leases of $85,046 and $77,177, respectively. As of December 31, 2009, the Company had total lease receivables, unearned lease income and net lease receivables of $726,039, $170,049 and $555,990, respectively. The unguaranteed residual values are reflected in the ‘‘Net Lease Receivables’’ above.
3. Leasing Equipment
The following is a summary of leasing equipment recorded:
|
|
|
|
|
|
|
Dry containers
|
|
$ |
122,231 |
|
|
$ |
46,604 |
|
Refrigerated containers
|
|
|
424,346 |
|
|
|
407,716 |
|
Generator sets
|
|
|
23,643 |
|
|
|
23,045 |
|
Total
|
|
|
570,220 |
|
|
|
477,365 |
|
Less accumulated depreciation
|
|
|
(134,565 |
) |
|
|
(116,518 |
) |
Leasing equipment, net of accumulated depreciation
|
|
$ |
435,655 |
|
|
$ |
360,847 |
|
There were no assets recorded under capital leases as of September 30, 2010 and December 31, 2009, respectively.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
3. Leasing Equipment (Continued)
The Company has debt obligations that are collateralized by the Company’s restricted cash, leasing equipment and net investment in direct finance leases. As of September 30, 2010 and December 31, 2009, assets pledged as collateral on the Company’s debt amounted to $963,865 and $940,750, respectively.
4. Borrowings
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, which can be extended for 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 five 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 bear interest at a rate equal to LIBOR plus a margin.
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.
The following is a summary of the Company’s borrowings:
|
|
|
|
|
|
|
Container Asset-Backed Securitizations:
|
|
|
|
|
|
|
Series 2006-1 Notes
|
|
$ |
367,841 |
|
|
$ |
414,469 |
|
CLI Funding III Credit Facility
|
|
|
329,293 |
|
|
|
383,795 |
|
CLI Funding IV Credit Facility
|
|
|
70,000 |
|
|
|
— |
|
Container Revolving Credit Facility
|
|
|
20,000 |
|
|
|
— |
|
Total debt
|
|
|
787,134 |
|
|
|
798,264 |
|
Less current maturities
|
|
|
(148,227 |
) |
|
|
(131,270 |
) |
Long-term debt, less current maturities
|
|
$ |
638,907 |
|
|
$ |
666,994 |
|
5. Derivatives and Hedging Activities
In the normal course of business the Company utilizes interest rate derivatives to manage our exposure to interest rate risks. Specifically, interest rate derivatives are hedging variable rate interest payments on its various debt facilities. If certain conditions are met, an interest rate derivative may be specifically designated as a cash flow hedge. All of the Company’s designated interest rate derivatives are cash flow hedges. For effective cash flow hedges, changes in fair value are recorded in accumulated other comprehensive income (loss) and subsequently reclassified into earnings when the interest payments on the debt are recorded in earnings.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
5. Derivatives and Hedging Activities (Continued)
The Company’s interest rate derivatives involve counterparty credit risk. As of September 30, 2010, all of the Company’s interest rate derivatives are held with counterparties or guaranteed by parties with a credit rating of at least A3 by Moody’s. The Company monitors the credit risk associated with these instruments periodically to validate that it is probable that the counterparty (or guarantor) will perform. As of September 30, 2010, the Company does not anticipate that any of these counterparties will fail to meet their obligations. As of September 30, 2010, there are no credit risk related contingent features in any of the Company’s derivative agreements.
The Company held the following interest rate derivatives designated as cash flow hedges as of September 30, 2010:
Hedged Item
|
|
|
|
Current
Notional
Amount
|
|
Effective
Date
|
|
Maturity
Date
|
|
Floating
Rate
|
|
Fixed
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-1 Notes
|
|
$ |
6,469 |
|
Feb-2006
|
|
Oct-2011
|
|
1M LIBOR
|
|
5.5800% |
|
$ |
(189 |
) |
|
|
|
15,417 |
|
Feb-2006
|
|
Oct-2013
|
|
1M LIBOR
|
|
4.1450% |
|
|
(839 |
) |
|
|
|
51,240 |
|
Feb-2006
|
|
Dec-2013
|
|
1M LIBOR
|
|
4.2990% |
|
|
(3,315 |
) |
|
|
|
24,375 |
|
Feb-2006
|
|
Dec-2013
|
|
1M LIBOR
|
|
4.9200% |
|
|
(1,684 |
) |
|
|
|
34,979 |
|
Aug-2006
|
|
Jun-2016
|
|
1M LIBOR
|
|
5.2950% |
|
|
(18,554 |
) |
|
|
|
116,562 |
|
Aug-2006
|
|
Mar-2011
|
|
1M LIBOR
|
|
4.9475% |
|
|
(2,443 |
) |
|
|
|
56,299 |
|
Jan-2009
|
|
Aug-2016
|
|
1M LIBOR
|
|
4.6400% |
|
|
(5,848 |
) |
|
|
|
62,500 |
|
Jan-2009
|
|
Aug-2016
|
|
1M LIBOR
|
|
4.9500% |
|
|
(6,925 |
) |
Total Series 2006-1 Notes
|
|
|
367,841 |
|
|
|
|
|
|
|
|
|
|
(39,797 |
) |
CLI Funding III
|
|
|
15,000 |
|
Apr-2009
|
|
Dec-2010
|
|
1M LIBOR
|
|
4.5400% |
|
|
(139 |
) |
Credit Facility
|
|
|
— |
|
Jun-2008
|
|
Jun-2018
|
|
1M LIBOR
|
|
5.2900% |
|
|
(31 |
) |
|
|
|
16,607 |
|
May-2008
|
|
Feb-2018
|
|
1M LIBOR
|
|
4.5200% |
|
|
(1,743 |
) |
|
|
|
31,025 |
|
May-2008
|
|
Jul-2017
|
|
1M LIBOR
|
|
4.5300% |
|
|
(3,229 |
) |
|
|
|
97,165 |
|
May-2008
|
|
Feb-2018
|
|
1M LIBOR
|
|
4.2075% |
|
|
(6,476 |
) |
|
|
|
5,063 |
|
Jul-2008
|
|
Jun-2016
|
|
1M LIBOR
|
|
4.0500% |
|
|
(445 |
) |
|
|
|
20,500 |
|
Jul-2008
|
|
Jul-2017
|
|
1M LIBOR
|
|
4.1000% |
|
|
(1,669 |
) |
|
|
|
22,203 |
|
Jul-2008
|
|
Dec-2018
|
|
1M LIBOR
|
|
3.6420% |
|
|
(924 |
) |
|
|
|
47,121 |
|
Mar-2010
|
|
Nov-2014
|
|
1M LIBOR
|
|
2.0200% |
|
|
(1,387 |
) |
Total CLI Funding III Credit Facility
|
|
|
254,684 |
|
|
|
|
|
|
|
|
|
|
(16,043 |
) |
Total
|
|
$ |
622,525 |
|
|
|
|
|
|
|
|
|
$ |
(55,840 |
) |
(a) All interest rate derivatives are recorded in fair value of derivative instruments in the liabilities section of the consolidated balance sheets.
The following tables set forth the net of tax effect of the Company’s cash flow hedge derivative instruments on the consolidated financial statements for the three and nine months ended September 30, 2010 and 2009:
|
|
For the Three Months Ended September 30, 2010
|
|
|
|
|
|
|
|
Derivative
Instrument
|
|
|
Change in
Unrealized (Gain)
Loss Recognized
in OCI(a)
|
|
Location of (Gain)
Loss reclassified
from Accumulated
OCI into Income
|
|
(Gain) Loss
Reclassified from
Accumulated OCI
into Income(b)
|
|
Location of
(Gain) Loss
Recognized Directly
in Income
|
|
(Gain) Loss
Recognized
Directly in
Income
|
|
Interest rate derivatives
|
|
(8,135 |
) |
Interest expense
|
|
7,778 |
|
Interest expense
|
|
2,119 |
|
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
5. Derivatives and Hedging Activities (Continued)
|
|
For the Three Months Ended September 30, 2009
|
|
|
|
|
|
|
|
Derivative
Instrument
|
|
|
Change in
Unrealized (Gain)
Loss Recognized
in OCI(a)
|
|
Location of (Gain)
Loss reclassified
from Accumulated
OCI into Income
|
|
(Gain) Loss
Reclassified from
Accumulated OCI
into Income(b)
|
|
Location of
(Gain) Loss
Recognized Directly
in Income
|
|
(Gain) Loss
Recognized
Directly in
Income
|
|
Interest rate derivatives
|
|
(11,987 |
) |
Interest expense
|
|
10,189 |
|
Interest expense
|
|
(677 |
) |
|
|
For the Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
Derivative
Instrument
|
|
|
Change in
Unrealized (Gain) Loss Recognized
in OCI(a)
|
|
Location of (Gain)
Loss reclassified
from Accumulated
OCI into Income
|
|
(Gain) Loss
Reclassified from
Accumulated OCI
into Income(b)
|
|
Location of
(Gain) Loss
Recognized Directly
in Income
|
|
(Gain) Loss
Recognized
Directly in
Income
|
|
Interest rate derivatives
|
|
(31,814 |
) |
Interest expense
|
|
24,823 |
|
Interest expense
|
|
431 |
|
|
|
For the Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
Derivative
Instrument
|
|
|
Change in
Unrealized (Gain)
Loss Recognized
in OCI(a)
|
|
Location of (Gain)
Loss reclassified
from Accumulated
OCI into Income
|
|
(Gain) Loss
Reclassified from
Accumulated OCI
into Income(b)
|
|
Location of
(Gain) Loss
Recognized Directly
in Income
|
|
(Gain) Loss
Recognized
Directly in
Income
|
|
Interest rate derivatives
|
|
(21,646 |
) |
Interest expense
|
|
30,843 |
|
Interest expense
|
|
(2,288 |
) |
(a) Represents the change in the fair market value of the Company’s interest rate derivatives, net of tax, offset by the amount of actual cash paid related to the net settlements of the interest rate derivatives.
(b) Represents the amount of actual cash paid related to the net settlements of the interest rate derivatives and amortization of deferred losses on the Company’s terminated derivatives as follows:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net settlement of interest rate derivatives
|
|
$ |
6,400 |
|
|
$ |
7,644 |
|
|
$ |
19,971 |
|
|
$ |
23,121 |
|
Amortization of terminated derivatives
|
|
|
1,378 |
|
|
|
2,545 |
|
|
|
4,852 |
|
|
|
7,722 |
|
As part of the 2009 Sale, an amount of $37,922 was reclassified from other comprehensive income (loss) into loss on termination of derivatives due to the termination and modification of swaps.
As of September 30, 2010, the amount of Accumulated OCI related to derivatives was $(49,355). The amount of loss expected to be reclassified from OCI into interest expense over the next 12 months consists of net interest settlements on active interest rate derivatives in the amount of $22,703 and the amortization of deferred net losses on the Company’s terminated derivatives of $3,093.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
6. Income Taxes
Prior to the Structure Formation, CLI was a disregarded U.S. entity owned by the Initial Shareholder which is incorporated in Bermuda. Therefore, only the Initial Shareholder’s income effectively connected with its U.S. trade or business was subject to U.S. taxation. Further, prior to the Structure Formation, the Company was a single-member LLC, and taxation was provided as if CLI was a stand-alone entity. After the Structure Formation, CLI is a disregarded entity owned by SeaCube Operating Company Ltd. which is incorporated in Bermuda. Therefore, only SeaCube Operating Company Ltd.’s income effectively connected with its U.S. trade or business is subject to U.S. taxation.
As of December 31, 2009, the Company had net operating loss and capital loss carryforwards of approximately $19,915 and $3,561, respectively, for U.S. federal and state income tax purposes. The Company recorded a valuation allowance against a portion of these deferred tax assets reflecting its view that it was unlikely that the assets will be fully realized. The net operating loss and capital loss carryforwards are no longer available to the Company due to the Structure Formation (see Note 1). The $2,848 of deferred tax assets associated with these loss carryforwards has been accounted for as a non-cash distribution to the Initial Shareholder.
In general, the Company’s effective tax rate differs from the U.S. federal tax rate of 35% primarily due to its lower or nontaxed foreign sourced income. The change in the effective tax rate in the current year is primarily due to the impact of the U.S. effectively connected income tax liability on the overall provision calculation.
7. Other Expenses (Income), Net
Other expenses (income), net of $(417) and $(945) for the three months and nine months ended September 30, 2010, respectively, included proceeds on a default insurance recovery of $0 and $1,683 for the three and nine months ended September 30, 2010, respectively. Other expenses (income), net of $(317) and $1,244 for the three and nine months ended September 30, 2009, respectively, included proceeds on a default insurance recovery of $750 and $750 for the three and nine months ended September 30, 2009, respectively.
8. Comprehensive Income (Loss)
Total comprehensive income (loss) includes net income, the changes in the fair value of derivative instruments, reclassification into earnings of amounts previously deferred relating to derivative instruments and foreign currency translation gain (loss) relating to the Company’s foreign subsidiaries. Total comprehensive income (loss) for the three and nine months ended September 30, 2010 and 2009 is as follows:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
4,827 |
|
|
$ |
2,613 |
|
|
$ |
19,358 |
|
|
$ |
(14,349 |
) |
Net derivative loss reclassified into earnings
|
|
|
1,378 |
|
|
|
2,545 |
|
|
|
4,852 |
|
|
|
7,722 |
|
Unrealized gain (loss) on derivative instruments, net of tax
|
|
|
(1,735 |
) |
|
|
(4,343 |
) |
|
|
(11,843 |
) |
|
|
1,475 |
|
Loss on terminations and modifications of derivative
instruments reclassified to earnings
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37,922 |
|
Foreign currency translation
|
|
|
107 |
|
|
|
6 |
|
|
|
24 |
|
|
|
32 |
|
Total comprehensive income (loss)
|
|
$ |
4,577 |
|
|
$ |
821 |
|
|
$ |
12,391 |
|
|
$ |
32,802 |
|
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
9. Commitments and Contingencies
Purchase Commitments
At September 30, 2010, commitments for capital expenditures totaled $40,503, all of which is committed for 2010.
Lease Commitments
The Company and its subsidiaries are parties to various operating leases relating to office facilities, transportation vehicles, and certain other equipment with various expiration dates through 2014. All leasing arrangements contain normal leasing terms without unusual purchase options or escalation clauses.
As of September 30, 2010, the aggregate minimum rental commitment under operating leases having initial or remaining noncancelable lease terms in excess of one year was $1,516.
10. Share Based Payments
Restricted Stock Awards
On April 23, 2010, certain employees of the Company and Seacastle exchanged an aggregate of 826,914 shares of Seacastle common stock for 477,812 of the Company’s common shares, at an exchange ratio of 0.577826 of a SeaCube common share for each share of Seacastle common stock. The 826,914 shares of Seacastle common stock included 721,731 vested shares and 105,183 unvested restricted shares which were exchanged into 417,033 vested shares and 60,779 unvested restricted shares. There was no change in the restricted share balance between April 23, 2010 and September 30, 2010.
SeaCube accounted for the exchange of the awards as a modification in accordance with the Compensation Topic where applicable and determined no additional compensation charges were required. SeaCube will record compensation expense on the unvested shares at the date of the exchange over the remaining vesting period. The weighted average grant date value per share is $11.17. The Company recorded compensation expense of $128 and $192 for the three and nine months ended September 30, 2010, respectively, related to these restricted shares.
11. Earnings per Share and Dividends
The computation of basic earnings per share is based on the weighted average number of common shares outstanding including participating securities outstanding during the period. The weighted average shares used to calculate basic and diluted earnings per share (“EPS”) have been retroactively adjusted based on the Structure Formation (see Note 1). The Company has issued 16,000,000 common shares to the Initial Shareholder.
In accordance with the Earnings per Share Topic, any unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. Accordingly, all of the Company’s restricted common shares are participating securities.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
11. Earnings per Share and Dividends (Continued)
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding
|
|
|
16,417,033 |
|
|
|
16,000,000 |
|
|
|
16,239,832 |
|
|
|
16,000,000 |
|
Restricted common shares
|
|
|
60,779 |
|
|
|
— |
|
|
|
34,953 |
|
|
|
— |
|
Total weighted-average shares
|
|
|
16,477,812 |
|
|
|
16,000,000 |
|
|
|
16,274,785 |
|
|
|
16,000,000 |
|
The calculation for basic and diluted earnings per share is as follows:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,827 |
|
|
$ |
2,613 |
|
|
$ |
19,358 |
|
|
$ |
(14,349 |
) |
Less: Undistributed earnings allocated to restricted shareholders
|
|
|
(18 |
) |
|
|
— |
|
|
|
(42 |
) |
|
|
— |
|
Income (loss) attributable to common shareholders
|
|
$ |
4,809 |
|
|
$ |
2,613 |
|
|
$ |
19,316 |
|
|
$ |
(14,349 |
) |
Income (loss) per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.29 |
|
|
$ |
0.16 |
|
|
$ |
1.19 |
|
|
$ |
(0.90 |
) |
Diluted
|
|
$ |
0.29 |
|
|
$ |
0.16 |
|
|
$ |
1.19 |
|
|
$ |
(0.90 |
) |
There were no potentially dilutive common shares for any period in these consolidated financial statements.
On April 22, 2010, the Company’s Board of Directors declared a dividend of $0.175 per common share, or an aggregate of $2.8 million, which was paid on May 28, 2010 to shareholders of record as of April 22, 2010.
12. Geographic Information
The Company’s customers use containers to conduct their global trading operations which utilize a vast network of worldwide trade routes. The Company earns its revenues from such customers when the equipment is in use carrying cargo around the world. Substantially all of the Company’s revenues are denominated in U.S. dollars. The following table represents the allocation of domestic and international revenues for the periods indicated based upon the customers’ primary domicile. As all of the Company’s containers are used internationally and not domiciled in one particular place for a prolonged period of time, these assets are considered to be international.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
Total revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
|
$ |
10,144 |
|
|
$ |
6,903 |
|
|
$ |
27,322 |
|
|
$ |
23,351 |
|
Australia/New Zealand
|
|
|
218 |
|
|
|
213 |
|
|
|
724 |
|
|
|
887 |
|
Europe/Africa/Middle East
|
|
|
13,925 |
|
|
|
14,641 |
|
|
|
38,589 |
|
|
|
47,980 |
|
North America
|
|
|
4,209 |
|
|
|
4,990 |
|
|
|
15,695 |
|
|
|
16,116 |
|
South America
|
|
|
5,977 |
|
|
|
6,510 |
|
|
|
18,986 |
|
|
|
20,497 |
|
|
|
$ |
34,473 |
|
|
$ |
33,257 |
|
|
$ |
101,316 |
|
|
$ |
108,831 |
|
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
13. Related Party Transactions
Transactions with Affiliates
Prior to our initial public offering (“IPO”), the Company shared some services, staff and space with other affiliates of Seacastle. For the three months ended September 30, 2010 and 2009, net charges (to) from these affiliates were $235 and $(264) respectively, and for the nine months ended September 30, 2010 and 2009, $174 and $777, respectively. Also included in these amounts are expenses for share-based compensation allocated from Seacastle, to both dedicated and shared SeaCube employees. These amounts are recorded in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations. The expense and cost allocations have been determined based on methodologies (such as space used or hours worked) in order to establish reasonable charges for the services provided or for the benefit received during the periods presented. Since becoming a public company, the transactions with affiliates are significantly reduced and currently limited to reimbursement for shared office space and staff to support tax related work. The Company has a net receivable (payable) to affiliates of Seacastle of $1,151 and $(1,151) as of September 30, 2010 and December 31, 2009, respectively.
Amended Seacastle Credit Facility Guarantee
On January 29, 2009, Seacastle entered into the Amended Seacastle Credit Facility, which facility has a maturity date of July 31, 2011. CLI is a guarantor under the facility. As such, CLI must maintain a minimum tangible net worth of $230.0 million. In connection with the Structure Formation, SeaCube Operating Company Ltd. also provided a guaranty of the Initial Shareholder’s obligations under the Amended Seacastle Credit Facility. SeaCube Operating Company Ltd. does not have to maintain a minimum tangible net worth in connection with such guaranty. As of September 30, 2010 and December 31, 2009, the amount outstanding under this facility was $74.0 million and $83.0 million, respectively. In conjunction with the Company’s IPO, the guaranties of Seacube Operating Company Ltd. and CLI under the Amended Seacastle Credit Facility terminated. (See Note 15)
Shareholder Note and Dividend
On January 27, 2009, the Company distributed a total of $115.8 million to the Initial Shareholder. Of the total, $55.8 million was in the form of a loan and $60.0 million was in the form of a dividend. The $115.8 million distribution was used by the Initial Shareholder to repay a portion of the Amended Seacastle Credit Facility. The Company accounted for the $60.0 million as a dividend, because it did not expect it to be repaid, while the $55.8 million was accounted for as a loan because the Company expected it to be repaid. The loan is in the form of a demand note (the “Shareholder Note”) at a stated interest of 4% per annum. The principal advanced under the note agreement can increase monthly as amounts become due under the Amended Seacastle Credit Facility. The note may not be presented for demand while there are still amounts outstanding under the Amended Seacastle Credit Facility, and the note is not assignable by CLI in whole or in part without the consent of Seacastle Operating. As of the date of the Structure Formation, the Shareholder Note had a balance of $94.8 million, consisting of $91.3 million in advanced principal and $3.5 million of accrued interest. Interest income earned from this note was $0 and $0.9 million for the three and nine months ended September 30, 2010. The obligations under this Shareholder Note were assumed by SeaCube Operating Company Ltd, in connection with the Structure Formation. The assumption was treated as a non-cash equity distribution to Seacastle Operating. In connection with the assumption, Seacastle Operating entered into a guarantee of the obligations of SeaCube Operating Company Ltd. under the Shareholder Note. 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.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except as otherwise noted)
(unaudited)
13. Related Party Transactions (Continued)
In August 2010, the Company distributed $3.75 million to the Initial Shareholder in the form of a loan which was used to make interest and principal payments on the Seacastle Credit Facility. In September 2010, the Company distributed $4.4 million to the Initial Shareholder in the form of a loan which was used to make interest and principal payments and pay fees on the Seacastle Credit Facility. The Initial Shareholder plans to repay these amounts with cash expected from SeaCube dividends, contributions from other Seacastle subsidiaries, or other cash flows.
14. Fair Value of Financial Instruments
The following tables set forth the valuation of the Company’s financial assets and liabilities measured at fair value on a recurring basis by input levels as of September 30, 2010 and December 31, 2009:
|
|
Fair Value
as of
September 30,
|
|
|
Fair Value Measurement as of
September 30, 2010 Using
Fair Value Hierarchy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
16,237 |
|
|
$ |
16,237 |
|
|
$ |
— |
|
|
$ |
— |
|
Restricted cash
|
|
|
17,362 |
|
|
|
17,362 |
|
|
|
— |
|
|
|
— |
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments
|
|
|
55,840 |
|
|
|
— |
|
|
|
55,840 |
|
|
|
— |
|
|
|
Fair Value
as of
December 31,
|
|
|
Fair Value Measurement as of
December 31, 2009 Using
Fair Value Hierarchy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
8,014 |
|
|
$ |
8,014 |
|
|
$ |
— |
|
|
$ |
— |
|
Restricted cash
|
|
|
22,060 |
|
|
|
22,060 |
|
|
|
— |
|
|
|
— |
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments
|
|
|
43,304 |
|
|
|
— |
|
|
|
43,304 |
|
|
|
— |
|
Restricted cash: Restricted cash consists of cash that is held by the Company for security deposits received from lessees pursuant to the terms of various lease agreements and rent collections held in lockbox accounts pursuant to the Company’s credit facilities and securitization agreements. These short-term investments are recorded at fair value on the Company’s Consolidated Balance Sheets based on quoted market prices and observable market inputs.
Derivative instruments: The Company’s interest rate derivatives are recorded at fair value on the Company’s Consolidated Balance Sheets and consist of United States dollar denominated LIBOR-based interest rate derivatives, and their fair values are determined using cash flows discounted at relevant market interest rates in effect at the period close. The fair value generally reflects the estimated amounts that the Company would receive or pay to transfer the contracts at the reporting date and therefore reflects the Company’s or counterparty’s non-performance risk.
The Company’s financial instruments, other than cash, consist principally of cash equivalents, restricted cash, accounts receivable, accounts payable, debt and interest rate derivatives. The fair value of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature. The fair value of the Company’s debt approximates the carrying value as all of the debt is variable rate debt.
SeaCube Container Leasing Ltd.
Notes to Consolidated Financial Statements (concluded)
(Dollars in thousands, except as otherwise noted)
(unaudited)
14. Fair Value of Financial Instruments (Continued)
Leasing assets held for sale are measured at fair value on a nonrecurring basis. There were no other assets and liabilities measured at fair value on a nonrecurring basis.
15. Subsequent Events
On October 27, 2010, the SEC declared effective the registration statement relating to the Company’s IPO of 10,925,000 shares at a price to the public of $10.00 per share. The Company issued 3,450,000 shares in the offering (inclusive of the underwriters’ over-allotment), which less underwriting discounts and expenses resulted in net proceeds of approximately $27.5 million. The Initial Shareholder sold 7,475,000 of previously outstanding shares (inclusive of the underwriters’ over-allotment). The Initial Shareholder used their proceeds to repay $69.4 million of the Amended Seacastle Credit Facility. At that time, the guaranties of Seacube Operating Company Ltd. and CLI under the Amended Seacastle Credit Facility terminated. (See Note 13) After the closing of the IPO, the Initial Shareholder owns approximately 42.6% of our issued common shares.
On November 11, 2010, the Company’s Board of Directors approved and declared a $0.20 per share initial cash dividend on its issued and outstanding common stock, payable on January 18, 2011 to shareholders of record at the close of business on January 3, 2011.
The Company has evaluated all significant activities through the time of filing these financial statements with the SEC and has concluded that no additional subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.
This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. You should read the following discussion in conjunction with our historical consolidated financial statements included in this Form 10-Q and our annual audited consolidated financial statements included in our prospectus filed with the SEC on October 28, 2010. 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’’ included in our prospectus filed with the SEC on October 28, 2010.
Overview
SeaCube Container Leasing Ltd (“SeaCube” or “the Company”) is 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. The Company leases our containers primarily under long-term contracts to a diverse group of the world’s leading shipping lines. As of September 30, 2010, we employ 74 people in seven offices in four countries and have total assets of $1.1 billion.
As of September 30, 2010, we own or manage a fleet of 518,672 units, representing 815,207 TEUs of containers and generator sets. For the three months ended September 30, 2010, our average utilization was 98.2%(1), 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 lease three types of assets:
• Refrigerated containers (‘‘reefers’’), which are used for perishable items such as fresh and frozen foods;
• Dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples and apparel; and
• Generator sets (‘‘gensets’’), which are diesel generators used to provide mobile power to reefers.
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:
• Operating leases, typically with initial terms of five to eight years, under which containers are re-leased or returned to us at expiration of the initial lease; and
• Direct finance leases, which are typically structured as long-term leases with a bargain purchase option, under which ownership transfers to the lessee at expiration of the lease.
The table below summarizes the composition of our total fleet by the type of unit as of September 30, 2010:
Container Fleet by Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
|
27,715 |
|
|
|
47,448 |
|
|
|
2,808 |
|
|
|
77,971 |
|
Direct Finance Leases
|
|
|
18,158 |
|
|
|
220,626 |
|
|
|
2,814 |
|
|
|
241,598 |
|
Total Owned
|
|
|
45,873 |
|
|
|
268,074 |
|
|
|
5,622 |
|
|
|
319,569 |
|
Managed
|
|
|
30,041 |
|
|
|
167,624 |
|
|
|
1,438 |
|
|
|
199,103 |
|
Total Fleet
|
|
|
75,914 |
|
|
|
435,698 |
|
|
|
7,060 |
|
|
|
518,672 |
|
The table below summarizes the composition of our owned fleet by net book value as of September 30, 2010:
Container Fleet by Net Book Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
$ |
305,528 |
|
|
$ |
114,828 |
|
|
$ |
15,299 |
|
|
$ |
435,655 |
|
Direct Finance Leases
|
|
|
172,354 |
|
|
|
340,578 |
|
|
|
16,036 |
|
|
|
528,968 |
|
Total Fleet
|
|
$ |
477,882 |
|
|
$ |
455,406 |
|
|
$ |
31,335 |
|
|
$ |
964,623 |
|
(1) Utilization excludes assets held for sale and new units at the factory. Using this methodology, the average utilization for the second quarter of 2010 would have been 98.2%
Results of Operations
Comparison of the Three Months Ended September 30, 2010 to the Three Months Ended September 30, 2009
|
|
Three Months
Ended
September 30,
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment leasing revenue
|
|
$ |
18,527 |
|
|
$ |
16,612 |
|
|
$ |
1,915 |
|
|
|
12 |
% |
Finance revenue
|
|
|
12,660 |
|
|
|
12,994 |
|
|
|
(334 |
) |
|
|
-3 |
% |
Other revenue
|
|
|
3,286 |
|
|
|
3,651 |
|
|
|
(365 |
) |
|
|
-10 |
% |
Total revenues
|
|
|
34,473 |
|
|
|
33,257 |
|
|
|
1,216 |
|
|
|
4 |
% |
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
|
|
1,656 |
|
|
|
2,681 |
|
|
|
(1,025 |
) |
|
|
-38 |
% |
Selling, general and administrative expenses
|
|
|
5,453 |
|
|
|
4,566 |
|
|
|
887 |
|
|
|
19 |
% |
Depreciation expenses
|
|
|
8,886 |
|
|
|
8,854 |
|
|
|
32 |
|
|
|
* |
|
Provision for doubtful accounts
|
|
|
122 |
|
|
|
1,824 |
|
|
|
(1,702 |
) |
|
|
-93 |
% |
Impairment of leasing equipment held for sale
|
|
|
291 |
|
|
|
1,270 |
|
|
|
(979 |
) |
|
|
-77 |
% |
Interest expense
|
|
|
13,704 |
|
|
|
12,485 |
|
|
|
1,219 |
|
|
|
10 |
% |
Interest income
|
|
|
(58 |
) |
|
|
(788 |
) |
|
|
730 |
|
|
|
-93 |
% |
Other expenses (income), net
|
|
|
(417 |
) |
|
|
(317 |
) |
|
|
(100 |
) |
|
|
32 |
% |
Total expenses
|
|
|
29,637 |
|
|
|
30,575 |
|
|
|
(938 |
) |
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
4,836 |
|
|
|
2,682 |
|
|
|
2,154 |
|
|
|
80 |
% |
Provision for income taxes
|
|
|
9 |
|
|
|
69 |
|
|
|
(60 |
) |
|
|
* |
|
Net income
|
|
$ |
4,827 |
|
|
$ |
2,613 |
|
|
$ |
2,214 |
|
|
|
85 |
% |
Loss on retirement of debt, net of tax
|
|
|
— |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
* |
|
Gain on 2009 Sale, net of tax
|
|
|
— |
|
|
|
(46 |
) |
|
|
46 |
|
|
|
* |
|
Non-cash interest expense, net of tax
|
|
|
3,740 |
|
|
|
2,084 |
|
|
|
1,656 |
|
|
|
79 |
% |
Adjusted net income**
|
|
$ |
8,567 |
|
|
$ |
4,655 |
|
|
$ |
3,912 |
|
|
|
84 |
% |
* Not meaningful.
** Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP.
Revenue
Total revenue was $34.5 million for the three months ended September 30, 2010 compared to $33.3 million for the three months ended September 30, 2009, an increase of $1.2 million or 4%.
Equipment leasing revenue was $18.5 million for the three months ended September 30, 2010 compared to $16.6 million for the three months ended September 30, 2009, an increase of $1.9 million or 12%. This was primarily due to the average on-hire fleet increasing by 12,600 units.
Finance revenue was $12.7 million for the three months ended September 30, 2010 compared to $13.0 million for the three months ended September 30, 2009, a decrease of $0.3 million or 3%. Amortization of the current lease portfolio in excess of new investments accounted for all of the decrease.
Other revenue, which includes management fee revenues and re-billable costs to our lessees, was $3.3 million for the three months ended September 30, 2010 compared to $3.7 million for the three months ended September 30, 2009, a decrease of $0.4 million or 10%. This decrease was attributable to lower rebillable costs offsetting higher management fee revenues.
Direct Operating Expenses
Direct operating expenses were $1.7 million for the three months ended September 30, 2010, compared to $2.7 million for the three months ended September 30, 2009, a decrease of $1.0 million or 38%. The primary reason for the decrease 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 $5.5 million for the three months ended September 30, 2010, compared to $4.6 million for the three months ended September 30, 2009, an increase of $0.9 million or 19%. The increase was primarily due to nonrecurring costs associated with the Company’s transition to becoming a standalone entity.
Depreciation Expenses
Depreciation of leasing equipment was $8.9 million for the three months ended September 30, 2010 and the three months ended September 30, 2009. Lower depreciation due to equipment reaching the end of their depreciable lives and the sales of equipment in the normal course of business were offset by higher depreciation on new leasing equipment.
Provision for Doubtful Accounts
Provision for doubtful accounts decreased by $1.7 million from the three months ended September 30, 2009 to $0.1 million for the three months ended September 30, 2010. The decrease was primarily a result of collections on accounts during the three months ended September 30, 2010 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 $0.3 million for the three months ended September 30, 2010 as compared to $1.3 million for the three months ended September 30, 2009, a decrease of $1.0 million or 77%. 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 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 have designated fewer units for sale in recognition of stronger market demand. Reefer impairments accounted for $0.9 million of the decrease while dry containers accounted for $0.1 million of the decrease.
Interest Expense
Interest expense was $13.7 million for the three months ended September 30, 2010, compared to $12.5 million for the three months ended September 30, 2009, an increase of $1.2 million or 10%. We incurred higher commitment fees of $0.6 million in the current period associated with new financing. Regularly scheduled debt amortization reduced our weighted average debt balance for the three months ended September 30, 2010 by $50.3 million resulting in a $0.6 million reduction in interest cost. We also benefited from lower average interest rates on our floating rate debt reducing interest by $0.4 million. In addition, non-cash interest expense was higher in the current period, including an increase in losses recognized directly into income for ineffective derivatives of $2.8 million which was partially offset by lower amortization of terminated derivatives of $1.2 million.
Interest Income
Interest income was $0.1 million for the three months ended September 30, 2010, compared to $0.8 million for the three months ended September 30, 2009, a decrease of $0.7 million. The decrease is primarily attributable to the decrease in the interest received from the $94.8 million promissory note from the Initial Shareholder to CLI. In March 2010, SeaCube Operating Company Ltd assumed the obligation of the Initial Shareholder, which was treated as a non-cash equity distribution to the Initial Shareholder.
Other Expense (Income), Net
Other expense (income), net was $(0.4) million for the three months ended September 30, 2010, compared to $(0.3) million for the three months ended September 30, 2009. This was due to higher gains on equipment sales of $0.8 million in the current period, offset by $0.7 million of default insurance proceeds received in the three months ended September 30, 2009.
Provision (Benefit) for Income Taxes
Provision for income taxes was $0.0 million for the three months ended September 30, 2010 compared to $0.1 million for the three months ended September 30, 2009. The full year effective tax rate changed from 3.8% to 2.8% in the third quarter 2010 resulting in a lower tax provision for the three months ended September 30, 2010.
Net Income
Net income was $4.8 million for the three months ended September 30, 2010 as compared to $2.6 million for the three months ended September 30, 2009. The increase in net income was attributable to the items above.
Adjusted Net Income
Adjusted net income was $8.6 million for the three months ended September 30, 2010 compared to $4.7 million for the three months ended September 30, 2009, an increase of $3.9 million or 84%. In addition to the changes in net income noted above, the three months ended September 30, 2010, includes an increase in the non-cash interest expense of $1.7 million.
Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP.
Comparison of the Nine Months Ended September 30, 2010 to the Nine Months Ended September 30, 2009
|
|
Nine Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
Prior Period Change
|
|
|
|
2010
|
|
|
2009
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(dollars in thousands)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment leasing revenue
|
|
$ |
52,708 |
|
|
$ |
57,573 |
|
|
$ |
(4,865 |
) |
|
|
-8 |
% |
Finance revenue
|
|
|
38,989 |
|
|
|
40,788 |
|
|
|
(1,799 |
) |
|
|
-4 |
% |
Other revenue
|
|
|
9,619 |
|
|
|
10,470 |
|
|
|
(851 |
) |
|
|
-8 |
% |
Total revenues (a)
|
|
|
101,316 |
|
|
|
108,831 |
|
|
|
(7,515 |
) |
|
|
-7 |
% |
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses (b)
|
|
|
5,715 |
|
|
|
7,183 |
|
|
|
(1,468 |
) |
|
|
-20 |
% |
Selling, general and administrative expenses
|
|
|
15,691 |
|
|
|
15,436 |
|
|
|
255 |
|
|
|
2 |
% |
Depreciation expenses
|
|
|
25,684 |
|
|
|
29,069 |
|
|
|
(3,385 |
) |
|
|
-12 |
% |
Provision for doubtful accounts
|
|
|
(234 |
) |
|
|
3,615 |
|
|
|
(3,849 |
) |
|
|
* |
|
Impairment of leasing equipment held for sale
|
|
|
1,073 |
|
|
|
4,778 |
|
|
|
(3,705 |
) |
|
|
-78 |
% |
Interest expense
|
|
|
35,359 |
|
|
|
39,852 |
|
|
|
(4,493 |
) |
|
|
-11 |
% |
Interest income
|
|
|
(965 |
) |
|
|
(1,935 |
) |
|
|
970 |
|
|
|
-50 |
% |
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
|
|
|
(945 |
) |
|
|
1,244 |
|
|
|
(2,189 |
) |
|
|
* |
|
Total expenses (c)
|
|
|
81,378 |
|
|
|
122,911 |
|
|
|
(41,533 |
) |
|
|
-34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
19,938 |
|
|
|
(14,080 |
) |
|
|
34,018 |
|
|
|
* |
|
Provision for income taxes
|
|
|
580 |
|
|
|
269 |
|
|
|
311 |
|
|
|
* |
|
Net (loss) income (d)
|
|
$ |
19,358 |
|
|
$ |
(14,349 |
) |
|
$ |
33,707 |
|
|
|
* |
|
Non-cash interest expense, net of tax
|
|
|
6,053 |
|
|
|
6,326 |
|
|
|
(273 |
) |
|
|
-4 |
% |
Loss on retirement of debt, net of tax
|
|
|
— |
|
|
|
1,317 |
|
|
|
(1,317 |
) |
|
|
* |
|
Loss on terminations and modifications of derivative instruments, net of tax
|
|
|
— |
|
|
|
37,922 |
|
|
|
(37,922 |
) |
|
|
* |
|
Gain on 2009 Sale, net of tax
|
|
|
— |
|
|
|
(15,427 |
) |
|
|
15,427 |
|
|
|
* |
|
Adjusted net income** (e)
|
|
$ |
25,411 |
|
|
$ |
15,789 |
|
|
$ |
9,622 |
|
|
|
61 |
% |
** Adjusted net income is a measure of financial and operational performance that is not defined by U.S. GAAP.
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:
|
(a)
|
Total revenues for the nine months ended September 30, 2009 and 2010 were $104.7 million on an adjusted basis and were $101.3 million on an actual basis, respectively, a decrease of $3.4 million or 3%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted
for 2009 Sale
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Total revenues
|
|
$ |
108,831 |
|
|
$ |
(4,084 |
) |
|
$ |
104,747 |
|
|
$ |
101,316 |
|
|
(b)
|
Direct operating expenses for the nine months ended September 30, 2009 and 2010 were $7.2 million on an adjusted basis and were $5.7 million on an actual basis, respectively, a decrease of $1.4 million or 20%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted
for 2009 Sale
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Direct operating expenses
|
|
$ |
7,183 |
|
|
$ |
(19 |
) |
|
$ |
7,164 |
|
|
$ |
5,715 |
|
|
(c)
|
Total expenses for the nine months ended September 30, 2009 and 2010 were $96.2 million on an adjusted basis and were $81.4 million on an actual basis, respectively, a decrease of $14.8 million or 15%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted
for 2009 Sale
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Total expenses
|
|
$ |
122,911 |
|
|
$ |
(26,726 |
) |
|
$ |
96,185 |
|
|
$ |
81,378 |
|
|
(d)
|
Net income (loss) for the nine months ended September 30, 2009 and 2010 was $8.4 million on an adjusted basis and was $19.4 million on an actual basis, respectively, an increase of $10.9 million or 129%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted
for 2009 Sale
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Net (loss) income
|
|
$ |
(14,349 |
) |
|
$ |
22,795 |
|
|
$ |
8,446 |
|
|
$ |
19,358 |
|
|
(e)
|
Adjusted net income for the nine months ended September 30, 2009 and 2010 was $14.8 million on an adjusted basis and was $25.4 million on an actual basis, respectively, an increase of $10.6 million or 72%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted
for 2009 Sale
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Adjusted net income
|
|
$ |
15,789 |
|
|
$ |
(1,017 |
) |
|
$ |
14,772 |
|
|
$ |
25,411 |
|
Revenue
Total revenue was $101.3 million for the nine months ended September 30, 2010 compared to $108.8 million for the nine months ended September 30, 2009, a decrease of $7.5 million or 7%.
Equipment leasing revenue was $52.7 million for the nine months ended September 30, 2010 compared to $57.6 million for the nine months ended September 30, 2009, a decrease of $4.9 million or 8%, 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 1,600 units (of which an average of 5,700 were renewed and reclassified as direct finance leases during the period) and, as a result, equipment leasing revenue decreased by $0.9 million.
Finance revenue was $39.0 million for the nine months ended September 30, 2010 compared to $40.8 million for the nine months ended September 30, 2009, a de