This management's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. 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 elsewhere in this report.

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 December 31, 2012, we employ 77 people in seven offices worldwide and have total assets of $1.7 billion.

As of December 31, 2012, we own or manage a fleet of 791,852 units, representing 1,224,395 TEUs of containers and generator sets. For the year ended December 31, 2012, our average utilization was 97.8% (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.

The tables below summarize the composition of our fleet by unit, TEU and net book value as of December 31, 2012:

                           Equipment Fleet by Units

                         Refrigerated         Dry        Gensets        Total
Operating Leases                36,442       196,857        2,369       235,668
Direct Finance Leases           25,931       244,281        2,710       272,922
Total Owned                     62,373       441,138        5,079       508,590
Managed                         30,216       251,723        1,323       283,262
Total Fleet                     92,589       692,861        6,402       791,852



                              Equipment Fleet by TEUs

                         Refrigerated          Dry         Gensets         Total
Operating Leases                66,551         303,687        2,369         372,607
Direct Finance Leases           50,442         376,594        2,710         429,746
Total Owned                    116,993         680,281        5,079         802,353
Managed                         56,855         363,864        1,323         422,042
Total Fleet                    173,848       1,044,145        6,402       1,224,395

                        Container Fleet by Net Book Value

                         Refrigerated         Dry        Gensets         Total
Operating Leases        $      433,006     $ 518,343     $  9,883     $   961,232
Direct Finance Leases          213,847       400,373       13,639         627,859
Total Fleet             $      646,853     $ 918,716     $ 23,522     $ 1,589,091

(1) Utilization excludes assets held for sale and new units at the factory.

Segment Reporting

The Company manages the business through a single set of product metrics and profitability measures that did not seek to allocate costs amongst the individual products. We employ a single sales force that sells each product and the back office functions are not allocable in total or in part to a single product. We expect to continue to operate our business as a single reportable segment.

Amalgamation Agreement

As of December 31, 2012, we recognized $0.8 million of expenses associated with our activities surrounding the pending Amalgamation. We have not recognized certain other expenses that are contingent on completion of the Amalgamation. These expenses include financial advisory fees and compensation expense comprised of retention bonuses, severance and share-based compensation for share-based awards that will vest in connection with the Amalgamation. These contingent expenses will be recognized in our consolidated financial statements commencing in the period in which the Amalgamation occurs. The final amount of compensation expense to be recognized is partially dependent upon personnel decisions that will be made as part of the integration planning. These amounts may be material.

Upon completion of the Amalgamation, our assets and liabilities will be revalued and recorded at fair value. The assignment of fair value will require a significant amount of judgment. The use of fair value measures will affect the comparability of our post-amalgamation financial information and may make it more difficult to predict earnings in future periods.

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. 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.

Results of Operations

Comparison of the Year Ended December 31, 2012 to the Year Ended December 31,

2011

                                       Year ended        Year ended
                                      December 31,      December 31,
                                          2012              2011           $ Change         % Change
                                                           (dollars in thousands)
Equipment leasing revenue             $     122,888     $     104,869     $    18,019               17 %
Finance revenue                              64,762            54,337          10,425               19 %
Other revenue                                11,265            10,273             992               10 %
Total revenues                        $     198,915     $     169,479     $    29,436               17 %

Revenue

Total revenue was $198.9 million for the year ended December 31, 2012 compared to $169.5 million for the year ended December 31, 2011, an increase of $29.4 million or 17%.

Equipment leasing revenue was $122.9 million for the year ended December 31, 2012 compared to $104.9 million for the year ended December 31, 2011, an increase of $18.0 million or 17%. The increase was the result of an increase to the average on-hire fleet by approximately 46,300 units.

Finance revenue was $64.8 million for the year ended December 31, 2012 compared to $54.3 million for the year ended December 31, 2011, an increase of $10.4 million or 19%. The increase was the result of new investments that increased the average size of our finance lease portfolio.

Other revenue, which includes management fee revenues and re-billable costs to our lessees, was $11.3 million for the year ended December 31, 2012 compared to $10.3 million for the year ended December 31, 2011, an increase of $1.0 million or 10%. This increase was attributable to higher rebillable costs of $1.6 million, which were partially offset by lower management fee revenues of $0.6 million.

                                       Year ended        Year ended
                                      December 31,      December 31,
                                          2012              2011           $ Change         % Change
                                                           (dollars in thousands)
Direct operating expenses             $       5,928     $       5,987     $       (59 )             -1 %
Selling, general and administrative
expenses                                     24,092            23,441             651                3 %
Depreciation expenses                        53,545            45,800           7,745               17 %
Provision for doubtful accounts               1,100               388             712                *
Impairment of leasing equipment
held for sale                                 2,158             1,289             869               67 %
Total                                 $      86,823     $      76,905     $     9,918               13 %

* Not meaningful.

Direct Operating Expenses

Direct operating expenses were $5.9 million for the year ended December 31, 2012 compared to $6.0 million for the year ended December 31, 2011, a decrease of $0.1 million or 1%. During the current year period, more containers were returned upon the completion of their lease than in the prior year period resulting in higher positioning as well as maintenance and repair costs. This was offset by higher recovery costs incurred in the prior year that were attributable to one customer.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $24.1 million for the year ended December 31, 2012, compared to $23.4 million for the year ended December 31, 2011, an increase of $0.7 million or 3%. This is primarily due to merit increases and higher incentive compensation expense that was partially offset by savings in travel, professional and legal fees.

Depreciation Expenses

Depreciation of leasing equipment was $53.5 million for the year ended December 31, 2012 compared to $45.8 million for the year ended December 31, 2011, an increase of $7.7 million or 17%. Depreciation on new additions net of disposals and sales accounted for an increase of $8.8 million, which was offset by a decrease of $1.1 million due to equipment reaching the end of their depreciable lives.

Provision for Doubtful Accounts

Provision for doubtful accounts was $1.1 million for the year ended December 31, 2012 compared to $0.4 million for year ended December 31, 2011. While we continue to have a good credit and collections experience, due to our comprehensive credit underwriting and monitoring, the current year period provision for doubtful account increased compared to the prior year period.

Impairment of Leasing Equipment Held for Sale

We recorded an impairment of leasing equipment held for sale of $2.2 million for the year ended December 31, 2012 compared to $1.3 million for the year ended December 31, 2011. 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. These impairments do not include amounts that we recover from lessees to return containers to leasable condition, in accordance with industry standards. We bill our lessees for the cost to repair equipment to this industry standard even if we do not repair the container. This revenue is recorded as Other Revenue and not a reduction of impairment losses. In the current year period, we had more containers returned and sold upon the completion of their lease term.

                                       Year ended        Year ended
                                      December 31,      December 31,
                                          2012              2011           $ Change        % Change
                                                          (dollars in thousands)
Interest expense                      $      68,702     $      54,638     $    14,064              26 %
Interest income                                (265 )            (309 )            44             -14 %
Other expenses (income), net                 (2,277 )            (500 )        (1,777 )             *
Total                                 $      66,160     $      53,829     $    12,331              23 %

* Not meaningful.

Interest Expense

Interest expense was $68.7 million for the year ended December 31, 2012 compared to $54.6 million for the year ended December 31, 2011, an increase of $14.1 million or 26%. Our weighted average debt balance for the year ended December 31, 2012 increased by approximately $268 million due to our investment in new containers. This resulted in an increase of approximately $13.4 million to interest expense. In the current year period, there were slightly higher commitment fees of $0.3 million. In addition, non-cash interest expense increased in the current period by $0.4 million, which included higher amortization of deferred financing fees of $1.8 million partially offset by increases in gains recognized directly into income for ineffective derivatives of $0.3 million and by lower amortization of terminated derivatives of $1.1 million.

Interest Income

Interest income was $0.3 million for both the year ended December 31, 2012 and 2011.

Other Expense (Income), Net

Other expense (income), net, was $(2.3) million for the year ended December 31,
2012 compared to $(0.5) million for the year ended December 31, 2011. This is
attributable to higher gains on the sale of equipment in the current year period
due to more containers being returned and sold upon the completion of
leases. These gains were partially offset by approximately $0.8 million of
one-time transaction expenses associated with the pending Amalgamation.

                                        Year ended        Year ended
                                       December 31,      December 31,
                                           2012              2011           $ Change         % Change
                                                            (dollars in thousands)
Provision (benefit) for income taxes   $        (504 )   $        (691 )   $       187             *

* Not meaningful.

Provision (benefit) for Income Taxes

Provision (benefit) for income taxes was $(0.5) million for the year ended December 31, 2012 and $(0.7) million for the year ended December 31, 2011. The Company is not subject to taxation in its country of incorporation and although the Company is subject to taxation in certain other jurisdictions, including in the U.S. and other foreign countries, none of those taxable amounts are material. Further, given the nature of the Company's operations and activities, including where its containers are used and where the lessees of its containers (or others in possession of its containers) are located, the remainder of its earnings is not attributable to any specific tax jurisdiction and is thus not taxable. The change in the effective tax rate is primarily attributable to its lower or nontaxed foreign sourced income.

                                          Year ended              Year ended
                                       December 31, 2012       December 31, 2011       $ Change         % Change
                                                                 (dollars in thousands)
Net income                            $            46,436     $            39,436     $     7,000               18 %
Adjusted net income**                 $            51,470     $            44,128     $     7,342               17 %
Adjusted EBITDA**                     $           289,478     $           239,755     $    49,723               21 %

** Adjusted net income and adjusted EBITDA are measures of financial and operational performance that are not defined by U.S. GAAP. See "Non-GAAP Measures" for the discussion of adjusted net income and adjusted EBITDA as a non-GAAP measures and their reconciliation to net income (loss).

Net Income

Net income was $46.4 million for the year ended December 31, 2012 as compared to $39.4 million for the year ended December 31, 2011. The increase in net income was attributable to the items above.

Adjusted Net Income

Adjusted net income was $51.5 million for the year ended December 31, 2012 compared to $44.1 million for the year ended December 31, 2011, an increase of $7.3 million or 17%. In addition to the changes in net income noted above, the year ended December 31, 2012, includes an increase in non-cash interest expense of $0.3 million, which is excluded in the adjusted net income calculation.

Adjusted EBITDA

Adjusted EBITDA was $289.5 million for the year ended December 31, 2012 compared to $239.8 million for the year ended December 31, 2011, an increase of $49.7 million or 21%. In addition to the changes in net income noted above, the year ended December 31, 2012, includes higher depreciation of $7.7 million and higher interest expense of $14.1 million, which are excluded in the adjusted EBITDA calculation. In addition, the current year period had higher collections on investments in direct financing leases of $20.7 million.

Comparison of the Year Ended December 31, 2011 to the Year Ended December 31,

2010

                                          Year ended              Year ended
                                       December 31, 2011       December 31, 2010       $ Change        % Change
                                                                (dollars in thousands)
Equipment leasing revenue             $           104,869     $            73,404     $    31,465              43 %
Finance revenue                                    54,337                  51,627           2,710               5 %
Other revenue                                      10,273                  12,218          (1,945 )           -16 %
Total revenues                        $           169,479     $           137,249     $    32,230              23 %

Revenue

Total revenue was $169.5 million for the year ended December 31, 2011 compared to $137.2 million for the year ended December 31, 2010, an increase of $32.2 million or 23%.

Equipment leasing revenue was $104.9 million for the year ended December 31, 2011 compared to $73.4 million for the year ended December 31, 2010, an increase of $31.5 million or 43%. The increase was the result of an increase to the average on-hire fleet by approximately 41,700 units.

Finance revenue was $54.3 million for the year ended December 31, 2011 compared to $51.6 million for the year ended December 31, 2010, an increase of $2.7 million or 5%. The increase was the result of new investments that increased the average size of our finance lease portfolio.

Other revenue, which includes management fee revenues and re-billable costs to our lessees, was $10.3 million for the year ended December 31, 2011 compared to $12.2 million for the year ended December 31, 2010, a decrease of $1.9 million or 16%. This decrease was due to lower management fee revenues of $1.9 million.

                                          Year ended              Year ended
                                       December 31, 2011       December 31, 2010       $ Change         % Change
                                                                 (dollars in thousands)
Direct operating expenses             $             5,987     $             6,139     $      (152 )             -2 %
Selling, general and administrative
expenses                                           23,441                  21,853           1,588                7 %
Depreciation expenses                              45,800                  35,341          10,459               30 %
Provision for doubtful accounts                       388                  (1,693 )         2,081                *
Impairment of leasing equipment
held for sale                                       1,289                   1,343             (54 )             -4 %
Total                                 $            76,905     $            62,983     $    13,922               22 %

* Not meaningful.

Direct Operating Expenses

Direct operating expenses were $6.0 million for the year ended December 31, 2011 compared to $6.1 million for the year ended December 31, 2010, a decrease of $0.2 million or 2%. Our storage fees continue to be relatively low, which is attributable to higher utilization (and thus fewer units stored). Overall, our lower storage and repair costs were partially offset by higher costs associated with recovering units and higher positioning expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $23.4 million for the year ended December 31, 2011, compared to $21.9 million for the year ended December 31, 2010, an increase of $1.6 million or 7%. The increase was primarily due to incremental costs associated with being a publicly traded company for the full year of 2011.

Depreciation Expenses

Depreciation of leasing equipment was $45.8 million for the year ended December 31, 2011 compared to $35.3 million for the year ended December 31, 2010, an increase of $10.5 million or 30%. Depreciation on new additions net of disposals and sales accounted for $10.8 million of the increase, which was offset by a decrease of $0.3 million due to equipment reaching the end of their depreciable lives.

Provision for Doubtful Accounts

Provision for doubtful accounts was $0.4 million for the year ended December 31, 2011 compared to $(1.7) million for year ended December 31, 2010. We continued to have a strong credit and collections experience, which was due to the improved credit quality of our customer base along with our comprehensive credit underwriting and monitoring. During the year ended December 31, 2010, we lowered our reserve as the credit quality of our customer base improved.

Impairment of Leasing Equipment Held for Sale

We recorded an impairment of leasing equipment held for sale of $1.3 million for both the year ended December 31, 2011 and the year ended December 31, 2010. 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.

                                          Year ended              Year ended
                                       December 31, 2011       December 31, 2010       $ Change        % Change
                                                                (dollars in thousands)
Interest expense                      $            54,638     $            44,522     $    10,116              23 %
Interest income                                      (309 )                (1,055 )           746             -71 %
Other expenses (income), net                         (500 )                   383            (883 )             *
Total                                 $            53,829     $            43,850     $     9,979              23 %

* Not meaningful.

Interest Expense

Interest expense was $54.6 million for the year ended December 31, 2011, compared to $44.5 million for the year ended December 31, 2010, an increase of $10.1 million or 23%. Our weighted average debt balance for the year ended December 31, 2011 increased by $211.0 million due to our investment in new containers, resulting in an increase of approximately $10 million to interest cost. In addition, in May and November of 2010, we increased our available credit under the CLIF IV and Revolving Credit Facilities, respectively, which resulted in higher commitment fees of $0.3 million in 2011. There was also a decrease in non-cash interest expense in 2011, including lower amortization of terminated derivatives of $2.1 million, which was partially offset by an increase in amortization of deferred financing fees of $1.4 million and a decrease in gains recognized directly into income for ineffective derivatives of $0.1 million.

Interest Income

Interest income was $0.3 million for the year ended December 31, 2011, compared to $1.1 million for the year ended December 31, 2010, 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 $(0.5) million for the year ended December 31,
2011 compared to $0.4 million for the year ended December 31, 2010. In the prior
year, we received default insurance proceeds of $1.7 million. There were no
proceeds from default insurance in the current year. In addition, the year ended
December 31, 2011 included gains on the sale of leasing equipment of
$0.7 million versus losses of $1.9 million for the year ended December 31, 2010.
. . .