Container Leasing - An Asset Investment Business

www.seacubecontainers.
com
Container Leasing An Asset Investment Business
www.seacubecontainers.com
Before Containerships came on Scene .
The Concept of Intermodalism
A system based on the theory that efficiency will be vastly improved when a
standardized cargo-laden container can be transported with minimum
interruption via different transport modes from an initial place of cargo
loading to the final delivery point over the ocean and land.
This means the containers would move seamlessly between ships, trucks and trains
Types of Marine Containers
General Purpose Containers (20,40,40 high cube and 45)
Flat Rack Open-Top
Refrigerated (Reefer)
Tank
Bulk
Platform
Pallet-Wide
TEU
FEU = 2TEU
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World Container Fleet
(2)
Container shipping is an integral part of the global economy; $200 billion annual revenue
Large global fleet of containers; ~34 million twenty-foot equivalent units (TEUs)
Container lessors play an essential role; own or manage 49% of container fleet
(1)
Over last 30 years, container fleet grew at 8.8% CAGR
(2)
Container fleet expected to be ~37 million TEUs by the end of 2015
__________
1) Measured in TEUs. Source: World Cargo News
2) Source: Harrison Consulting, as of June 2013
Container Leasing Companies Annual Fleet* Size (TEUx1000)
Jan12 Jan13 Jan14
Textainer 2,470 2,775 3,040
TritonContainer 1,855 2,060 2,200
TALInternational 1,625 1,935 2,050
Florens Container 1,775 1,855 1,900
SeaCube Containers 930 1,225 1,300
Seaco Global 990 1,095 1,190
CAIInternational 930 1,060 1,150
Cronos Group 725 810 880
DongFangInternational 495 485 555
TouaxContainer 505 520 500
BeaconIntermodal 355 440 485
BlueSkyIntermodal 220 225 250
Other 1,125 1,165 1,250
Total leasingfirms 14,000 15,650 16,750
Total line/otherowned 17,250 17,250 17,600
GrandTotal 31,250 32,900 34,350
Leasingcoshare(%) 44.8 47.6 48.8
*Alltypes(dryfreight,reefer,tanketc)
Source:WorldCargoNews(February2014)
Leasing companies own 49% of the global fleet
Top 7 companies control 82% market share
High Return, Low Risk
Assets
Strong Market
Fundamentals
Significant Growth
Potential
Assets on long-term triple-net lease
High utilization among leasing companies
15 20% return on equity; low losses and high recoveries
Useful life of 12 to 15 years with minimal risk of technical obsolescence
Built to standard ISO specifications and can be leased to different
customers
Global container fleet growth of 8.8% CAGR for over 30 years
Sizable market value
Diversification of portfolio risk attracts low debt interest rate
Shipping companies continue to rely on leasing companies as a source
of capital
Demand for new container leasing will be supported by trade growth
and replacement of old units
Attractive Demand and Supply Dynamics
Demand Supply
Container shipping companies are continuing to rely
on container leasing companies to supply majority of
their containers
Introduction of slow steaming requires 5-7% more
containers for same cargo volume
Correlation between container trade growth and
world GDP growth
Container manufacturers manage production to meet
demand, as balanced supply-and-demand of
containers helps their profitability
Current container production lead-time:
Approximately 6 to 8 weeks for dry containers
Approximately 14 weeks for refrigerated
containers
Utilization for container lessors continues to be at
high levels
Container Trade Volumes
(1)
Container Production Volumes
(1)
2.5
3.1
2.8
3.2
4.4
3.6
0.5
3.1
3.7
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DryProduction ReeferProduction
__________
1) Source: Harrison Consulting, as of June 2013
Types of Lease
Direct Finance Leases
5 8 year term
Fully amortizing to a bargain purchase option
No utilization or residual value exposure;
minimal default risk
Lessee builds in asset owning value during
lease term
Only interest portion recognized as revenue
Full amount of interest and principal
recognized as cash flow
Operating Leases
5 8 year initial term
Extensions of lease until containers are
disposed of between 10 to 15 years of age
High renewal rate
Lessor retains re-leasing and residual
value exposure
Entire payment recognized as revenue
Potential asset capital gains at disposal
Industry Fundamentals - Customers
Top 20 shipping lines operate approximately 85% of total capacity
51%
26%
8%
6%
China manufacturers dominate container production with 97% market share
Industry Fundamentals - Suppliers
Source: Company data, Credit Suisse estimates
Applications of Used Containers
A Case Study
14
__________
1) Source: Harrison Consulting. Based on TEUs (twenty-foot equivalent units) as of June 2013
2) Based on net book value of owned units (excluding new inventory) as of September 30, 2013
Case Study : SeaCube Container Leasing LLC
Company History
1994 Founded as a JV between Carlisle Industries and Marubeni
Early 2000s wholly owned by Marubeni
2006 February Marubeni sold the company to Fortress Funds
2007 acquired Interpool container fleet
2010 October IPO on NYSE
2012 April Ontario Teachers Pension Plan acquired 100% of SeaCube
15
SeaCube is one of the worlds largest container leasing companies
Total fleet of 828,614 units of containers (refrigerated containers, dry containers and gensets)
One of the largest lessor of refrigerated containers with 18% global reefer market share
(1)
89%of containers on long-term lease
(2)
Average remaining term: 3.2 years
__________
1) Source: Harrison Consulting. Based on TEUs (twenty-foot equivalent units) as of June 2013
Drys (61%)
Steel boxes with wooden floors
Carry general cargo
(e.g., consumer staples and
apparel)
Refrigerated Containers
( Reefers - 38%)
Insulated
Include cooling machine
Carry perishable cargo
Asset Mix - $1.8 Billion Net Book Value
(2)
Generator Sets
( Gensets - 1%)
Power reefers on chassis or
rail (reefers usually plugged
into containerships)
Overview of SeaCube
16
SeaCube is one of the worlds largest lessors of reefers
Sixth largest lessor of dry and refrigerated containers with 7% global market share
Competitive Landscape
__________
1) By fleet size (TEU) as of June 30, 2013. Source: Harrison Consulting
2) By cost equivalent unit (CEU) as of June 30, 2013. Source: Harrison Consulting
Top 10 Lessors Market Share
(2)
Top 10 Reefer Lessors Market Share
(1)
17
38%
23%
BOX WorldFleet
Asset Strategy
Reefers make up 38% of SeaCube owned fleet
Growing trade in perishable foods
Reefers provide greater stability in
Underlying trade demand
Equipment pricing
Lease rates
__________
1) For SeaCube, based on net book value as of September 30, 2013. For world fleet, based on replacement cost as of June 2013. Source: Harrison Consulting
Reefer Dry
Utilization More stable demand (cargo is
predominantly food)
Demand more sensitive to economic cycles
(consumer goods cargo)
Equipment Prices High value: 6 - 8x dry prices; less volatile Tied to steel prices
New Entrants More technical expertise required More market participants
Customers / Market Concentrated among large liners Diverse, includes liners, freight forwarding
companies, etc.
Reefers (% of NBV)
(1)
18
89% of containers on long-term lease
(1)
Average remaining term: 3.2 years
(2)
Approximately $1.3 billion of future contracted
cash flows from owned assets
(3)
Lease strategy tailored to asset types
40% of drys are on direct finance leases
(3)
60% of reefers are on operating leases
(3)
Leasing Strategy Focus on Long-Term
__________
1) Based on net book value of owned assets as of September 30, 2013. Includes assets on long-term operating and direct finance lease, excludes new inventory. Direct finance
leases (DFLs) are fully amortizing leases with bargain purchase options
2) Average remaining lease term of our existing lease portfolio, including both short- and long-term operating leases and direct finance leases
3) As of September 30, 2013
4) Based on net book value of owned assets as of September 30, 2013, excludes new inventory
5 8 year initial term
High renewal rate
Lessor retains re-leasing and residual
value exposure
Entire payment recognized as revenue
Operating Leases
5 8 year term
Fully amortizing to a bargain purchase option
No utilization or residual value exposure;
minimal default risk
Only interest portion recognized as revenue
Full amount of interest and principal
recognized as cash flow
Direct Finance Leases
Net Book Value by Lease Type
(4)
ShortTerm
Operating
Lease
6%
Inventory
5%
Finance
Lease
40%
LongTerm
Operating
Lease
49%
19
Q3 2008- Q3 13
2008 2009 2010 2011 2012 2013 Wtd. Avg
Renewal
Rates
83.9% 79.8% 93.4% 91.1% 90.9% 77.3% 85.9%
80%
85%
90%
95%
100%
High, Stable Utilization and Renewal Rates
____________
1) Utilization for SeaCube owned and managed units
2) Industry utilization is the average reported utilization rates for TAL International, Textainer and CAI International. Source: Public filings
Utilization Rates
SeaCube
Industry Average
(2)
Over 97% average utilization since December 2007
(1)
; stable through economic downturn
Strong demand for reefer assets sustained through 2009
Dry boxes largely on long-term and direct finance leases
Approximately 86% of units on long-term operating lease are renewed at lease expiration
Most units remain on lease with the original lessee for their entire economic useful life
High Lease Renewal Rates
20
Containers on Lease at Time of Default 11,871
Containers Recovered (Completed Recoveries) 11,152
% Recovered 94%
High Recoveries
(3)
($ in millions) 2006 2007 2008 2009 2010
2011 2012
YTD Sep
2013 2006 - Sep '13
Total Net Billings $333.0 $358.0 $361.7 $252.4 $291.4 $324.4 $385.4 $305.2 $2,611.4
Write-Offs, Net of Recoveries
(2)
$0.3 $2.1 $3.4 $2.7 $2.0 $0.0 $0.0 $0.0 $10.6
Write-Offs Rate 0.10% 0.59% 0.95% 1.08% 0.69% 0.00% 0.00% 0.00% 0.41%
Low Losses
Low Losses; High Recoveries
Low historical average write-off rate of 0.41% since 2006
Net write-offs $11 million on total billings of $2.6 billion
Recovered 94% of units that were on lease at the time of default
(1)
________________________
1) Completed recoveries from 1998 through November 30, 2013
2) Write-offs adjusted to coincide with time of default
3) Include units recovered from one large default customer (8,600 units onhired at default, of which 6,917 units recovered as of Q3 2012)
21
Legal /
Contracts
Strong in-house capabilities across all container leasing functions
Operations include acquisition, leasing, re-leasing and subsequent sale of assets
Global presence
77 employees in 7 offices worldwide
Supported by more than 200 depots around the world
Scalable platform supports significant asset growth with no material increase in overhead
Strong In-House Capabilities
Origination &
Leasing
Pricing /
Analytics
Risk
Asset
Management
Disposal
Full Service Container Leasing Company
22
Growth Opportunities
SeaCube yearly investments in containers have led to significant growth in revenue, earnings and cash
flow
SeaCube has a significant capital expenditure program in place and has invested more than $335
million annually
(1)
since 2004
In 2013, SeaCube invested approximately $430 million
_______________________
1) 2004-2012 average capital investment
23
89% of assets on long-term lease
(1)
; 97.0% utilization
(2)
15 20% return on equity; low losses and high recoveries
Average remaining term of 3.2 years
Strong Market
Fundamentals
Global container fleet growth of 8.8% CAGR for over 30 years
Shipping companies continue to rely on leasing companies as a source
of capital
Demand for new container leasing will be supported by trade growth
and replacement of old units
High Return, Low Risk
Assets
Significant Growth
Potential
Strong balance sheet supports significant investments in containers
Container investments drive revenue, earnings and cash flow growth
Best-In-Class
Management Team
Dedicated and experienced team with strong track record
Excellent customer relationships with major shipping companies
__________
2) Average utilization for Q3 2013
Conclusion
Company Presentation
December 2013
End of Presentation

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