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

FORM 10-Q

Commission file number 1-7560

SEA CONTAINERS LTD.
(Exact name of registrant as specified in its charter)

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (under Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of October 31, 2003, 19,507,899 Class A common shares and 14,414,195 Class B common shares of Sea Containers Ltd. were outstanding including 12,900,000 Class B shares owned by a subsidiary.

PART I—FINANCIAL INFORMATION

Sea Containers Ltd. and Subsidiaries
Consolidated Balance Sheets

See notes to consolidated financial statements.

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Sea Containers Ltd. and Subsidiaries
Consolidated Balance Sheets (continued)

See notes to consolidated financial statements.

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Sea Containers Ltd. and Subsidiaries
Statements of Consolidated Operations (unaudited)

See notes to consolidated financial statements.

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Sea Containers Ltd. and Subsidiaries
Statements of Consolidated Operations (unaudited)

See notes to consolidated financial statements.

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Sea Containers Ltd. and Subsidiaries
Statements of Consolidated Cash Flows (unaudited)

See notes to consolidated financial statements.

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Sea Containers Ltd. and Subsidiaries
Statement of Consolidated Shareholders' Equity (unaudited)

See notes to consolidated financial statements.

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Sea Containers Ltd. and Subsidiaries
Notes to Consolidated Financial Statements

1.     Basis of financial statement presentation

(a)   Accounting policies

        For a description of significant accounting policies, see the Notes to the consolidated financial statements in Amendment No. 1 of the Company's 2002 Form 10-K annual report. "SFAS" means a Statement of Financial Accounting Standards and "FIN" means an accounting interpretation, both of the Financial Accounting Standards Board.

        Certain reclassifications have been made to the 2002 financial statements to conform to the classifications in the 2003 financial statements. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the three and nine months ended September 30, 2003 and 2002, which are all of a normal recurring nature, have been reflected in the information provided.

        For purposes of these Notes, the "Company" refers to Sea Containers Ltd., and "SCL" refers to Sea Containers Ltd. and its subsidiaries. "OEH" refers to Orient-Express Hotels Ltd., an equity investment of the Company engaged in the hotel and leisure business. "GE SeaCo" refers to GE SeaCo SRL, a container leasing joint venture company between the Company and General Electric Capital Corporation accounted for under the equity method. "GNER" refers to Great North Eastern Railway Ltd., a wholly-owned subsidiary of the Company and operator of SCL's passenger rail franchise in Great Britain. "Silja" refers to Silja Oyj Abp, a wholly-owned subsidiary of the Company based in Finland engaged in ferry operations in the northern Baltic Sea.

(b)   Earnings per share

        The number of shares used in computing basic and diluted earnings per share was as follows:

        The anti-dilutive effect of stock options on 33,383 and 116,549 shares, respectively, for the nine months ended September 30, 2003 and 2002 and on 18,295 and 116,532 shares, respectively, for the three months ended September 30, 2003 and 2002 have been excluded from the computation of diluted earnings per share. In addition, 478,622 common shares to be issued upon conversion of convertible preferred shares were also excluded from the nine months ended September 30, 2002 computation of diluted earnings because to do so would be anti-dilutive.

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(c)   Other

        Other in the statements of consolidated operations comprises gains/(losses) on asset sales, excluding the gain on sale of ferry assets and non-recurring changes, and earnings from unconsolidated companies.

        For the nine months ended September 30, 2003, gains/(losses) on asset sales were $6,392,000 (2002—$3,120,000). The 2003 gains related to a gain of $5,000,000 on the sale of land at the port of Newhaven and container asset disposal gains of $1,392,000. During 2002, $6,523,000 of gains related to the sale by the Company of OEH shares and $3,403,000 of losses related to container asset disposals.

        For the three months ended September 30, 2003, gains/(losses) on asset sales were $5,384,000 (2002—$(826,000)). The 2003 gains related to a gain of $5,000,000 on the sale of land at the port of Newhaven and container asset disposal gains of $384,000. During 2002, $1,031,000 of losses related to container asset disposals and $205,000 of gains related to the sale by the Company of OEH shares.

        Earnings from unconsolidated companies include SCL's share of the net earnings of its equity investments as well as interest income related to loans and advances to the equity investees.

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(d)   Stock-based compensation

        SCL's compensation cost for share options is measured as the excess, if any, of the quoted market price of the Company's shares at the date of the grant over the amount an employee must pay to acquire the shares, in accordance with the intrinsic value method under Accounting Principles Board Opinion No. 25. If compensation cost for the Company's stock option plans had been determined based on fair values as of the date of grant, SCL's net earnings and earnings per share would have been reported as follows:

        The pro forma figures in the preceding tables may not be representative of pro forma amounts in future years.

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2.     Gain on sale of ferry assets and non-recurring charges

        Included in Gain on sale of ferry assets and non-recurring charges in the three and nine months ended September 30, 2003 are the following items:

(a)   Gain on sale of ferry assets

        On July 18, 2003, the Company completed the sale of its indirect wholly-owned subsidiary Sea Containers Isle of Man Ltd., which was the holding company of SCL's Isle of Man Steam Packet ferry business (collectively "Steam Packet"). The sale was to Windwood Limited, a company unaffiliated with SCL and controlled by Montagu Private Equity Ltd., formerly the private equity arm of HSBC. Steam Packet operated passenger, vehicle and freight ferry services between the Isle of Man in the Irish Sea and England, Northern Ireland and the Republic of Ireland. The sale price was approximately $242,000,000, paid in cash, which resulted in a gain on sale of approximately $100,000,000. Under separate contractual agreements, SCL will continue to charter a vessel and provide certain administrative services to Steam Packet. SCL retains its remaining ferry service in the Irish Sea between Northern Ireland and Scotland for which Steam Packet will provide certain administrative services also under separate contractual agreement.

(b)   Non-recurring charges

        As a result of the sale of Steam Packet and SCL's concurrent restructuring of its fast ferry business, an impairment evaluation was performed in accordance with the guidelines of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This indicated that the carrying value of certain ship and ship-related assets exceeded the expected future cash flows attributable to these assets, resulting in an impairment. The total impairment charge recognized during the quarter was approximately $15,000,000 determined by taking the excess of the carrying value over the estimated fair value. Fair value was determined using estimated future discounted cash flows and external valuations where applicable.

        In connection with the restructuring of some of SCL's ferry routes, SCL recorded a severance charge of approximately $10,000,000, about $5,500,000 of which has been paid during the third quarter of 2003 with the remaining $4,500,000 expected to be paid during the fourth quarter of 2003.

        Other non-recurring charges of approximately $5,000,000 were incurred relating to the Company's exchange offers for a portion of its publicly-traded debt (see Note 7). These costs consisted of legal and other professional fees and were paid during the third quarter of 2003.

        In addition, during the third quarter of 2003 management implemented a plan to sell certain specifically identified container assets and applied the provisions of SFAS No. 144. This required that these assets be valued at the lower of their respective carrying amount or fair value less costs to sell. As a result, SCL recognized a charge of approximately $10,000,000. The carrying value of container assets held for sale at September 30, 2003 was approximately $16,000,000.

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3.     Acquisitions and investments; deconsolidation of Orient-Express Hotels Ltd.

(a)   Acquisitions

        As reported in Note 3(a) to the financial statements in Amendment No. 1 of SCL's 2002 Form 10-K annual report, during the second quarter of 1999, SCL purchased a 50% interest in Silja which was listed on the Helsinki Exchanges. The shareholders from whom SCL acquired this investment had options under the 1999 share purchase agreement to sell the balance of their shares in Silja to SCL exercisable in April 2002, representing an additional 25% of shares outstanding. These options were duly exercised and SCL purchased the shares at a total price of €40,299,000 ($37,954,000) paid in newly-issued class A common shares of the Company.

        On June 25, 2002, SCL launched a redemption offer for the remaining shares in Silja and for Silja's outstanding convertible subordinated bonds, which had an aggregate par value of €55,368,000. The offer was €2.25 for each common share and 92.4% of the par value of the bonds. The offer expired on August 26, 2002 and SCL acquired additional Silja shares, bringing its total shareholding to 97.2%, and €13,222,900 of the Silja bonds for an aggregate price of €43,398,000 ($42,654,000) paid in cash funded by bank loans. Any shares not tendered have been compulsorily acquired as permitted by Finnish law.

        This acquisition has been accounted for as a purchase in accordance with SFAS No. 141, Business Combinations. The results of Silja's operations have been included in the consolidated financial results of SCL from the date of acquisition (May 1, 2002), and the assets and liabilities of Silja have been recorded at their fair value at the date of acquisition. The pro forma impact on results, had this acquisition occurred on January 1, 2002, is not material.

(b)   Investments

        Investments represent equity interests of 20% to 50% in any unconsolidated company. SCL does not have effective control of these unconsolidated companies and, therefore, accounts for these investments using the equity method. SCL's principal equity investees are as follows:

GE SeaCo SRL

        GE SeaCo and its subsidiaries are engaged in the container leasing business. SCL and General Electric Capital Corporation each have a 50% interest in GE SeaCo. See Note 14 regarding transactions between SCL and GE SeaCo.

Orient-Express Hotels Ltd.

        OEH and its subsidiaries are engaged in the hotel and leisure business. During the fourth quarter of 2002, SCL sold sufficient common shares in OEH to reduce its equity interest in OEH below 50% to 47%. Prior to those sales, OEH was accounted for as a consolidated subsidiary of SCL. Thereafter, SCL began to account for the investment in OEH under the equity method of accounting. Note 2 to the financial statements in Amendment No. 1 of SCL's 2002 Form 10-K annual report presents unaudited pro forma financial information of SCL as if this deconsolidation of OEH had occurred on January 1, 2002. As of September 30, 2003 and December 31, 2002, SCL had a 47% interest in OEH.

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        Summarized financial data of SCL's unconsolidated companies for the periods during which the investments were held by SCL are as follows:

4.     Real estate and other fixed assets

        The major classes of real estate and other fixed assets are as follows:

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5.     Intangible assets

        Intangible assets consist of the following:

        Amortization for the next five years is expected to be approximately $3,400,000 annually. The changes in the carrying amount of goodwill for the nine months ended September 30, 2003 are as follows:

6.     Long-term debt (other than senior notes and senior subordinated debentures)

        Long-term debt consists of the following:

        Several credit agreements of SCL have restrictive financial covenants. At September 30, 2003, SCL was in compliance with its covenants.

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        Included in long-term debt is a revolving credit facility with a group of banks secured by container equipment, a securitization facility with a nine-year term secured by other container equipment, and a revolving credit and term loan facility secured on Silja ship assets. At September 30, 2003, an aggregate of $652,540,000 (December 31, 2002— $758,572,000) was outstanding under these and related facilities. A securitization facility of Steam Packet in the amount of $101,500,000 was repaid in July 2003 using part of the Steam Packet sale proceeds.

        The following is a summary of the aggregate maturities of long-term debt at September 30, 2003. The 2004 amount includes $127,514,000 due under a bank-syndicated facility that SCL expects to refinance:

        The interest rates on substantially all SCL's long-term debt are adjusted regularly to reflect current market rates. Accordingly, the carrying value of SCL's long-term debt at September 30, 2003 and December 31, 2002 was a reasonable estimate of its fair value.

        In addition, syndicates of banks have provided GE SeaCo with $156,454,000 of credit facilities to fund new container purchases. Also, a bankruptcy-remote subsidiary of GE SeaCo formed to facilitate asset securitization has a $375,000,000 container securitization facility. At September 30, 2003, GE SeaCo had borrowed $471,454,000 (December 31, 2002— $368,100,000) under these facilities, none of which is guaranteed by SCL.

        Also, SCL has guaranteed through 2005 a bank loan of OEH in the amount of $18,579,000 (December 31, 2002—$112,854,000), and through 2010 one half of a $8,344,000 (December 31, 2002—$8,879,000) bank loan to Speedinvest Ltd., owner of the Adriatic fast ferry in which SCL has a 50% interest.

7.     Senior notes and subordinated debentures

        The maturities relating to the senior notes and senior subordinated debentures of SCL are disclosed in Note 10 to the financial statements in Amendment No. 1 of SCL's 2002 Form 10-K annual report.

        On May 28, 2003, SCL commenced an exchange offer of 13% senior notes due 2006 for its outstanding $158,798,000 principal amount of 9¹/2% and 10¹/2% senior notes due 2003 that matured on July 1, 2003. On the same date, SCL commenced an exchange offer of 12¹/2% senior notes due 2009 for its outstanding $98,883,000 principal amount of 12¹/2% senior subordinated debentures due 2004. The offer of 13% senior notes expired on June 27, 2003, and SCL accepted for exchange $22,475,000 of 9¹/2% and 10¹/2% senior notes into an equal principal amount of new 13% senior notes. The offer of 12¹/2% senior notes expired on July 23, 2003, and SCL accepted for exchange $19,154,000 of 12¹/2% debentures into an equal principal amount of new 12¹/2% senior notes. The balance of the 12¹/2% debentures remain outstanding and mature on December 1, 2004.

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        The balance of the 9¹/2% and 10¹/2% senior notes were repaid on July 1, 2003 with the proceeds of a one-year $158,000,000 secured bridge loan to SCL from a syndicate of banks. The primary security for this loan was the shares in Company subsidiaries whose assets were designated to be sold and the shares in OEH owned by SCL. Of this bridging loan, $120,000,000 was repaid from part of the proceeds from the sale of Steam Packet (see Note 2).

8.     Income taxes

        Income taxes provided by SCL relate principally to its foreign subsidiaries as pre-tax income is primarily foreign. The provision for (benefit from) income taxes consists of the following:

        SCL is incorporated in Bermuda which does not impose an income tax. SCL's effective tax rate is entirely due to income taxes imposed by jurisdictions in which SCL conducts business other than Bermuda.

        The net deferred tax assets recorded in other assets in the consolidated balance sheets are comprised of the following:

        The gross deferred tax assets relate primarily to operating loss carryforwards and future tax benefits of accrued pension costs. The deferred tax liabilities are temporary differences substantially caused by tax depreciation in excess of book depreciation.

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9.     Supplemental cash flow information

        In conjunction with acquisitions (see Note 3), liabilities were assumed as follows:

10.   Derivative financial instruments

(a)   Derivative financial instruments

        As reported in Note 1(s) to the financial statements in Amendment No. 1 of SCL's 2002 Form 10-K annual report, SCL adopted effective January 1, 2001 SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, No. 138 and No. 149. For the nine months ended September 30, 2003 and 2002, the change in the fair market value of derivative instruments resulted in a charge of $1,146,000 and a credit of $7,765,000, respectively, to other comprehensive income/(loss).

        The components of other comprehensive income are as follows:

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(b)   Accumulated other comprehensive loss

        The accumulated balances for each component of other comprehensive loss are as follows:

11.   Commitments

        Outstanding contracts to purchase fixed assets were approximately $5,300,000 at September 30, 2003 (December 31, 2002—$14,000,000).

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12.   Information concerning financial reporting for segments and operations in different geographical areas

        In 2003, SCL changed its reportable segments. SCL's GNER operations, which had previously been included in the passenger transport segment, are now reported as the rail operations segment. The remaining business that had been included in the passenger transport segment, SCL's ferry operations, is now reported as the ferry operations segment. SCL has reclassified the prior year's segment information to conform to the current year's presentation. Accordingly, financial information regarding SCL's business segments is as follows:

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        Leisure operations in 2003 include SCL's equity share of OEH earnings compared with consolidated OEH earnings of $39,027,000 in 2002, made up as follows: