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

FORM 10-Q

Commission file number 1-7560

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 July 30, 2004, 21,832,568 Class A common shares and 14,412,095 Class B common shares of Sea Containers Ltd. were outstanding including 12,900,000 Class B shares owned by a subsidiary of the registrant.

PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

Sea Containers Ltd. and Subsidiaries

Consolidated Balance Sheets (unaudited)

See notes to consolidated financial statements.

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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 Changes in Consolidated Shareholders' Equity and Comprehensive Loss (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

        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., a 42% equity investment of the Company engaged in the hotel and leisure business. "GE SeaCo" refers to GE SeaCo SRL, a 50%/50% 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 Oy Ab, a wholly-owned subsidiary of the Company based in Finland engaged in ferry operations in the Baltic Sea.

        (a) Accounting policies

        For a description of significant accounting policies, see the Notes to the consolidated financial statements in the Company's 2003 Form 10-K annual report. As of June 30, 2004, these significant accounting policies have not changed from December 31, 2003. The consolidated financial statements are unaudited and have been prepared following the rules and regulations of the U.S. Securities & Exchange Commission. "SFAS" means a Statement of Financial Accounting Standards and "FIN" means an accounting interpretation, both of the U.S. Financial Accounting Standards Board.

        Investments represent equity interests of 20% to 50% in unconsolidated companies. SCL exerts significant influence over these companies but does not have control and, therefore, accounts for these investments using the equity method. SCL's principal equity investees are GE SeaCo and OEH. GE SeaCo is engaged in the container leasing business. OEH is engaged in the hotel and leisure business.

        Equity in earnings of GE SeaCo is presented within earnings from operations in the statements of consolidated operations due to the integral nature of GE SeaCo's operations to SCL's consoldiated operations as both companies are engaged in the container leasing business operated in a similar manner with similar management. SCL provides management and administrative services and leases containers to GE SeaCo (see Note 14). In addition, certain officers of the Company are also officers of GE SeaCo, including the Chairman and Chief Financial Officer. Equity in earnings of OEH is presented below earnings after tax in the statements of consolidated operations because OEH's operations are not considered integral to SCL's operations.

        Certain reclassifications have been made to the 2003 financial statements to conform to the classifications in the 2004 financial statements. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the six months ended June 30, 2004 and 2003, which are all of a normal recurring nature, have been reflected in the information provided. Due to the seasonal nature of SCL's business, operating results of the interim period are not indicative of a full year's operating results.

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(b) Earnings/(losses) per share

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

        Options to purchase 7,995 and 290,895 class A common shares at prices greater than the average market price of these shares were excluded from the computation of diluted losses per share for the six months ended June 30, 2004 and 2003, respectively.

        Options to purchase 9,820 and 224,366 class A common shares at prices greater than the average market price of these shares were excluded from the computation of diluted earnings per share for the three months ended June 30, 2004 and 2003, respectively. In addition, for the six months and three months ended June 30, 2004 and 2003, 478,622 class B common shares issuable on conversion of the convertible preferred shares were excluded from the computation of diluted earnings/(losses) per share because to do so would have been anti-dilutive for the periods presented.

(c) 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

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based on fair values as of the date of grant, SCL's net earnings and earnings per share would have been reported as follows (dollars in thousands, except per share amounts):

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

(d) Dividends

        On January 20 and April 20, 2004, the Company declared a quarterly dividend of $0.025 per class A common share and $0.0225 per class B common share.

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(e) Recent accounting pronouncements

        In March 2004, the Emerging Issues Task Force reached consensus on Issue No. 03-06 ("EITF 03-06"), "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share". Effective for quarters ending after March 31, 2004, EITF 03-06 clarifies the term participating security as used in SFAS No. 128. The Company has determined that its convertible preferred shares are not considered a participating security under EITF 03-06 and that the provisions of this consensus had no effect on SCL's financial statements.

        In January 2003, the Financial Accounting Standards Board issued FIN No. 46 "Consolidation of Variable Interest Entities", as amended by FIN No. 46R, which applied immediately to variable interest entities created after January 31, 2003, and with respect to variable interests held before February 1, 2003, applied beginning with SCL's quarter ended June 30, 2004. SCL has evaluated all of its existing joint venture agreements and has determined that none of its joint ventures is within the scope of FIN No. 46R. The adoption of FIN No. 46R had no impact on SCL.

(f) Pensions

        Components of net periodic pension benefit cost are as follows (dollars in thousands):

        As reported in Note 12 to the financial statements in the 2003 Form 10-K annual report, SCL expected to contribute $7,961,000 to its pension plans in 2004. As of June 30, 2004, pension contributions of $3,578,000 have been made. SCL anticipates contributing an additional $4,728,000 to fund its pension plans in 2004 for a total of $8,306,000.

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2.     Investments

        Summarized financial data for SCL's unconsolidated companies for the periods during which the investments were held by SCL are as follows (dollars in thousands):

3.     Real estate and other fixed assets

        The major classes of real estate and other fixed assets are as follows (dollars in thousands):

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4.     Intangible assets

        Intangible assets consist of the following (dollars in thousands):

        Amortization expense related to intangible assets subject to amortization was $1,781,000 and $1,716,000 for the six month period ended June 30, 2004 and 2003, respectively, and $822,000 and $862,000 for the three months ended June 30, 2004 and 2003, respectively. Amortization for the next five years is expected to be approximately $3,500,000 annually. The changes in the carrying amount of goodwill for the six months ended June 30, 2004 are as follows (dollars in thousands):

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

        Long-term debt consists of the following (dollars in thousands):

        Several credit agreements of SCL have restrictive financial covenants. At June 30, 2004, SCL was in compliance with its covenants.

        Included in long-term debt is a revolving credit facility with a group of banks collateralized by container equipment, a securitization facility with a nine-year term collateralized by other container equipment, and a revolving credit and term loan facility collateralized on Silja ship assets. At June 30, 2004, $120,486,000, $195,779,000 and $473,387,000, respectively, was outstanding under these facilities (December 31, 2003—$129,038,000, $223,201,000 and $397,328,000, respectively).

        The following is a summary of the aggregate maturities of long-term debt at June 30, 2004. The 2004 amount includes $120,500,000 due under bank-syndicated facilities that SCL expects to refinance (dollars in thousands):

        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 June 30, 2004 and December 31, 2003 was a reasonable estimate of its fair value.

        In addition, syndicates of banks have provided GE SeaCo with $218,700,000 of credit facilities to fund new container purchases. Also, a bankruptcy-remote subsidiary of GE SeaCo formed to facilitate asset securitization has a $673,000,000 container securitization facility. At June 30, 2004, GE SeaCo had borrowed $620,600,000 (December 31, 2003—$511,000,000) under these facilities, none of which is guaranteed by SCL.

        Also, SCL has guaranteed through 2010 one half of a $7,199,000 (December 31, 2003—$9,026,000) bank loan to Speedinvest Ltd., owner of the Adriatic fast ferry in which SCL has a 50% interest. This guarantee existed prior to December 31, 2002 and has not been modified.

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6.     Senior notes and subordinated debentures

        The maturities relating to the senior notes and senior subordinated debentures of SCL are disclosed in Note 11 to the financial statements in the Company's 2003 Form 10-K annual report.

        On May 4, 2004, the Company issued and sold $103,000,000 aggregate principal amount of unsecured 10¹/2% senior notes due 2012 in an underwritten public offering. The notes bear interest at 10¹/2% per annum but were sold at a discounted price of $100,290,070 to yield 11% per annum. The $2,709,930 original issue discount will be amortized over the life of the notes, which have no sinking fund requirement and come due on May 15, 2012. The notes are redeemable, in whole or in part, at the option of the Company at a price of 105.25% of the principal amount on or after May 15, 2008, 102.625% on or after May 15, 2009, and 100% on or after May 15, 2010. The notes may also be redeemed by the Company in the event of certain tax law changes. In the event a change in control of the Company occurs, it is obligated to make an offer to purchase the notes at a price of 101% of the principal amount. The proceeds of the sale of the notes were used in part to redeem on June 7, 2004 the $79,729,000 aggregate principal amount of the Company's 12¹/2% senior subordinated debentures due 2004.

7.     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 (dollars in thousands):

        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 (dollars in thousands):

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        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.

8.     Supplemental cash flow information

9.     Derivative financial instruments

        At June 30, 2004, SCL had a fixed rate interest rate swap on a container debt of the securitization facility described in Note 5, which has been designated as a cash flow hedge. Changes in fair value that represent the effective portion of the swap are accumulated in other comprehensive loss. Amounts accumulated in other comprehensive loss are being reclassified into earnings as the hedged interest cash flows are accrued and as a result of ineffectiveness. The fair value of the swap at June 30, 2004 was a $7,870,000 liability (December 31, 2003—$12,570,000 liability). During the six months ended June 30, 2004, $3,000,000 was recognized in earnings as a result of ineffectiveness. SCL estimates that approximately $2,200,000 will be recognized in earnings during the next 12 months.

10.   Accumulated other comprehensive loss

        The accumulated balances for each component of other comprehensive loss are as follows (dollars in thousands):

11.   Commitments

        Outstanding contracts to purchase fixed assets were approximately $4,500,000 at June 30, 2004 (December 31, 2003—$16,000,000).

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

        Financial information regarding SCL's business segments is as follows (dollars in thousands):

        The identifiable assets of SCL's business segments are as follows (dollars in thousands):

        Transactions between reportable segments are not material. The main factor SCL uses to identify its segments is similarity of the products and services provided.

13.   Contingencies

Strategic Rail Authority

        The previously reported claim by the Strategic Rail Authority against GNER was settled in early July 2004. See Note 15.

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GNER performance bond

        GNER has undertaken since 1996 to reimburse the Strategic Rail Authority its costs in the event GNER breaches its franchise agreement to the extent that the authority must award the franchise to another operator. This undertaking is secured by a surety bond issued by an insurance company in the amount of $32,305,000 which the Company has guaranteed. The surety bond requirement, previously in the amount of $60,080,000, was reduced and the partial cash collateralization of the bond was released when the franchise agreement was amended in early July 2004. See Note 15.

14.   Related party transactions

        For the six months ended June 30, 2004, SCL earned revenue in connection with the lease and management agreements relating to SCL-owned containers provided to the GE SeaCo joint venture of $10,828,000 (2003—$15,212,000). Also in 2004, SCL incurred expenses under the services agreement with GE SeaCo by which SCL provides management and administration services to the joint venture and for which GE SeaCo recognized and paid to SCL net amounts of $16,317,000 (2003—$16,361,000). For the six months ended June 30, 2004, SCL sold containers from its factories and provided use of SCL's depots for container repair and storage services, for which GE SeaCo paid $3,395,000 (2003—$9,767,000). At June 30, 2004, SCL had a loan balance of $3,000,000 due from GE SeaCo (December 31, 2003—$3,000,000). At June 30, 2004, a receivable of $28,270,000 (December 31, 2003—$30,342,000) remains outstanding from GE SeaCo in respect of all the above, which is included in the amount due from related parties on SCL's consolidated balance sheet and significantly all of which will be settled during the period ended September 30, 2004.

        For the six months ended June 30, 2004, subsidiaries of SCL received from OEH $2,676,000 (2003—$2,181,000) for the provision of various administrative services under a shared services agreement between SCL and OEH on the basis of a fee plus reimbursements equivalent to the direct and indirect costs of providing the services. At June 30, 2004, SCL had a receivable of $5,148,000 (December 31, 2003—$4,924,000) due from OEH, including the above, which is included in the amount due from related parties on SCL's consolidated balance sheet and significantly all of which will be settled during the period ended September 30, 2004. In March 2004, the last guarantee by SCL of an OEH bank loan (December 31, 2003—$19,088,000 principal amount) that predated OEH's initial public offering in August 2000 was released and cancelled.

15.   Subsequent events

        As previously reported in Note 18(b) to the financial statements in Sea Containers' 2003 Form 10-K annual report, the U.K. Strategic Rail Authority ("SRA") had claimed a portion of the compensation recognized by GNER in its settlement in December 2003 of arbitration proceedings with Network Rail Infrastructure Ltd. relating to past disruptions of GNER's passenger rail services in Great Britain. The SRA is the governmental franchisor under GNER's passenger rail franchise agreement, and Network Rail owns and maintains substantially all of the railway infrastructure in Britain. While GNER was advised by its legal counsel that GNER had no obligation to the SRA under the franchise agreement, GNER and the SRA engaged in discussions to resolve the dispute which otherwise could have been submitted to a separate arbitration proceeding. Because these discussions might have been unsuccessful and GNER might have been required to make payments to the SRA following arbitration, Sea Containers recorded a liability in its December 31, 2003 consolidated accounts for this dispute.

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        In early July 2004, GNER and the SRA reached agreement to settle this dispute. GNER paid to the SRA £17,000,000 (approximately $30,000,000), an amount already provided for in Sea Containers' 2003 accounts, and the SRA withdrew its claim relating to GNER's December 2003 settlement with Network Rail. GNER is seeking to renew its franchise and is bidding for two additional new U.K. passenger rail franchises, and believed it was not appropriate to remain in dispute with the SRA during this process.

        Also in early July 2004, GNER and the SRA separately amended GNER's existing franchise agreement in certain ways. Primarily the SRA released £42,000,000 (approximately $76,000,000) of cash security which GNER had previously been required to maintain under the franchise agreement, and GNER has agreed to pay the SRA an amount of £8,000,000 (approximately $14,000,000) in 13 monthly instalments commencing April 2005. The SRA also agreed to remove its right under the franchise agreement to require GNER to increase its share capital, and to indemnify GNER for the difference between the new compensation regime stipulated by the U.K. Rail Regulator to take effect from April 1, 2004 and the original compensation regime in force when the franchise agreement came into effect in 1996. The new regime is less favorable to GNER than the original one. The compensation regimes relate to payments made by Network Rail to GNER for infrastructure failings, and bonus payments from GNER to Network Rail when infrastructure performance exceeds defined targets.

        SCL signed contracts for the sale of Folkestone port on July 2, 2004 to a third party, and completion of the sale is expected at a gain in the third quarter of 2004.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three months ended June 30, 2004 compared
with the three months ended June 30, 2003

Revenue

        Changes in revenue are analyzed as follows (dollars in thousands):