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Textainer Group Holdings Limited Reports First-Quarter 2012 Results And Increases Quarterly Dividend

Important Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. securities laws. Forward-looking statements include statements that are not statements of historical facts and include, without limitation, statements regarding: (i) Textainer’s belief that its recent financing not only lowers its overall cost of funds but also provide significant capacity for organic growth as it continues purchasing both new and used containers; (ii) Textainer’s belief that having 79% of its fleet committed to long-term and direct financing and sales-type leases, compared to 76% a year ago, reduces the volatility of its utilization; and (iii) Textainer’s expectation that it will maintain its focus on healthy organic growth during the coming months. Readers are cautioned that these forward-looking statements involve risks and uncertainties, are only predictions and may differ materially from actual future events or results. These risks and uncertainties include, without limitation, the following items that could materially and negatively impact our business, results of operations, cash flows, financial condition and future prospects: any deceleration or reversal of the current domestic and global economic recoveries; lease rates may decrease and lessees may default, which could decrease revenue and increasing storage, repositioning, collection and recovery expenses; we own a large and growing number of containers in our fleet and are subject to significant ownership risk; further consolidation of container manufacturers or the disruption of manufacturing for the major manufacturers could result in higher new container prices and/or decreased supply of new containers and any increase in the cost or reduction in the supply of new containers; the demand for leased containers depends on many political and economic factors beyond Textainer's control; the demand for leased containers is partially tied to international trade and if this demand were to decrease due to increased barriers to trade, or for any other reason, it could reduce demand for intermodal container leasing; as we increase the number of containers in our owned fleet, we will have significant capital at risk and may need to incur more debt, which could result in financial instability; Textainer faces extensive competition in the container leasing industry; the international nature of the container shipping industry exposes Textainer to numerous risks; gains and losses associated with the disposition of used equipment may fluctuate; our indebtedness reduces our financial flexibility and could impede our ability to operate; and other risks and uncertainties, including those set forth in Textainer's filings with the Securities and Exchange Commission. For a discussion of some of these risks and uncertainties, see Item 3 "Key Information-- Risk Factors" in Textainer's Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 15, 2012.

Textainer's views, estimates, plans and outlook as described within this document may change subsequent to the release of this press release. Textainer is under no obligation to modify or update any or all of the statements it has made herein despite any subsequent changes Textainer may make in its views, estimates, plans or outlook for the future.

       

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 2012 and 2011
(Unaudited)
(All currency expressed in United States dollars in thousands, except per share amounts)
 
March 31,
2012 2011
 
Revenues:
Lease rental income $ 87,888 $ 72,359
Management fees 6,801 7,684
Trading container sales proceeds 11,537 4,765
Gains on sale of containers, net   11,289     6,394  
Total revenues   117,515     91,202  
Operating expenses:
Direct container expense 6,060 3,958
Cost of trading containers sold 10,002 4,166
Depreciation expense 21,580 18,866
Amortization expense 1,306 1,758
General and administrative expense 5,723 6,198
Short-term incentive compensation expense 992 959
Long-term incentive compensation expense 2,154 1,736
Bad debt expense, net   1,718     136  
Total operating expenses   49,535     37,777  
Income from operations   67,980     53,425  
Other income (expense):
Interest expense (14,719 ) (7,523 )
Interest income 28 7
Realized losses on interest rate swaps and caps, net (2,550 ) (2,642 )
Unrealized gains on interest rate swaps and caps, net 1,048 2,211
Other, net   (1 )   (51 )
Net other expense   (16,194 )   (7,998 )
Income before income tax and noncontrolling interest 51,786 45,427
Income tax expense   (2,323 )   (2,614 )
Net income 49,463 42,813
Less: Net loss (income) attributable to the noncontrolling interest   447   (5,623 )
Net income attributable to Textainer Group Holdings
Limited common shareholders $ 49,910 $ 37,190  
 

Net income attributable to Textainer Group Holdings Limited

common shareholders per share:

Basic $ 1.01 $ 0.76
Diluted $ 0.99 $ 0.75
 
Weighted average shares outstanding (in thousands):
Basic 49,425 48,660
Diluted 50,384 49,892
 
Other comprehensive income:
Foreign currency translation adjustments   77     82  
Comprehensive income 49,540 42,895
Less: Comprehensive loss (income) attributable to the noncontrolling interest   447     (5,623 )
Comprehensive income attributable to Textainer Group Holdings
Limited common shareholders $ 49,987   $ 37,272  
 
   
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2012 and December 31, 2011
(Unaudited)
(All currency expressed in United States dollars in thousands)
 
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 76,426 $ 74,816

Accounts receivable, net of allowance for doubtful accounts of $9,555 and $7,840 in 2012 and 2011, respectively

83,779 86,428
Net investment in direct financing and sales-type leases 25,668 25,075
Trading containers 8,716 12,970
Containers held for sale 10,757 7,832
Prepaid expenses 11,064 10,243
Deferred taxes   2,453   2,443  
Total current assets 218,863 219,807
Restricted cash 70,969 45,858

Containers, net of accumulated depreciation of $395,977 and $377,731 at 2012 and 2011, respectively

2,018,866 1,903,855
Net investment in direct financing and sales-type leases 83,503 85,121

Fixed assets, net of accumulated depreciation of $8,856 and $9,027 at 2012 and 2011, respectively

1,654 1,717

Intangible assets, net of accumulated amortization of $32,251 and $33,340 at 2012 and 2011, respectively

45,402 46,675
Other assets   7,606   7,171  
Total assets $ 2,446,863 $ 2,310,204  
Liabilities and Equity
Current liabilities:
Accounts payable $ 3,280 $ 2,616
Accrued expenses 8,760 18,491
Container contracts payable 76,329 25,510
Deferred revenue 4,441 6,245
Due to owners, net 13,863 15,812
Secured debt facility 62,452 41,035
Bonds payable   91,500   91,500  
Total current liabilities 260,625 201,209
Revolving credit facilities 202,285 133,047
Secured debt facility 770,245 779,383
Bonds payable 441,584 464,226
Deferred revenue 347 1,136
Interest rate swaps and caps 15,062 16,110
Income tax payable 23,639 22,729
Deferred taxes   6,715   7,438  
Total liabilities   1,720,502   1,625,278  
Equity:
Textainer Group Holdings Limited shareholders' equity:

Common shares, $0.01 par value. Authorized 140,000,000 shares; issued and outstanding 49,530,473 and 48,951,114 at 2012 and 2011, respectively

495 490
Additional paid-in capital 163,146 154,460
Accumulated other comprehensive loss 49 (28 )
Retained earnings   560,528   528,906  
Total Textainer Group Holdings Limited shareholders’ equity 724,218 683,828
Noncontrolling interest   2,143   1,098  
Total equity   726,361   684,926  
Total liabilities and equity $ 2,446,863 $ 2,310,204  
 
   
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2012 and 2011
(Unaudited)
(All currency expressed in United States dollars in thousands)
 

Three Months Ended March 31,

2012 2011
Cash flows from operating activities:
Net income $ 49,463   $ 42,813  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense 21,580 18,866
Bad debt expense, net 1,718 136
Unrealized gains on interest rate swaps and caps, net (1,048 ) (2,211 )
Amortization of debt issuance costs 2,418 1,750
Amortization of intangible assets 1,306 1,758
Amortization of acquired below-market leases (33 ) (151 )
Amortization of deferred revenue (2,404 ) (1,687 )
Amortization of unearned income on direct financing and sales-type leases (2,861 ) (1,920 )
Gains on sale of containers, net (11,289 ) (6,394 )
Share-based compensation expense 2,510 1,842
Changes in operating assets and liabilities   (8,453 )   (10,862 )
Total adjustments   3,444     1,127  
Net cash provided by operating activities   52,907     43,940  
Cash flows from investing activities:
Purchase of containers and fixed assets (105,496 ) (129,919 )
Proceeds from sale of containers and fixed assets 23,229 14,706
Receipt of principal payments on direct financing and sales-type leases   8,808     7,035  
Net cash used in investing activities   (73,459 )   (108,178 )
Cash flows from financing activities:
Proceeds from revolving credit facility 69,630 55,000
Principal payments on revolving credit facility (392 ) (40,000 )
Proceeds from secured debt facility 12,000 142,500
Principal payments on secured debt facility - (31,000 )
Principal payments on bonds payable (22,875 ) (12,875 )
Increase in restricted cash (25,111 ) (9,438 )
Debt issuance costs (552 ) (1,058 )
Issuance of common shares upon exercise of share options 3,344 4,849
Excess tax benefit from share-based compensation awards 2,837 3,182
Capital contributions from noncontrolling interest 1,492 -
Dividends paid   (18,288 )   (14,115 )
Net cash provided by financing activities   22,085     97,045  
Effect of exchange rate changes   77     82  
Net increase in cash and cash equivalents 1,610 32,889
Cash and cash equivalents, beginning of the year   74,816     57,081  
Cash and cash equivalents, end of period $ 76,426   $ 89,970  
 
 

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Reconciliation of GAAP financial measures to non-GAAP financial measures
Three Months Ended March 31, 2012 and 2011
(Unaudited)
(All currency expressed in United States dollars in thousands, except per share amounts)
 
(1) The following is a reconciliation of certain GAAP measures to non-GAAP financial measures (such items listed in (a) to (d) below and defined as “Non-GAAP Measures”) for the three months ended March 31, 2012 and 2011, including:
(a) net income attributable to Textainer Group Holdings Limited common shareholders to EBITDA (EBITDA defined as net income attributable to Textainer Group Holdings Limited common shareholders before interest income and interest expense, realized and unrealized losses (gains) on interest rate swaps and caps, net, income tax expense, net (loss) income attributable to the noncontrolling interest (“NCI”), depreciation and amortization expense and the related impact of reconciling items on net (loss) income attributable to the NCI);
(b) net cash provided by operating activities to EBITDA;
(c) net income attributable to Textainer Group Holdings Limited common shareholders to Adjusted net income (defined as net income attributable to Textainer Group Holdings Limited common shareholders before unrealized gains on interest rate swaps and caps, net and the related impact of reconciling items on net (loss) income attributable to the NCI); and
(d) net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share to Adjusted net income per diluted common share (defined as net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share before unrealized gains on interest rate swaps and caps, net and the related impact of reconciling items on net (loss) income attributable to the NCI).

Non-GAAP Measures are not financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Non-GAAP Measures are presented solely as supplemental disclosures. Management believes that EBITDA may be a useful performance measure that is widely used within our industry and Adjusted net income may be a useful performance measure because Textainer intends to hold its interest rate swaps until maturity and over the life of an interest rate swap or cap held to maturity the unrealized (gains) losses will net to zero. EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison.

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