Second Quarter Results:
Textainer’s financial results benefited from a 33.9% increase in the size of the owned container fleet in the second quarter of 2013, compared to the year ago quarter, offset by incremental increases in depreciation expense and direct container expense due to the larger owned container fleet and lower utilization. Textainer has experienced a significant increase in the useful lives of its containers over the past few years as the Company has entered into more lifecycle leases and shipping lines have kept containers on-lease for longer periods. As a result, the Company increased the estimated useful lives of its non-refrigerated containers from 12 years to 13 years beginning in the first quarter of 2013 based on this extended period of higher useful lives and a view that new equipment lives will remain consistent with recent levels. This change resulted in $6.8 million less depreciation expense in the second quarter of 2013 than would have been recorded using the prior 12 year useful life during the quarter. The second quarter also included a $1.8 million provision for bad debt related to a customer that filed for bankruptcy; we are working through the recovery process with this customer.
During the second quarter, Textainer refinanced one of its revolving credit facilities, reducing its credit spread by 175 basis points and expanding its size to an aggregate commitment amount of $170 million, an increase of $50 million. The Company also expanded the size of its corporate revolver by $100 million. Overall, the Company reduced its average effective interest rate by 145 basis points year-over-year and by 34 basis points compared to the prior quarter.
Outlook“While we have made robust investments over the past twelve months and our fleet continues to grow, demand has been softer than expected due to lower than projected trade growth and the inability to successfully implement and maintain general freight rate increases,” stated Mr. Brewer. “While we experienced an increase in demand in June and July, we believe the peak season will be subdued and the competitive dynamics of our industry will contribute to a similar earnings environment during the second half of 2013 as during the first half.