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

Textainer Group Holdings Limited (NYSE:TGH), the world’s largest lessor of intermodal containers based on fleet size, today reported results for the first quarter ended March 31, 2012.

“Our Q1 results represent a solid start to 2012,” said Philip Brewer, President and Chief Executive Officer of Textainer. “We significantly expanded our fleet size by ordering 224,000 TEU of dry freight containers and 15,000 TEU of refrigerated containers, representing over $658 million of capital expenditures, for delivery through July 2012, building momentum and positioning the Company for continued success in 2012.”

Key Financial Information (in thousands except for per share and TEU amounts):
    Q1 2012   Q1 2011   % Change
Total revenues   $117,515   $91,202   28.9%
Net income attributable to Textainer Group Holdings Limited common shareholders  

$49,910
 

$37,190
 

34.2%
Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share  

$0.99
 

$0.75
 

32.0%
Adjusted net income (1)   $48,842   $35,448   37.8%
Adjusted net income per diluted common share (1)   $0.97   $0.71   36.6%
EBITDA (1)   $90,354   $69,842   29.4%
Average fleet utilization   96.9%   98.2%   (1.3%)
Total fleet size at end of period (TEU)   2,487,029   2,358,077   5.5%
Owned percentage of total fleet at end of period   58.5%   52.1%   12.3%
     

“Adjusted net income” and “EBITDA” are Non-GAAP Measures that are reconciled to GAAP measures in footnote 1. “Adjusted net income” is defined as net income attributable to Textainer Group Holdings Limited common shareholders before unrealized gains on interest rate swaps and caps, net and related impact of reconciling item on net (loss) income attributable to the noncontrolling interest (“NCI”). “EBITDA” is 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 income attributable to the NCI, depreciation and amortization expense and related impact of reconciling items on net (loss) income attributable to the NCI. Footnote 1 provides certain qualifications and limitations on the use of Non-GAAP Measures.

Textainer’s financial results benefitted from a 20.1% increase in the size of the owned container fleet in the first quarter 2012, compared to the year ago quarter, from an average of 1,201,000 TEU to 1,442,000 TEU, partially offset by incremental increases in depreciation expense and interest expense due to the increase in the size of the owned container fleet and associated debt to fund this expansion.

On April 18, 2012, one of our subsidiaries issued $400 million in aggregate principal amount of container backed notes (the "Notes"). The Notes are fully amortizing notes payable on a straight-line basis over a scheduled payment term of ten years, with a maximum payment term of fifteen years. The Notes have a fixed interest rate, payable monthly, of 4.21% per annum, resulting in an effective semi-annual yield on the Notes of 4.25% per annum.

On May 1, 2012, the company completed a $1.2 billion securitization facility and amounts outstanding under our existing $850 million securitization facility were repaid and this facility was terminated. The interest rate on the new $1.2 billion securitization facility is 2.625% over LIBOR during the initial two-year revolving period, if not refinanced or renewed following this two-year period the facility is structured to partially amortize over the next five years and then mature.

With a debt-to-equity ratio of 2.2:1 and the additional liquidity created by our recent financings, the Company is in a strong position to continue purchasing both new and used containers to meet the needs of shipping companies that have shown an increasing preference to lease containers.

“I am pleased with our recent financings which not only lower our overall cost of funds but also provide significant capacity for organic growth as we continue purchasing both new and used containers to meet market demand and further strengthen our industry leading position,” concluded Mr. Brewer.

Outlook

The run rate of capital expenditures for new dry-freight and refrigerated containers already exceeds the record levels of 2011. In-fleet container utilization continues to remain at or near historic highs.

“Although utilization decreased 1.3% during the first quarter of 2012 compared to the year ago quarter, it has improved steadily since early April,” commented Mr. Brewer. “Today, 79% of our fleet is committed to long-term, direct financing and sales-type leases, compared to 76% a year ago, which reduces the volatility of our utilization. We continue to see strong demand for new containers and expect to maintain our focus on healthy organic growth during the coming months.”

Dividend

On May 4, 2012, Textainer’s board of directors approved and declared a quarterly cash dividend of $0.40 per share on Textainer’s issued and outstanding common shares, payable on May 29, 2012 to shareholders of record as of May 18, 2012. This dividend is an increase of $0.03 per share from the prior quarter, Textainer’s ninth consecutive quarterly increase, and will continue the Company’s history of paying constant or higher dividends. The current dividend represents 41% of Adjusted net income (1).

“Our consistent performance and confidence in our long-term outlook enables us to increase our dividend for the ninth consecutive quarter as we continue to focus on total shareholder return,” concluded Mr. Brewer.

Investors’ Webcast

Textainer will hold a conference call and a Webcast at 11:00 am EDT on Tuesday, May 8, 2012 to discuss Textainer’s 2012 first-quarter results. An archive of the Webcast will be available one hour after the live call through May 8, 2013. For callers in the U.S. the dial-in number for the conference call is (877) 303-9078; for callers outside the U.S. the dial-in number for the conference call is (970) 315-0455. To access the live Webcast or archive, please visit Textainer’s website at http://www.textainer.com.

About Textainer Group Holdings Limited

Textainer Group Holdings Limited and its subsidiaries (“Textainer”) is the world's largest lessor of intermodal containers based on fleet size. The Company began operations in 1979 and as of the most recent quarter end had more than 1.6 million containers, representing more than 2.4 million TEU, in its owned and managed fleet. Textainer leases dry freight, refrigerated, and specialized containers. Each year the Company is one of the largest purchasers of new containers as well as one of the largest sellers of used containers. Textainer leases containers to approximately 400 shipping lines and other lessees and sells containers to more than 1,000 customers worldwide and provides services worldwide via a network of regional and area offices, as well as independent depots.

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.

Management also believes that Adjusted net income and Adjusted net income per diluted common share are useful in evaluating our operating performance because unrealized (gains) losses on interest rate swaps and caps, net is a noncash item, non-operating item. We believe Non-GAAP Measures provide useful information on our earnings from ongoing operations. We believe that EBITDA provides useful information on our ability to service our long-term debt and other fixed obligations and on our ability to fund our expected growth with internally generated funds. Non-GAAP Measures have limitations as analytical tools, and you should not consider either of them in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are:

  • They do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • They do not reflect changes in, or cash requirements for, our working capital needs;
  • EBITDA does not reflect interest expense or cash requirements necessary to service interest or principal payments on our debt;
  • Although depreciation is a noncash charge, the assets being depreciated may be replaced in the future, and neither EBITDA, Adjusted net income or Adjusted net income per diluted common share reflects any cash requirements for such replacements;
  • They are not adjusted for all noncash income or expense items that are reflected in our statements of cash flows; and
  • Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
 
Three Months Ended
March 31,
2012   2011
(Dollars in thousands)
(Unaudited)
Reconciliation of EBITDA:

Net income attributable to Textainer Group Holdings Limited common shareholders
$ 49,910 $ 37,190
Adjustments:
Interest income (28 ) (7 )
Interest expense 14,719 7,523
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 )
Income tax expense 2,323 2,614
Net (loss) income attributable to the noncontrolling interest (447 ) 5,623
Depreciation expense 21,580 18,866
Amortization expense 1,306 1,758

Impact of reconciling items on net (loss) income attributable to the noncontrolling interest
  (511 )   (4,156 )
EBITDA $ 90,354   $ 69,842  
 
 
Net cash provided by operating activities $ 52,907 $ 43,940
Adjustments:
Bad debt expense, net (1,718 ) (136 )
Amortization of debt issuance costs (2,418 ) (1,750 )
Amortization of acquired net 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 )
Interest income (28 ) (7 )
Interest expense 14,719 7,523
Realized losses on interest rate swaps and caps, net 2,550 2,642
Income tax expense 2,323 2,614
Changes in operating assets and liabilities 8,453 10,862

Impact of reconciling items on net (loss) income attributable to the noncontrolling interest
  (511 )   (4,156 )
EBITDA $ 90,354   $ 69,842  
 
 
Three Months Ended
March 31,
2012   2011
(Dollars in thousands)
(Unaudited)
Reconciliation of Adjusted net income:

Net income attributable to Textainer Group Holdings Limited common

shareholders
$ 49,910 $ 37,190
Adjustments:
Unrealized gains on interest rate swaps and caps, net (1,048 ) (2,211 )

Impact of reconciling item on net (loss) income attributable to noncontrolling interest
  (20 )   469  
Adjusted net income $ 48,842   $ 35,448  
 
Reconciliation of Adjusted net income per diluted common share:

Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share
$ 0.99 $ 0.75
Adjustments:
Unrealized gains on interest rate swaps and caps, net (0.02 ) (0.05 )

Impact of reconciling item on net (loss) income attributable to noncontrolling interest
  -     0.01  
Adjusted net income per diluted common share $ 0.97   $ 0.71  
 

Copyright Business Wire 2010

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