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, non-operating item. We believe Non-GAAP Measures provide useful information on our earnings from ongoing operations. We believe that adjusted 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;
  • Adjusted 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 Adjusted 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   Six Months Ended
June 30, June 30,
2013   2012 2013   2012
(Dollars in thousands) (Dollars in thousands)
(Unaudited) (Unaudited)
 
Reconciliation of adjusted net income:

Net income attributable to Textainer Group Holdings Limited common shareholders
$ 48,815 $ 45,809 $ 97,149 $ 95,719
Adjustments:
Unrealized gains on interest rate swaps and caps, net (3,981 ) (1,025 ) (6,268 ) (2,073 )

Impact of reconciling item on net income (loss) attributable to the noncontrolling interest
  834     (110 )   909     (130 )
Adjusted net income $ 45,668   $ 44,674   $ 91,790   $ 93,516  
 
Reconciliation of adjusted net income per diluted common share:

Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share
$ 0.86 $ 0.91 $ 1.71 $ 1.90
Adjustments:
Unrealized gains on interest rate swaps and caps, net (0.07 ) (0.02 ) (0.11 ) (0.05 )

Impact of reconciling item on net income (loss) attributable to the noncontrolling interest
  0.01     -     0.01     -  
Adjusted net income per diluted common share $ 0.80   $ 0.89   $ 1.61   $ 1.85  
 
       
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
(Dollars in thousands) (Dollars in thousands)
(Unaudited) (Unaudited)
Reconciliation of adjusted EBITDA:

Net income attributable to Textainer Group Holdings Limited common shareholders
$ 48,815 $ 45,809 $ 97,149 $ 95,719
Adjustments:
Interest income (31 ) (35 ) (69 ) (63 )
Interest expense 20,894 18,531 42,523 33,250
Realized losses on interest rate swaps and caps, net 2,089 2,529 4,479 5,079
Unrealized gains on interest rate swaps and caps, net (3,981 ) (1,025 ) (6,268 ) (2,073 )
Income tax expense 2,240 4,122 6,781 6,445
Net income (loss) attributable to the noncontrolling interest 2,025 (687 ) 3,507 (1,134 )
Depreciation expense 33,833 22,801 66,516 44,381
Amortization expense 1,088 1,299 2,175 2,605

Impact of reconciling items on net income (loss) attributable to the noncontrolling interest
  (745 )   (646 )   (2,026 )   (1,157 )
Adjusted EBITDA $ 106,227   $ 92,698   $ 214,767   $ 183,052  
 
 
Net cash provided by operating activities $ 137,052 $ 108,525
Adjustments:
Bad debt expense, net (2,487 ) (2,461 )
Amortization of debt issuance costs (5,985 ) (6,370 )
Amortization of acquired net below market leases - 33
Amortization of deferred revenue 970 4,532

Amortization of unearned income on direct financing and sales-type leases
10,679 5,407
Gains on sale of containers, net 15,123 19,451
Share-based compensation expense (2,557 ) (4,190 )
Interest income (69 ) (63 )
Interest expense 42,523 33,250
Realized losses on interest rate swaps and caps, net 4,479 5,079
Income tax expense 6,781 6,445
Changes in operating assets and liabilities 10,284 14,571

Impact of reconciling items on net income (loss) attributable to the noncontrolling interest
  (2,026 )   (1,157 )
Adjusted EBITDA $ 214,767   $ 183,052  
 

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