Textainer Group Holdings Limited Reports First-Quarter 2013 Results and Increases Quarterly Dividend

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Textainer Group Holdings Limited Reports First-Quarter 2013 Results and Increases Quarterly Dividend

HAMILTON, Bermuda--(BUSINESS WIRE)-- Textainer Group Holdings Limited (NYS: TGH) ("Textainer", "the Company", "we" and "our"), the world's largest lessor of intermodal containers based on fleet size, today reported results for the first quarter ended March 31, 2013.

Highlights:

  • Total revenues of $128.8 million, an increase of 9.6% from the prior year quarter;
  • Income from operations of $76.1 million, an increase of 11.9% from the prior year quarter;
  • Adjusted EBITDA(1)of $108.5 million, an increase of 20.1% from the prior year quarter;
  • Continued strong pace of expansion, invested $232 million in new and used containers year to date following $198 million of new containers in the fourth quarter of 2012 for lease outs in 2013;
  • After the close of the quarter the Company refinanced one of its revolving credit facilities, reducing the funding costs by 175 basis points and increasing the size by $50 million to $170 million; and
  • Increased our dividend by 2.2%, declaring a $0.46 per share dividend in the second quarter of 2013, or 57% of adjusted net income and the Company's thirteenth consecutive quarterly increase.

"Our first quarter results mark a good start to 2013 after achieving robust results for 2012," commented Philip K. Brewer, President and Chief Executive Officer of Textainer. "While our total revenues increased nearly 10% over the prior year quarter, our lease rental income of $113.2 million increased almost 29% and adjusted EBITDA(1) increased over 20% from the prior year quarter. We continue to invest heavily in new containers, having purchased more than 140,000 TEU since the beginning of the fourth quarter of 2012 for lease outs in 2013, of which approximately 90% was for our owned fleet."

"Since the beginning of the year our utilization has declined by 1.1 percentage points but has averaged 95.5% for the entire period. The last few weeks have shown signs that the decline in utilization has slowed or stopped and we are optimistic that we will see improvements in the near term. Of the new containers purchased since the beginning of the fourth quarter of 2012, approximately 50% are either already on-hire or booked for pickup prior to the end of the second quarter," added Mr. Brewer.

Key Financial Information (in thousands except for per share and TEU amounts):

       
  Q1 2013 Q1 2012 % Change

Total revenues

 

$128,763

 

$117,515

 

9.6%

Income from operations

 

$76,070

 

$67,980

 

11.9%

Net income attributable to Textainer Group Holdings Limited common shareholders

 

$48,334

 

$49,910

 

-3.2%

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

 

$0.85

 

$0.99

 

-14.1%

Adjusted net income(1)

 

$46,122

 

$48,842

 

-5.6%

Adjusted net income per diluted common share(1)

 

$0.81

 

$0.97

 

-16.5%

Adjusted EBITDA(1)

 

$108,540

 

$90,354

 

20.1%

Average fleet utilization

 

95.4%

 

96.9%

 

-1.5%

Total fleet size at end of period (TEU)

 

2,808,690

 

2,487,029

 

12.9%

Owned percentage of total fleet at end of period

 

73.3%

 

58.5%

 

25.3%

   

"Adjusted net income" and "adjusted 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 income (loss) attributable to the noncontrolling interest ("NCI"). "Adjusted 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 income (loss) attributable to the NCI. Footnote 1 provides certain qualifications and limitations on the use of Non-GAAP Measures.

Textainer's financial results benefited from a 34.3% increase in the size of the owned container fleet in the first quarter 2013, compared to the year ago quarter, 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 and slightly lower utilization. In addition, 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 an extended period of higher useful lives and a view that new equipment lives will remain consistent with recent levels. This change resulted in $6.3 million less depreciation expense than would have been recorded using the prior 12 year useful lives during the current quarter.

After quarter end, 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 from its previous commitment amount.

"We have continued to lower our funding costs as shown by our recent refinancing and we expect there will also be opportunities to refinance some of our existing ABS notes at more attractive levels. With our low debt-to-equity ratio of 2.2 to 1, we have ample capacity to fund growth to meet the demand from shipping lines," commented Hilliard C. Terry, III, Textainer Executive Vice President and Chief Financial Officer.

Outlook

"Demand was softer than expected during the first quarter and we saw several shipping lines purchasing containers," stated Mr. Brewer. "Due in part to the abundance of liquidity in the marketplace, we have seen aggressive pricing for new business which has served to compress yields. Nevertheless, we are well positioned as we move through 2013 given our strong investments over the past six months at very attractive prices," added Mr. Brewer.

"At this time, it is very difficult to predict market conditions for the remainder of the year. We currently expect to see stronger demand in the third quarter. We also expect that container lessors will purchase between 50-60% of total output although output is likely to fall below that of 2012. On the other hand, we expect to see an increasing number of purchase leaseback opportunities. We remain excited about our prospects for 2013," concluded Mr. Brewer.

Dividend

On May 2, 2013, Textainer's board of directors approved and declared a quarterly cash dividend of $0.46 per share on Textainer's issued and outstanding common shares, payable on May 29, 2013 to shareholders of record as of May 17, 2013. This dividend is an increase of $0.01 per share from the prior quarter. The current dividend represents 57% of adjusted net income(1).

"We increased our dividend by 2% from the prior quarter reflecting our positive outlook for the year. This results in a 57% payout ratio and is a 15% increase compared to the dividend declared for the first quarter of 2012," added Mr. Brewer. "We believe our dividend policy strikes the right balance between our need to fund growth while providing income to our shareholders."

Investors' Webcast

Textainer will hold a conference call and a Webcast at 11:00 am EDT on Tuesday, May 7, 2013 to discuss Textainer's first quarter 2013 results. An archive of the Webcast will be available one hour after the live call through May 7, 2014. For callers in the U.S. the dial-in number for the conference call is 1-888-895-5271; for callers outside the U.S. the dial-in number for the conference call is 1-847-619-6547. The participant passcode for both dial-in numbers is 34628960. 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 approximately 1.9 million containers, representing approximately 2.8 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 in the world. Textainer leases containers to approximately 400 shipping lines and other lessees and sells containers to more than 1,100 customers worldwide. Textainer operates via an international network of 14 regional and area offices, as well as more than 390 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 the decline in its utilization has slowed or stopped out and that improvements will be seen in the near term; (ii) Textainer's expectation that there will be opportunities to refinance some of its existing ABS notes at attractive levels; (iii) Textainer's belief that it is well positioned as it moves through 2013 given its strong investments over the past six months at very attractive prices; (iv) Textainer's expectation that it will see stronger demand in the third quarter and that container lessors will purchase between 50-60% of total output although output is likely to fall below that of 2012; and (v) Textainer's expectation that it will see an increasing number of purchase leaseback opportunities. 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, 2013.

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, 2013 and 2012
(Unaudited)
(All currency expressed in United States dollars in thousands, except per share amounts)
   
March 31,
20132012
 
Revenues:
Lease rental income$113,227$87,888
Management fees5,2836,801
Trading container sales proceeds2,79311,537
Gains on sale of containers, net 7,460  11,289 
Total revenues 128,763  117,515 
Operating expenses:
Direct container expense9,0046,060
Cost of trading containers sold2,46510,002
Depreciation expense32,68321,580
Amortization expense1,0871,306
General and administrative expense6,4375,723
Short-term incentive compensation expense687992
Long-term incentive compensation expense1,0802,154
Bad debt (recovery) expense, net (750) 1,718 
Total operating expenses 52,693  49,535 
Income from operations 76,070  67,980 
Other income (expense):
Interest expense(21,629)(14,719)
Interest income3828
Realized losses on interest rate swaps and caps, net(2,390)(2,550)
Unrealized gains on interest rate swaps and caps, net2,2871,048
Other, net (19) (1)
Net other expense (21,713) (16,194)
Income before income tax and noncontrolling interest54,35751,786
Income tax expense (4,541) (2,323)
Net income49,81649,463
Less: Net (income) loss attributable to the noncontrolling interest (1,482) 447
Net income attributable to Textainer Group Holdings
Limited common shareholders$48,334 $49,910
 
Net income attributable to Textainer Group Holdings Limited

common shareholders per share:

Basic$0.86$1.01
Diluted$0.85$0.99
 
Weighted average shares outstanding (in thousands):
Basic56,22849,425
Diluted56,95550,384
 
Other comprehensive income:
Foreign currency translation adjustments (97) 77 
Comprehensive income49,71949,540
Comprehensive (income) loss attributable to the noncontrolling interest (1,482) 447 
Comprehensive income attributable to Textainer Group Holdings
Limited common shareholders$48,237 $49,987 
 
  
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2013 and December 31, 2012
(Unaudited)
(All currency expressed in United States dollars in thousands)
 
20132012
Assets
Current assets:
Cash and cash equivalents$76,971$100,127

Accounts receivable, net of allowance for doubtful accounts of $7,261 and $8,025 in 2013 and 2012, respectively

105,52994,102
Net investment in direct financing and sales-type leases54,14343,253
Trading containers5,3707,296
Containers held for sale20,17915,717
Prepaid expenses14,09814,006
Deferred taxes2,2962,332
Due from affiliates, net 77 4,377
Total current assets278,663281,210
Restricted cash54,58654,945

Containers, net of accumulated depreciation of $476,248 and $490,930 at 2013 and 2012, respectively

3,008,1242,916,673
Net investment in direct financing and sales-type leases209,211173,634

Fixed assets, net of accumulated depreciation of $8,273 and $9,189 at 2013 and 2012, respectively

1,6581,621

Intangible assets, net of accumulated amortization of $28,050 and $26,963 at 2013 and 2012, respectively

32,29633,383
Other assets 11,885 14,614
Total assets$3,596,423$3,476,080
Liabilities and Equity
Current liabilities:
Accounts payable$5,319$4,451
Accrued expenses10,21714,329
Container contracts payable65,05387,708
Deferred revenue6981,681
Due to owners, net13,74613,218
Bonds payable 131,500 131,500
Total current liabilities226,533252,887
Revolving credit facilities682,908549,911
Secured debt facility891,500874,000
Bonds payable673,417706,291
Interest rate swaps and caps8,53210,819
Income tax payable28,75227,580
Deferred taxes5,3365,249
Other liabilities 3,391 3,210
 
Total liabilities?
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