Textainer Group Holdings Limited Reports Second Quarter 2013 Results and Increases Quarterly Dividen
Textainer Group Holdings Limited Reports Second Quarter 2013 Results and Increases Quarterly Dividend
- Total revenues of $130.1 million, an increase of 8.4% from the prior year quarter
- Net income attributable to Textainer Group Holdings Limited common shareholders of $48.8 million, an increase of 6.6% from the prior year quarter
- Adjusted EBITDA(1) of $106.2 million, an increase of 14.6% from the prior year quarter
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 reported second quarter 2013 results.
"The second quarter was marked by attractive growth in both our lease rental income and net income," commented Philip K. Brewer, President and Chief Executive Officer of Textainer. "EBITDA also increased significantly from the second quarter of last year demonstrating our strong generation of cash.
"Total capex ordered for delivery in 2013 was $692 million. Our fleet size has grown by 9.4% over the past twelve months to 2.9 million TEU. Utilization has averaged 95.1% year to date and is 94.3% currently. Utilization has been quite stable remaining within 1% of its current level for more than four months.
"Although the demand for containers improved in the second quarter, we continue to see compression of returns due to the high level of liquidity among container lessors and the ease with which containers can be purchased at factories. We expect these market conditions to continue for the near term. We are also expecting a muted peak season with utilization remaining near today's levels as the market stabilizes," added Mr. Brewer.
- Continued strong pace of expansion, investing $494 million in new and used containers year-to-date following $198 million invested in new containers in the fourth quarter of 2012 for lease outs in 2013;
- Total fleet size grew by 9.4% to 2.9 million TEU, given the strong pace of investment over the past year;
- Announced a collaboration with Trifleet allowing expansion into tank leasing with one of the leaders in the industry;
- Reduced our average effective interest rate (which includes interest rate swaps) by 145 basis points year-over-year and by 34 basis points compared to the prior quarter, while increasing the size of several financing facilities;
- Achieved average utilization of 94.7% during the quarter and 94.3% currently; and
- Increased dividend to $0.47 per share, resulting in the Company's fourteenth consecutive quarterly increase.
Key Financial Information (in thousands except for per share and TEU amounts):
|Q2 QTD||Q2 YTD|
|2013||2012||% Change||2013||2012||% Change|
|Income from operations||$||72,061||$||69,245||4.1%||$||148,131||$||137,225||7.9%|
|Net income attributable to Textainer Group Holdings Limited common shareholders||$||48,815||$||45,809||6.6%||$||97,149||$||95,719||1.5%|
|Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share||$||0.86||$||0.91||-5.5%||$||1.71||$||1.90||-10.0%|
|Adjusted net income(1)||$||45,668||$||44,674||2.2%||$||91,790||$||93,516||-1.8%|
|Adjusted net income per diluted common share(1)||$||0.80||$||0.89||-10.1%||$||1.61||$||1.85||-13.0%|
|Average fleet utilization||94.7%||97.5%||-2.9%||95.1%||97.2%||-2.2%|
|Total fleet size at end of period (TEU)||2,860,549||2,615,282||9.4%|
|Owned percentage of total fleet at end of period||74.0%||60.4%||22.5%|
"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.
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.
"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.
"We expect that total new container production will be substantially below the level of 2012, and that lessors will purchase around 50% of total output. New container prices have declined steadily since March and are at levels not seen since early 2010. We do not expect to see new container prices rise significantly from their current levels during the remainder of the year. Used container prices have fallen by approximately 10% over the last twelve months and additional declines are possible. We expect to see an increasing number of purchase leaseback opportunities, but pricing for such deals is equally as competitive as for new equipment lease-outs. Additionally, although we are just getting started, we are excited about the opportunity to work with Trifleet to expand into the tank market," concluded Mr. Brewer.
On August 2, 2013, Textainer's board of directors approved and declared a quarterly cash dividend of $0.47 per share on Textainer's issued and outstanding common shares, payable on August 27, 2013 to shareholders of record as of August 16, 2013. This dividend is an increase of $0.01 per share from the prior quarter and represents 59% of this quarter's adjusted net income(1).
"We increased our dividend by $0.01 from the prior quarter. While we continue to target a dividend level of approximately 50% of net income, this payout is slightly higher at 59%," stated Mr. Brewer. "Our dividend reflects our confidence in the long-term outlook for our business and in our strong cash flow. We believe our dividend enables us to balance investing for growth in the business and providing attractive ongoing returns to our shareholders."
Textainer will hold a conference call and a Webcast at 11:00 am EDT on Tuesday, August 6, 2013 to discuss Textainer's second quarter 2013 results. An archive of the Webcast will be available one hour after the live call through August 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 35300627. To access the live Webcast or archive, please visit Textainer's website at http://investor.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 2.9 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 1,200 customers worldwide. Textainer operates via an international network of 14 regional and area offices, as well as approximately 400 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 certain market conditions, such as compressed returns of containers due to the high level of liquidity among container lessors and the ease with which containers can be purchased at factories, will continue for the near term; (ii) Textainer's expectation of a muted peak season with utilization remaining near today's levels as the market stabilizes; (iii) Textainer's belief that the peak season will be subdued and the competitive dynamics of its industry will contribute to a similar earnings environment during the second half of 2013 as during the first half; (iv) Textainer's expectation that a total new container production will be substantially below the level of 2012, and that lessors will purchase around 50% of total output; (v) Textainer's expectation that new container prices will not rise significantly from their current levels during the remainder of the year; (vi) Textainer's belief that additional declines in used container prices are possible; and (vii) Textainer's expectation that it will see an increasing number of purchase leaseback opportunities, but that pricing for such deals will be equally as competitive as for new equipment lease-outs. 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 and Six Months Ended June 30, 2013 and 2012|
|(All currency expressed in United States dollars in thousands, except per share amounts)|
|Three Months Ended June 30,||Six Months Ended June 30,|
|Lease rental income||$||115,370||$||91,791||$||228,597||$||179,679|
|Trading container sales proceeds||2,102||12,744||4,895||24,281|
Gains on sale of containers, net
|Direct container expense||10,134||6,104||19,138||12,164|
|Cost of trading containers sold||1,745||11,130||4,210||21,132|
|General and administrative expense||6,167||5,822||12,604||11,545|
|Short-term incentive compensation expense||685||1,322||1,372||2,314|
|Long-term incentive compensation expense||1,134||1,524||2,214||3,678|
|Bad debt expense, net||3,237||743||2,487||2,461|
|Total operating expenses||58,023||50,745||110,716||100,280|
|Income from operations||72,061||69,245||148,131||137,225|
|Other income (expense):|
|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|
|Net other expense||(18,981||)||(20,001||)||(40,694||)||(36,195||)|
|Income before income tax and noncontrolling interest||53,080||49,244||107,437||101,030|
|Income tax expense||(2,240||)||(4,122||)||(6,781||)||(6,445||)|
|Less: Net (income) loss attributable to the noncontrolling interest||(2,025||)||687||(3,507||)||1,134|
Net income attributable to Textainer Group Holdings Limited common shareholders
Net income attributable to Textainer Group Holdings Limited common shareholders per share:
|Weighted average shares outstanding (in thousands):|