HAMILTON, Bermuda--(BUSINESS WIRE)--Nov. 4, 2014-- Textainer Group Holdings Limited (NYSE: TGH) (“Textainer”, “the Company”, “we” and “our”), the world’s largest lessor of intermodal containers based on fleet size, reported third-quarter 2014 results.

Financial and Business Highlights:

• Net income attributable to Textainer Group Holdings Limited common shareholders increased 35.4 percent from the prior year quarter to $54.3 million, or $0.95 per diluted share;
• Adjusted net income⁽¹⁾ increased 25.9 percent from the prior year quarter to $50.2 million, or $0.88 per diluted share;
• Lease rental income grew 10.9 percent from the prior year quarter to $130.5 million;
• Utilization increased 1.6 percentage points during the third quarter and is currently 97.4 percent, the highest since 2012;
• Adjusted EBITDA⁽¹⁾ of $120.0 million, an increase of 12.7 percent from the prior year quarter;
• Declared a quarterly dividend of $0.47 per share;
• Continued our strong pace of expansion with $821 million of capex year-to-date and more than $882 million invested for delivery in 2014; and
• Increased total fleet size by 6.8 percent year-over-year to 3.2 million Twenty-Foot Equivalent Units (“TEU”).

“During 2014, we have invested $821 million to purchase 433,000 TEU of new, purchase leaseback and previously managed containers. Utilization has increased almost 4 percentage points since March to 97.4 percent, the highest level in two years. Our depot inventory is at its lowest level since 2012 and dry container lease-outs outpaced turn-ins by 2.6 to 1 during the third quarter,” commented Philip K. Brewer, President and Chief Executive Officer of Textainer. “Our results have exceeded our expectations. Lease rental income grew by nearly 11 percent year-over-year to $130 million, a new record. Adjusted net income(1) was $50.2 million for the quarter, an increase of 26% from the prior year quarter.”

“Our adjusted net income(1) includes $7.9 million received from a settlement with a lessee in bankruptcy proceedings. The settlement covers a portion of rental and recovery costs which had been expensed in prior quarters. Excluding these proceeds, our adjusted net income(1) would have been $42.4 million or a year-to-year increase of 6.5%.”

“Our relatively low leverage and low cost funding provide ample flexibility to invest. We have reduced our funding costs by 48 basis points year over year. Our fleet has grown by 7 percent over the past 12 months to 3.2 million TEU and our owned fleet has grown 11 percent in the last 12 months. While lower rental rates impact per container profitability, our growing fleet, declining cost of funds and higher utilization have offset this decline and allowed us to continue to deliver solid performance.”

“We continue to see pressure on rental rates due to the high level of liquidity available to container lessors coupled with low new container prices and low interest rates. Low new prices continue to depress used container prices resulting in reduced gains on sales and trading profits. We believe container prices are near the cost of production and interest rates cannot go much lower. We also believe returns on containers purchased at today’s prices will improve over time, especially if interest rates and/or new container prices rise.”

“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 charges to interest expense for the write-off of unamortized debt issuance costs related to refinancing of debt, unrealized gains on interest rate swaps, collars and caps, net, the related impact of reconciling items on income tax expense and the related impact of reconciling items on net income 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 expense, realized and unrealized losses (gains) on interest rate swaps, collars and caps, net, income tax expense (benefit), net income attributable to the NCI, depreciation expense and container impairment, amortization expense and the related impact of reconciling items on net income attributable to the NCI. Footnote 1 provides certain qualifications and limitations on the use of Non-GAAP Measures.

Effective January 1, 2014, we began reporting utilization including containers on direct financing and sales-type leases. We previously reported utilization only for containers under operating leases but, as direct financing and sales-type leases become a more significant part of our business, we believe that including these containers provides a better indication of the utilization of our total fleet and makes our calculation comparable with some of our public competitors. Accordingly, utilization for the three and nine months ended September 30, 2013 was revised to include direct financing and sales-type leases to conform to the current presentation.

Third-Quarter Results:

Textainer’s third-quarter financial results benefited from higher revenue due to an increase in our owned container fleet size and an increase in utilization. The Company settled outstanding claims from a lessee in bankruptcy, which resulted in an increase in lease rental income of $2.6 million and a bad debt recovery of $5.3 million. Textainer benefited from lower interest expense primarily due to interest savings from the refinancing of debt earlier in the year. These factors were offset by an increase in depreciation expense due to the larger owned fleet and lower gains on sale of containers, net.

Dividend

On October 30, 2014, 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 December 1, 2014 to shareholders of record as of November 19, 2014.

Outlook

“For the first time in several years, 2014 had a traditional second to third quarter peak season. Although the demand for refrigerated containers is expected to be strong over the coming months, we are now heading into the slow season for dry containers. Fortunately, we closed out the third-quarter with our lowest depot inventory in two years, which positions us well for the near term.

“Pressure on rental rates will remain as a result of the competitive environment and ready access to capital. We do not expect new and used container prices or returns to increase in the near term,” continued Mr. Brewer. “We believe our utilization level will remain high and expect similar operating performance next quarter as booked containers are picked up and we continue to benefit from reduced funding costs.”

Investors’ Webcast

Textainer will hold a conference call and a Webcast at 11:00 am EST on Tuesday, November 4, 2014 to discuss Textainer’s third quarter 2014 results. An archive of the Webcast will be available one hour after the live call through November 3, 2015. 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 847-619-6547. The participant passcode for both dial-in numbers is 38212899. To access the live Webcast or archive, please visit Textainer’s investor 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. Textainer has more than 2 million containers, representing 3.2 million TEU, in its owned and managed fleet. Textainer leases dry freight, dry freight specialized, and refrigerated containers. Textainer is one of the world’s 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, sells containers to more than 1,200 customers 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 container prices are near the cost of production and interest rates cannot go much lower; (ii) Textainer’s belief that returns on containers purchased at today’s prices will improve over time, especially if interest rates and/or new container prices rise; (iii) Textainer’s expectation that demand for reefers will be strong in the coming months; (iv) Textainer’s belief that pressure on rental rates will remain as a result of the competitive environment and ready access to capital for container lessors; (v) Textainer’s expectation that new and used container prices or returns will not increase in the near term; and (vi) Textainer’s belief that its utilization level will remain high and that it will have similar operating performance next quarter as booked containers are picked up and it benefits from a full quarter of reduced funding costs. 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 increase storage, repositioning, collection and recovery expenses; the demand for leased containers depends on many political and economic factors and is tied to international trade and if demand were to decrease due to increased barriers to trade or political or economic factors, 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 19, 2014.

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
Reconciliation of GAAP financial measures to non-GAAP financial measures
Three and Nine Months Ended September 30, 2014 and 2013
(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 and nine months ended September 30, 2014 and 2013, including:

(a) net income attributable to Textainer Group Holdings Limited common shareholders to adjusted EBITDA (Adjusted EBITDA defined as net income attributable to Textainer Group Holdings Limited common shareholders before interest income and expense, realized and unrealized gains on interest rate swaps, collars and caps, net, income tax expense (benefit), net income attributable to the noncontrolling interest (“NCI”), depreciation expense and container impairment, amortization expense and the related impact of reconciling items on net income attributable to the NCI);

(b) net cash provided by operating activities to Adjusted 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 the write-off of unamortized debt issuance costs, unrealized gains on interest rate swaps, collars and caps, net, the related impact of reconciling items on income tax expense and the related impact of reconciling items on net 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 the write-off of unamortized debt issuance costs, unrealized gains on interest rate swaps, collars and caps, net, the related impact of reconciling items on income tax expense and the related impact of reconciling items on net 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 adjusted 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, collars and caps until maturity and over the life of an interest rate swap, collar or cap the unrealized gains will net to zero. Adjusted 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 losses (gains) on interest rate swaps, collars 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 expense and container impairment 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.

Source: Textainer Group Holdings Limited

Textainer Group Holdings Limited
Hilliard C. Terry, III, +1 415-658-8214
Executive Vice President and Chief Financial Officer
ir@textainer.com