tgh-6k_20190331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO

RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

Commission File Number 001-33725

 

Textainer Group Holdings Limited

(Translation of Registrant’s name into English)

 

Century House

16 Par-La-Ville Road

Hamilton HM 08

Bermuda

(441) 296-2500

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  Yes      No  

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable

 

 

 

 

 

 

 

1


 

TEXTAINER GROUP HOLDINGS LIMITED

Quarterly Report on Form 6-K for the Three Months Ended March 31, 2019

Table of Contents

 

Information Regarding Forward-Looking Statements; Cautionary Language

 

Page

 

 

 

Item 1. Condensed Consolidated Financial Statements (Unaudited):

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018

 

4

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

 

5

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018

 

7

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market and Credit Risk

 

36

 

 

 

Item 4. Risk Factors

 

36

 

 

 

Signature

 

37

 

 

2


INFORMATION REGARDING FORWARD-LOOKING STATEMENTS; CAUTIONARY LANGUAGE

This Quarterly Report on Form 6-K, including the section entitled Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements within the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not statements of historical facts and may relate to, but are not limited to, expectations or estimates of future operating results or financial performance, capital expenditures, regulatory compliance, plans for growth and future operations, as well as assumptions relating to the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue” or the negative of these terms or other similar terminology. The forward-looking statements contained in this Quarterly Report on Form 6-K include, but are not limited to, statements regarding  (i) factors that are likely to continue to affect our performance and (ii) our belief that, assuming that our lenders remain solvent that our cash flow from operations, proceeds from the sale of containers and borrowing availability under our debt facilities are sufficient to meet our liquidity needs, including for the payment of dividends, for the next twelve months.

Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy, and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which cannot be foreseen. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including, among others, the risks we face that are described in the section entitled Item 3, “Key Information -- Risk Factors” included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 25, 2019 (our “2018 Form 20-F”).

We believe that it is important to communicate our expectations about the future to potential investors, shareholders and other readers. However, there may be events in the future that we are not able to accurately predict or control and that may cause actual events or results to differ materially from the expectations expressed in or implied by our forward-looking statements. The risk factors listed in Item 3, “Key Information -- Risk Factors” included in our 2018 Form 20-F, as well as any cautionary language in this Quarterly Report on Form 6-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you decide to buy, hold or sell our common shares, you should be aware that the occurrence of the events described in Item 3, “Key Information -- Risk Factors” included in our 2018 Form 20-F and elsewhere in this Quarterly Report on Form 6-K could negatively impact our business, cash flows, results of operations, financial condition and share price. Potential investors, shareholders and other readers are cautioned not to place undue reliance on our forward-looking statements.

Forward-looking statements regarding our present plans or expectations for fleet size, management contracts, container purchases, sources and availability of financing, and growth involve risks and uncertainties relative to return expectations and related allocation of resources, and changing economic or competitive conditions, as well as the negotiation of agreements with container investors, which could cause actual results to differ from present plans or expectations, and such differences could be material. Similarly, forward-looking statements regarding our present expectations for operating results and cash flow involve risks and uncertainties related to factors such as utilization rates, per diem rates, container prices, demand for containers by container shipping lines, supply and other factors discussed under Item 3, “Key Information -- Risk Factors” included in our 2018 Form 20-F or elsewhere in this Quarterly Report on Form 6-K, which could also cause actual results to differ from present plans. Such differences could be material.

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. The forward-looking statements contained in this Quarterly Report on Form 6-K speak only as of, and are based on information available to us on, the date of the filing of this Quarterly Report on Form 6-K. We assume no obligation to, and do not plan to, update any forward-looking statements after the date of this Quarterly Report on Form 6-K as a result of new information, future events or developments, except as expressly required by U.S. federal securities laws. You should read this Quarterly Report on Form 6-K and the documents that we reference and have furnished as exhibits with the understanding that we cannot guarantee future results, levels of activity, performance or achievements and that actual results may differ materially from what we expect.  

In this Quarterly Report on Form 6-K, unless otherwise specified, all monetary amounts are in U.S. dollars. To the extent that any monetary amounts are not denominated in U.S. dollars, they have been translated into U.S. dollars in accordance with our accounting policies as described in Item 18, “Financial Statements” included in our 2018 Form 20-F.

 

 

3


ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31, 2019 and 2018

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

Lease rental income - owned fleet

 

$

128,973

 

 

$

120,222

 

Lease rental income - managed fleet (1)

 

 

26,553

 

 

 

28,404

 

Lease rental income

 

 

155,526

 

 

 

148,626

 

 

 

 

 

 

 

 

 

 

Management fees - non-leasing (2)

 

 

2,301

 

 

 

1,815

 

 

 

 

 

 

 

 

 

 

Trading container sales proceeds (2)

 

 

13,300

 

 

 

2,401

 

Cost of trading containers sold (2)

 

 

(10,732

)

 

 

(2,105

)

Trading container margin

 

 

2,568

 

 

 

296

 

 

 

 

 

 

 

 

 

 

Gain on sale of owned fleet containers, net

 

 

6,767

 

 

 

6,627

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Direct container expense - owned fleet

 

 

11,647

 

 

 

13,696

 

Distribution expense to managed fleet container investors (1)

 

 

24,480

 

 

 

26,231

 

Depreciation expense

 

 

60,944

 

 

 

56,334

 

Container impairment

 

 

800

 

 

 

832

 

Amortization expense

 

 

602

 

 

 

1,822

 

General and administrative expense (2)

 

 

9,830

 

 

 

10,400

 

Bad debt expense (recovery), net

 

 

159

 

 

 

(607

)

Total operating expenses

 

 

108,462

 

 

 

108,708

 

Income from operations

 

 

58,700

 

 

 

48,656

 

Other (expense) income:

 

 

 

 

 

 

 

 

Interest expense

 

 

(37,516

)

 

 

(31,619

)

Interest income

 

 

638

 

 

 

303

 

Realized gain on interest rate swaps, collars and caps, net

 

 

1,444

 

 

 

1,184

 

Unrealized (loss) gain on interest rate swaps, collars and caps, net

 

 

(5,738

)

 

 

2,263

 

Other, net

 

 

 

 

 

2

 

Net other expense

 

 

(41,172

)

 

 

(27,867

)

Income before income tax and noncontrolling interests

 

 

17,528

 

 

 

20,789

 

Income tax expense

 

 

(373

)

 

 

(560

)

Net income

 

 

17,155

 

 

 

20,229

 

Less: Net income attributable to the noncontrolling interests

 

 

(105

)

 

 

(1,511

)

Net income attributable to Textainer Group Holdings

   Limited common shareholders

 

$

17,050

 

 

$

18,718

 

Net income attributable to Textainer Group Holdings Limited

   common shareholders per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.30

 

 

$

0.33

 

Diluted

 

$

0.30

 

 

$

0.33

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

Basic

 

 

57,475

 

 

 

57,099

 

Diluted

 

 

57,587

 

 

 

57,530

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

107

 

 

 

106

 

Comprehensive income

 

 

17,262

 

 

 

20,335

 

Comprehensive income attributable to the noncontrolling interests

 

 

(105

)

 

 

(1,511

)

Comprehensive income attributable to Textainer Group Holdings

    Limited common shareholders

 

$

17,157

 

 

$

18,824

 

 

(1)  Certain amounts for the three months ended March 31, 2018 have been reclassified to present the gross amounts of lease rental income and expenses for the

managed fleet instead of the net presentation (see Note 3 “Immaterial Reclassification and Adjustment of Prior Periods”).

(2)  Amounts for the three months ended March 31, 2018 have been reclassified to conform with 2019 presentation (see Note 2 (g) “Reclassifications and Changes in Presentation”).

See accompanying notes to condensed consolidated financial statements.

4


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

March 31, 2019 and December 31, 2018

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

132,001

 

 

$

137,298

 

Accounts receivable, net of allowance for doubtful accounts of $5,730 and $5,729, respectively (1)

 

 

127,300

 

 

 

134,225

 

Net investment in direct financing and sales-type leases

 

 

38,246

 

 

 

39,270

 

Trading containers

 

 

33,801

 

 

 

40,852

 

Containers held for sale

 

 

24,126

 

 

 

21,874

 

Prepaid expenses and other current assets (1)

 

 

19,281

 

 

 

13,325

 

Insurance receivable

 

 

-

 

 

 

9,814

 

Due from affiliates, net

 

 

1,682

 

 

 

1,692

 

Total current assets

 

 

376,437

 

 

 

398,350

 

Restricted cash

 

 

87,522

 

 

 

87,630

 

Containers, net of accumulated depreciation of $1,342,732 and $1,322,221, respectively

 

 

4,182,395

 

 

 

4,134,016

 

Net investment in direct financing and sales-type leases

 

 

147,613

 

 

 

127,790

 

Fixed assets, net of accumulated depreciation of $11,731 and $11,525, respectively

 

 

1,967

 

 

 

2,066

 

Intangible assets, net of accumulated amortization of $43,868 and $43,266, respectively

 

 

6,782

 

 

 

7,384

 

Interest rate swaps, collars and caps

 

 

3,242

 

 

 

5,555

 

Deferred taxes

 

 

2,090

 

 

 

2,087

 

Other assets

 

 

15,670

 

 

 

3,891

 

Total assets

 

$

4,823,718

 

 

$

4,768,769

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses (1)

 

$

24,002

 

 

$

27,297

 

Container contracts payable

 

 

93,265

 

 

 

42,710

 

Other liabilities

 

 

2,047

 

 

 

219

 

Due to container investors, net (1)

 

 

25,354

 

 

 

30,672

 

Debt, net of unamortized deferred financing costs of $5,667 and $5,738, respectively

 

 

177,684

 

 

 

191,689

 

Total current liabilities

 

 

322,352

 

 

 

292,587

 

Debt, net of unamortized deferred financing costs of $20,589 and $22,248, respectively

 

 

3,207,701

 

 

 

3,218,138

 

Interest rate swaps, collars and caps

 

 

7,064

 

 

 

3,639

 

Income tax payable

 

 

9,671

 

 

 

9,570

 

Deferred taxes

 

 

8,188

 

 

 

7,039

 

Other liabilities

 

 

14,433

 

 

 

1,805

 

Total liabilities

 

 

3,569,409

 

 

 

3,532,778

 

Equity:

 

 

 

 

 

 

 

 

Textainer Group Holdings Limited shareholders' equity:

 

 

 

 

 

 

 

 

Common shares, $0.01 par value. Authorized 140,000,000 shares; 58,032,164 shares issued and 57,402,164 shares outstanding

 

 

581

 

 

 

581

 

Treasury shares, at cost, 630,000 shares

 

 

(9,149

)

 

 

(9,149

)

Additional paid-in capital

 

 

407,139

 

 

 

406,083

 

Accumulated other comprehensive loss

 

 

(329

)

 

 

(436

)

Retained earnings

 

 

826,784

 

 

 

809,734

 

Total Textainer Group Holdings Limited shareholders’ equity

 

 

1,225,026

 

 

 

1,206,813

 

Noncontrolling interests

 

 

29,283

 

 

 

29,178

 

Total equity

 

 

1,254,309

 

 

 

1,235,991

 

Total liabilities and equity

 

$

4,823,718

 

 

$

4,768,769

 

 

 

(1) Certain amounts for the year ended December 31, 2018 have been reclassified to present the gross amounts of accounts receivable, prepaid expenses, accounts payable and accrued expenses arising from the managed fleet instead of the net presentation (see Note 3 “Immaterial Reclassification and Adjustment of Prior Periods” and Note 2 (g) “Reclassifications and Changes in Presentation”).

 

See accompanying notes to condensed consolidated financial statements.

5


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

Three Months Ended March 31, 2019 and 2018

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

 

Textainer Group Holdings Limited Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

other

 

 

 

 

 

 

Textainer Group

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

Treasury shares

 

 

paid-in

 

 

comprehensive

 

 

Retained

 

 

Holdings Limited

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

earnings

 

 

shareholders' equity

 

 

interest

 

 

equity

 

Balances, December 31, 2017 (1)

 

 

57,727,220

 

 

$

578

 

 

 

(630,000

)

 

$

(9,149

)

 

$

397,821

 

 

$

(309

)

 

$

759,356

 

 

$

1,148,297

 

 

$

57,740

 

 

$

1,206,037

 

Exercise of share options

 

 

2,029

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,504

 

 

 

 

 

 

 

 

 

1,504

 

 

 

 

 

 

1,504

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Textainer Group

   Holdings Limited common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,718

 

 

 

18,718

 

 

 

 

 

 

18,718

 

Net income attributable to noncontrolling

   interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,511

 

 

 

1,511

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

106

 

 

 

 

 

 

106

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,335

 

Balances, March 31, 2018

 

 

57,729,249

 

 

 

578

 

 

 

(630,000

)

 

 

(9,149

)

 

 

399,350

 

 

 

(203

)

 

 

778,074

 

 

 

1,168,650

 

 

 

59,251

 

 

 

1,227,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2018

 

 

58,032,164

 

 

 

581

 

 

 

(630,000

)

 

 

(9,149

)

 

 

406,083

 

 

 

(436

)

 

 

809,734

 

 

 

1,206,813

 

 

 

29,178

 

 

 

1,235,991

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,056

 

 

 

 

 

 

 

 

 

1,056

 

 

 

 

 

 

1,056

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Textainer Group

   Holdings Limited common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,050

 

 

 

17,050

 

 

 

 

 

 

17,050

 

Net income attributable to noncontrolling

   interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105

 

 

 

105

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

107

 

 

 

 

 

 

107

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,262

 

Balances, March 31, 2019

 

 

58,032,164

 

 

$

581

 

 

 

(630,000

)

 

$

(9,149

)

 

$

407,139

 

 

$

(329

)

 

$

826,784

 

 

$

1,225,026

 

 

$

29,283

 

 

$

1,254,309

 

 

(1)

Certain amounts for the year ended December 31, 2017 have been adjusted to defer acquisition fees of the managed fleet as earned over the deemed lease term (see Note 3 “Immaterial Reclassification and Adjustment of Prior Periods”).

 

 

 

6


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2019 and 2018

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018 (1)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

17,155

 

 

$

20,229

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

60,944

 

 

 

56,334

 

Container impairment

 

 

800

 

 

 

832

 

Bad debt expense (recovery), net

 

 

159

 

 

 

(607

)

Unrealized loss (gain) on interest rate swaps, collars and caps, net

 

 

5,738

 

 

 

(2,263

)

Amortization of unamortized deferred debt issuance costs and

   accretion of bond discount

 

 

1,870

 

 

 

2,213

 

Amortization of intangible assets

 

 

602

 

 

 

1,822

 

Gain on sale of owned fleet containers, net

 

 

(6,767

)

 

 

(6,627

)

Share-based compensation expense

 

 

1,056

 

 

 

1,504

 

Changes in operating assets and liabilities

 

 

25,552

 

 

 

4,554

 

Total adjustments

 

 

89,954

 

 

 

57,762

 

Net cash provided by operating activities

 

 

107,109

 

 

 

77,991

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of containers and fixed assets

 

 

(119,335

)

 

 

(253,619

)

Proceeds from sale of containers and fixed assets

 

 

32,885

 

 

 

32,639

 

Net cash used in investing activities

 

 

(86,450

)

 

 

(220,980

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

60,000

 

 

 

714,000

 

Principal payments on debt

 

 

(86,171

)

 

 

(533,367

)

Debt issuance costs

 

 

 

 

 

(2,674

)

Issuance of common shares upon exercise of share options

 

 

 

 

 

25

 

Net cash (used in) provided by financing activities

 

 

(26,171

)

 

 

177,984

 

Effect of exchange rate changes

 

 

107

 

 

 

106

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(5,405

)

 

 

35,101

 

Cash, cash equivalents and restricted cash, beginning of the year

 

 

224,928

 

 

 

237,569

 

Cash, cash equivalents and restricted cash, end of period

 

$

219,523

 

 

$

272,670

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest expense and realized losses on interest rate swaps, collars and caps, net

 

$

33,826

 

 

$

27,755

 

Net income taxes paid

 

$

15

 

 

$

14

 

Receipt of payments on direct financing and sales-type leases, net of income earned

 

$

14,428

 

 

$

12,893

 

Supplemental disclosures of noncash operating activities:

 

 

 

 

 

 

 

 

Initial recognition of operating lease liability arising from obtaining right-of use assets

 

$

12,024

 

 

$

-

 

Supplemental disclosures of noncash investing activities:

 

 

 

 

 

 

 

 

Increase in accrued container purchases

 

$

50,555

 

 

$

27,706

 

Containers placed in direct financing and sales-type leases

 

$

29,757

 

 

$

14,335

 

Decrease in insurance receivable due to a decrease in estimated unrecoverable containers

 

$

-

 

 

$

1,246

 

 

 

 

 

 

 

 

 

 

 

(1)   Certain amounts for the three months ended March 31, 2018 have been reclassified to conform with 2019 presentation (see Note 2 (g) “Reclassifications and Changes in Presentation”).

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

7


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(1)

Nature of Business

Textainer Group Holdings Limited (“TGH”) is incorporated in Bermuda. TGH is the holding company of a group of companies, consisting of TGH and its subsidiaries (collectively, the “Company”), involved in the purchase, management, leasing and resale of a fleet of marine cargo containers. The Company manages and provides administrative support to the affiliated and unaffiliated third-party owners’ (the “Container Investors”) container fleets.

The Company conducts its business activities in three main areas: Container Ownership, Container Management and Container Resale (see Note 11 “Segment Information”).

 

(2)    Accounting Policies and Recent Accounting Pronouncements

 

(a)

Basis of Accounting

Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018 (“2018 Form 20-F”) filed with the Securities and Exchange Commission on March 25, 2019.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal and recurring adjustments) necessary to present fairly the Company’s condensed consolidated financial position as of March 31, 2019, and the Company’s condensed consolidated results of operations for the three months ended March 31, 2019 and 2018, condensed consolidated stockholder’s equity for the three months ended March 31, 2019 and 2018 and condensed consolidated cash flows for the three months ended March 31, 2019 and 2018. These condensed consolidated financial statements are not necessarily indicative of the results of operations or cash flows that may be reported for the remainder of the fiscal year ending December 31, 2019.

 

 

(b)

Principles of Consolidation and Variable Interest Entity

The condensed consolidated financial statements of the Company include TGH and all of its subsidiaries in which the Company has a controlling financial interest. All significant intercompany accounts and balances have been eliminated in consolidation.

TAP Funding

TAP Funding Ltd. (“TAP Funding”) (a Bermuda company) is a joint venture between the Company’s wholly-owned subsidiary, Textainer Limited (“TL”) (a Bermuda company) and TAP Ltd. (“TAP”) in which TL owns 50.1%, TAP owns 49.9% of the common shares of TAP Funding, and TAP Funding is a voting interest entity (“VME”).  The Company consolidates TAP Funding as the Company has a controlling financial interest in TAP Funding.

The equity owned by TAP in TAP Funding is shown as a noncontrolling interest on the Company’s condensed consolidated balance sheets and the net income attributable to the noncontrolling interest’s operations is shown as net income attributable to the noncontrolling interests on the Company’s condensed consolidated statements of comprehensive income.

TWCL

The Company had a joint venture, TW Container Leasing, Ltd. (“TW”) (a Bermuda company), between TL and Wells Fargo Container Corp. (“WFC”). TL owned 25% and WFC owned 75% of the common shares and related voting rights of TW. In October 2018, TL entered into an agreement to purchase 75% of the total outstanding common shares of TW from WFC for a cash consideration of $29,658. The Company accounted for this equity transaction as a reduction in the related noncontrolling interest.

Prior to the capital restructuring, the Company had determined that it had a variable interest in TW and that TW was a variable interest entity (“VIE”). The Company consolidated TW as the Company had determined that it was the primary beneficiary of TW by its equity ownership in the entity and by virtue of its role as manager of the vehicle, namely that the Company had the power to direct the activities of TW that most significantly impact TW’s economic performance.

8


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

After the capital restructuring which was effective on October 1, 2018, TW became a wholly-owned subsidiary or a VME of TL. Therefore, there is no noncontrolling interest in TW on the Company’s condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018. The TW net income attributable to the noncontrolling interests’ operations for the period ending March 31, 2018 is shown as net income attributable to the noncontrolling interests on the Company’s condensed consolidated statements of comprehensive income. There is no TW net income attributable to the noncontrolling interests’ operations for the period ending March 31, 2019 on the Company’s condensed consolidated statements of comprehensive income.

 

 

 

(c)

Containers

Capitalized container costs include the container cost payable to the manufacturer and the associated transportation costs incurred in moving the Company’s owned containers from the manufacturer to the containers’ first destined port. Containers are depreciated using the straight-line method over their estimated useful lives to an estimated dollar residual value. Used containers are depreciated based upon their remaining useful lives at the date of acquisition to an estimated dollar residual value.

The cost, accumulated depreciation and net book value of the Company’s container leasing equipment by equipment type as of March 31, 2019 and December 31, 2018 were as follows:

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Dry containers other than

   folding flat rack and open top

   containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' standard

 

$

1,625,272

 

 

$

(380,715

)

 

$

1,244,557

 

 

$

1,632,927

 

 

$

(381,929

)

 

$

1,250,998

 

40' standard

 

 

182,214

 

 

 

(65,309

)

 

 

116,905

 

 

 

191,354

 

 

 

(69,463

)

 

 

121,891

 

40' high cube

 

 

2,424,035

 

 

 

(550,411

)

 

 

1,873,624

 

 

 

2,376,975

 

 

 

(540,349

)

 

 

1,836,626

 

45' high cube dry van

 

 

28,699

 

 

 

(10,400

)

 

 

18,299

 

 

 

29,305

 

 

 

(10,034

)

 

 

19,271

 

Refrigerated containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' standard

 

 

20,716

 

 

 

(6,415

)

 

 

14,301

 

 

 

20,883

 

 

 

(6,153

)

 

 

14,730

 

20' high cube

 

 

5,135

 

 

 

(2,801

)

 

 

2,334

 

 

 

5,148

 

 

 

(2,714

)

 

 

2,434

 

40' high cube

 

 

1,066,085

 

 

 

(293,406

)

 

 

772,679

 

 

 

1,030,078

 

 

 

(279,661

)

 

 

750,417

 

Floating flat rack and open top containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' folding flat rack

 

 

17,477

 

 

 

(4,195

)

 

 

13,282

 

 

 

16,641

 

 

 

(4,068

)

 

 

12,573

 

40' folding flat rack

 

 

48,012