tgh-6k_20161231.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

February 16, 2017

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

 

 

 

 


This report contains a copy of the press release entitled “Textainer Group Holdings Limited Reports Fourth-Quarter and Full-Year Results,” dated February 16, 2017.

Exhibit

1.

Press Release dated February 16, 2017


Textainer Group Holdings Limited

Reports Fourth-Quarter and Full-Year Results

HAMILTON, Bermuda – (BUSINESS WIRE) – February 16, 2017 – Textainer Group Holdings Limited (NYSE: TGH) (“Textainer”, “the Company”, “we” and “our”), one of the world’s largest lessors of intermodal containers, reported fourth-quarter and full-year 2016 results.

Financial and Business Summaries

 

Lease rental income of $105.9 million for the quarter, a decrease of $19.1 million (or 15.3 percent) from the prior year quarter; $7.2 million of this reduction was due to lost rental income from Hanjin Shipping Co. (“Hanjin”). Lease rental income, adjusted for Hanjin decreased 9.5 percent from the prior year quarter;

 

Net loss attributable to Textainer Group Holdings Limited common shareholders of $0.3 million for the quarter, or $0.01 per diluted common share, a decrease of $45.6 million (or 99.2 percent) from the prior quarter;

 

Adjusted net loss (1) of $13.6 million for the quarter, or $0.24 per diluted common share, a decrease of $38.7 million (or 74.0 percent) from the prior quarter;

 

Net loss and adjusted net loss (1) attributable to Textainer Group Holdings Limited common shareholders of $50.7 million, or $0.89 per diluted common share and $56.1 million, or $0.99 per diluted common share, respectively, for the full year;

 

Recorded container impairments to write down our inventory of containers that are pending disposal to their fair value of $12.9 million (or $0.23 per diluted common share) for the quarter and $66.5 (or $1.17 per diluted common share) for the full year;

 

Financial impact for the full year as a result of the Hanjin bankruptcy was $53.3 million (or $0.94 per diluted common share), including a $12.1 million reduction of revenue for the full year;

 

Utilization averaged 94.3 percent for the quarter and is currently at 94.5 percent; and

 

Invested $480 million to purchase more than 286,000 TEU of new and used containers for the year.

  

“Our fourth quarter results improved significantly compared to the prior quarter, primarily due to improved market conditions and the prior quarter’s results being significantly impacted by Hanjin. Our adjusted net loss decreased by $38.7 million, compared to the prior quarter,” stated Philip K. Brewer, President and Chief Executive Officer of Textainer Group Holdings Limited.  “During 2016, we invested $480 million to purchase 286,000 TEU of new and used containers and our utilization remained high at 94.5 percent”.

“We are pleased with our progress recovering containers from Hanjin, who had been one of our major customers that filed for bankruptcy in August 2016.  To date we have recovered or are in the process of recovering 80 percent of the containers leased to Hanjin. We are also actively negotiating the release of another 13 percent of our containers although we do not know whether all negotiations will result in successful recoveries. The remaining 7 percent of containers are being recovered in small batches. At this time, we expect to recover around 90 percent of our containers. We have $80 million of insurance which we expect will substantially cover unrecovered containers, lost revenue and recovery and repair costs.”

“Our results were negatively affected by ongoing container impairments of $12.9 million for the quarter and $66.5 million for the full year due to low used container prices.  These impairments prompted our decision to reduce residual values for certain equipment types, effective July 1, 2016.  Subsequently, used container prices increased significantly causing the level of impairments to decline.  Impairments for containers held for disposal decreased 22 percent from an average of $5.5 million per month during the third quarter of 2016 to $4.3 million per month during the fourth quarter of 2016.”

“New container prices today are about $850 (or 70 percent) per CEU higher than they were at the low point last year.  Used container prices have increased 15 to 25 percent since September.  More importantly, rental rates and margins on new and depot container lease-outs have more than doubled to levels not seen for several years.  After adjusting for Hanjin recoveries, our lease-out to turn-in ratio for the fourth quarter was 1.8:1.0.  These are among the many positive signs we are currently seeing,” concluded Mr. Brewer.  


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

 

 

Q4 QTD

 

 

Full-year

 

 

 

2016

 

 

2015 (a)

 

 

% Change

 

 

2016

 

 

2015 (a)

 

 

% Change

 

Total revenues

 

$

120,075

 

 

$

129,691

 

 

 

-7.4

%

 

$

498,189

 

 

$

544,278

 

 

 

-8.5

%

Income from operations

 

$

9,658

 

 

$

38,041

 

 

 

-74.6

%

 

$

28,163

 

 

$

211,819

 

 

 

-86.7

%

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders

 

$

(346

)

 

$

21,673

 

 

 

-101.6

%

 

$

(50,662

)

 

$

108,408

 

 

 

-146.7

%

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders per diluted common share

 

$

(0.01

)

 

$

0.38

 

 

 

-102.6

%

 

$

(0.89

)

 

$

1.90

 

 

 

-146.8

%

Adjusted net (loss) income (1)

 

$

(13,609

)

 

$

12,941

 

 

 

-205.2

%

 

$

(56,132

)

 

$

110,171

 

 

 

-150.9

%

Adjusted net (loss) income per diluted common share (1)

 

$

(0.24

)

 

$

0.23

 

 

 

-204.3

%

 

$

(0.99

)

 

$

1.93

 

 

 

-151.3

%

Adjusted EBITDA (1)

 

$

86,189

 

 

$

104,476

 

 

 

-17.5

%

 

$

346,953

 

 

$

432,129

 

 

 

-19.7

%

Net cash provided by operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

286,089

 

 

$

371,958

 

 

 

-23.1

%

Average fleet utilization

 

 

94.3

%

 

 

95.7

%

 

 

-1.5

%

 

 

94.7

%

 

 

96.8

%

 

 

-2.2

%

Total fleet size at end of period (TEU)

 

 

3,142,556

 

 

 

3,147,690

 

 

 

-0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Owned percentage of total fleet at end of period

 

 

81.0

%

 

 

80.1

%

 

 

1.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Certain amounts for the periods ended December 31, 2015 have been restated for immaterial corrections of identified errors pertaining to the classification of certain leases. 

 

“Adjusted net (loss) income” and “adjusted EBITDA” are Non-GAAP Measures that are reconciled to GAAP measures in footnote 1. “Adjusted net (loss) income” is defined as net (loss) 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) losses on interest rate swaps, collars and caps, net and the related impact of reconciling items on income tax (benefit) expense and net income (loss) attributable to the non-controlling interests (“NCI”). “Adjusted EBITDA” is defined as net (loss) income attributable to Textainer Group Holdings Limited common shareholders before interest income and expense, realized and unrealized (gains) losses on interest rate swaps, collars and caps, net, income tax (benefit) expense, net income (loss) attributable to the NCI, depreciation expense, container impairment, amortization expense and the 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.

Fourth-Quarter and Full-Year Results

Lease rental income decreased 15.3 percent for the quarter and 10.3 percent for the year, from the prior year comparable periods. The decrease was due to a decrease in average rental rates, lower utilization and lost revenue from the Hanjin bankruptcy, partially offset by an increase in our owned fleet size.  Direct container expense also increased primarily due to an increase in storage costs resulting from lower utilization and higher storage rates.

In August 2016, Hanjin filed for bankruptcy. The Company maintains insurance to cover the value of containers that are unlikely to be recovered from its customers, the cost to recover containers, up to 183 days of lost lease rental income and a portion of the accounts receivable balance. Our 2016 results included a $17.4 million impairment to write down the carrying value of containers on terminated direct financing leases to Hanjin to their estimated fair market value. An impairment of $4.8 million was also recognized for $24.9 million of containers unlikely to be recovered, net of $20.1 million of anticipated insurance proceeds. These impairments net of estimated insurance proceeds totaled $22.1 million. In addition, bad debt expense of $19.0 million, net of insurance receivable of $2.6 million, was recorded in 2016 to fully reserve for Hanjin’s outstanding accounts receivable.

 

Based on the extended period of lower realized container resale prices and longer useful lives, we decreased the residual values and increased the useful lives of several container types, effective July 1, 2016. The decrease in estimated residual values and increase in estimated useful lives resulted in $10.2 million of additional depreciation expense in the fourth quarter of 2016 and $25.2 million for the second half of 2016, of which $4.4 million was a one-time charge for containers that were fully depreciated to the previous residual values.

In addition to the above mentioned factors, Textainer’s 2016 results included $12.9 million for the fourth quarter and $66.5 for the full year of container impairments to write down our inventory of containers that are pending disposal to their fair market value.

 

Outlook

“As we look to the rest of 2017, we see a number of positive trends that should help us turn the corner from a difficult 2016. Total new dry freight container production last year of 1.8 million TEU was not significantly higher than the 1.5 million TEU which were disposed, meaning the world’s container fleet barely grew. New dry freight container inventories at factories are currently near a historical low of 300,000 TEU and our inventory of unbooked depot containers is below 100,000 TEU. Utilization remains high throughout the industry.  These all bode well for a good supply-demand balance even if only modest trade growth materializes in 2017,” stated Mr. Brewer.


“Steel prices are 80 percent higher than they were one year ago which, combined with the switch to waterborne paint, should help support new container prices at their current level above $2,000.  The public container manufacturers all reported significant losses during the first half of 2016 and are focused on returning to profitability. Used container prices have increased significantly, especially in Asia. New container rental rates have increased to a greater degree than new container prices, demonstrating an improvement in margins, and depot lease-out rates have also improved.”

“However, we expect our 2017 results to continue to be negatively affected by the costs of recovering Hanjin containers, impairments of containers put to disposal, increased depreciation expense due to the recent changes to our depreciation policy and our expectation that our effective interest rate will increase. These factors are projected to result in accounting losses over the near term. Furthermore, the full impact of new container rental rates will only build over time as our fleet reprices and we put new containers on-lease. The important point is that our industry has passed the bottom of this cycle and is showing strong signs of recovery,” concluded Mr. Brewer.

Investors’ Conference Call and Webcast

Textainer will hold a conference call and a Webcast at 11:00 am EDT on Thursday, February 16, 2017 to discuss Textainer’s fourth quarter 2016 results. An archive of the Webcast will be available one hour after the live call through February 15, 2018. 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 44184538. To access the live Webcast or archive, please visit Textainer’s Investor Relations website at http://investor.textainer.com.

About Textainer Group Holdings Limited

Textainer has operated since 1979 and is one of the world’s largest lessors of intermodal containers with a total of 2.1 million containers representing 3.1 million TEU in our owned and managed fleet. We lease containers to approximately 320 customers, including all of the world’s leading international shipping lines, and other lessees. Our fleet consists of standard dry freight, dry freight specials, and refrigerated intermodal containers. We also lease tank containers through our relationship with Trifleet Leasing and are the primary supplier of containers to the U.S. Military. Textainer is one of the largest and most reliable suppliers of new and used containers. In addition to selling older containers from our lease fleet, we buy older containers from our shipping line customers for trading and resale. We sold an average of almost 120,000 containers per year for the last five years to more than 1,400 customers making us the largest seller of used containers. Textainer operates via a network of 14 offices and approximately 500 depots worldwide.



 

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 expectation that it will recover around 90 percent of its containers from Hanjin; (ii) Textainer’s belief that its insurance coverage will substantially cover Hanjin’s unrecovered containers, lost revenue and recovery and repair costs; (iii) Textainer’s belief that with steel prices 80 percent higher than they were one year ago, which combined with the switch to waterborne paint, should help support new container prices at their current level above $2,000; (iv) Textainer’s expectation that 2017 results  will continue to be negatively affected by the costs of recovering Hanjin containers, impairments of containers put to disposal and increased depreciation expense due to the recent changes to its depreciation policy; (v) Textainer’s expectation that it will have accounting losses over the near term; (vi) Textainer’s belief that the full impact of new container rental rates will only build over time as its fleet reprices and it puts new containers on-lease; and (vii) Textainer’s belief that its industry has passed the bottom of its cycle and is showing strong signs of recovery. 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 conditions; 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 decreases due to increased barriers to trade or political or economic factors, or for other reasons, it reduces demand for intermodal container leasing; as we increase the number of containers in our owned fleet, we increase our 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 which tends to depress returns; 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 11, 2016.

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.

Contact:

Textainer Group Holdings Limited

Hilliard C. Terry, III

Executive Vice President and Chief Financial Officer

Phone: +1 (415) 658-8214

ir@textainer.com

###

 

 


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months and Years ended December 31, 2016 and 2015

(Unaudited)

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

 

 

Three Months Ended December 31,

 

 

Years Ended December 31,

 

 

 

2016

 

 

2015 (1)

 

 

2016

 

 

2015 (1)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease rental income

 

 

 

 

 

$

105,870

 

 

 

 

 

 

$

125,008

 

 

 

 

 

 

$

459,588

 

 

 

 

 

 

$

512,544

 

Management fees

 

 

 

 

 

 

3,646

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

13,420

 

 

 

 

 

 

 

15,610

 

Trading container sales proceeds

 

 

 

 

 

 

6,525

 

 

 

 

 

 

 

1,338

 

 

 

 

 

 

 

15,628

 

 

 

 

 

 

 

12,670

 

Gains on sale of containers, net

 

 

 

 

 

 

4,034

 

 

 

 

 

 

 

(287

)

 

 

 

 

 

 

9,553

 

 

 

 

 

 

 

3,454

 

Total revenues

 

 

 

 

 

 

120,075

 

 

 

 

 

 

 

129,691

 

 

 

 

 

 

 

498,189

 

 

 

 

 

 

 

544,278

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct container expense

 

 

 

 

 

 

17,727

 

 

 

 

 

 

 

14,856

 

 

 

 

 

 

 

62,596

 

 

 

 

 

 

 

47,342

 

Cost of trading containers sold

 

 

 

 

 

 

4,999

 

 

 

 

 

 

 

1,268

 

 

 

 

 

 

 

15,904

 

 

 

 

 

 

 

12,475

 

Depreciation expense

 

 

 

 

 

 

63,530

 

 

 

 

 

 

 

51,726

 

 

 

 

 

 

 

236,144

 

 

 

 

 

 

 

191,930

 

Container impairment

 

 

 

 

 

 

14,125

 

 

 

 

 

 

 

15,211

 

 

 

 

 

 

 

94,623

 

 

 

 

 

 

 

35,345

 

Amortization expense

 

 

 

 

 

 

937

 

 

 

 

 

 

 

1,239

 

 

 

 

 

 

 

5,053

 

 

 

 

 

 

 

4,741

 

General and administrative expense

 

 

 

 

 

 

6,399

 

 

 

 

 

 

 

6,016

 

 

 

 

 

 

 

26,311

 

 

 

 

 

 

 

27,645

 

Short-term incentive compensation expense

 

 

 

 

 

 

1,174

 

 

 

 

 

 

 

(732

)

 

 

 

 

 

 

2,242

 

 

 

 

 

 

 

913

 

Long-term incentive compensation expense

 

 

 

 

 

 

1,423

 

 

 

 

 

 

 

2,199

 

 

 

 

 

 

 

5,987

 

 

 

 

 

 

 

7,040

 

Bad debt expense, net

 

 

 

 

 

 

103

 

 

 

 

 

 

 

(133

)

 

 

 

 

 

 

21,166

 

 

 

 

 

 

 

5,028

 

Total operating expenses

 

 

 

 

 

 

110,417

 

 

 

 

 

 

 

91,650

 

 

 

 

 

 

 

470,026

 

 

 

 

 

 

 

332,459

 

Income from operations

 

 

 

 

 

 

9,658

 

 

 

 

 

 

 

38,041

 

 

 

 

 

 

 

28,163

 

 

 

 

 

 

 

211,819

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

(23,972

)

 

 

 

 

 

 

(18,882

)

 

 

 

 

 

 

(85,215

)

 

 

 

 

 

 

(76,521

)

Interest income

 

 

 

 

 

 

126

 

 

 

 

 

 

 

35

 

 

 

 

 

 

 

408

 

 

 

 

 

 

 

125

 

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

 

 

 

 

 

 

(1,929

)

 

 

 

 

 

 

(3,241

)

 

 

 

 

 

 

(8,928

)

 

 

 

 

 

 

(12,823

)

Unrealized gains (losses) on interest rate swaps, collars and

   caps, net

 

 

 

 

 

 

15,252

 

 

 

 

 

 

 

10,106

 

 

 

 

 

 

 

6,210

 

 

 

 

 

 

 

(1,947

)

Other, net

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

 

26

 

Net other expense

 

 

 

 

 

 

(10,522

)

 

 

 

 

 

 

(11,981

)

 

 

 

 

 

 

(87,533

)

 

 

 

 

 

 

(91,140

)

(Loss) income before income tax and

    noncontrolling interests

 

 

 

 

 

 

(864

)

 

 

 

 

 

 

26,060

 

 

 

 

 

 

 

(59,370

)

 

 

 

 

 

 

120,679

 

Income tax benefit (expense)

 

 

 

 

 

 

1,094

 

 

 

 

 

 

 

(2,435

)

 

 

 

 

 

 

3,447

 

 

 

 

 

 

 

(6,695

)

Net (loss) income

 

 

 

 

 

 

230

 

 

 

 

 

 

 

23,625

 

 

 

 

 

 

 

(55,923

)

 

 

 

 

 

 

113,984

 

Less: Net (income) loss attributable to the noncontrolling

   interests

 

 

(576

)

 

 

 

 

 

 

(1,952

)

 

 

 

 

 

 

5,261

 

 

 

 

 

 

 

(5,576

)

 

 

 

 

Net (loss) income attributable to Textainer Group

   Holdings Limited common shareholders

 

$

(346

)

 

 

 

 

 

$

21,673

 

 

 

 

 

 

$

(50,662

)

 

 

 

 

 

$

108,408

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

 

 

 

 

$

0.38

 

 

 

 

 

 

$

(0.89

)

 

 

 

 

 

$

1.90

 

 

 

 

 

Diluted

 

$

(0.01

)

 

 

 

 

 

$

0.38

 

 

 

 

 

 

$

(0.89

)

 

 

 

 

 

$

1.90

 

 

 

 

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

56,690

 

 

 

 

 

 

 

56,832

 

 

 

 

 

 

 

56,608

 

 

 

 

 

 

 

56,953

 

 

 

 

 

Diluted

 

 

56,690

 

 

 

 

 

 

 

56,929

 

 

 

 

 

 

 

56,608

 

 

 

 

 

 

 

57,093

 

 

 

 

 

Other comprehensive loss (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

(151

)

 

 

 

 

 

 

(35

)

 

 

 

 

 

 

(233

)

 

 

 

 

 

 

(240

)

Comprehensive income (loss)

 

 

 

 

 

 

79

 

 

 

 

 

 

 

23,590

 

 

 

 

 

 

 

(56,156

)

 

 

 

 

 

 

113,744

 

Comprehensive (income) loss attributable to the

   noncontrolling interests

 

 

 

 

 

 

(576

)

 

 

 

 

 

 

(1,952

)

 

 

 

 

 

 

5,261

 

 

 

 

 

 

 

(5,576

)

Comprehensive (loss) income attributable to Textainer

   Group Holdings Limited common shareholders

 

 

 

 

 

$

(497

)

 

 

 

 

 

$

21,638

 

 

 

 

 

 

$

(50,895

)

 

 

 

 

 

$

108,168

 

 

(1) Certain amounts for the periods ended December 31, 2015 have been restated for immaterial corrections of identified errors pertaining to the classification of certain leases. 

 


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

December 31, 2016 and 2015

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

2016

 

 

2015 (1)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

84,045

 

 

$

115,594

 

Accounts receivable, net of allowance for doubtful accounts of $31,844 and $14,053 in 2016 and

   2015, respectively

 

 

75,708

 

 

 

88,370

 

Net investment in direct financing and sales-type leases

 

 

64,951

 

 

 

86,404

 

Trading containers

 

 

4,363

 

 

 

4,831

 

Containers held for sale

 

 

25,513

 

 

 

43,245

 

Prepaid expenses and other current assets

 

 

13,584

 

 

 

8,385

 

Insurance receivable

 

 

44,785

 

 

 

11,435

 

Due from affiliates, net

 

 

869

 

 

 

514

 

Total current assets

 

 

313,818

 

 

 

358,778

 

Restricted cash

 

 

58,078

 

 

 

33,917

 

Containers, net of accumulated depreciation of $990,784 and $814,790 at 2016 and

   2015, respectively

 

 

3,720,334

 

 

 

3,696,311

 

Net investment in direct financing and sales-type leases

 

 

172,283

 

 

 

245,388

 

Fixed assets, net of accumulated depreciation of $10,136 and $9,836 at 2016 and

   2015, respectively

 

 

1,993

 

 

 

1,663

 

Intangible assets, net of accumulated amortization of $40,762 and $35,709 at 2016 and

   2015, respectively

 

 

15,197

 

 

 

20,250

 

Interest rate swaps, collars and caps

 

 

4,816

 

 

 

814

 

Deferred taxes

 

 

1,385

 

 

 

1,203

 

Other assets

 

 

8,075

 

 

 

6,988

 

Total assets

 

$

4,295,979

 

 

$

4,365,312

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,060

 

 

$

10,477

 

Accrued expenses

 

 

9,721

 

 

 

6,816

 

Container contracts payable

 

 

11,990

 

 

 

41,356

 

Other liabilities

 

 

265

 

 

 

291

 

Due to owners, net

 

 

18,132

 

 

 

11,806

 

Credit facility

 

 

31,822

 

 

 

-

 

Secured debt facility

 

 

20,740

 

 

 

-

 

Term loan

 

 

30,771

 

 

 

31,097

 

Bonds payable

 

 

58,970

 

 

 

58,788

 

Total current liabilities

 

 

194,471

 

 

 

160,631

 

Credit facilities

 

 

1,085,196

 

 

 

1,013,252

 

Secured debt facilities

 

 

1,071,385

 

 

 

1,062,539

 

Term loan

 

 

363,961

 

 

 

403,500

 

Bonds payable

 

 

375,452

 

 

 

434,472

 

Interest rate swaps, collars and caps

 

 

1,204

 

 

 

3,412

 

Income tax payable

 

 

9,076

 

 

 

8,678

 

Deferred taxes

 

 

6,237

 

 

 

10,420

 

Other liabilities

 

 

2,259

 

 

 

2,523

 

Total liabilities

 

 

3,109,241

 

 

 

3,099,427

 

Equity:

 

 

 

 

 

 

 

 

Textainer Group Holdings Limited shareholders’ equity:

 

 

 

 

 

 

 

 

Common shares, $0.01 par value. Authorized 140,000,000 shares; 57,417,119 shares

   issued and 56,787,119 shares outstanding at 2016; 57,163,095 shares issued and

   56,533,095 shares outstanding at 2015

 

 

572

 

 

 

572

 

Additional paid-in capital

 

 

390,783

 

 

 

385,020

 

Treasury shares, at cost, 630,000 shares

 

 

(9,149

)

 

 

(9,149

)

Accumulated other comprehensive income

 

 

(516

)

 

 

(283

)

Retained earnings

 

 

746,057

 

 

 

825,473

 

Total Textainer Group Holdings Limited shareholders’ equity

 

 

1,127,747

 

 

 

1,201,633

 

Noncontrolling interest

 

 

58,991

 

 

 

64,252

 

Total equity

 

 

1,186,738

 

 

 

1,265,885

 

Total liabilities and equity

 

$

4,295,979

 

 

$

4,365,312

 

 

 

 

 

 

 

 

 

 

(1) Amounts as of December 31, 2015 have been restated for immaterial corrections of identified errors pertaining to the classification of certain leases.

 


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Years ended December 31, 2016 and 2015

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

2016

 

 

2015 (1)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(55,923

)

 

$

113,984

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

236,144

 

 

 

191,930

 

Container impairment

 

 

94,623

 

 

 

35,345

 

Bad debt expense, net

 

 

21,166

 

 

 

5,028

 

Unrealized losses on interest rate swaps, collars and caps, net

 

 

(6,210

)

 

 

1,947

 

Amortization of debt issuance costs and accretion of bond discount

 

 

9,704

 

 

 

7,887

 

Amortization of intangible assets

 

 

5,053

 

 

 

4,741

 

Gains on sale of containers, net

 

 

(9,553

)

 

 

(3,454

)

Share-based compensation expense

 

 

6,573

 

 

 

7,743

 

Changes in operating assets and liabilities

 

 

(15,488

)

 

 

6,807

 

Total adjustments

 

 

342,012

 

 

 

257,974

 

Net cash provided by operating activities

 

 

286,089

 

 

 

371,958

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of containers and fixed assets

 

 

(505,528

)

 

 

(533,306

)

Proceeds from sale of containers and fixed assets

 

 

126,560

 

 

 

129,452

 

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

 

 

90,343

 

 

 

98,227

 

Net cash used in investing activities

 

 

(288,625

)

 

 

(305,627

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from credit facilities

 

 

349,500

 

 

 

406,177

 

Principal payments on credit facilities

 

 

(245,529

)

 

 

(331,447

)

Proceeds from secured debt facilities

 

 

233,000

 

 

 

160,000

 

Principal payments on secured debt facilities

 

 

(206,040

)

 

 

(107,600

)

Principal payments on term loan

 

 

(39,787

)

 

 

(39,600

)

Principal payments on bonds payable

 

 

(60,230

)

 

 

(60,230

)

(Increase) decrease in restricted cash

 

 

(24,161

)

 

 

26,393

 

Purchases of treasury shares

 

 

 

 

 

(9,149

)

Debt issuance costs

 

 

(5,969

)

 

 

(5,853

)

Issuance of common shares upon exercise of share options

 

 

 

 

 

301

 

Net tax benefit from share-based compensation awards

 

 

(810

)

 

 

(1,333

)

Capital contributions from noncontrolling interest

 

 

 

 

 

1,850

 

Dividends paid to Textainer Group Holdings Limited shareholders

 

 

(28,754

)

 

 

(94,079

)

Dividends paid to noncontrolling interest

 

 

 

 

 

(2,994

)

Net cash used in financing activities

 

 

(28,780

)

 

 

(57,564

)

Effect of exchange rate changes

 

 

(233

)

 

 

(240

)

Net (decrease) increase in cash and cash equivalents

 

 

(31,549

)

 

 

8,527

 

Cash and cash equivalents, beginning of the year

 

 

115,594

 

 

 

107,067

 

Cash and cash equivalents, end of the year

 

$

84,045

 

 

$

115,594

 

 

(1) Certain amounts for the year ended December 31, 2015 have been restated for immaterial corrections of identified errors pertaining to the classification of certain leases. 

 


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Reconciliation of GAAP financial measures to non-GAAP financial measures

Three Months and Years Ended December 31, 2016 and 2015

(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 months and years ended December 31, 2016 and 2015, including:

 

(a)

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

 

(b)

net cash provided by operating activities to Adjusted EBITDA;

 

(c)

net (loss) income attributable to Textainer Group Holdings Limited common shareholders to adjusted net (loss) income (defined as net (loss) income attributable to Textainer Group Holdings Limited common shareholders before the write-off of unamortized debt issuance costs, unrealized (gains) losses on interest rate swaps, collars and caps, net, the related impact of reconciling items on income tax (benefit) expense and net income (loss) attributable to the NCI); and

 

(d)

net (loss) income attributable to Textainer Group Holdings Limited common shareholders per diluted common share to adjusted net (loss) income per diluted common share (defined as net (loss) income attributable to Textainer Group Holdings Limited common shareholders per diluted common share before the write-off of unamortized debt issuance costs, unrealized (gains) losses on interest rate swaps, collars and caps, net, the related impact of reconciling items on income tax (benefit) expense and net income (loss) 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 (loss) 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 (loss) 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) losses 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 (loss) income per diluted common share are useful in evaluating our operating performance because unrealized (gains) losses 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 (loss) income or adjusted net (loss) 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

 

 

Years Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2016

 

 

2015 (1)

 

 

2016

 

 

2015 (1)

 

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Reconciliation of adjusted net (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders

 

$

(346

)

 

$

21,673

 

 

$

(50,662

)

 

$

108,408

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of unamortized debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

458

 

Unrealized (gains) losses on interest rate swaps, collars and caps, net

 

 

(15,252

)

 

 

(10,106

)

 

 

(6,210

)

 

 

1,947

 

Impact of reconciling items on income tax benefit (expense)

 

 

253

 

 

 

464

 

 

 

104

 

 

 

(129

)

Impact of reconciling items on net income (loss) attributable to

   the noncontrolling interests

 

 

1,736

 

 

 

910

 

 

 

636

 

 

 

(513

)

Adjusted net (loss) income

 

$

(13,609

)

 

$

12,941

 

 

$

(56,132

)

 

$

110,171

 

Reconciliation of adjusted net (loss) income per diluted common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders per diluted common share

 

$

(0.01

)

 

$

0.38

 

 

$

(0.89

)

 

$

1.90

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of unamortized debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Unrealized (gains) losses on interest rate swaps, collars and caps, net

 

 

(0.26

)

 

 

(0.18

)

 

 

(0.11

)

 

 

0.03

 

Impact of reconciling items on income tax benefit (expense)

 

 

 

 

 

0.01

 

 

 

 

 

 

-

 

Impact of reconciling items on net income (loss) attributable to

   the noncontrolling interests

 

 

0.03

 

 

 

0.02

 

 

 

0.01

 

 

 

(0.01

)

Adjusted net (loss) income per diluted common share

 

$

(0.24

)

 

$

0.23

 

 

$

(0.99

)

 

$

1.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Certain amounts for the periods ended December 31, 2015 have been restated for immaterial corrections of identified errors pertaining to the classification of certain leases.

 


 

 

Three Months Ended

 

 

Years Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2016

 

 

2015 (1)

 

 

2016

 

 

2015 (1)

 

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Reconciliation of adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders

 

$

(346

)

 

$

21,673

 

 

$

(50,662

)

 

$

108,408

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(126

)

 

 

(35

)

 

 

(408

)

 

 

(125

)

Interest expense

 

 

23,972

 

 

 

18,882

 

 

 

85,215

 

 

 

76,521

 

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

 

 

1,929

 

 

 

3,241

 

 

 

8,928

 

 

 

12,823

 

Unrealized (gains) losses on interest rate swaps, collars and caps, net

 

 

(15,252

)

 

 

(10,106

)

 

 

(6,210

)

 

 

1,947

 

Income tax (benefit) expense

 

 

(1,094

)

 

 

2,435

 

 

 

(3,447

)

 

 

6,695

 

Net income (loss) attributable to the noncontrolling interests

 

 

576

 

 

 

1,952

 

 

 

(5,261

)

 

 

5,576

 

Depreciation expense

 

 

63,530

 

 

 

51,726

 

 

 

236,144

 

 

 

191,930

 

Container impairment

 

 

14,125

 

 

 

15,211

 

 

 

94,623

 

 

 

35,345

 

Amortization expense

 

 

937

 

 

 

1,239

 

 

 

5,053

 

 

 

4,741

 

Impact of reconciling items on net income (loss) attributable to

   the noncontrolling interests

 

 

(2,062

)

 

 

(1,742

)

 

 

(17,022

)

 

 

(11,732

)

Adjusted EBITDA

 

$

86,189

 

 

$

104,476

 

 

$

346,953

 

 

$

432,129

 

Net cash provided by operating activities

 

 

 

 

 

 

 

 

 

$

286,089

 

 

$

371,958

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bad debt expense, net

 

 

 

 

 

 

 

 

 

 

(21,166

)

 

 

(5,028

)

Amortization of debt issuance costs and accretion of bond

   discount

 

 

 

 

 

 

 

 

 

 

(9,704

)

 

 

(7,887

)

Gains on sale of containers, net

 

 

 

 

 

 

 

 

 

 

9,553

 

 

 

3,454

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(6,573

)

 

 

(7,743

)

Interest income

 

 

 

 

 

 

 

 

 

 

(408

)

 

 

(125

)

Interest expense

 

 

 

 

 

 

 

 

 

 

85,215

 

 

 

76,521

 

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

 

 

 

 

 

 

 

 

 

 

8,928

 

 

 

12,823

 

Income tax (benefit) expense

 

 

 

 

 

 

 

 

 

 

(3,447

)

 

 

6,695

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

 

15,488

 

 

 

(6,807

)

Impact of reconciling items on net income (loss) attributable to

   the noncontrolling interests

 

 

 

 

 

 

 

 

 

 

(17,022

)

 

 

(11,732

)

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

$

346,953

 

 

$

432,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Certain amounts for the periods ended December 31, 2015 have been restated for immaterial corrections of identified errors pertaining to the classification of certain leases.

 

 

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 16, 2017

 

Textainer Group Holdings Limited

 

/s/ PHILIP K. BREWER

Philip K. Brewer

President and Chief Executive Officer