-
Lease rental income increased 6.6 percent from the prior year to
$120.7 million ; -
Adjusted net income(1) of
$59.1 million for the quarter, which included a$22.7 million discrete income tax benefit following the completion of anIRS examination; -
Declared a quarterly dividend of
$0.47 per share; -
Continued our strong pace of expansion with more than
$284 million of capex during the quarter; - Increased total fleet size by 8.6 percent year-over-year and the percentage of the total fleet that is owned by 4.3 percent over last year to 76 percent; and
- Achieved average utilization of 94.4 percent during the quarter and 94.7 percent currently.
“Our first quarter results marked a solid start to the year. Lease
rental income grew by 7 percent year over year to
“Rental rates remain under pressure. New container prices fell from
around
“We invested more than
Business Highlights:
-
Textainer acquired 30,000 TEU of standard dry freight containers from our managed fleet inJanuary 2014 for$35 million , increasing the owned percentage of the total fleet to approximately 76 percent, the highest percentage in Company history; -
The Company reduced its funding costs by 50 basis points
year-over-year. Subsequent to the end of the quarter the Company
announced a
$500 million term loan to refinance the debt in its oldest asset-backed trust,Textainer Marine Containers Limited (“TMCL”). This term loan will further lower Textainer’s funding costs and free up cash to be used for additional container purchases or other purposes; and -
Beginning in 2014,
Textainer will calculate earnings and profits under U.S. federal income tax principles for purposes of determining whether distributions to shareholders exceed the Company’s current and accumulated earnings and profits, which will cause some or all of Textainer’s 2014 distributions to be treated as a return of capital by U.S. shareholders.
Key Financial Information (in thousands except for per share and TEU amounts): |
|||||||||||
Q1 QTD | |||||||||||
2014 | 2013 | % Change | |||||||||
Total revenues | $ | 135,422 | $ | 128,763 | 5.2 | % | |||||
Income from operations | $ | 64,340 | $ | 76,070 | -15.4 | % | |||||
Net income attributable to Textainer Group Holdings Limited common shareholders | $ | 59,649 | $ | 48,334 | 23.4 | % | |||||
Net income attributable to Textainer Group Holdings Limited common
shareholders
per diluted common share |
$ | 1.05 | $ | 0.85 | 23.5 | % | |||||
Adjusted net income(1) | $ | 59,104 | $ | 46,122 | 28.1 | % | |||||
Adjusted net income per diluted common share(1) | $ | 1.04 | $ | 0.81 | 28.4 | % | |||||
Adjusted EBITDA(1) | $ | 103,412 | $ | 108,540 | -4.7 | % | |||||
Average fleet utilization | 94.4 | % | 95.7 | % | -1.4 | % | |||||
Total fleet size at end of period (TEU) | 3,049,244 | 2,808,690 | 8.6 | % | |||||||
Owned percentage of total fleet at end of period | 76.4 | % | 73.3 | % | 4.3 | % | |||||
“Adjusted net income” and “adjusted EBITDA” are Non-GAAP Measures that
are reconciled to GAAP measures in footnote 1. “Adjusted net income” is
defined as net income attributable to
Effective
First-Quarter Results:
Textainer’s first-quarter financial results benefited from higher
revenue due to an increase in the average size of the owned container
fleet. The Company’s higher revenue for the first quarter was offset by
an increase in depreciation expense due to the larger owned fleet, lower
gains on sale of containers, net and higher direct container expense due
to lower utilization and a larger fleet size. The first-quarter
financial results included a one-time
Dividend
On
"Each quarter our board evaluates our dividend taking into account the investment needed for growth opportunities available to us, returns inherent in those opportunities and our long-term funding needs," commented Mr. Brewer. “Our current dividend level reflects our comfort with the stability of our business and our strong cash flow, and enables us to balance investing for growth with providing an attractive return to shareholders. The Board will continue to evaluate this strategy each quarter, keeping in mind the desire to deliver strong total shareholder return."
Outlook
“Container demand in April exceeded February and March combined. However, we believe that some of the demand in April was related to a desire by shippers to ship their cargo prior to new freight rate increases taking effect at the start of May. We continue to operate in a very competitive environment. Yields on new container lease-outs and used container prices are at their lowest levels of the last several years, resulting in lower returns and gains on sale of trading and in-fleet containers,” commented Mr. Brewer. “With 84 percent of our fleet subject to long-term and finance leases and less than 4 percent of our total fleet subject to long-term leases that will expire this year, we predict utilization will remain at or near its current level. We also expect to continue to see purchase leaseback opportunities, but the market remains very competitive.”
“On the financing front, our new term loan will further reduce our
funding costs and free up cash to be used for additional container
purchases or other purposes. Funding costs have declined 50 basis points
compared to the prior year quarter. Interest expense during the second
quarter will include the write-off of approximately
“We are cautiously optimistic that we will continue to see increased seasonal demand through the end of the second quarter and into the third quarter. We do not expect new container prices to increase and believe used container prices will continue to decline or stabilize. Even though we expect shipping lines to rely on lessors for more than half of their container needs in 2014, container rental rates will remain under pressure due to the easy access to financing for all container lessors no matter their size and to the quick turn-around times at most container factories . Assuming the pick-up in demand we are currently seeing continues through the traditional third quarter seasonal peak, we expect our normalized performance to show a quarter-to-quarter improvement.”
Investors’ Webcast
About
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 prediction
that utilization will remain at or near its current level; (ii)
Textainer’s expectation that it will continue to see purchase leaseback
opportunities; (iii) Textainer’s belief that it is well positioned for
2014 with a conservative 2.3 times leverage ratio and access to
additional financing, if needed, to provide operational flexibility;
(iv) Textainer’s belief that it will continue to see increased seasonal
demand through the end of the second quarter and into the third quarter;
(v) Textainer’s expectation that new container prices will not increase
and that used container prices will continue to decline or stabilize;
(vi) Textainer’s expectation that shipping lines will rely on lessors
for more than half of their container needs in 2014 and that container
rental rates will remain under pressure due to the easy access to
financing for all container lessors no matter their size and to the
quick turn-around times at most container factories; and (viii)
Textainers expectation that its normalized performance will show a
quarter-to-quarter improvement assuming the pick-up in demand that it is
currently seeing continues through the traditional third quarter
seasonal peak. 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 GROUP HOLDINGS LIMITED AND SUBSIDIARIES | ||||||||||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||||
Three Months Ended March 31, 2014 and 2013 |
||||||||||||||||
(Unaudited) | ||||||||||||||||
(All currency expressed in United States dollars in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||
2014 | 2013 | |||||||||||||||
Revenues: | ||||||||||||||||
Lease rental income | $ | 120,654 | $ | 113,227 | ||||||||||||
Management fees | 4,401 | 5,283 | ||||||||||||||
Trading container sales proceeds | 6,840 | 2,793 | ||||||||||||||
Gains on sale of containers, net | 3,527 | 7,460 | ||||||||||||||
Total revenues | 135,422 | 128,763 | ||||||||||||||
Operating expenses: | ||||||||||||||||
Direct container expense | 12,282 | 9,004 | ||||||||||||||
Cost of trading containers sold | 7,075 | 2,465 | ||||||||||||||
Depreciation expense and container impairment | 40,415 | 32,683 | ||||||||||||||
Amortization expense | 953 | 1,087 | ||||||||||||||
General and administrative expense | 6,699 | 6,437 | ||||||||||||||
Short-term incentive compensation expense | 695 | 687 | ||||||||||||||
Long-term incentive compensation expense | 1,558 | 1,080 | ||||||||||||||
Bad debt expense (recovery), net | 1,405 | (750 | ) | |||||||||||||
Total operating expenses | 71,082 | 52,693 | ||||||||||||||
Income from operations | 64,340 | 76,070 | ||||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (22,189 | ) | (21,629 | ) | ||||||||||||
Interest income | 30 | 38 | ||||||||||||||
Realized losses on interest rate swaps and caps, net | (2,022 | ) | (2,390 | ) | ||||||||||||
Unrealized gains on interest rate swaps, collars and caps, net | 516 | 2,287 | ||||||||||||||
Other, net | (7 | ) | (19 | ) | ||||||||||||
Net other expense | (23,672 | ) | (21,713 | ) | ||||||||||||
Income before income tax and noncontrolling interest | 40,668 | 54,357 | ||||||||||||||
Income tax benefit (expense) | 20,305 | (4,541 | ) | |||||||||||||
Net income | 60,973 | 49,816 | ||||||||||||||
Less: Net income attributable to the noncontrolling interest | (1,324 | ) | (1,482 | ) | ||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders |
$ | 59,649 | $ | 48,334 | ||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders per share: |
||||||||||||||||
Basic | $ | 1.05 | $ | 0.86 | ||||||||||||
Diluted | $ | 1.05 | $ | 0.85 | ||||||||||||
Weighted average shares outstanding (in thousands): | ||||||||||||||||
Basic | 56,648 | 56,228 | ||||||||||||||
Diluted | 57,030 | 56,955 | ||||||||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustments | 31 | (97 | ) | |||||||||||||
Comprehensive income | 61,004 | 49,719 | ||||||||||||||
Comprehensive income attributable to the noncontrolling interest |
(1,324 | ) | (1,482 | ) | ||||||||||||
Comprehensive income attributable to Textainer Group Holdings Limited common shareholders |
$ | 59,680 | $ | 48,237 | ||||||||||||
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES | ||||||
Condensed Consolidated Balance Sheets | ||||||
March 31, 2014 and December 31, 2013 | ||||||
(Unaudited) | ||||||
(All currency expressed in United States dollars in thousands) | ||||||
2014 | 2013 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 90,515 | $ | 120,223 | ||
Accounts receivable, net of allowance for doubtful accounts of $16,030 and $14,891 in 2014 and 2013, respectively |
90,226 | 91,967 | ||||
Net investment in direct financing and sales-type leases | 70,956 | 64,811 | ||||
Trading containers | 12,709 | 13,009 | ||||
Containers held for sale | 30,876 | 31,968 | ||||
Prepaid expenses | 17,792 | 19,063 | ||||
Deferred taxes | 1,508 | 1,491 | ||||
Total current assets | 314,582 | 342,532 | ||||
Restricted cash | 56,615 | 63,160 | ||||
Containers, net of accumulated depreciation of $592,794 and $562,456 at 2014 and 2013, respectively |
3,342,396 | 3,233,131 | ||||
Net investment in direct financing and sales-type leases | 232,994 | 217,310 | ||||
Fixed assets, net of accumulated depreciation of $8,548 and $8,286 at 2014 and 2013, respectively |
1,700 | 1,635 | ||||
Intangible assets, net of accumulated amortization of $32,141 and $31,188 at 2014 and 2013, respectively |
28,147 | 29,157 | ||||
Interest rate swaps, collars and caps | 1,519 | 1,831 | ||||
Other assets | 18,312 | 20,227 | ||||
Total assets | $ | 3,996,265 | $ | 3,908,983 | ||
Liabilities and Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 7,085 | $ | 8,086 | ||
Accrued expenses | 9,208 | 9,838 | ||||
Container contracts payable | 56,703 | 22,819 | ||||
Deferred revenue and other liabilities | 338 | 345 | ||||
Due to owners, net | 10,210 | 12,775 | ||||
Bonds payable | 161,315 | 161,307 | ||||
Total current liabilities | 244,859 | 215,170 | ||||
Revolving credit facilities | 870,734 | 860,476 | ||||
Secured debt facilities | 880,600 | 808,600 | ||||
Bonds payable | 796,568 | 836,901 | ||||
Interest rate swaps, collars and caps | 3,166 | 3,994 | ||||
Income tax payable | 6,075 | 16,050 | ||||
Deferred taxes | 5,591 | 19,166 | ||||
Other liabilities | 3,053 | 3,132 | ||||
Total liabilities | 2,810,646 | 2,763,489 | ||||
Equity: | ||||||
Textainer Group Holdings Limited shareholders' equity: | ||||||
Common shares, $0.01 par value. Authorized 140,000,000 shares; issued and outstanding 56,656,322 and 56,450,580 at 2014 and 2013, respectively |
564 | 564 | ||||
Additional paid-in capital | 369,694 | 366,197 | ||||
Accumulated other comprehensive income | 100 | 69 | ||||
Retained earnings | 764,016 | 730,993 | ||||
Total Textainer Group Holdings Limited shareholders’ equity | 1,134,374 | 1,097,823 | ||||
Noncontrolling interest | 51,245 | 47,671 | ||||
Total equity | 1,185,619 | 1,145,494 | ||||
Total liabilities and equity | $ | 3,996,265 | $ | 3,908,983 | ||
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
Three Months Ended March 31, 2014 and 2013 | ||||||||
(Unaudited) | ||||||||
(All currency expressed in United States dollars in thousands) | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 60,973 | $ | 49,816 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation expense and container impairment | 40,415 | 32,683 | ||||||
Bad debt expense (recovery), net | 1,405 | (750 | ) | |||||
Unrealized gains on interest rate swaps, collars and caps, net | (516 | ) | (2,287 | ) | ||||
Amortization of debt issuance costs and accretion of bond discount | 2,951 | 2,743 | ||||||
Amortization of intangible assets | 953 | 1,087 | ||||||
Amortization of deferred revenue | - | (674 | ) | |||||
Gains on sale of containers, net | (3,527 | ) | (7,460 | ) | ||||
Share-based compensation expense | 1,826 | 1,255 | ||||||
Changes in operating assets and liabilities | (26,905 | ) | (6,106 | ) | ||||
Total adjustments | 16,602 | 20,491 | ||||||
Net cash provided by operating activities | 77,575 | 70,307 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of containers and fixed assets | (180,412 | ) | (229,419 | ) | ||||
Proceeds from sale of containers and fixed assets | 31,180 | 26,737 | ||||||
Receipt of payments on direct financing and sales-type leases, net of income earned |
16,218 | 12,386 | ||||||
Net cash used in investing activities | (133,014 | ) | (190,296 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from revolving credit facilities | 68,840 | 136,978 | ||||||
Principal payments on revolving credit facilities | (58,582 | ) | (3,981 | ) | ||||
Proceeds from secured debt facilities | 90,000 | 30,000 | ||||||
Principal payments on secured debt facilities | (18,000 | ) | (12,500 | ) | ||||
Principal payments on bonds payable | (40,398 | ) | (32,874 | ) | ||||
Decrease in restricted cash | 6,545 | 359 | ||||||
Issuance of common shares upon exercise of share options | 601 | 1,221 | ||||||
Excess tax benefit from share-based compensation awards | 1,070 | 2,065 | ||||||
Capital contributions from noncontrolling interests | 2,250 | 975 | ||||||
Dividends paid | (26,626 | ) | (25,313 | ) | ||||
Net cash provided by financing activities | 25,700 | 96,930 | ||||||
Effect of exchange rate changes | 31 | (97 | ) | |||||
Net decrease in cash and cash equivalents | (29,708 | ) | (23,156 | ) | ||||
Cash and cash equivalents, beginning of the year | 120,223 | 100,127 | ||||||
Cash and cash equivalents, end of period | $ | 90,515 | $ | 76,971 | ||||
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES |
||
Reconciliation of GAAP financial measures to non-GAAP financial measures | ||
Three Months Ended March 31, 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 months ended March 31, 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 interest expense, realized and unrealized losses (gains) on interest rate swaps, collars and caps, net, income tax (benefit) expense, 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 unrealized gains on interest rate swaps, collars and caps, net and the related impact of reconciling item 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 unrealized gains on interest rate swaps, collars and caps, net and the related impact of reconciling item 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
Management also believes that adjusted net income and adjusted net income per diluted common share are useful in evaluating our operating performance because unrealized 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.
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
(Dollars in thousands) | ||||||||
(Unaudited) | ||||||||
Reconciliation of adjusted net income: | ||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders | $ | 59,649 | $ | 48,334 | ||||
Adjustments: | ||||||||
Unrealized gains on interest rate swaps, collars and caps, net | (516 | ) | (2,287 | ) | ||||
Impact of reconciling item on net income attributable to the noncontrolling interests | (29 | ) | 75 | |||||
Adjusted net income | $ | 59,104 | $ | 46,122 | ||||
Reconciliation of adjusted net income per diluted common share: | ||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share | $ | 1.05 | $ | 0.85 | ||||
Adjustments: | ||||||||
Unrealized gains on interest rate swaps, collars and caps, net | (0.01 | ) | (0.04 | ) | ||||
Impact of reconciling item on net income attributable to the noncontrolling interests | - | - | ||||||
Adjusted net income per diluted common share | $ | 1.04 | $ | 0.81 | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
(Dollars in thousands) | ||||||||
(Unaudited) | ||||||||
Reconciliation of adjusted EBITDA: | ||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders |
$ | 59,649 | $ | 48,334 | ||||
Adjustments: | ||||||||
Interest income | (30 | ) | (38 | ) | ||||
Interest expense | 22,189 | 21,629 | ||||||
Realized losses on interest rate swaps and caps, net | 2,022 | 2,390 | ||||||
Unrealized gains on interest rate swaps, collars and caps, net | (516 | ) | (2,287 | ) | ||||
Income tax (benefit) expense | (20,305 | ) | 4,541 | |||||
Net income attributable to the noncontrolling interest | 1,324 | 1,482 | ||||||
Depreciation expense and container impairment | 40,415 | 32,683 | ||||||
Amortization expense | 953 | 1,087 | ||||||
Impact of reconciling items on net income attributable to the noncontrolling interests | (2,289 | ) | (1,281 | ) | ||||
Adjusted EBITDA | $ | 103,412 | $ | 108,540 | ||||
Net cash provided by operating activities | $ | 77,575 | $ | 70,307 | ||||
Adjustments: | ||||||||
Bad debt expense (recovery), net | (1,405 | ) | 750 | |||||
Amortization of debt issuance costs and accretion of bond discount | (2,951 | ) | (2,743 | ) | ||||
Amortization of deferred revenue | - | 674 | ||||||
Gains on sale of containers, net | 3,527 | 7,460 | ||||||
Share-based compensation expense | (1,826 | ) | (1,255 | ) | ||||
Interest income | (30 | ) | (38 | ) | ||||
Interest expense | 22,189 | 21,629 | ||||||
Realized losses on interest rate swaps and caps, net | 2,022 | 2,390 | ||||||
Income tax (benefit) expense | (20,305 | ) | 4,541 | |||||
Changes in operating assets and liabilities | 26,905 | 6,106 | ||||||
Impact of reconciling items on net income attributable to the noncontrolling interests | (2,289 | ) | (1,281 | ) | ||||
Adjusted EBITDA | $ | 103,412 | $ | 108,540 |
Source:
Textainer Group Holdings Limited
Hilliard C. Terry, III, +1
415-658-8214
Executive Vice President and Chief Financial Officer
ir@textainer.com