HAMILTON, Bermuda--(BUSINESS WIRE)--Aug. 6, 2014-- Textainer Group Holdings Limited (NYSE:TGH) (“Textainer”, “the Company”, “we” and “our”), the world’s largest lessor of intermodal containers based on fleet size, reported second-quarter 2014 results.

Financial and Business Highlights:

• Utilization increased 2 percentage points during the quarter to end at 95.6 percent, and is currently at 96.3 percent;
• Lease rental income increased 7.2 percent from the prior year to $123.6 million;
• Adjusted net income⁽¹⁾ of $40.2 million for the quarter, or $0.70 per share;
• Declared a quarterly dividend of $0.47 per share;
• Continued our strong pace of expansion with more than $658 million invested for delivery in 2014 and $598 million of capex year-to-date; and
• Increased total fleet size by 7 percent year-over-year to 3.1 million Twenty-Foot Equivalent Units (“TEU”).

“We are pleased with our second quarter results. Utilization has increased almost 3% since its low point in the first quarter and this positive trend is continuing into the third quarter,” commented Philip K. Brewer, President and Chief Executive Officer of Textainer. “Lease rental income grew by 7 percent year over year to $124 million, primarily due to our larger owned fleet.

“We continue to see pressure on rental rates due to the high level of liquidity among container lessors and the low level of new container prices and interest rates. We also see reduced gains on container sales due to the declines in used container prices. We expect these conditions to continue for the near term. Our profitability was negatively affected by these factors.

“We remain the lowest cost operator among our public peers and we have lowered our financing costs. The economies of scale created by our size enable us to grow without adding significantly to our overhead. As a result, we continue to provide above average returns in both good and challenging markets.

“We invested $598 million year-to-date, purchasing more than 314,000 TEU including new, purchase leaseback and previously managed containers. Our fleet has grown by 7 percent over the past 12 months to over 3 million TEU. We believe new container prices are close to the cost of production and that returns on containers purchased at today’s prices can be expected to increase over time as the containers depreciate and especially if interest rates and/or new container prices rise,” concluded Mr. Brewer.

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

“Adjusted net income” and “adjusted EBITDA” are Non-GAAP Measures that are reconciled to GAAP measures in footnote 1. “Adjusted net income” is defined as net income attributable to Textainer Group Holdings Limited common shareholders before a $6.4 million charge to interest expense for the write-off of unamortized debt issuance costs related to refinancing of debt, unrealized losses (gains) on interest rate swaps, collars and caps, net, the related impact of reconciling items on income tax expense and the related impact of reconciling items on net income attributable to the noncontrolling interest (“NCI”). “Adjusted EBITDA” is defined as net income attributable to Textainer Group Holdings Limited common shareholders before interest income and expense, realized and unrealized losses (gains) on interest rate swaps, collars and caps, net, income tax expense (benefit), net income attributable to the NCI, depreciation expense and container impairment, amortization expense and the related impact of reconciling items on net income attributable to the NCI. Footnote 1 provides certain qualifications and limitations on the use of Non-GAAP Measures.

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

Second-Quarter Results:

Textainer’s second-quarter financial results benefited from higher revenue due to an increase in the average size of the owned container fleet and an increase in utilization for the owned fleet. The Company’s higher revenue for the second quarter was offset by an increase in depreciation expense due to the larger owned fleet, higher interest expense due to the $6.4 million write-off of unamortized debt issuance costs related to the refinancing of debt, lower gains on sale of containers, net and higher direct container expense due to an increase in repair and recovery costs for slow-paying and bankrupt lessees and a larger fleet size, partially offset by higher utilization.

During the second quarter the Company entered into a $500 million term loan, the proceeds of which were primarily used to refinance asset-backed debt. This term loan will further lower Textainer’s funding costs and free up cash to be used for additional container purchases or other purposes. As a result of the recent refinancing, the Company reduced its funding costs by 39 basis points year-over-year. Our average interest rate for the quarter was 3.39% (including interest rate hedging costs and excluding write-off of unamortized debt issuance costs).

Dividend

On July 30, 2014, Textainer’s board of directors approved and declared a quarterly cash dividend of $0.47 per share on Textainer’s issued and outstanding common shares, payable on August 27, 2014 to shareholders of record as of August 18, 2014.

Outlook

“During the second quarter we saw a strong increase in container demand which we expect to continue through the third quarter. However, the pressure on rental rates will remain. Returns on new container investments have declined and are unlikely to return to previous levels. We do not expect new or used container prices to increase in the short term. Used container prices could decline further although they appear to be nearing a bottom”, continued Mr. Brewer. “We expect to show improved results in the third quarter as we benefit from the expected continued increase in utilization, booked containers being picked-up and a full quarter of both higher lease-outs and lower funding costs.”

Investors’ Webcast

Textainer will hold a conference call and a Webcast at 11:00 am EDT on Thursday, August 7, 2014 to discuss Textainer’s second quarter 2014 results. An archive of the Webcast will be available one hour after the live call through August 6, 2015. For callers in the U.S. the dial-in number for the conference call is 1-888-895-5271; for callers outside the U.S. the dial-in number for the conference call is 1-847-619-6547. The participant passcode for both dial-in numbers is 37683971. To access the live Webcast or archive, please visit Textainer’s investor website at http://investor.textainer.com.

About Textainer Group Holdings Limited

Textainer Group Holdings Limited and its subsidiaries (“Textainer”) is the world's largest lessor of intermodal containers based on fleet size. Textainer has more than 2 million containers, representing more than 3 million TEU, in its owned and managed fleet. Textainer leases dry freight, dry freight specialized, and refrigerated containers. Textainer is one of the largest purchasers of new containers as well as one of the largest sellers of used containers. Textainer leases containers to approximately 400 shipping lines and other lessees, sells containers to more than 1,200 customers and provides services worldwide via a network of regional and area offices, as well as independent depots.

Important Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. securities laws. Forward-looking statements include statements that are not statements of historical facts and include, without limitation, statements regarding: (i) Textainer’s expectation that pressure on rental rates due to the high level of liquidity among container lessors and the low level of new container prices and interest rates will continue for the near term; (ii) Textainer’s belief that the economies of scale created by its size enables it to grow without adding significantly to its overhead; (iii) Textainer’s belief that new container prices are close to the cost of production and that returns on containers purchased at today’s prices can be expected to increase over time as the containers depreciate and especially if interest rates and/or new container prices rise; (iv) Textainer’s expectation that the strong increase in container demand seen during the second quarter will continue through the third quarter; (v) Textainer’s expectation that the pressure on rental rates will remain; (vi) Textainer’s belief that returns on new container investments are unlikely to return to previous levels; (vii) Textainer’s expectation that new or used container prices will not increase in the short term; and (viii) Textainer’s belief that used container prices could decline further although they appear to be nearing a bottom. Readers are cautioned that these forward-looking statements involve risks and uncertainties, are only predictions and may differ materially from actual future events or results. These risks and uncertainties include, without limitation, the following items that could materially and negatively impact our business, results of operations, cash flows, financial condition and future prospects: any deceleration or reversal of the current domestic and global economic recoveries; lease rates may decrease and lessees may default, which could decrease revenue and increasing storage, repositioning, collection and recovery expenses; we own a large and growing number of containers in our fleet and are subject to significant ownership risk; further consolidation of container manufacturers or the disruption of manufacturing for the major manufacturers could result in higher new container prices and/or decreased supply of new containers and any increase in the cost or reduction in the supply of new containers; the demand for leased containers depends on many political and economic factors beyond Textainer's control; the demand for leased containers is partially tied to international trade and if this demand were to decrease due to increased barriers to trade, or for any other reason, it could reduce demand for intermodal container leasing; as we increase the number of containers in our owned fleet, we will have significant capital at risk and may need to incur more debt, which could result in financial instability; Textainer faces extensive competition in the container leasing industry; the international nature of the container shipping industry exposes Textainer to numerous risks; gains and losses associated with the disposition of used equipment may fluctuate; our indebtedness reduces our financial flexibility and could impede our ability to operate; and other risks and uncertainties, including those set forth in Textainer's filings with the Securities and Exchange Commission. For a discussion of some of these risks and uncertainties, see Item 3 "Key Information-- Risk Factors" in Textainer's Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 19, 2014.

Textainer's views, estimates, plans and outlook as described within this document may change subsequent to the release of this press release. Textainer is under no obligation to modify or update any or all of the statements it has made herein despite any subsequent changes Textainer may make in its views, estimates, plans or outlook for the future.

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Reconciliation of GAAP financial measures to non-GAAP financial measures

Three and Six Months Ended June 30, 2014 and 2013

(Unaudited)

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

(1) The following is a reconciliation of certain GAAP measures to non-GAAP financial measures (such items listed in (a) to (d) below and defined as “Non-GAAP Measures”) for the three and six months ended June 30, 2014 and 2013, including:

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

(b) net cash provided by operating activities to Adjusted EBITDA;

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

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

Non-GAAP Measures are not financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Non-GAAP Measures are presented solely as supplemental disclosures. Management believes that adjusted EBITDA may be a useful performance measure that is widely used within our industry and adjusted net income may be a useful performance measure because Textainer intends to hold its interest rate swaps, collars and caps until maturity and over the life of an interest rate swap, collar or cap the unrealized losses (gains) will net to zero. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison.

Management also believes that adjusted net income and adjusted net income per diluted common share are useful in evaluating our operating performance because unrealized losses (gains) on interest rate swaps, collars and caps, net is a noncash, non-operating item. We believe Non-GAAP Measures provide useful information on our earnings from ongoing operations. We believe that adjusted EBITDA provides useful information on our ability to service our long-term debt and other fixed obligations and on our ability to fund our expected growth with internally generated funds. Non-GAAP Measures have limitations as analytical tools, and you should not consider either of them in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are:

• They do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
• They do not reflect changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest or principal payments on our debt;
• Although depreciation expense and container impairment is a noncash charge, the assets being depreciated may be replaced in the future, and neither adjusted EBITDA, adjusted net income or adjusted net income per diluted common share reflects any cash requirements for such replacements;
• They are not adjusted for all noncash income or expense items that are reflected in our statements of cash flows; and
• Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Source: Textainer Group Holdings Limited

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