Textainer Group Holdings Limited Reports First-Quarter 2020 Results

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May 4, 2020 4:05 PM EDT

HAMILTON, Bermuda, May 4, 2020 /PRNewswire/ -- Textainer Group Holdings Limited (NYSE: TGH; JSE: TXT) ("Textainer", "the Company", "we" and "our"), one of the world's largest lessors of intermodal containers, today reported financial results for the three-months ended March 31, 2020.

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

QTD

Q1 2020

Q4 2019

Lease rental income

$

145,478

$

151,555

Gain on sale of owned fleet containers, net

$

5,794

$

3,134

Income from operations

$

46,409

$

64,579

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders

$

(4,379)

$

28,782

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders per diluted common share

$

(0.08)

$

0.50

Adjusted net income (1)

$

9,702

$

10,977

Adjusted net income per diluted common share (1)

$

0.17

$

0.19

Adjusted EBITDA (1)

$

117,065

$

113,187

Average fleet utilization (2)

96.2

%

96.4

%

Total fleet size at end of period (TEU) (3)

3,450,680

3,500,812

Owned percentage of total fleet at end of period

85.6

%

85.4

%

(1)

Refer to the "Use of Non-GAAP Financial Information" set forth below.

(2)

Utilization is computed by dividing total units on lease in CEUs (cost equivalent unit) by the total units in our fleet in CEUs, excluding CEUs that have been designated as held for sale units and manufactured for us but have not yet been delivered to a lessee. CEU is a unit of measurement based on the approximate cost of a container relative to the cost of a standard 20-foot dry container. These factors may differ slightly from CEU ratios used by others in the industry.

(3)

TEU refers to a twenty-foot equivalent unit, which is a unit of measurement used in the container shipping industry to compare shipping containers of various lengths to a standard 20-foot container, thus a 20-foot container is one TEU and a 40-foot container is two TEU.

 

  • Net loss of $4.4 million for the first quarter, which includes an unrealized loss on derivatives of $14.9 million;
  • Adjusted net income of $9.7 million for the first quarter, or $0.17 per diluted common share, as compared to $11.0 million, or $0.19 per diluted common share in the fourth quarter of 2019;
  • Adjusted EBITDA of $117.1 million for the first quarter, as compared to $113.2 million in the fourth quarter of 2019;
  • Utilization averaged 96.2% for the first quarter, as compared to 96.4% for the fourth quarter of 2019;
  • Minimal container investments during the first quarter; and
  • Repurchased approximately 1,947,000 shares of common stock at an average price of $7.84 per share during the first quarter under the share repurchase program authorized on August 29, 2019. As announced on March 30, 2020, Textainer's Board of Directors authorized an increase to the share repurchase program for an additional $25 million of the Company's outstanding shares.

"Our most important priority is to maintain business continuity while ensuring the health and safety of our employees, and we reacted swiftly and efficiently to transition into working remotely.  I am proud of how our team has risen to the challenge with their dedication and professionalism, focused on providing exceptional service to our customers in the face of the significant disruptions caused by the COVID-19 pandemic," stated Olivier Ghesquiere, President and Chief Executive Officer of Textainer Group Holdings Limited.

Ghesquiere continued, "Our performance in the first quarter was in line with our expectations. Average utilization remained strong at 96.2%, we delivered lease rental income of $145.5 million, adjusted net income of $9.7 million and adjusted EBITDA of $117.1 million.  Despite the global Covid-19 pandemic, container trade remains essential for the global economy. The current challenging economic environment also means that we are strongly focused on our cash collections and monitoring of customer credit.  We are particularly pleased with our liquidity position as we reduced our debt outstanding by $135 million in the quarter while protecting our cash reserves and ability to invest upon the eventual return of container demand."

Ghesquiere concluded, "The market remains challenged by the extraordinary effects and implications of the broad-based response to the current pandemic, and there is a high level of uncertainty to our outlook for the rest of the year. However, Textainer is well-positioned to navigate through the current crisis and participate in an eventual market recovery with a strong balance sheet, healthy liquidity, an optimized capital structure as well as demonstrated expense control and efficiency. We remain focused on using our strong and stable cash flows to improve our financial performance and deliver shareholder value creation."

First-Quarter Results

Lease rental income decreased $6.1 million from the fourth quarter of 2019, due primarily to a reduction in fleet size and average rental rates.  Lease rental income - owned fleet, increased $2.8 million from the fourth quarter and includes the full impact of the acquisition of a previously managed fleet on December 31, 2019 (the "LAPCO fleet").

Trading container margin decreased $1.3 million from the fourth quarter of 2019, primarily due to a lower sales volume.

Gain on sale of owned fleet containers, net, increased $2.7 million from the fourth quarter of 2019, driven by an improvement in the average gain per container sold.

Direct container expense increased $1.5 million from the fourth quarter of 2019, mostly due to the inclusion of the acquired LAPCO fleet.

Distribution to managed fleet container investors decreased $8.2 million from the fourth quarter of 2019, due to a decrease in the managed fleet size resulting from the LAPCO fleet acquisition.

Bad debt expense was $2.0 million in the first quarter of 2020 as a result of an increase in reserves related to the current weakening in global economic conditions.

Interest expense decreased $1.4 million compared to the fourth quarter of 2019. Realized loss on derivative instruments, net, increased $0.8 million compared to the fourth quarter of 2019. These changes were driven by a decrease in interest rates.

Unrealized loss on derivative instruments, net, was a loss of $14.9 million for the quarter and a gain of $2.9 million for the fourth quarter of 2019, resulting from a decrease and an increase, respectively, in the forward LIBOR curve at the end of the respective period ends, which reduced the fair value of the current interest rate derivatives as of the end of the first quarter. Textainer uses interest rate derivatives to manage interest rate risk and intends to hold these derivatives until maturity. Changes in the fair value of derivatives result in non-cash adjustments to their carrying value that get recorded through net income for the portion of our derivatives not designated under hedge accounting at their inception.

Conference Call and Webcast

A conference call to discuss the financial results for the first quarter 2020 will be held at 5:00 pm Eastern Time on Monday, May 4, 2020. The dial-in number for the conference call is 1-855-327-6837 (U.S. & Canada) and 1-631-891-4304 (International). The call and archived replay may also be accessed via webcast on 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 approximately 3.5 million TEU in our owned and managed fleet. We lease containers to approximately 250 customers, including all of the world's leading international shipping lines, and other lessees. Our fleet consists of standard dry freight, refrigerated intermodal containers, and dry freight specials. We also lease tank containers through our relationship with Trifleet Leasing and are a 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 fleet, we buy older containers from our shipping line customers for trading and resale. We sold an average of approximately 140,000 containers per year for the last five years to more than 1,500 customers making us one of the largest sellers of used containers. Textainer operates via a network of 14 offices and approximately 500 independent depots worldwide. Textainer has a primary listing on the New York Stock Exchange (NYSE: TGH) and a secondary listing on the Johannesburg Stock Exchange (JSE: TXT). Visit www.textainer.com for additional information about Textainer.

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 may relate to, but are not limited to, expectations or estimates of future operating results or financial performance, capital expenditures, introduction of new products, 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. 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: Container trade will remain essential to the global economy; Textainer is well positioned to navigate through the current crisis and participate in an eventual recovery; 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 30, 2020.

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 LimitedInvestor RelationsPhone: +1 (415) 658-8333[email protected]

 

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended March 31, 2020 and 2019

(Unaudited)

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

Three Months Ended March 31,

2020

2019

Revenue:

Lease rental income - owned fleet

$

130,072

$

128,973

Lease rental income - managed fleet

15,406

26,553

Lease rental income

145,478

155,526

Management fees - non-leasing

1,484

2,301

Trading container sales proceeds

9,585

13,300

Cost of trading containers sold

(8,936)

(10,732)

Trading container margin

649

2,568

Gain on sale of owned fleet containers, net

5,794

6,767

Operating expenses:

Direct container expense - owned fleet (a)

13,264

11,580

Distribution expense to managed fleet container investors

14,163

24,480

Depreciation expense (b)

66,834

62,464

Amortization expense

564

602

General and administrative expense

10,138

9,830

Bad debt expense, net

2,045

159

Container lessee default recovery, net (a)

(12)

(653)

Total operating expenses

106,996

108,462

Income from operations

46,409

58,700

Other (expense) income:

Interest expense

(36,112)

(37,516)

Write-off of unamortized deferred debt issuance costs

(122)

—

Interest income

400

638

Realized (loss) gain on derivative instruments, net

(1,526)

1,444

Unrealized loss on derivative instruments, net

(14,937)

(5,738)

Other, net

(53)

—

Net other expense

(52,350)

(41,172)

(Loss) income before income tax and noncontrolling interest

(5,941)

17,528

Income tax benefit (expense)

833

(373)

Net (loss) income

(5,108)

17,155

Less: Net loss (income) attributable to the noncontrolling interest

729

(105)

Net (loss) income attributable to Textainer Group Holdings Limited common shareholders

$

(4,379)

$

17,050

Net (loss) income attributable to Textainer Group Holdings

   Limited common shareholders per share:

Basic

$

(0.08)

$

0.30

Diluted

$

(0.08)

$

0.30

Weighted average shares outstanding (in thousands):

Basic

56,455

57,475

Diluted

56,455

57,587

Other comprehensive (loss) income, before tax:

Change in derivative instruments designated as cash flow hedges

(8,858)

—

Reclassification of realized gain on derivative instruments designated as cash flow hedges

(62)

—

Foreign currency translation adjustments

(63)

107

Comprehensive (loss) income, before tax

(14,091)

17,262

Income tax benefit related to items of other comprehensive (loss) income

93

—

Comprehensive (loss) income, after tax

(13,998)

17,262

Comprehensive loss (income) attributable to the noncontrolling interest

729

(105)

Comprehensive (loss) income attributable to Textainer Group Holdings Limited common shareholders

$

(13,269)

$

17,157

(a) Amounts for container write-off and recovery and container recovery costs from lessee default for the period ended March 31, 2019 have been reclassified out of the previously reported line item "container impairment" and "direct container expense – owned fleet", respectively, and included within "container lessee default recovery, net" to conform with the 2020 presentation. 

(b) Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item "container impairment" and included within "depreciation expense" to conform with the 2020 presentation. 

 

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

March 31, 2020 and December 31, 2019

(Unaudited)

(All currency expressed in United States dollars in thousands)

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

128,664

$

180,552

Accounts receivable, net of allowance for doubtful accounts of $8,026 and $6,299, respectively

118,905

109,384

Net investment in finance leases, net of allowance for credit losses of $186 and $0, respectively

40,164

40,940

Container leaseback financing receivable, net of allowance for credit losses of $90 and $0, respectively

20,661

20,547

Trading containers

12,894

11,330

Containers held for sale

46,902

41,884

Prepaid expenses and other current assets

14,367

14,816

Due from affiliates, net

2,112

1,880

Total current assets

384,669

421,333

Restricted cash

97,334

97,353

Containers, net of accumulated depreciation of $1,482,677 and $1,443,167, respectively

4,007,433

4,156,151

Net investment in finance leases, net of allowance for credit losses of $801 and $0, respectively

297,549

254,363

Container leaseback financing receivable, net of allowance for credit losses of $379 and $0, respectively

245,507

251,111

Fixed assets, net of accumulated depreciation of $12,465 and $12,266, respectively

1,108

1,128

Intangible assets, net of accumulated amortization of $45,923 and $45,359, respectively

4,727

5,291

Derivative instruments

-

135

Deferred taxes

1,388

1,388

Other assets

14,091

14,364

Total assets

$

5,053,806

$

5,202,617

Liabilities and Equity

Current liabilities:

Accounts payable and accrued expenses

$

21,499

$

23,404

Container contracts payable

5,294

9,394

Other liabilities

2,733

2,636

Due to container investors, net

19,151

21,978

Debt, net of unamortized deferred financing costs of $6,293 and $8,120, respectively

239,066

242,433

Total current liabilities

287,743

299,845

Debt, net of unamortized deferred financing costs of $21,160 and $21,446, respectively

3,426,079

3,555,296

Derivative instruments

37,500

13,778

Income tax payable

9,945

9,909

Deferred taxes

6,644

7,789

Other liabilities

29,546

30,355

Total liabilities

3,797,457

3,916,972

Equity:

Textainer Group Holdings Limited shareholders' equity:

Common shares, $0.01 par value. Authorized 140,000,000 shares; 58,326,555 shares issued and 54,870,475 shares outstanding at 2020; 58,326,555 shares issued and 56,817,918 shares outstanding at 2019

583

583

Treasury shares, at cost, 3,456,080 shares and 1,508,637 shares, respectively

(33,223)

(17,746)

Additional paid-in capital

411,666

410,595

Accumulated other comprehensive loss

(9,401)

(511)

Retained earnings

861,194

866,458

Total Textainer Group Holdings Limited shareholders' equity

1,230,819

1,259,379

Noncontrolling interest

25,530

26,266

Total equity

1,256,349

1,285,645

Total liabilities and equity

$

5,053,806

$

5,202,617

 

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2020 and 2019

(Unaudited)

(All currency expressed in United States dollars in thousands)

2020

2019

Cash flows from operating activities:

Net (loss) income

$

(5,108)

$

17,155

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

Depreciation expense (a)

66,834

62,464

Bad debt expense, net

2,045

159

Container recovery from lessee default, net (b)

(1)

(720)

Unrealized loss on derivative instruments, net

14,937

5,738

Amortization and write-off of unamortized deferred debt issuance costs and accretion of bond discounts

2,183

1,870

Amortization of intangible assets

564

602

Gain on sale of owned fleet containers, net

(5,794)

(6,767)

Share-based compensation expense

1,071

1,056

Changes in operating assets and liabilities

(3,009)

25,552

Total adjustments

78,830

89,954

Net cash provided by operating activities

73,722

107,109

Cash flows from investing activities:

Purchase of containers and fixed assets

(11,249)

(119,335)

Receipt of principal payments on container leaseback financing receivable

5,099

—

Proceeds from sale of containers and fixed assets

30,939

32,885

Net cash provided by (used in) investing activities

24,789

(86,450)

Cash flows from financing activities:

Proceeds from debt

—

60,000

Principal payments on debt

(134,697)

(86,171)

Principal repayments on container leaseback financing liability, net

(124)

—

Purchase of treasury shares

(15,477)

—

Debt issuance costs

(57)

—

Net cash used in financing activities

(150,355)

(26,171)

Effect of exchange rate changes

(63)

107

Net decrease in cash, cash equivalents and restricted cash

(51,907)

(5,405)

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

277,905

224,928

Cash, cash equivalents and restricted cash, end of the period

$

225,998

$

219,523

(a) Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item "container impairment" and included within "depreciation expense" to conform with the 2020 presentation. 

(b) Amount for container write-off and recovery from lessee default for the period ended March 31, 2019 has been reclassified out of the previously reported line item "container impairment" and included within "container recovery from lessee default, net" to conform with the 2020 presentation. 

Use of Non-GAAP Financial Information

To supplement Textainer's condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include adjusted net income, adjusted net income per diluted common share, adjusted EBITDA, headline earnings and headline earnings per basic and dilute common share.

Management believes that adjusted net income and adjusted net income per diluted common share are useful in evaluating Textainer's operating performance, as we intend to hold derivative instruments until maturity and any unrealized gain or loss on derivative instruments is a non-cash, non-operating item. Management considers adjusted EBITDA a widely used industry measure and useful in evaluating Textainer's ability to fund growth and service long-term debt and other fixed obligations. Headline earnings is reported as a requirement of Textainer's listing on the JSE. Headline earnings and headline earnings per basic and dilute common share are calculated from net (loss) income which has been determined based on GAAP.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the tables below for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019.

Non-GAAP measures are not financial measures calculated in accordance with GAAP and are presented solely as supplemental disclosures. Non-GAAP measures have limitations as analytical tools, and should not be relied in isolation, or as a substitute to net (loss) income, income from operations, cash flows from operating activities, or any other performance measures derived in accordance with GAAP. Some of these limitations are:

  • They do not reflect cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • They do not reflect changes in, or cash requirements for, working capital needs;
  • Adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest or principal payments on debt;
  • Although depreciation expense and container impairment are a non-cash 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 non-cash 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 31,2020

December 31,2019

March 31,2019

(Dollars in thousands)

(Unaudited)

Reconciliation of adjusted net income:

Net (loss) income attributable to Textainer Group Holdings Limited common shareholders

$

(4,379)

$

28,782

$

17,050

Adjustments:

Write-off of unamortized deferred debt issuance costs

122

—

—

Unrealized loss (gain) on derivative instruments, net

14,937

(2,873)

5,738

Gain on insurance recovery and legal settlement

—

(14,040)

—

Gain on settlement of pre-existing management agreement

—

(1,823)

—

Impact of reconciling items on income tax (benefit) expense

(150)

551

(57)

Impact of reconciling items attributable to the noncontrolling interest

(828)

380

(289)

Adjusted net income

$

9,702

$

10,977

$

22,442

Adjusted net income per diluted common share

$

0.17

$

0.19

$

0.39

Three Months Ended,

March 31,2020

December 31,2019

March 31,2019

(Dollars in thousands)

(Unaudited)

Reconciliation of adjusted EBITDA:

Net (loss) income attributable to Textainer Group Holdings Limited common shareholders

$

(4,379)

$

28,782

$

17,050

Adjustments:

Interest income

(400)

(458)

(638)

Interest expense

36,112

37,486

37,516

Write-off of unamortized deferred debt issuance costs

122

—

—

Realized loss (gain) on derivative instruments, net

1,526

763

(1,444)

Unrealized loss (gain) on derivative instruments, net

14,937

(2,873)

5,738

Gain on insurance recovery and legal settlement

—

(14,040)

—

Gain on settlement of pre-existing management agreement

—

(1,823)

—

Income tax (benefit) expense

(833)

478

373

Net (loss) income attributable to the noncontrolling interest

(729)

407

105

Depreciation expense

66,834

66,129

62,464

Container (recovery) expense from lessee default, net

(1)

25

(720)

Amortization expense

564

517

602

Impact of reconciling items attributable to the noncontrolling interest

3,312

(2,206)

(2,917)

Adjusted EBITDA

$

117,065

$

113,187

$

118,129

Three Months Ended

March 31,2020

December 31,2019

March 31,2019

(Dollars in thousands)

(Unaudited)

Reconciliation of headline earnings:

Net (loss) income attributable to Textainer Group Holdings Limited common shareholders

$

(4,379)

$

28,782

$

17,050

Adjustments:

Container impairment

4,586

4,348

800

Gain on insurance recovery and legal settlement

—

(14,040)

—

Gain on settlement of pre-existing management agreement

—

(1,823)

—

Impact of reconciling items on income tax (benefit) expense

(46)

477

(8)

Impact of reconciling items attributable to the noncontrolling interest

(115)

100

(32)

Headline earnings

$

46

$

17,844

$

17,810

Headline earnings per basic common share

$

-

$

0.31

$

0.31

Headline earnings per diluted common share

$

-

$

0.31

$

0.31

 

Cision View original content:http://www.prnewswire.com/news-releases/textainer-group-holdings-limited-reports-first-quarter-2020-results-301052215.html

SOURCE Textainer Group Holdings Limited


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