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Textainer Group Holdings Limited Reports Third-Quarter 2020 Results

·12 min read

HAMILTON, Bermuda , Nov. 12, 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 third-quarter ended September 30, 2020 .

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



QTD





Q3 2020



Q2 2020



Q3 2019


Lease rental income


$

149,130



$

144,774



$

155,848


Gain on sale of owned fleet containers, net


$

7,976



$

5,640



$

6,092


Income from operations


$

54,109



$

49,265



$

53,487


Net income attributable to Textainer Group Holdings

   Limited common shareholders


$

16,952



$

15,989



$

10,578


Net income attributable to Textainer Group Holdings

   Limited common shareholders per diluted common share


$

0.32



$

0.30



$

0.18


Adjusted net income (1)


$

21,634



$

14,794



$

12,950


Adjusted net income per diluted common share (1)


$

0.41



$

0.28



$

0.22


Adjusted EBITDA (1)


$

118,960



$

109,977



$

118,254


Average fleet utilization (2)



96.0

%



95.4

%



97.3

%

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



3,599,889




3,458,080




3,557,466


Owned percentage of total fleet at end of period



87.1

%



86.1

%



80.7

%


















(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 income of $17.0 million for the third quarter or $0.32 per diluted common share, as compared to $16.0 million or $0.30 per diluted common share in the second quarter of 2020;

  • Adjusted net income of $21.6 million for the third quarter, or $0.41 per diluted common share, as compared to $14.8 million , or $0.28 per diluted common share in the second quarter of 2020;

  • Adjusted EBITDA of $119.0 million for the third quarter, as compared to $110.0 million in the second quarter of 2020;

  • Utilization averaged 96.0% for the third quarter and is currently at 97.7%;

  • Container deliveries of approximately $420 million during the third quarter, for a total $610 million delivered through the first nine months of the year, virtually all of which are currently on lease;

  • Issued $450 million and $829 million of fixed-rate asset backed notes on August 20, 2020 and September 21, 2020 , respectively, for a combined total of nearly $1.3 billion . Proceeds were used to pay down certain fixed-rate asset backed notes and variable-rate facilities, lowering our effective interest rate to 3.10% and creating additional borrowing capacity for future container investments; and

  • Repurchased 2,376,222 shares of common stock at an average price of $11.61 per share during the third quarter under the share repurchase program. As announced on September 14, 2020 , Textainer's Board of Directors authorized an increase to the share repurchase program for an additional $50 million of the Company's outstanding shares. As of the end of the third quarter, the remaining authority under the share repurchase program totaled $34.9 million .

"We are very pleased with our much-improved performance and outlook which demonstrates the effectiveness and disciplined execution of our long-term strategic turnaround plan. For the quarter, we delivered lease rental income of $149.1 million , adjusted EBITDA of $119.0 million and adjusted net income of $21.6 million ," stated Olivier Ghesquiere , President and Chief Executive Officer of Textainer Group Holdings Limited.

Ghesquiere continued, "Industry fundamentals have improved dramatically since June, allowing us to seize upon substantial business opportunities that will continue to generate long-term additional revenue and continue to improve our profitability over the coming quarters. During the quarter, we leased out over 390,000 TEU of factory and depot containers, helping improve our utilization which currently stands at 97.7%. Container prices and lease terms steadily improved in the third quarter and remain at attractive levels today.

"In addition, we have taken a number of actions this year to strengthen our business, financial resources and long-term outlook. In particular, since the beginning of the year, we lowered our borrowing costs with the successful issuance of nearly $1.3 billion in asset backed financings, we invested over $56 million in share buybacks, and we invested over $610 million in containers delivered through the third quarter.

"We expect steady earnings momentum to continue in the fourth quarter, driven by growth and operating efficiencies. While we are optimistic about our outlook in 2021, significant uncertainties remain due to the unpredictable impact of a resurgence of COVID-19. We continue to be committed to delivering long term value to our shareholders while maintaining a strong financial position to support the future growth of our business," concluded Ghesquiere.

Third-Quarter Results

Lease rental income increased $4.4 million from the second quarter of 2020, due primarily to an increase in utilization and fleet size.

Gains on sale of owned fleet containers, net increased $2.3 million from the second quarter of 2020, due primarily to an increase in the number of containers sold.

Direct container expense owned fleet increased $1.1 million from the second quarter of 2020, which includes higher handling and maintenance to prepare depot units for lease-out, partially offset by lower storage costs resulting from an increase in utilization.

Depreciation expense increased $1.5 million from the second quarter of 2020, primarily due to an increase in fleet size.

General and administrative expense increased $1.0 million from the second quarter of 2020, due primarily to an increase in consulting fees associated with our IT enhancement project and management incentive compensation resulting from improved company performance.

Bad debt recovery was $2.1 million in the third quarter of 2020, resulting from a reduction in reserves due to improved collections, compared to a recovery of $0.3 million in the second quarter of 2020.

Write off of unamortized deferred debt issuance costs and bond discounts amounted to $8.6 million in the third quarter of 2020, resulting from the early redemption of certain fixed-rate asset backed notes in the quarter.

Conference Call and Webcast

A conference call to discuss the financial results for the third quarter 2020 will be held at 5:00 pm Eastern Time on Thursday , November 12, 2020. The dial-in number for the conference call is 1-877-407-9039 (U.S. & Canada ) and 1-201-689-8470 (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 3.6 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: (i) we expect earnings momentum to continue in the fourth quarter; (ii) will continue to generate long-term additional revenue and improve our profitability over the coming quarters; (iii) our actions this year will strengthen our business, financial resources and long-term outlook; and (iv) optimistic outlook in 2021; 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 Limited
Investor Relations
Phone: +1 (415) 658-8333
ir@textainer.com

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

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




Three Months Ended September 30,



Nine Months Ended September 30,




2020



2019



2020



2019


Revenues:

































Lease rental income - owned fleet






$

133,587







$

130,555







$

392,307







$

390,555


Lease rental income - managed fleet







15,543








25,293








47,075








77,650


Lease rental income







149,130








155,848








439,382








468,205



































Management fees - non-leasing







1,696








1,582








3,724








5,823



































Trading container sales proceeds







7,655








10,669








24,667








37,775


Cost of trading containers sold







(6,721)








(9,469)








(22,513)








(32,371)


Trading container margin







934








1,200








2,154








5,404



































Gain on sale of owned fleet containers, net







7,976








6,092








19,410








18,263



































Operating expenses:

































Direct container expense - owned fleet







16,395








11,810








44,907








34,071


Distribution expense to managed fleet container investors







14,364








23,318








43,219








71,535


Depreciation expense







65,374








67,644








196,056








194,243


Amortization expense







645








481








1,766








1,576


General and administrative expense







10,868








9,364








30,872








28,638


Bad debt (recovery) expense, net







(2,095)








(1,198)








(326)








2,650


Container lessee default expense (recovery), net







76








(184)








(1,607)








7,718


Gain on insurance recovery and legal settlement




























(841)


Total operating expenses







105,627








111,235








314,887








339,590


Income from operations







54,109








53,487








149,783








158,105


Other (expense) income:

































Interest expense







(29,123)








(39,970)








(95,257)








(115,699)


Write-off of unamortized deferred debt issuance costs and bond discounts







(8,628)















(8,750)









Interest income







23








680








479








2,047


Realized (loss) gain on derivative instruments, net







(4,107)








170








(8,900)








2,709


Unrealized gain (loss) on derivative instruments, net







4,161








(2,478)








(9,434)








(18,315)


Other, net







859








(10)








803








(10)


Net other expense







(36,815)








(41,608)








(121,059)








(129,268)


Income before income tax and noncontrolling interest







17,294








11,879








28,724








28,837


Income tax benefit (expense)







152








(1,318)








(89)








(1,470)


Net income







17,446








10,561








28,635








27,367


Less: Net (income) loss attributable to the noncontrolling

   interest



(494)








17








(73)








575






Net income attributable to Textainer Group  Holdings Limited common shareholders


$

16,952







$

10,578







$

28,562







$

27,942






Net income attributable to Textainer Group Holdings

   Limited common shareholders per share:

































Basic


$

0.32







$

0.18







$

0.53







$

0.49






Diluted


$

0.32







$

0.18







$

0.53







$

0.49






Weighted average shares outstanding (in thousands):

































Basic



52,514








57,503








54,221








57,493






Diluted



52,713








57,598








54,317








57,586






Other comprehensive income, before tax:

































Change in derivative instruments designated as cash flow hedges







158















(13,093)









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







1,130















1,658









Foreign currency translation adjustments







105








(119)








3








(52)


Comprehensive income, before tax







18,839








10,442








17,203








27,315


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







(17)















115









Comprehensive income, after tax







18,822








10,442








17,318








27,315


Comprehensive (income) loss attributable to the
   
noncontrolling interest







(494)








17








(73)








575


Comprehensive income attributable to Textainer
Group Holdings Limited common shareholders






$

18,328







$

10,459







$

17,245







$

27,890


TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(All currency expressed in United States dollars in thousands)




September 30, 2020



December 31, 2019

Assets








Current assets:








Cash and cash equivalents


$

155,166



$

180,552

Accounts receivable, net of allowance of $4,692 and $6,299, respectively



101,771




109,384

Net investment in finance leases, net of allowance of $199 and $0, respectively



59,485




40,940

Container leaseback financing receivable, net of allowance of $105 and $0, respectively



22,412




20,547

Trading containers



14,290




11,330

Containers held for sale



32,457




41,884

Prepaid expenses and other current assets



11,646




14,816

Due from affiliates, net



2,098




1,880

Total current assets



399,325




421,333

Restricted cash



78,712




97,353

Containers, net of accumulated depreciation of $1,566,794 and $1,443,167, respectively



4,102,791




4,156,151

Net investment in finance leases, net of allowance of $1,137 and $0, respectively



555,427




254,363

Container leaseback financing receivable, net of allowance of $367 and $0, respectively



256,994




251,111

Fixed assets, net of accumulated depreciation of $12,695 and $12,266, respectively



834




1,128

Intangible assets, net of accumulated amortization of $47,125 and $45,359, respectively



3,525




5,291

Derivative instruments



-




135

Deferred taxes



1,388




1,388

Other assets



14,355




14,364

Total assets


$

5,413,351



$

5,202,617

Liabilities and Equity








Current liabilities:








Accounts payable and accrued expenses


$

27,717



$

23,404

Container contracts payable



325,897




9,394

Other liabilities



2,248




2,636

Due to container investors, net



18,501




21,978

Debt, net of unamortized costs of $6,542 and $8,120, respectively



240,144




242,433

Total current liabilities



614,507




299,845

Debt, net of unamortized costs of $22,430 and $21,446, respectively



3,481,145




3,555,296

Derivative instruments



34,512




13,778

Income tax payable



10,035




9,909

Deferred taxes



7,335




7,789

Other liabilities



17,083




30,355

Total liabilities



4,164,617




3,916,972

Equity:








Textainer Group Holdings Limited shareholders' equity:








Common shares, $0.01 par value. Authorized 140,000,000 shares; 58,413,983 shares issued and
50,947,887 shares outstanding at 2020; 58,326,555 shares issued and 56,817,918 shares
outstanding at 2019



584




583

Treasury shares, at cost, 7,466,096 and 1,508,637 shares, respectively



(74,525)




(17,746)

Additional paid-in capital



414,036




410,595

Accumulated other comprehensive loss



(11,828)




(511)

Retained earnings



894,135




866,458

Total Textainer Group Holdings Limited shareholders' equity



1,222,402




1,259,379

Noncontrolling interest



26,332




26,266

Total equity



1,248,734




1,285,645

Total liabilities and equity


$

5,413,351



$

5,202,617

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(All currency expressed in United States dollars in thousands)




Nine Months Ended September 30,




2020



2019


Cash flows from operating activities:









Net income


$

28,635



$

27,367


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









Depreciation expense



196,056




194,243


Bad debt (recovery) expense, net



(326)




2,650


Container (recovery) write-off from lessee default, net



(140)




7,154


Unrealized loss on derivative instruments, net



9,434




18,315


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



14,761




5,922


Amortization of intangible assets



1,766




1,576


Gain on sale of owned fleet containers, net



(19,410)




(18,263)


Gain on insurance recovery and legal settlement






(841)


Share-based compensation expense



3,218




3,213


Changes in operating assets and liabilities



54,319




80,875


Total adjustments



259,678




294,844


Net cash provided by operating activities



288,313




322,211


Cash flows from investing activities:









Purchase of containers and fixed assets



(273,171)




(449,105)


Payment on leaseback financing receivable



(24,089)




(271,976)


Receipt of principal payments on container leaseback financing receivable



15,788




2,083


Proceeds from sale of containers and fixed assets



109,144




111,523


Net cash used in investing activities



(172,328)




(607,475)


Cash flows from financing activities:









Proceeds from debt



1,626,759




995,134


Principal payments on debt



(1,704,132)




(654,723)


Principal repayments on container leaseback financing liability, net



(12,754)





Purchase of treasury shares



(56,779)




(2,558)


Debt issuance costs



(13,333)




(7,368)


Dividends paid to noncontrolling interest






(2,744)


Issuance of common shares upon exercise of share options



224




121


Net cash (used in) provided by financing activities



(160,015)




327,862


Effect of exchange rate changes



3




(52)


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



(44,027)




42,546


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



277,905




224,928


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


$

233,878



$

267,474


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 diluted 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 diluted common shares are calculated from net 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 and nine months ended September 30, 2020 and 2019 and for the three months ended June 30, 2020.

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 upon in isolation, or as a substitute to net 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,



Nine Months Ended



September 30,
2020



June 30,
2020



September 30,
2019



September 30,
2020


September 30,
2019



(Dollars in thousands)



(Dollars in thousands)



(Unaudited)



(Unaudited)

Reconciliation of adjusted net income:




















Net income attributable to Textainer Group Holdings

Limited common shareholders


$

16,952



$

15,989



$

10,578



$

28,562



$

27,942

Adjustments:




















Write-off of unamortized deferred debt issuance costs and bond discounts



8,628










8,750




Unrealized (gain) loss on derivative instruments, net



(4,161)




(1,342)




2,478




9,434




18,315

Gain on insurance recovery and legal settlement















(841)

Impact of reconciling items on income tax (benefit) expense



(42)




13




(27)




(179)




(173)

Impact of reconciling items attributable to the noncontrolling interest



257




134




(79)




(437)




(845)

Adjusted net income


$

21,634



$

14,794



$

12,950



$

46,130



$

44,398





















Adjusted net income per diluted common share


$

0.41



$

0.28



$

0.22



$

0.85



$

0.77














































Three Months Ended,



Nine Months Ended



September 30,
2020



June 30,
2020



September 30,
2019



September 30,
2020



September 30,
2019



(Dollars in thousands)



(Dollars in thousands)



(Unaudited)



(Unaudited)

Reconciliation of adjusted EBITDA:




















Net income attributable to Textainer Group Holdings

Limited common shareholders


$

16,952



$

15,989



$

10,578



$

28,562



$

27,942

Adjustments:




















Interest income



(23)




(56)




(680)




(479)




(2,047)

Interest expense



29,123




30,022




39,970




95,257




115,699

Write-off of unamortized deferred debt issuance costs and bond discounts



8,628










8,750




Realized loss (gain) on derivative instruments, net



4,107




3,267




(170)




8,900




(2,709)

Unrealized (gain) loss on derivative instruments, net



(4,161)




(1,342)




2,478




9,434




18,315

Gain on insurance recovery and legal settlement















(841)

Income tax (benefit) expense



(152)




1,074




1,318




89




1,470

Net income (loss) attributable to the noncontrolling interest



494




308




(17)




73




(575)

Depreciation expense



65,374




63,848




67,644




196,056




194,243

Container write-off (recovery) from lessee default, net



33




(1,557)




(576)




(1,525)




7,154

Amortization expense



645




557




481




1,766




1,576

Impact of reconciling items attributable to the noncontrolling interest



(2,060)




(2,133)




(2,772)




(7,507)




(9,099)

Adjusted EBITDA


$

118,960



$

109,977



$

118,254



$

339,376



$

351,128





Three Months Ended



Nine Months Ended



September 30,
2020



June 30,
2020



September 30,
2019



September 30,
2020



September 30,
2019



(Dollars in thousands)



(Dollars in thousands)



(Unaudited)



(Unaudited)

Reconciliation of headline earnings:




















Net income attributable to Textainer Group Holdings

Limited common shareholders


$

16,952



$

15,989



$

10,578



$

28,562



$

27,942

Adjustments:




















Container impairment



3,074




1,197




5,351




8,857




17,069

Gain on insurance recovery and legal settlement















(841)

Impact of reconciling items on income tax benefit



(28)




(12)




(53)




(86)




(158)

Impact of reconciling items attributable to the
noncontrolling interest



(85)




(43)




(137)




(243)




(463)

Headline earnings


$

19,913



$

17,131



$

15,739



$

37,090



$

43,549





















Headline earnings per basic common share


$

0.38



$

0.32



$

0.27



$

0.68



$

0.76

Headline earnings per diluted common share


$

0.38



$

0.32



$

0.27



$

0.68



$

0.76

Cision
Cision

View original content:http://www.prnewswire.com/news-releases/textainer-group-holdings-limited-reports-third-quarter-2020-results-301172337.html

SOURCE Textainer Group Holdings Limited