Textainer Group Holdings Limited Reports Third-Quarter 2019 Results
HAMILTON, Bermuda, Oct. 31, 2019 /PRNewswire/ -- Textainer Group Holdings Limited (NYSE: TGH) ("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, 2019.
Key Financial Information (in thousands except for per share and TEU amounts) and Business Highlights:
QTD |
||||||||||||
Q3 2019 |
Q2 2019 |
Q3 2018 |
||||||||||
Lease rental income (1) |
$ |
154,665 |
$ |
155,110 |
$ |
157,760 |
||||||
Gain on sale of owned fleet containers, net |
$ |
6,092 |
$ |
5,404 |
$ |
8,450 |
||||||
Income from operations |
$ |
53,487 |
$ |
45,918 |
$ |
37,156 |
||||||
Net income attributable to Textainer Group Holdings Limited common shareholders |
$ |
10,578 |
$ |
314 |
$ |
1,913 |
||||||
Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share |
$ |
0.18 |
$ |
0.01 |
$ |
0.03 |
||||||
Adjusted net income (2) |
$ |
12,950 |
$ |
9,006 |
$ |
4,815 |
||||||
Adjusted net income per diluted common share (2) |
$ |
0.22 |
$ |
0.16 |
$ |
0.08 |
||||||
Adjusted EBITDA (2) |
$ |
118,254 |
$ |
114,745 |
$ |
113,697 |
||||||
Average fleet utilization |
97.3 |
% |
97.9 |
% |
98.0 |
% |
||||||
Total fleet size at end of period (TEU) |
3,557,466 |
3,601,681 |
3,451,293 |
|||||||||
Owned percentage of total fleet at end of period |
80.7 |
% |
80.9 |
% |
76.8 |
% |
||||||
(1) |
"Lease rental income" includes both owned and managed fleet lease rental income. See note (a) within the attached Condensed Consolidated Statements of Comprehensive Income. |
(2) |
"Adjusted net income" and "Adjusted EBITDA" are Non-GAAP Measures that are reconciled to GAAP measures in section "Reconciliation of GAAP financial measures to non-GAAP financial measures" below. Section "Reconciliation of GAAP financial measures to non-GAAP financial measures" provides certain qualifications and limitations on the use of Non-GAAP Measures. |
- Lease rental income of $154.7 million for the third quarter, as compared to $155.1 million in the second quarter of 2019;
- Adjusted net income of $13.0 million for the third quarter, or $0.22 per diluted common share, as compared to $9.0 million, or $0.16 per diluted common share in the second quarter of 2019;
- Adjusted EBITDA of $118.3 million for the third quarter, as compared to $114.7 million in the second quarter of 2019;
- Utilization averaged 97.3% for the third quarter, as compared to 97.9% for the second quarter of 2019;
- Container investments of approximately $67 million during the third quarter, for a total of $710 million delivered through the first nine months of the year; and
- Repurchased approximately 240,000 shares of common stock during the third quarter under the share repurchase program authorized on August 29, 2019.
"Textainer's performance was resilient in a generally lackluster market environment, delivering a stable lease rental income of $154.7 million and Adjusted EBITDA of $118.3 million. Adjusted net income was $13.0 million or $0.22 per share, comparing well against $9.0 million or $0.16 per share in the second quarter," stated Olivier Ghesquiere, President and Chief Executive Officer of Textainer Group Holdings Limited.
Ghesquiere continued, "Market activity remained slow in the third quarter, as the traditional peak season did not materialize given the ongoing trade tensions and slower economic growth. As such, we have limited our incremental container investment to $67 million delivered during the third quarter and remain focused on a disciplined profit improvement strategy targeting specific yield and return thresholds."
Ghesquiere concluded, "While the overall market activity remains muted and is reflected in our operating results, we have taken a number of actions this year to enhance shareholder value. We have improved our capital structure through our previously announced new debt offering and facility refinancing, which leaves us strongly positioned to participate in any future rebound in market demand. We repurchased approximately 240,000 shares of our common stock during the third quarter under our $25 million share repurchase program, which commenced in September 2019. We are investing in technology and personnel while implementing cost cutting initiatives that lower operating expenses. Finally, also in September, we announced plans to dual list our shares on the Johannesburg Stock Exchange to enable Trencor to distribute its Textainer shares to its shareholders, which we believe will lead to a broader and deeper shareholder base over the longer term."
Third-Quarter Results
Lease rental income was essentially stable with a decrease of $0.4 million from the second quarter of 2019 and a decrease of $3.1 million from the third quarter of 2018, which reflected the impact of lower utilization.
Gain on sale of owned fleet containers, net, increased $0.7 million from the second quarter of 2019, due to an increase in the number of containers sold, partially offset by a reduction in the average gain per container sold. Gain on sale of owned fleet containers, net, decreased $2.4 million from the third quarter of 2018, due to a reduction in the average gain per container sold.
Trading container margin decreased $1.0 million from the second quarter of 2019, due to a decrease in both sales volume and per unit margin. Trading container margin increased $0.6 million from the third quarter of 2018, due to an increase in both sales volume and per unit margin.
Direct container expense – owned fleet, increased $1.1 million compared to the second quarter of 2019, primarily due to an increase in storage costs, partially offset by reductions in other direct costs. Direct container expense – owned fleets, decreased $2.3 million compared to the third quarter of 2018 from a reduction in repositioning expense, partially offset by higher storage costs.
Depreciation expense increased $3.5 million compared to the second quarter of 2019 and decreased $1.2 million compared to the third quarter of 2018, primarily due to mark to market adjustments on certain containers held for sale. Changes to the carrying value are necessary for certain containers based on the prevailing market value in the locations where they are located when put to disposal. In the aggregate across all locations, the average sales proceeds less cost to sell exceeds the average carrying value of all containers held for sale.
General and administrative expense was flat from the second quarter of 2019 and decreased $3.1 million from the third quarter of 2018. The third quarter of 2018 included $2.4 million in costs associated with departing senior executive personnel.
Container lessee default recovery, net, of $0.2 million, compared to an expense of $8.6 million in the second quarter of 2019. The second quarter of 2019 included a $9.1 million charge for the estimated unrecoverable containers held by a non-performing lessee. Container lessee default expense, net, was $10.9 million in the third quarter of 2018, which included $2.5 million in container recovery costs and a $8.1 million charge for the estimated unrecoverable containers from two non-performing lessees.
Bad debt recovery was $1.2 million, due to improved financial conditions for certain lessees. Bad debt expense of $3.7 million in the second quarter 2019 included $3.3 million to fully reserve for a non-performing lessee.
Interest expense increased $1.8 million and $4.3 million, compared to the second quarter of 2019 and third quarter of 2018, respectively, primarily due to a higher average debt balance, partially offset by a decrease in interest rates. Realized gains on interest rate swaps, collars and caps, net, decreased $0.9 million and $1.1 million, compared to the second quarter 2019 and third quarter of 2018, respectively, primarily due to a decrease in interest rates.
Unrealized loss on interest rate swaps, collars and caps, net, was $2.5 million for the third quarter of 2019, resulting from a decrease in the forward LIBOR curve at the end of the quarter which reduced the value of the current interest rate derivatives. This is a non-cash loss that flows through net income as the Company has elected not to designate these derivative instruments under hedge accounting. Textainer manages interest rate risk on a portion of its floating rate debt by entering into interest rate derivatives. This hedging policy lessens volatility from the effective interest rate. Textainer intends to hold the underlying hedges until maturity.
Conference Call and Webcast
A conference call to discuss the financial results for the third quarter 2019 will be held at 5:00 pm EDT on Thursday, October 31, 2019. 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 more than 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 lease fleet, we buy older containers from our shipping line customers for trading and resale. We sold an average of almost 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.
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: any deceleration or reversal of the current domestic and global economic conditions; lease rates may decrease and lessees may default, which could decrease revenue and increase storage, repositioning, collection and recovery expenses; the demand for leased containers depends on many political and economic factors and is tied to international trade and if demand decreases due to increased barriers to trade or political or economic factors, or for other reasons, it reduces demand for intermodal container leasing; as we increase the number of containers in our owned fleet, we increase our capital at risk and may need to incur more debt, which could result in financial instability; Textainer faces extensive competition in the container leasing industry which tends to depress returns; the international nature of the container shipping industry exposes Textainer to numerous risks; gains and losses associated with the disposition of used equipment may fluctuate; our indebtedness reduces our financial flexibility and could impede our ability to operate; and other risks and uncertainties, including those set forth in Textainer's filings with the Securities and Exchange Commission. For a discussion of some of these risks and uncertainties, see Item 3 "Key Information— Risk Factors" in Textainer's Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 25, 2019.
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
[email protected]
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited) (All currency expressed in United States dollars in thousands, except per share amounts) |
||||||||||||||||||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||
Lease rental income - owned fleet |
$ |
129,372 |
$ |
129,834 |
$ |
387,651 |
$ |
371,639 |
||||||||||||||||||||||||
Lease rental income - managed fleet (a) |
25,293 |
27,926 |
77,650 |
83,950 |
||||||||||||||||||||||||||||
Lease rental income |
154,665 |
157,760 |
465,301 |
455,589 |
||||||||||||||||||||||||||||
Management fees - non-leasing (a) |
1,582 |
1,994 |
5,823 |
6,279 |
||||||||||||||||||||||||||||
Trading container sales proceeds (b) |
11,852 |
7,123 |
40,679 |
12,681 |
||||||||||||||||||||||||||||
Cost of trading containers sold (b) |
(9,469) |
(5,319) |
(32,371) |
(10,535) |
||||||||||||||||||||||||||||
Trading container margin |
2,383 |
1,804 |
8,308 |
2,146 |
||||||||||||||||||||||||||||
Gain on sale of owned fleet containers, net (b) |
6,092 |
8,450 |
18,263 |
26,480 |
||||||||||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||||||
Direct container expense - owned fleet (c) |
11,810 |
14,072 |
34,071 |
41,105 |
||||||||||||||||||||||||||||
Distribution to managed fleet container investors (a) |
23,318 |
25,889 |
71,535 |
77,651 |
||||||||||||||||||||||||||||
Depreciation expense (d) |
67,644 |
68,821 |
194,243 |
184,699 |
||||||||||||||||||||||||||||
Container lessee default (recovery) expense, net (c) |
(184) |
10,869 |
7,718 |
11,005 |
||||||||||||||||||||||||||||
Amortization expense |
481 |
439 |
1,576 |
3,219 |
||||||||||||||||||||||||||||
General and administrative expense (e) |
9,364 |
12,487 |
28,638 |
33,665 |
||||||||||||||||||||||||||||
Bad debt (recovery) expense, net |
(1,198) |
275 |
2,650 |
1,058 |
||||||||||||||||||||||||||||
Gain on insurance recovery and legal settlement |
- |
- |
(841) |
- |
||||||||||||||||||||||||||||
Total operating expenses |
111,235 |
132,852 |
339,590 |
352,402 |
||||||||||||||||||||||||||||
Income from operations |
53,487 |
37,156 |
158,105 |
138,092 |
||||||||||||||||||||||||||||
Other (expense) income: |
||||||||||||||||||||||||||||||||
Interest expense |
(39,970) |
(35,706) |
(115,699) |
(101,838) |
||||||||||||||||||||||||||||
Write-off of unamortized deferred debt issuance costs and bond discounts |
- |
(881) |
- |
(881) |
||||||||||||||||||||||||||||
Interest income |
680 |
446 |
2,047 |
1,153 |
||||||||||||||||||||||||||||
Realized gain on interest rate swaps, collars and caps, net |
170 |
1,268 |
2,709 |
3,951 |
||||||||||||||||||||||||||||
Unrealized (loss) gain on interest rate swaps, collars and caps, net |
(2,478) |
22 |
(18,315) |
2,248 |
||||||||||||||||||||||||||||
Other, net |
(10) |
(1) |
(10) |
(1) |
||||||||||||||||||||||||||||
Net other expense |
(41,608) |
(34,852) |
(129,268) |
(95,368) |
||||||||||||||||||||||||||||
Income before income tax and noncontrolling interests |
11,879 |
2,304 |
28,837 |
42,724 |
||||||||||||||||||||||||||||
Income tax (expense) benefit |
(1,318) |
224 |
(1,470) |
(1,262) |
||||||||||||||||||||||||||||
Net income |
10,561 |
2,528 |
27,367 |
41,462 |
||||||||||||||||||||||||||||
Less: Net loss (income) attributable to the noncontrolling interests |
17 |
(615) |
575 |
(3,325) |
||||||||||||||||||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders |
$ |
10,578 |
$ |
1,913 |
$ |
27,942 |
$ |
38,137 |
||||||||||||||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders per share: |
||||||||||||||||||||||||||||||||
Basic |
$ |
0.18 |
$ |
0.03 |
$ |
0.49 |
$ |
0.67 |
||||||||||||||||||||||||
Diluted |
$ |
0.18 |
$ |
0.03 |
$ |
0.49 |
$ |
0.66 |
||||||||||||||||||||||||
Weighted average shares outstanding (in thousands): |
||||||||||||||||||||||||||||||||
Basic |
57,503 |
57,212 |
57,493 |
57,144 |
||||||||||||||||||||||||||||
Diluted |
57,598 |
57,426 |
57,586 |
57,438 |
||||||||||||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||||||||||
Foreign currency translation adjustments |
(119) |
(93) |
(52) |
(82) |
||||||||||||||||||||||||||||
Comprehensive income |
10,442 |
2,435 |
27,315 |
41,380 |
||||||||||||||||||||||||||||
Comprehensive loss (income) attributable to the noncontrolling interests |
17 |
(615) |
575 |
(3,325) |
||||||||||||||||||||||||||||
Comprehensive income attributable to Textainer Group Holdings Limited common shareholders |
$ |
10,459 |
$ |
1,820 |
$ |
27,890 |
$ |
38,055 |
||||||||||||||||||||||||
(a) |
Management fees for managed fleet leasing revenue for the periods ended September 30, 2018 have been reclassified to present the gross amount of revenue and expense under separate line items "lease rental income – managed fleet" and "distribution to managed fleet container investors" to conform with the 2019 presentation. Management fees - non-leasing include acquisition fees and sales commission earned on the managed fleet. |
(b) |
Amounts for the periods ended September 30, 2018 have been reclassified to conform with the 2019 presentation. |
(c) |
Amounts for container write-down and container recovery costs from lessee default for the periods ended September 30, 2018 have been reclassified out of the previously reported line item "container impairment" and "direct container expense – owned fleet" and included within "container lessee default (recovery) expense, net" to conform with the 2019 presentation. |
(d) |
Amounts to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the periods ended September 30, 2018 have been reclassified out of the previously reported line item "container impairment" and included within "depreciation expense" to conform with the 2019 presentation. |
(e) |
Amounts for the periods ended September 30, 2018 have been reclassified out of the separate line items "short term incentive compensation expense" and "long term incentive compensation expense" and included within "general and administrative expense" to conform with the 2019 presentation. |
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES Condensed Consolidated Balance Sheets September 30, 2019 and December 31, 2018 (Unaudited) (All currency expressed in United States dollars in thousands) |
||||||||
2019 |
2018 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
163,387 |
$ |
137,298 |
||||
Accounts receivable, net of allowance for doubtful accounts of $7,068 and $5,729, respectively (a) |
124,505 |
134,225 |
||||||
Net investment in direct financing and sales-type leases |
36,811 |
39,270 |
||||||
Container leaseback financing receivable |
18,464 |
- |
||||||
Trading containers |
26,549 |
40,852 |
||||||
Containers held for sale |
27,452 |
21,874 |
||||||
Prepaid expenses and other current assets (a) |
15,303 |
23,139 |
||||||
Due from affiliates, net |
1,666 |
1,692 |
||||||
Total current assets |
414,137 |
398,350 |
||||||
Restricted cash |
104,087 |
87,630 |
||||||
Containers, net of accumulated depreciation of $1,415,081 and $1,322,221, respectively |
4,117,631 |
4,134,016 |
||||||
Net investment in direct financing and sales-type leases |
223,723 |
127,790 |
||||||
Container leaseback financing receivable |
248,627 |
- |
||||||
Fixed assets, net of accumulated depreciation of $11,975 and $11,525, respectively |
1,333 |
2,066 |
||||||
Intangible assets, net of accumulated amortization of $44,842 and $43,266, respectively |
5,808 |
7,384 |
||||||
Interest rate swaps, collars and caps |
426 |
5,555 |
||||||
Deferred taxes |
2,080 |
2,087 |
||||||
Other assets |
14,441 |
3,891 |
||||||
Total assets |
$ |
5,132,293 |
$ |
4,768,769 |
||||
Liabilities and Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses (a) |
$ |
24,009 |
$ |
27,297 |
||||
Container contracts payable |
7,005 |
42,710 |
||||||
Other liabilities |
2,262 |
219 |
||||||
Due to container investors, net (a) |
27,742 |
30,672 |
||||||
Debt, net of unamortized deferred financing costs of $7,926 and $5,738, respectively |
278,707 |
191,689 |
||||||
Total current liabilities |
339,725 |
292,587 |
||||||
Debt, net of unamortized deferred financing costs of $22,055 and $22,248, respectively |
3,469,651 |
3,218,138 |
||||||
Interest rate swaps, collars and caps |
16,825 |
3,639 |
||||||
Income tax payable |
9,845 |
9,570 |
||||||
Deferred taxes |
7,992 |
7,039 |
||||||
Other liabilities |
26,917 |
1,805 |
||||||
Total liabilities |
3,870,955 |
3,532,778 |
||||||
Equity: |
||||||||
Textainer Group Holdings Limited shareholders' equity: |
||||||||
Common shares, $0.01 par value. Authorized 140,000,000 shares; 58,079,743 shares issued and 57,208,954 shares outstanding at 2019; 58,032,164 shares issued and 57,402,164 shares outstanding at 2018 |
581 |
581 |
||||||
Treasury shares, at cost, 870,789 shares and 630,000 shares, respectively |
(11,707) |
(9,149) |
||||||
Additional paid-in capital |
409,417 |
406,083 |
||||||
Accumulated other comprehensive loss |
(488) |
(436) |
||||||
Retained earnings |
837,676 |
809,734 |
||||||
Total Textainer Group Holdings Limited shareholders' equity |
1,235,479 |
1,206,813 |
||||||
Noncontrolling interests |
25,859 |
29,178 |
||||||
Total equity |
1,261,338 |
1,235,991 |
||||||
Total liabilities and equity |
$ |
5,132,293 |
$ |
4,768,769 |
||||
(a) |
Certain amounts for the year ended December 31, 2018 have been reclassified to report the gross amounts of accounts receivable, prepaid expenses, accounts payable and accrued expenses arising from the managed fleet instead of the net presentation previously reported within "due to container investor, net". |
||||||||
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2019 and 2018 (Unaudited) (All currency expressed in United States dollars in thousands) |
||||||||
2019 |
2018 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ |
27,367 |
$ |
41,462 |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation expense (a) |
194,243 |
184,699 |
||||||
Container write-down from lessee default, net (b) |
7,154 |
8,426 |
||||||
Bad debt expense, net |
2,650 |
1,058 |
||||||
Unrealized loss (gain) on interest rate swaps, collars and caps, net |
18,315 |
(2,248) |
||||||
Amortization and write-off of unamortized deferred debt issuance costs and accretion of bond discounts |
5,922 |
7,616 |
||||||
Amortization of intangible assets |
1,576 |
3,219 |
||||||
Gain on sale of owned fleet containers, net |
(18,263) |
(26,480) |
||||||
Gain on insurance recovery and legal settlement |
(841) |
— |
||||||
Share-based compensation expense |
3,213 |
6,334 |
||||||
Changes in operating assets and liabilities |
80,875 |
44,469 |
||||||
Total adjustments |
294,844 |
227,093 |
||||||
Net cash provided by operating activities |
322,211 |
268,555 |
||||||
Cash flows from investing activities: |
||||||||
Purchase of containers and fixed assets |
(449,105) |
(572,948) |
||||||
Payments on container leaseback financing receivable |
(271,976) |
— |
||||||
Receipt of principal payments on container leaseback financing receivable |
2,083 |
— |
||||||
Proceeds from sale of containers and fixed assets |
111,523 |
106,504 |
||||||
Net cash used in investing activities |
(607,475) |
(466,444) |
||||||
Cash flows from financing activities: |
||||||||
Proceeds from debt |
995,134 |
1,688,026 |
||||||
Principal payments on debt |
(654,723) |
(1,476,401) |
||||||
Purchase of treasury shares |
(2,558) |
— |
||||||
Debt issuance costs |
(7,368) |
(10,017) |
||||||
Dividends paid to noncontrolling interest |
(2,744) |
(1,996) |
||||||
Issuance of common shares upon exercise of share options |
121 |
52 |
||||||
Net cash provided by financing activities |
327,862 |
199,664 |
||||||
Effect of exchange rate changes |
(52) |
(82) |
||||||
Net increase in cash, cash equivalents and restricted cash |
42,546 |
1,693 |
||||||
Cash, cash equivalents and restricted cash, beginning of the year |
224,928 |
237,569 |
||||||
Cash, cash equivalents and restricted cash, end of the period |
$ |
267,474 |
$ |
239,262 |
||||
(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 September 30, 2018 has been reclassified out of the previously reported line item "container impairment" and included within "depreciation expense" to conform with the 2019 presentation. |
(b) |
Amounts for container write-down and container recovery costs from lessee default for the period ended September 30, 2018 have been reclassified out of the previously reported line item "container impairment" and "direct container expense – owned fleet" and included within "container lessee default (recovery) expense, net" to conform with the 2019 presentation. |
TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES
Reconciliation of GAAP financial measures to non-GAAP financial measures
Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
(All currency expressed in United States dollars in thousands, except per share amounts)
The following is a reconciliation of certain GAAP measures to non-GAAP financial measures (such items listed in (a) to (c) below and defined as "Non-GAAP Measures") for the three and nine months ended September 30, 2019 and 2018, 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, write-off of unamortized deferred debt issuance costs and bond discounts, realized gain on interest rate swaps, collars and caps, net, unrealized loss (gain) on interest rate swaps, collars and caps, net, costs associated with departing senior executives, gain on insurance recovery and legal settlement, income tax expense, net income attributable to the noncontrolling interests ("NCI"), depreciation expense, container impairment, amortization expense and the related impact of reconciling items on net income attributable to the NCI); |
(b) |
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 deferred debt issuance costs and bond discounts, unrealized loss (gain) on interest rate swaps, collars and caps, net, costs associated with departing senior executives, gain on insurance recovery and legal settlement, the related impact of reconciling items on income tax expense and net income attributable to the NCI); and |
(c) |
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 deferred debt issuance costs and bond discounts, unrealized loss (gain) on interest rate swaps, collars and caps, net, costs associated with departing senior executives, gain on insurance recovery and legal settlement, the related impact of reconciling items on income tax expense and 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 loss (gain) 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 loss (gain) 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 are 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 |
Nine Months Ended |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(Dollars in thousands) |
(Dollars in thousands) |
|||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||
Reconciliation of adjusted net income: |
||||||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders |
$ |
10,578 |
$ |
1,913 |
$ |
27,942 |
$ |
38,137 |
||||||||
Adjustments: |
||||||||||||||||
Write-off of unamortized deferred debt issuance costs and bond discounts |
— |
881 |
— |
881 |
||||||||||||
Unrealized loss (gain) on interest rate swaps, collars and caps, net |
2,478 |
(22) |
18,315 |
(2,248) |
||||||||||||
Costs associated with departing senior executives |
— |
2,368 |
— |
2,368 |
||||||||||||
Gain on insurance recovery and legal settlement |
— |
— |
(841) |
— |
||||||||||||
Impact of reconciling items on income tax expense (benefit) |
(27) |
(506) |
(173) |
(484) |
||||||||||||
Impact of reconciling items on net (loss) income attributable to the noncontrolling interests |
(79) |
181 |
(845) |
900 |
||||||||||||
Adjusted net income |
$ |
12,950 |
$ |
4,815 |
$ |
44,398 |
$ |
39,554 |
||||||||
Reconciliation of adjusted net income per diluted common share: |
||||||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share |
$ |
0.18 |
$ |
0.03 |
$ |
0.49 |
$ |
0.66 |
||||||||
Adjustments: |
||||||||||||||||
Write-off of unamortized deferred debt issuance costs and bond discounts |
— |
0.02 |
— |
0.02 |
||||||||||||
Unrealized loss (gain) on interest rate swaps, collars and caps, net |
0.04 |
— |
0.32 |
(0.04) |
||||||||||||
Costs associated with departing senior executives |
— |
0.04 |
— |
0.04 |
||||||||||||
Gain on insurance recovery and legal settlement |
— |
— |
(0.02) |
— |
||||||||||||
Impact of reconciling items on income tax expense (benefit) |
— |
(0.01) |
— |
(0.01) |
||||||||||||
Impact of reconciling items on net (loss) income attributable to the noncontrolling interests |
— |
— |
(0.02) |
0.02 |
||||||||||||
Adjusted net income per diluted common share |
$ |
0.22 |
$ |
0.08 |
$ |
0.77 |
$ |
0.69 |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(Dollars in thousands) |
(Dollars in thousands) |
|||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||
Reconciliation of adjusted EBITDA: |
||||||||||||||||
Net income attributable to Textainer Group Holdings Limited common shareholders |
$ |
10,578 |
$ |
1,913 |
$ |
27,942 |
$ |
38,137 |
||||||||
Adjustments: |
||||||||||||||||
Interest income |
(680) |
(446) |
(2,047) |
(1,153) |
||||||||||||
Interest expense |
39,970 |
35,706 |
115,699 |
101,838 |
||||||||||||
Write-off of unamortized deferred debt issuance costs and bond discounts |
— |
881 |
— |
881 |
||||||||||||
Realized gain on interest rate swaps, collars and caps, net |
(170) |
(1,268) |
(2,709) |
(3,951) |
||||||||||||
Unrealized loss (gain) on interest rate swaps, collars and caps, net |
2,478 |
(22) |
18,315 |
(2,248) |
||||||||||||
Costs associated with departing senior executives |
— |
2,368 |
— |
2,368 |
||||||||||||
Gain on insurance recovery and legal settlement |
— |
— |
(841) |
— |
||||||||||||
Income tax expense (benefit) |
1,318 |
(224) |
1,470 |
1,262 |
||||||||||||
Net (loss) income attributable to the noncontrolling interests |
(17) |
615 |
(575) |
3,325 |
||||||||||||
Depreciation expense |
67,644 |
68,821 |
194,243 |
184,699 |
||||||||||||
Container write-down from lessee default, net |
(576) |
8,407 |
7,154 |
8,426 |
||||||||||||
Amortization expense |
481 |
439 |
1,576 |
3,219 |
||||||||||||
Impact of reconciling items on net (loss) income attributable to the noncontrolling interests |
(2,772) |
(3,493) |
(9,099) |
(8,713) |
||||||||||||
Adjusted EBITDA |
$ |
118,254 |
$ |
113,697 |
$ |
351,128 |
$ |
328,090 |
||||||||
SOURCE Textainer Group Holdings Limited
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