Textainer Group Holdings Limited (NYSE:TGH) (“Textainer”, “the
Company”, “we” and “our”), one of the world’s largest lessors of
intermodal containers, reported third-quarter 2016 results.
Financial and Business Summaries
Textainer’s third quarter 2016 financial results were
significantly impacted by Hanjin Shipping Co.’s (“Hanjin”)
bankruptcy filing. On August 31, 2016, Hanjin, filed for bankruptcy
protection in South Korea, the United States and certain other
countries in which it previously conducted business. Textainer had
approximately 114,000 containers on lease to Hanjin, representing
6.4% of its total fleet, on both operating and direct finance
leases.
- Lease rental income of $110.9 million
for the quarter, a decrease of $18.3 million (or 14.2 percent) from
the prior year quarter; $4.8 million of this reduction was due to
Hanjin. Lease rental income adjusted for Hanjin decreased 10.5
percent from the prior year quarter;
- Financial impact for the quarter as of
result of the bankruptcy of Hanjin was $44.0 million (or $0.78 per
diluted common share);
- Decreased estimated future residual
values and increased the estimated useful lives of certain
equipment types resulting in $15.0 million (or $0.26 per diluted
common share) of additional depreciation expense for the
quarter;
- Recorded $16.5 million (or $0.29 per
diluted common share) of container impairments to write down our
inventory of containers that are pending disposal for the quarter
to their fair market value;
- Net loss attributable to Textainer
Group Holdings Limited common shareholders of $45.9 million for the
quarter, or $0.81 per diluted common share;
- Adjusted net loss (1) of $52.3 million
for the quarter, or $0.92 per diluted common share; and
- Utilization averaging 95.4 percent for
the quarter and is currently at 94.6 percent, which includes the
equipment on-lease to Hanjin;
“Our third quarter results were negatively affected by several
significant factors the biggest of which was the bankruptcy filing
by Hanjin. We recorded $22.1 million of container impairments net
of estimated insurance proceeds of $20.2 million, $17.1 million of
bad debt provision net of estimated insurance proceeds of $2.6
million which combined with $4.8 million of revenue reduction,
resulted in a $44.0 million (or $0.78 per dilute common share)
negative financial impact for the quarter as a result of the
bankruptcy of Hanjin,” commented Philip K. Brewer, President and
Chief Executive Officer of Textainer Group Holdings Limited. “In
addition to Hanjin, our results were hurt by ongoing impairments
due to low used container prices which also prompted our decision
to reduce residual values for certain equipment types.”
“To date, we have recovered, booked or approved to recover for
turn-in 41% of our containers on lease to Hanjin. We are also
actively negotiating the release of another 26% of our containers.
As many Hanjin containers are still with shippers, on vessels or
held by shipping terminals, we are unable currently to accurately
predict the effect of future estimates to be made on the recovery.
At this time, we expect to recover between 70% to 90% of our
containers. We have $80 million of insurance to cover unrecoverable
containers, lost revenue and recovery and repair costs. Due
largely to the expected level of these costs and the significant
amount of lost revenue, we expect our losses will exceed our
insurance coverage.”
“The Hanjin bankruptcy and ongoing impairments are overshadowing
recent improvements in the lease-out market. New container prices
have increased by about $400 per CEU since the low point of the
year. More importantly, rental rates on new and depot container
lease-outs have increased significantly to levels not seen for
several years. There is very little new container inventory
available for lease and our unbooked depot inventory is at its
lowest level since the third quarter 2015. After adjusting for
Hanjin recoveries, our lease-out to turn-in ratio for the third
quarter was 1.7:1.0. Sales prices for disposal containers have
improved by $100-$200 or more in certain regions. All of these
factors are resulting in improved returns on both new and existing
containers,” added Mr. Brewer.
“Notwithstanding these improvements in market conditions, the
Board made the very difficult decision to eliminate our dividend.
This was not an easy decision but was made in the best interests of
the company and its shareholders. Our Board recognizes the value
shareholders place on dividends and will review this decision as
market conditions change.”
Key Financial Information (in thousands except for per share
and TEU amounts):
Q3 QTD Q3 YTD 2016
2015 (1) % Change 2016 2015
(1) % Change Total revenues $ 121,211 $ 136,532
-11.2 % $ 378,114 $ 414,587 -8.8 %
(Loss) income from operations
$ (38,509 ) $ 44,241 -187.0 % $ 18,505 $ 173,778 -89.4 %
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders
$ (45,917 ) $ 10,554 -535.1 % $ (50,316 ) $ 86,735 -158.0 %
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders per diluted
common share
$ (0.81 ) $ 0.18 -550.0 % $ (0.89 ) $ 1.52 -158.6 % Adjusted net
(loss) income (2) $ (52,299 ) $ 18,342 -385.1 % $ (42,523 ) $
97,230 -143.7 % Adjusted net (loss) income per diluted common share
(2) $ (0.92 ) $ 0.32 -387.5 % $ (0.75 ) $ 1.70 -144.1 % Adjusted
EBITDA (2) $ 68,072 $ 105,068 -35.2 % $ 260,764 $ 327,653 -20.4 %
Net cash provided by operating activities $ 223,265 $ 279,246 -20.0
% Average fleet utilization 95.4 % 96.4 % -1.0 % 94.9 % 97.2 % -2.4
% Total fleet size at end of period (TEU) 3,195,443 3,219,550 -0.7
% Owned percentage of total fleet at end of period 81.7 % 80.0 %
2.1 %
(1) Amounts for Q3 QTD 2015 and Q3 YTD
2015 have been restated for immaterial corrections of identified
errors pertaining to the classification of certain leases.
“Adjusted net (loss) income” and “adjusted EBITDA” are Non-GAAP
Measures that are reconciled to GAAP measures in footnote 2.
“Adjusted net (loss) income” is defined as net (loss) income
attributable to Textainer Group Holdings Limited common
shareholders before charges to interest expense for the write-off
of unamortized debt issuance costs related to refinancing of debt,
unrealized (gains) losses on interest rate swaps, collars and caps,
net and the related impact of reconciling items on income tax
(benefit) expense and net (loss) income attributable to the
non-controlling interests (“NCI”). “Adjusted EBITDA” is defined as
net (loss) income attributable to Textainer Group Holdings Limited
common shareholders before interest income and expense, realized
and unrealized (gains) losses on interest rate swaps, collars and
caps, net, income tax (benefit) expense, net (loss) income
attributable to the NCI, depreciation expense, container
impairment, amortization expense and the related impact of
reconciling items on net (loss) income attributable to the NCI.
Footnote 2 provides certain qualifications and limitations on the
use of Non-GAAP Measures.
Third-Quarter Results
Textainer’s third quarter results compared to the prior year
quarter were negatively impacted primarily by container impairments
and bad debt expense related to Hanjin’s bankruptcy, our decision
to reduce the estimated future residual values on certain equipment
types and an increase in container impairments due to a decrease in
used container prices and an increase in the quantity of containers
designated for disposal. Furthermore, lease rental income
decreased due to a decrease in average rental rates, lower
utilization and lost revenue from the Hanjin bankruptcy, partially
offset by an increase in our owned fleet and an increase in direct
container expense primarily due to an increase in storage costs
resulting from lower utilization and higher storage rates.
In August 2016, Hanjin filed for bankruptcy. The Company
maintains insurance to cover the value of containers that are
unlikely to be recovered from its customers, the cost to recover
containers, up to 183 days of lost lease rental income and a
portion of the accounts receivable balance. Our third quarter 2016
results included a $17.4 million impairment to write down the
carrying value of containers on terminated direct financing leases
to Hanjin to their estimated fair market value. An impairment of
$4.8 million was also recognized for $24.9 million of containers
unlikely to be recovered, net of $20.1 million of anticipated
insurance proceeds. These impairments net of estimated insurance
proceeds totaled $22.1 million. In addition, bad debt expense of
$17.1 million, net of insurance receivable of $2.6 million, was
recorded in the third quarter 2016 to fully reserve for Hanjin’s
outstanding accounts receivable.
The net book value of all containers in our fleet on lease to
Hanjin is approximately $280.2 million, comprised of $88.2 million
of finance lease containers and $192.0 million of operating lease
containers. The net book value of containers effectively owned by
Textainer is $237.0 million or 85% of this total.
We evaluate the estimated future residual values and monitor the
sales prices and useful lives of our containers on an ongoing
basis. Textainer has experienced a significant decrease in
container resale prices as a result of the decreased cost of new
containers and an increased in useful lives as a result of shipping
lines leasing containers for longer periods. Based on the extended
period of lower realized container resale prices and longer useful
lives, we decreased the residual values and increased the useful
lives of several container types. The decrease in estimated
residual values and increase in estimated useful lives resulted in
$15.0 million of additional depreciation expense in the third
quarter of 2016, of which $4.4 million was a one-time charge for
containers that were fully depreciated to the previous residual
values.
The changes to our containers’ estimated useful lives and
residual values are as follows:
Estimated Residual Values Estimated
useful life (years) Container types
Prior July 1, 2016
Effective
July 1, 2016
Container types
Prior July 1, 2016
Effective
July 1, 2016
20' standard containers $ 1,050 $ 950 40' standard containers 13 14
40' high cube containers $ 1,450 $ 1,300 20' folding flat
containers 14 15 40' standard containers $ 1,300 $ 1,150 20' open
top containers 14 15 40' folding flat containers $ 2,000 $ 1,700
40' folding flat containers 14 16
Outlook
“We expect new container production to total 1.6-1.7 million TEU
this year, which would be the lowest level of production since
2009. We estimate 1.5 million TEU will be disposed meaning the
world’s container fleet will show minimal growth in 2016. If
investment in new containers remains at these low levels, the
recent increase in rental rates should continue,” noted Mr. Brewer.
“New container prices are currently approximately $1,600 per CEU.
Increased prices should be further supported by the implementation
of water-born paint regulations throughout China during 2017. Used
container prices have shown particular strength recently in Asia in
part due to the relative shortage of containers available for
lease.”
“Notwithstanding this recent strength in new and depot container
lease-outs and increases in new and used container prices, the
costs of recovering Hanjin containers as well as continued
impairments and increases in depreciation expense are expected to
outweigh these factors and depress our earnings for at least the
next two to three quarters. The relatively low inventory of new and
depot containers in Asia should help stimulate demand to lease
recovered Hanjin containers. On the other hand, if large quantities
of Hanjin containers are sold, the recent increase in disposal
prices could be reversed,” concluded Mr. Brewer.
Investors’ Webcast
Textainer will hold a conference call and a Webcast at 11:00 am
EDT on Tuesday, November 8, 2016 to discuss Textainer’s third
quarter 2016 results. An archive of the Webcast will be available
one hour after the live call through November 7, 2017. 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 43595371. To access the live Webcast or
archive, please visit Textainer’s investor 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 a total of
2.1 million containers representing 3.2 million TEU in
our owned and managed fleet. We lease containers to approximately
350 customers, including all of the world’s leading international
shipping lines, and other lessees. Our fleet consists of standard
dry freight, dry freight specials, and refrigerated intermodal
containers. We also lease tank containers through our relationship
with Trifleet Leasing and are the primary 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 100,000 containers per year for the
last five years to more than 1,200 customers making us the largest
seller of used containers. Textainer operates via a network of 14
offices and approximately 500 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
include, without limitation, statements regarding: (i) Textainer’s
belief that due largely to the expected level of unrecovered
containers, lost revenue and recovery and repair costs, that its
losses will exceed its insurance coverage; (ii) Textainer’s
expectation that new container production to total 1.6-1.7 million
TEU this year; (iii) Textainer’s belief that 1.5 million TEU will
be disposed meaning the world’s container fleet will show minimal
growth in 2016; (iv) Textainer’s expectation that if investment in
new containers remains at today’s low level, the recent increase in
rental rates should continue; (v) Textainer’s expectation that
increased container prices should be further supported by the
implementation of water-born paint regulations throughout China
during 2017; (vi) Textainer’s belief that notwithstanding the
recent strength in the new and depot container lease-outs and
increases in new and used container prices, the costs of recovering
Hanjin containers as well as continued impairments and increases in
depreciation expense are expected to outweigh these factors and
depress earnings for at least the next two to three quarters; (vii)
Textainer’s belief that the relatively low inventory of new and
depot containers in Asia should help stimulate demand to lease
recovered Hanjin containers; and (viii) Textainer’s belief that if
large quantities of Hanjin containers are sold, the recent increase
in disposal prices could be reversed. 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 11, 2016.
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
Condensed Consolidated Statements of
Comprehensive (Loss) Income
Three and nine months ended
September 30, 2016 and 2015
(Unaudited)
(All currency expressed in United States
dollars in thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended
September 30, 2016 2015 (1) 2016
2015 (1) Revenues: Lease
rental income $ 110,905 $ 129,209 $ 353,718 $ 387,536 Management
fees 3,136 3,951 9,774 11,978 Trading container sales proceeds
4,139 2,280 9,103 11,332 Gains on sale of containers, net
3,031 1,092 5,519 3,741 Total revenues
121,211 136,532 378,114 414,587 Operating
expenses: Direct container expense 15,691 13,317 44,869 32,486 Cost
of trading containers sold 4,647 2,599 10,905 11,207
Depreciation expense
68,220 51,608 172,614 140,204 Container impairment 43,722 12,279
80,498 20,134 Amortization expense 1,370 1,168 4,116 3,502 General
and administrative expense 6,147 7,134 19,912 21,629 Short-term
incentive compensation expense 388 207 1,068 1,645 Long-term
incentive compensation expense 1,458 1,360 4,564 4,841 Bad debt
expense, net 18,077 2,619 21,063 5,161
Total operating expenses 159,720 92,291
359,609 240,809
(Loss) income from operations
(38,509 ) 44,241 18,505 173,778 Other
(expense) income: Interest expense (21,256 ) (18,979 ) (61,243 )
(57,639 ) Interest income 103 27 282 90 Realized losses on interest
rate swaps, collars and caps, net (2,268 ) (3,488 ) (6,999 ) (9,582
)
Unrealized gains (losses) on interest rate
swaps, collars and caps, net
7,157 (9,378 ) (9,042 ) (12,053 ) Other, net (4 ) 12
(9 ) 25 Net other expense (16,268 )
(31,806 ) (77,011 ) (79,159 )
(Loss) income before income tax and
noncontrolling interests
(54,777 ) 12,435 (58,506 ) 94,619 Income tax benefit (expense)
3,170 (1,625 ) 2,353 (4,260 ) Net
(loss) income (51,607 ) 10,810 (56,153 ) 90,359
Less: Net loss (income) attributable to
the noncontrolling interests
5,690 (256 ) 5,837 (3,624 )
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders
$ (45,917 ) $ 10,554 $ (50,316 ) $ 86,735
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders per share:
Basic $ (0.81 ) $ 0.19 $ (0.89 ) $ 1.52 Diluted $ (0.81 ) $ 0.18 $
(0.89 ) $ 1.52 Weighted average shares outstanding (in thousands):
Basic 56,591 57,009 56,580 56,993 Diluted 56,591 57,083 56,580
57,127 Other comprehensive (loss) income: Foreign currency
translation adjustments (80 ) (86 ) (82 )
(205 ) Comprehensive (loss) income (51,687 ) 10,724 (56,235
) 90,154
Comprehensive loss (income) attributable
to the noncontrolling interests
5,690 (256 ) 5,837 (3,624 )
Comprehensive (loss) income attributable
to Textainer Group Holdings Limited common shareholders
$ (45,997 ) $ 10,468 $ (50,398 ) $ 86,530
(1) Amounts for the three and nine months
ended September 30, 2015 have been restated for immaterial
corrections of identified errors pertaining to the classification
of certain leases.
TEXTAINER GROUP HOLDINGS LIMITED AND
SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2016 and
December 31, 2015
(Unaudited)
(All currency expressed in United States
dollars in thousands)
2016 2015 (1) Assets Current assets:
Cash and cash equivalents $ 91,589 $ 115,594
Accounts receivable, net of allowance for
doubtful accounts of $37,306 and $14,053 in 2016 and 2015,
respectively
83,032 88,370 Net investment in direct financing and sales-type
leases 65,921 86,404 Trading containers 4,002 4,831 Containers held
for sale 31,028 43,245 Prepaid expenses and other current assets
16,222 8,385 Insurance receivable 26,911 11,435 Due from
affiliates, net 816 514 Total current assets 319,521
358,778 Restricted cash 36,405 33,917
Containers, net of accumulated
depreciation of $940,859 and $814,790 at 2016 and 2015,
respectively
3,804,461 3,696,311 Net investment in direct financing and
sales-type leases 181,560 245,388
Fixed assets, net of accumulated
depreciation of $10,080 and $9,836 at 2016 and 2015,
respectively
1,888 1,663
Intangible assets, net of accumulated
amortization of $39,824 and $35,709 at 2016 and 2015,
respectively
16,134 20,250 Interest rate swaps, collars and caps 557 814
Deferred taxes 1,417 1,203 Other assets 7,839 6,988
Total assets $ 4,369,782 $ 4,365,312
Liabilities and Equity
Current liabilities: Accounts payable $ 9,402 $ 10,477 Accrued
expenses 7,319 6,816 Container contracts payable 114,674 41,356
Other liabilities 271 291 Due to owners, net 13,626 11,806 Credit
facility 31,573 - Term loan 30,935 31,097 Bonds payable
58,975 58,788 Total current liabilities 266,775 160,631
Credit facilities 1,105,339 1,013,252 Secured debt facilities
1,016,242 1,062,539 Term loan 373,894 403,500 Bonds payable 390,221
434,472 Interest rate swaps, collars and caps 12,197 3,412 Income
tax payable 9,461 8,678 Deferred taxes 7,486 10,420 Other
liabilities 2,325 2,523 Total liabilities
3,183,940 3,099,427 Equity: Textainer Group Holdings Limited
shareholders’ equity: Common shares, $0.01 par value. Authorized
140,000,000 shares; 57,220,797 shares
issued and 56,590,797 shares outstanding
at 2016; 57,163,095 shares issued and
56,533,095 shares outstanding at 2015
572 572 Additional paid-in capital 389,966 385,020 Treasury shares,
at cost, 630,000 shares (9,149 ) (9,149 ) Accumulated other
comprehensive income (365 ) (283 ) Retained earnings 746,403
825,473 Total Textainer Group Holdings Limited shareholders’
equity 1,127,427 1,201,633 Noncontrolling interest 58,415
64,252 Total equity 1,185,842 1,265,885 Total
liabilities and equity $ 4,369,782 $ 4,365,312 (1) Amounts
as of December 31, 2015 have been restated for immaterial
corrections of identified errors pertaining to the classification
of certain leases.
TEXTAINER GROUP HOLDINGS LIMITED AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
Nine months ended September 30, 2016
and 2015
(Unaudited)
(All currency expressed in United States
dollars in thousands)
2016 2015 (1) Cash flows from operating
activities: Net (loss) income $ (56,153 ) $ 90,359 Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: Depreciation expense 172,614 140,204 Container
impairment 80,498 20,134 Bad debt expense, net 21,063 5,161
Unrealized losses on interest rate swaps, collars and caps, net
9,042 12,053 Amortization of debt issuance costs and accretion of
bond discount 5,743 6,028 Amortization of intangible assets 4,116
3,502 Gains on sale of containers, net (5,519 ) (3,741 )
Share-based compensation expense 5,056 5,345 Changes in operating
assets and liabilities (13,195 ) 201 Total
adjustments 279,418 188,887 Net cash provided by
operating activities 223,265 279,246 Cash flows from
investing activities: Purchase of containers and fixed assets
(382,533 ) (447,765 ) Proceeds from sale of containers and fixed
assets 94,149 94,486 Receipt of payments on direct financing and
sales-type leases, net of income earned 74,761 76,057
Net cash used in investing activities (213,623 )
(277,222 ) Cash flows from financing activities: Proceeds from
credit facilities 237,500 345,177 Principal payments on credit
facilities (113,960 ) (322,704 ) Proceeds from secured debt
facilities 40,000 160,000 Principal payments on secured debt
facilities (89,200 ) (56,000 ) Principal payments on term loan
(29,700 ) (29,700 ) Principal payments on bonds payable (45,173 )
(45,173 ) (Increase) decrease in restricted cash (2,488 ) 19,904
Debt issuance costs (1,679 ) (5,058 ) Issuance of common shares
upon exercise of share options — 292 Net tax benefit from
share-based compensation awards (110 ) 94 Capital contributions
from noncontrolling interest — 1,850 Dividends paid to Textainer
Group Holdings Limited shareholders (28,755 ) (80,360 ) Dividends
paid to noncontrolling interest - (2,994 ) Net cash
used in financing activities (33,565 ) (14,672 )
Effect of exchange rate changes (82 ) (205 ) Net
decrease in cash and cash equivalents (24,005 ) (12,853 ) Cash and
cash equivalents, beginning of the year 115,594
107,067 Cash and cash equivalents, end of the period $ 91,589 $
94,214
(1) Amounts for the nine months ended
September 30, 2015 have been restated for immaterial corrections of
identified errors pertaining to the classification of certain
leases.
TEXTAINER GROUP HOLDINGS LIMITED AND
SUBSIDIARIESReconciliation of GAAP financial measures to
non-GAAP financial measuresThree and nine Months Ended September
30, 2016 and 2015(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 nine months ended September 30, 2016 and 2015,
including:
(a) net (loss) income attributable to Textainer Group
Holdings Limited common shareholders to adjusted EBITDA (Adjusted
EBITDA defined as net (loss) 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, net income (loss)
attributable to the noncontrolling interests (“NCI”), depreciation
expense, container impairment, amortization expense and the related
impact of reconciling items on net income (loss) attributable to
the NCI); (b) net cash provided by operating activities to
Adjusted EBITDA; (c) net (loss) income attributable to
Textainer Group Holdings Limited common shareholders to adjusted
net (loss) income (defined as net (loss) 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 net income
(loss) attributable to the NCI); and (d) net (loss) income
attributable to Textainer Group Holdings Limited common
shareholders per diluted common share to adjusted net (loss) income
per diluted common share (defined as net (loss) 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 net income (loss) 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
(loss) 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 (loss) 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 (loss) 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 (loss) income or adjusted net (loss) 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 EndedSeptember 30, Nine
Months EndedSeptember 30, 2016 2015
(1) 2016 2015 (1) (Dollars in
thousands)(Unaudited) (Dollars in
thousands)(Unaudited) Reconciliation of adjusted net
(loss) income:
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders
$ (45,917 ) $ 10,554 $ (50,316 ) $ 86,735 Adjustments: Write-off of
unamortized debt issuance costs — — — 458 Unrealized (gains) losses
on interest rate swaps, collars and caps, net (7,157 ) 9,378 9,042
12,053 Impact of reconciling items on income tax benefit (expense)
117 (485 ) (149 ) (593 )
Impact of reconciling items on net income
(loss) attributable to the noncontrolling interests
658 (1,105 ) (1,100 ) (1,423 )
Adjusted net (loss) income $ (52,299 ) $ 18,342 $ (42,523 )
$ 97,230
Reconciliation of adjusted net (loss) income per
diluted common share:
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders per diluted
common share
$ (0.81 ) $ 0.18 $ (0.89 ) $ 1.52 Adjustments: Write-off of
unamortized debt issuance costs — —
—
—
Unrealized (gains) losses on interest rate swaps, collars and caps,
net (0.12 ) 0.17 0.16 0.21 Impact of reconciling items on income
tax benefit (expense) — (0.01 ) — (0.01 )
Impact of reconciling items on net income
(loss) attributable to the noncontrolling interests
0.01 (0.02 ) (0.02 ) (0.02 )
Adjusted net (loss) income per diluted common share $ (0.92
) $ 0.32 $ (0.75 ) $ 1.70 (1) Amounts for the three and nine
months ended September 30, 2015 have been restated for immaterial
corrections of identified errors pertaining to the classification
of certain leases.
Three Months EndedSeptember
30, Nine Months EndedSeptember 30,
2016 2015 (1) 2016 2015
(1) (Dollars in thousands)(Unaudited) (Dollars
in thousands)(Unaudited) Reconciliation of adjusted
EBITDA:
Net (loss) income attributable to
Textainer Group Holdings Limited common shareholders
$ (45,917 ) $ 10,554 $ (50,316 ) $ 86,735 Adjustments: Interest
income (103 ) (27 ) (282 ) (90 ) Interest expense 21,256 18,979
61,243 57,639 Realized losses on interest rate swaps, collars and
caps, net 2,268 3,488 6,999 9,582 Unrealized (gains) losses on
interest rate swaps, collars and caps, net (7,157 ) 9,378 9,042
12,053 Income tax (benefit) expense (3,170 ) 1,625 (2,353 ) 4,260
Net (loss) income attributable to the noncontrolling interests
(5,690 ) 256 (5,837 ) 3,624 Depreciation expense 68,220 51,608
172,614 140,204 Container impairment 43,722 12,279 80,498 20,134
Amortization expense 1,370 1,168 4,116 3,502
Impact of reconciling items on net (loss)
income attributable to the noncontrolling interests
(6,727 ) (4,240 ) (14,960 ) (9,990 )
Adjusted EBITDA $ 68,072 $ 105,068 $ 260,764 $ 327,653 Net cash
provided by operating activities $ 223,265 $ 279,246 Adjustments:
Bad debt expense, net (21,063 ) (5,161 )
Amortization of debt issuance costs and
accretion of bond discount
(5,743 ) (6,028 ) Gains on sale of containers, net 5,519 3,741
Share-based compensation expense (5,056 ) (5,345 ) Interest income
(282 ) (90 ) Interest expense 61,243 57,639 Realized losses on
interest rate swaps, collars and caps, net 6,999 9,582 Income tax
(benefit) expense (2,353 ) 4,260 Changes in operating assets and
liabilities 13,195 (201 )
Impact of reconciling items on net (loss)
income attributable to the noncontrolling interests
(14,960 ) (9,990 ) Adjusted EBITDA $ 260,764 $
327,653 (1) Amounts for the three and nine months ended
September 30, 2015 have been restated for immaterial corrections of
identified errors pertaining to the classification of certain
leases.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161108005388/en/
Textainer Group Holdings LimitedHilliard C. Terry, III, +1
415-658-8214Executive Vice President and Chief Financial
Officerir@textainer.com
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