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 second-quarter ended June 30, 2023.

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

    QTD  
    Q2 2023     Q1 2023     Q2 2022  
Total lease rental income   $ 192,163     $ 194,901     $ 203,232  
Gain on sale of owned fleet containers, net   $ 7,703     $ 9,548     $ 23,213  
Income from operations   $ 97,678     $ 100,379     $ 122,847  
Net income attributable to common shareholders   $ 51,332     $ 53,626     $ 78,590  
Net income attributable to common shareholders    per diluted common share   $ 1.20     $ 1.22     $ 1.63  
Adjusted net income (1)   $ 51,332     $ 53,624     $ 78,522  
Adjusted net income per diluted common share (1)   $ 1.20     $ 1.22     $ 1.63  
Adjusted EBITDA (1)   $ 162,958     $ 166,985     $ 191,086  
Average fleet utilization (2)     98.8 %     98.8 %     99.6 %
Total fleet size at end of period (TEU) (3)     4,334,809       4,375,474       4,508,490  
Owned percentage of total fleet at end of period     93.8 %     93.7 %     93.3 %

(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 and units manufactured for us but not yet 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 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 $51.3 million for the second quarter, or $1.20 per diluted common share, as compared to $53.6 million, or $1.22 per diluted common share, for the first quarter of 2023;
  • Adjusted EBITDA of $163.0 million for the second quarter, as compared to $167.0 million for the first quarter of 2023;
  • Second quarter average and current utilization rate of 98.8% and 98.9%, respectively;
  • Added $135.2 million of new containers through the first six months of 2023, virtually all assigned to long-term leases with expected on-hire dates throughout the third quarter;
  • Repurchased 1,148,711 common shares at an average price of $36.86 per share during the second quarter. On July 24, 2023, Textainer's board of directors authorized a further increase of $100 million to the share repurchase program. Combined with the increased authorization, the remaining available authority under the share repurchase program totaled $139 million as of the end of the second quarter;
  • Textainer’s board of directors approved and declared a quarterly preferred cash dividend on its 7.00% Series A and its 6.25% Series B cumulative redeemable perpetual preference shares, payable on September 15, 2023, to holders of record as of September 1, 2023; and
  • Textainer’s board of directors approved and declared a $0.30 per common share cash dividend, payable on September 15, 2023 to holders of record as of September 1, 2023.

“We are very pleased with our second quarter results which demonstrate the stability and resilience of our long tenured lease portfolio combined with our well-structured fixed and hedged financing. For the quarter, utilization was stable at a high level of 98.8% and lease rental income remained firm at $192 million. Adjusted net income was $51 million, or $1.20 per diluted common share against $1.22 for the previous quarter,” stated Olivier Ghesquiere, President and Chief Executive Officer.

“The conditions across the overall container market remained consistent from the first quarter, with limited, new container demand and very low production volumes which we consider healthy for the industry following two years of elevated volumes. Our priority has therefore continued to focus on optimizing capital allocation and further securing our strong cash flows through continued action on operational efficiencies and lease renewals. As a result, our average lease duration remains at approximately 6 years, and we expect our utilization rate to remain elevated.”

“As we position ourselves for the return of higher cargo volumes in the second half of the year, we have observed the initial signs of higher ship loadings as well as firming ocean freight rates on major shipping routes. We have also noticed a reduction in off hires of older containers and have deployed some limited capex, mostly as a result of confirmed leases that will start generating revenue in the third quarter.”

“While we await the opportune market turn to deploy larger capex volumes, we continue to focus on long-term shareholder value creation as demonstrated by our steady increase in book value per share. In addition to de-leveraging, we continue our buyback program and have now repurchased 5.5% of our outstanding common shares over the first half of the year. We are furthermore pleased to announce that our board of directors has approved an increase of $100 million to our repurchase program, as we continue to view this program as accretive and beneficial to shareholders,” concluded Ghesquiere.

Conference Call and Webcast

A conference call to discuss the financial results for the second quarter of 2023 will be held at 11:00 am Eastern Time on Tuesday, August 1, 2023. 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 4 million TEU in our owned and managed fleet. We lease containers to approximately 200 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 and we are one of the largest sellers of used containers. Textainer operates via a network of 14 offices and approximately 400 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 StatementsThis 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) As a result, our average lease duration remains at approximately 6 years, and we expect our utilization rate to remain elevated; (ii) 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 February 14, 2023.

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

Textainer Group Holdings LimitedInvestor RelationsPhone: +1 (415) 658-8333ir@textainer.com

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIESConsolidated Statements of Operations(Unaudited)(All currency expressed in United States dollars in thousands, except per share amounts)

  Three Months Ended June 30,     Six Months Ended June 30,  
  2023     2022     2023     2022  
Revenues:                              
Operating leases - owned fleet   $ 143,484       $ 152,590       $ 288,808       $ 304,082  
Operating leases - managed fleet     10,693         12,678         21,803         25,319  
Finance leases and container leaseback financing receivable - owned fleet     37,986         37,964         76,453         72,549  
Total lease rental income     192,163         203,232         387,064         401,950  
                               
Management fees - non-leasing     710         673         1,454         1,205  
                               
Trading container sales proceeds     4,849         5,392         8,815         13,010  
Cost of trading containers sold     (4,650 )       (4,945 )       (8,771 )       (11,701 )
Trading container margin     199         447         44         1,309  
                               
Gain on sale of owned fleet containers, net     7,703         23,213         17,251         39,126  
                               
Operating expenses:                              
Direct container expense - owned fleet     10,399         6,779         20,442         12,298  
Distribution expense to managed fleet container investors     9,507         11,302         19,432         22,475  
Depreciation and amortization     70,527         72,957         142,365         145,450  
General and administrative expense     12,752         13,185         25,871         24,712  
Bad debt (recovery) expense, net     (100 )       60         (405 )       537  
Container lessee default expense, net     12         435         51         555  
Total operating expenses     103,097         104,718         207,756         206,027  
Income from operations     97,678         122,847         198,057         237,563  
Other (expense) income:                              
Interest expense     (42,138 )       (37,593 )       (84,268 )       (72,902 )
Other, net     2,107         352         3,929         258  
Net other expense     (40,031 )       (37,241 )       (80,339 )       (72,644 )
Income before income taxes     57,647         85,606         117,718         164,919  
Income tax expense     (1,346 )       (2,047 )       (2,822 )       (3,686 )
Net income     56,301         83,559         114,896         161,233  
Less: Dividends on preferred shares     4,969         4,969         9,938         9,938  
Net income attributable to common shareholders   $ 51,332       $ 78,590       $ 104,958       $ 151,295  
Net income attributable to common shareholders per share:                              
Basic   $ 1.22       $ 1.66       $ 2.47       $ 3.16  
Diluted   $ 1.20       $ 1.63       $ 2.42       $ 3.10  
Weighted average shares outstanding (in thousands):                              
Basic     41,963         47,486         42,536         47,942  
Diluted     42,862         48,305         43,365         48,799  
                                       

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIESConsolidated Balance Sheets(Unaudited)(All currency expressed in United States dollars in thousands, except share data)

    June 30, 2023     December 31, 2022  
Assets            
Current assets:            
Cash and cash equivalents   $ 153,738     $ 164,818  
Marketable securities     -       1,411  
Accounts receivable, net of allowance of $1,633 and $1,582, respectively     118,931       114,805  
Net investment in finance leases, net of allowance of $191 and $252, respectively     130,681       130,913  
Container leaseback financing receivable, net of allowance of $48 and $62, respectively     59,519       53,652  
Trading containers     6,651       4,848  
Containers held for sale     40,261       31,637  
Prepaid expenses and other current assets     8,100       16,703  
Due from affiliates, net     3,040       2,758  
Total current assets     520,921       521,545  
Restricted cash     102,336       102,591  
Containers, net of accumulated depreciation of $2,092,858 and $2,029,667, respectively     4,182,242       4,365,124  
Net investment in finance leases, net of allowance of $701 and $1,027 respectively     1,624,264       1,689,123  
Container leaseback financing receivable, net of allowance of $15 and $52, respectively     834,809       770,980  
Derivative instruments     146,994       149,244  
Deferred taxes     1,165       1,135  
Other assets     22,425       13,492  
Total assets   $ 7,435,156     $ 7,613,234  
Liabilities and Equity            
Current liabilities:            
Accounts payable and accrued expenses   $ 21,363     $ 24,160  
Container contracts payable     72,618       6,648  
Other liabilities     5,667       5,060  
Due to container investors, net     14,879       16,132  
Debt, net of unamortized costs of $7,607 and $7,938, respectively     392,720       377,898  
Total current liabilities     507,247       429,898  
Debt, net of unamortized costs of $22,619 and $26,946, respectively     4,872,129       5,127,021  
Derivative instruments     475        
Income tax payable     13,889       13,196  
Deferred taxes     16,055       13,105  
Other liabilities     31,578       33,725  
Total liabilities     5,441,373       5,616,945  
Equity:            
Textainer Group Holdings Limited shareholders' equity:            
Cumulative redeemable perpetual preferred shares, $0.01 par value, $25,000 liquidation preference    per share. Authorized 10,000,000 shares; 12,000 shares issued and outstanding (equivalent   to 12,000,000 depositary shares at $25.00 liquidation preference per depositary share)     300,000       300,000  
Common shares, $0.01 par value. Authorized 140,000,000 shares; 60,060,224 shares issued   and 41,336,704 shares outstanding at June 30, 2023; 59,943,282 shares issued and 43,634,655 shares   outstanding at December 31, 2022     601       599  
Treasury shares, at cost, 18,723,520 and 16,308,627 shares, respectively     (421,656 )     (337,551 )
Additional paid-in capital     447,886       442,154  
Accumulated other comprehensive income     144,665       147,350  
Retained earnings     1,522,287       1,443,737  
Total shareholders’ equity     1,993,783       1,996,289  
Total liabilities and shareholders' equity   $ 7,435,156     $ 7,613,234  
   

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIESConsolidated Statements of Cash Flows(Unaudited)(All currency expressed in United States dollars in thousands)

    Six Months Ended June 30,  
    2023     2022  
Cash flows from operating activities:            
Net income   $ 114,896     $ 161,233  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     142,365       145,450  
Bad debt (recovery) expense, net     (405 )     537  
Container write-off from lessee default, net           241  
Amortization of unamortized debt issuance costs and accretion     of bond discounts     4,659       5,206  
Gain on sale of owned fleet containers, net     (17,251 )     (39,126 )
Share-based compensation expense     4,551       3,498  
Changes in operating assets and liabilities     59,975       107,190  
Total adjustments     193,894       222,996  
Net cash provided by operating activities     308,790       384,229  
Cash flows from investing activities:            
Purchase of containers     (32,015 )     (254,963 )
Payment on container leaseback financing receivable     (37,193 )     (468,252 )
Proceeds from sale of containers     85,402       91,292  
Receipt of principal payments on container leaseback financing receivable     27,062       30,098  
Other     3       (2,119 )
Net cash provided by (used in) investing activities     43,259       (603,944 )
Cash flows from financing activities:            
Proceeds from debt     57,000       844,650  
Payments on debt     (301,729 )     (483,313 )
Principal repayments on container leaseback financing liability, net     (410 )     (398 )
Purchase of treasury shares     (84,105 )     (81,603 )
Issuance of common shares upon exercise of share options     1,183       3,979  
Dividends paid on common shares     (25,398 )     (23,858 )
Dividends paid on preferred shares     (9,938 )     (9,938 )
Net cash (used in) provided by financing activities     (363,397 )     249,519  
Effect of exchange rate changes     13       (236 )
Net change in cash, cash equivalents and restricted cash     (11,335 )     29,568  
Cash, cash equivalents and restricted cash, beginning of the year     267,409       282,572  
Cash, cash equivalents and restricted cash, end of the period   $ 256,074     $ 312,140  
             
Supplemental disclosures of cash flow information:            
Interest paid   $ 79,020     $ 66,344  
Income taxes paid   $ 239     $ 140  
Receipt of payments on finance leases, net of income earned   $ 67,562     $ 95,712  
Supplemental disclosures of noncash investing activities:            
Increase in accrued container purchases   $ 65,970     $ 3,604  
Containers placed in finance leases   $ 1,225     $ 169,620  
                 

Use of Non-GAAP Financial Information

To supplement Textainer’s 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. Adjusted net income is defined as net income attributable to common shareholders excluding unrealized gain (loss) on marketable securities and the related impacts on income taxes. 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 six months ended June 30, 2023 and 2022 and for the three months ended March 31, 2023.

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,     Six Months Ended,  
    June 30, 2023     March 31, 2023     June 30, 2022     June 30, 2023     June 30, 2022  
    (Dollars in thousands,     (Dollars in thousands,  
    except per share amounts)     except per share amounts)  
    (Unaudited)     (Unaudited)  
Reconciliation of adjusted net income:                              
Net income attributable to common shareholders   $ 51,332     $ 53,626     $ 78,590     $ 104,958     $ 151,295  
Adjustments:                              
Unrealized (gain) loss on marketable securities, net           (3 )     (85 )     (3 )     122  
Impact of reconciling items on income tax           1       17       1       (26 )
Adjusted net income   $ 51,332     $ 53,624     $ 78,522     $ 104,956     $ 151,391  
                               
Adjusted net income per diluted common share   $ 1.20     $ 1.22     $ 1.63     $ 2.42     $ 3.10  
                               
   
    Three Months Ended,     Six Months Ended,  
    June 30, 2023     March 31, 2023     June 30, 2022     June 30, 2023     June 30, 2022  
    (Dollars in thousands)     (Dollars in thousands)  
    (Unaudited)     (Unaudited)  
Reconciliation of adjusted EBITDA:                              
Net income attributable to common shareholders   $ 51,332     $ 53,626     $ 78,590     $ 104,958     $ 151,295  
Adjustments:                              
Interest income     (2,385 )     (2,082 )     (257 )     (4,467 )     (293 )
Interest expense     42,138       42,130       37,593       84,268       72,902  
Unrealized (gain) loss on marketable securities, net           (3 )     (85 )     (3 )     122  
Income tax expense     1,346       1,476       2,047       2,822       3,686  
Depreciation and amortization     70,527       71,838       72,957       142,365       145,450  
Container write-off from lessee default, net                 241             241  
Adjusted EBITDA   $ 162,958     $ 166,985     $ 191,086     $ 329,943     $ 373,403  
                               
    Three Months Ended,     Six Months Ended,  
    June 30, 2023     March 31, 2023     June 30, 2022     June 30, 2023     June 30, 2022  
    (Dollars in thousands,     (Dollars in thousands,  
    except per share amount)     except per share amount)  
    (Unaudited)     (Unaudited)  
Reconciliation of headline earnings:                              
Net income attributable to common shareholders   $ 51,332     $ 53,626     $ 78,590     $ 104,958     $ 151,295  
Adjustments:                              
Container write-off from lessee default, net                 241             241  
Impact of reconciling items on income tax                 (2 )           (2 )
Headline earnings   $ 51,332     $ 53,626     $ 78,829     $ 104,958     $ 151,534  
                               
Headline earnings per basic common share   $ 1.22     $ 1.24     $ 1.66     $ 2.47     $ 3.16  
Headline earnings per diluted common share   $ 1.20     $ 1.22     $ 1.63     $ 2.42     $ 3.11  
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