Textainer Group Holdings Limited (TGH)

TGH 
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Textainer Group Holdings Limited (TGH)

Q2 2010 Earnings Call Transcript

August 12, 2010 11:00 am ET

Executives

Phil Brewer – EVP

John Maccarone – President and CEO

Ernie Furtado – SVP and CFO

Robert Pederson – EVP

Analysts

Rob Salmon – Deutsche Bank

Robert Napoli – Piper Jaffray

Sameer Gokhale – Keefe, Bruyette

Presentation

Operator

Hello and welcome to the Textainer Group Holdings Limited second quarter 2010 earnings call. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions) For your information, this conference is being recorded. I would now like to turn the conference over to Mr. Phil Brewer, executive vice president. Please begin.

Phil Brewer

Thank you and welcome to our second quarter 2010 earnings conference call. Joining me on this morning's call are John Maccarone, president and chief executive officer; Ernie Furtado, senior vice president and chief financial officer; and Robert Pedersen, executive vice president.

Before I turn the call over to John and Ernie, I would like to point out that this conference call contains forward-looking statements within the meaning of US securities laws. These statements involve risks and uncertainties, are only predictions, and may differ materially from actual future events or results. It is possible that the company's future financial performance may differ from expectations due to a variety of factors.

Any forward-looking statements made during this call are based on certain current assumptions and analysis made by the company in light of its experience and current perception of historical trends, conditions, expected future developments, and other factors it currently believes are appropriate. Any such statements are not a guarantee of future performance and actual results or developments may differ from those projected.

Finally, the company's views, estimates, plans, and outlook as described within this call may change subsequent to this discussion. The company is under no obligation to modify or update any or all of the statements that are made herein despite any subsequent changes the company may make in its views, estimates, plans, or outlook for the future. For discussion of such risks and uncertainties, see the risk factors included in the company's annual report on Form 20-F for the year ended December 31st, 2009 filed with the Securities and Exchange Commission on March 17th, 2009.

I would also like to point out that during this call we will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures will be provided either on this conference call or can be found at the company's August 12th, 2010 press release.

I would now like to turn the call over to John.

John Maccarone

I'd like to start with slide three and welcome everyone to our second quarter 2010 earnings conference call. I'll begin today's call by reviewing Textainer's second quarter and year-to-date highlights as well as the current market overview and key business trends, and turn the call over to Ernie to discuss our financials and quarterly dividend. And finally, Phil will then discuss the resale business and our new securitization facility. At that point, we'll open it up for questions.

Turning to slide four, Textainer posted solid result in the second quarter of 2010 as we continue to expand our industry leadership and capitalize on the positive fundamentals in the container leasing industry. For the three months ended June 30th, 2010, we generated net income of $25.1 million or $0.51 per diluted common share for the quarter.

Excluding unrealized losses on interest rate swaps, net income was $29 million or $0.59 per diluted common share for the quarter. Based on our results, Textainer's board declared a second quarter dividend of $0.25 a share, which is an increase of 4.2% from our previous quarterly payout. Since our IPO in October 2007, we've increased our quarterly dividend payout a total of five times, including each of the past two quarters and declared cumulative dividend of $2.73 per share.

The considerable success we've achieved during the second quarter and first six months of the year is directly related to the significant increase on our fleet utilization, which averaged 95.3% in Q2. On August 6, our fleet utilization reached an all-time high of 98.6%, which was an increase of approximately 10% compared to the end of 2009.

We also maintained our focus on fleet expansion with acquisition of 198,000 TEU of new containers to be delivered through the end of 2010. Importantly, 90% of these new containers are owned by Textainer and owned containers are significantly more profitable than managed containers. By the end of this year, we will own about 50% of our total fleet, up from 45% at the beginning of the year. And finally, in support of our strong growth, we enhanced our financial flexibility by expanding and increasing our securitization facility to a total commitment of $750 billion over a two-year revolving period.

Slide five is next, and some comments about the market. Our strong performance is positively influenced by the favorable industry fundamentals. Currently, cargo volumes are expected to grow about 10% in 2010 compared to 2009, which is considerably higher compared to initial projections of 5.5% for the year. One of the main drivers behind the improved market forecast is higher exports from the USA and EU countries. With more balanced trade, there were few empty containers – fewer empty containers returning back to Asia for immediate use. According to our customers, it now takes an additional two weeks for a container to be made available in Asia for another load of cargo.

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