Textainer Group Holdings Limited (TGH)

TGH 
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Textainer Group Holdings Limited (TGH)

Q2 2008 Earnings Call

August 5, 2008 2:00 pm ET

Executives

Philip K. Brewer - Executive Vice President

John A. Maccarone - President, Chief Executive Officer, Director

Ernest J. Furtado - Chief Financial Officer, Senior Vice President, Secretary

Analysts

Justin Yagerman - Wachovia Capital Markets, LLC

Gregory Lewis - Credit Suisse

Robert Napoli - Piper Jaffray

Richard Shane - Jefferies & Co.

Bill McKenzie - Lafitte Capital

Jordan Heimowitz - Philadelphia Financial

Presentation

Operator

Welcome to today’s Textainer Group Holdings Ltd. second quarter results conference call. (Operator Instructions) And now at this time I’d like to turn the call over to Phil Brewer.

Philip K. Brewer

We are here to discuss Textainer’s second quarter 2008 results that were reported on August 5, 2008. Joining us on this morning’s call are John Maccarone, President and Chief Executive Officer, and Ernie Furtado, Senior Vice President and Chief Financial Officer.

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 analyses made by the company in light of its experience and current perceptions 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 a discussion of such risks and uncertainties, see the “Risk Factors” included in the company’s quarterly report Form 6K filed with the SEC on May 14, 2008.

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 in the company’s August 5, 2008 press release.

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

John A. Maccarone

We had an excellent second quarter in all phases of our business: Resale, new container long-term lease and finance lease originations, and depot container lease ups. The utilization for the second quarter averaged 93.9% about 1% higher than the first quarter average. Looking at the first half we ordered 104,000 TEU of new standard dry freight container production for our owned and managed fleets for delivery through August, and that was about $229 million of cap ex. We also ordered 2,750 refrigerated containers comprising $48 million of cap ex for the owned and managed fleet for delivery through September. We originated 164,000 TEU of long-term leases, 18,000 TEU of finance leases, sold 16,000 trading units and 30,000 owner units. We’re especially pleased about our financing and Phil will give us an update on that in just a few minutes.

Second quarter net income was up $24.5 million excluding unrealized gains on interest rate swaps net of minority interest is a 53% increase over the second quarter of 2007 and net income per diluted common share excluding unrealized gains on interest rate swaps net of minority interest is $0.51 a share.

The dividend paid in the second quarter of 2008 was $0.22 a share which is an increase of $0.01 or 5% over the prior quarter. Our next dividend to be paid this month is $0.23 a share nearly another 5% increase. In the four dividends that we will have paid since becoming a public company last October of $0.20, $0.21, $0.22, and $0.23 respective we will have distributed a total of $0.86. Textainer’s goal is to pay out about 50% of net income in dividends which we believe properly rewards our shareholders and still enables us to achieve our capital expenditure and acquisition goals.

I’d now like to turn it over to Ernie Furtado, our CFO, to take us through the numbers.

Ernest J. Furtado

I’d like to take this opportunity to review our financial performance for the second quarter and the six months ended June 30, 2008. Fleet size at the end of the second quarter consisted of slightly more than 2 million TEU of which 41% were owned and the remainder were managed, subleased or on finance lease. Utilization for the total fleet for the second quarter was 93.9%.

First I’ll review the second quarter results. Net income excluding unrealized gains on interest rate swaps net of minority interest was $24.5 million which represents a 53% increase over the $16 million in the prior year quarter. Net income was $30.4 million which represents an 83% increase over the prior year quarter and includes $7.2 million in unrealized gains on interest rate swaps which is a non-cash non-operating item and which was $6.1 million higher in the current quarter compared to the prior year quarter. Lease rental income decreased by $0.6 million or 1% compared to the prior year quarter as the 4.7% increase in fleet size was partially offset by a $1.1 million decrease in geography income due to less military activity and a 3.3% decrease in rental rates which is partially due to the decline in containers on lease to the military.

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