Textainer Group Holdings Limited (TGH)

TGH 
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Textainer Group Holdings Limited

Q3 2010 Earnings Call

November 4, 2010 11:00 a.m. ET

Executives

Philip Brewer - Executive Vice President

John Maccarone - President and CEO

Ernest Furtado - SVP and CFO

Analysts

Gregory Lewis - Credit Suisse

Justin Yagerman - Deutsche Bank

Michael Webber - Wells Fargo

Sameer Gokhale - KBW

Brian Hogan - Piper Jaffray

Sal Vitale - Sterne, Agee

Presentation

Operator

Hello and welcome to the Textainer Group Holdings Limited Third Quarter 2010 Earnings Conference Call. There will be an opportunity for you to ask questions at the end of today’s presentation. At this time, all participants are in a listen-only mode. (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.

Philip Brewer

Thank you and welcome to Textainer’s third 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, I would like to point out that this conference call contains forward-looking statements within the meaning of U.S. 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 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 that 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 Annual Report on Form 20-F for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 17, 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 in the company’s November 4, 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 third quarter 2010 earnings conference call. I’ll begin today’s call by reviewing Textainer’s third quarter and year-to-date highlights, as well as the current market overview and strategic focus. I’ll then turn the call over to Ernie to discuss our financials and quarterly dividend, and Phil will then give a summary of the container sale market before we open it up to questions.

Turning to slide four, based on the positive fundamentals in the container leasing industry, Textainer posted solid results in the third quarter of 2010. For the three months ended September 30, 2010, we generated net income of $30.7 million or $0.62 per diluted common share for the quarter. Excluding unrealized losses on interest rate swaps, net income was $33.3 million or $0.67 per diluted common share for the quarter.

Based on our results, Textainer’s board declared a third quarter 2010 dividend of $0.27 per share, which is an increase of 8% from our previous quarterly payout. Since our IPO on October 2007, we’ve increased the quarterly dividend to total of six times, including in each of the past three quarters and declared cumulative total dividends of $3 a share.

The considerable success that we achieved during the third quarter and first nine months of 2010 is directly related to two trends. First, the significant increase in our fleet utilization, which averaged 98% in Q3. This is an improvement of 12.6 percentage points compared to the average fleet utilization for the third quarter of 2009. Second, the acquisition of over 212,000 TEU of new containers for about $507 million of CapEx to be delivered through December of this year. Importantly, 90% of the new containers are owned by Textainer, and it’s much more profitable for us owning than managing.

Next on slide five, some comments about the market outlook. As we have discussed in detail on our past few earnings calls, current industry dynamics have created a worldwide shortage of containers this year. As a result, a few well-capitalized container lessors such as Textainer have been able to gain market share, as container shipping continues to improve.

For 2010, cargo volumes are now expected to grow between 10 and 11% compared to 2009 and this is considerably higher than initial projections of 5.5% for the year.

I’ve recently completed over 40 customer meetings in Europe and Asia, with the opportunity to meet face-to-face with 19 of our top 25 customers, as well as many medium and smaller sized container shipping lines. I was able to get a current view of their outlook for 2011, as well as their projected new container requirements. Almost every customer I met with is optimistic about next year, forecasting growth of 6% to 8% in the Asia-Europe and Trans-Pacific trades, and 10% in the inter-Asia trade routes.

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