Textainer Group Holdings Limited (TGH)

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Textainer Group Holdings Limited (TGH)

Q3 2012 Earnings Call

November 6, 2012 11:00 AM ET


Hilliard Terry – EVP and CFO

Phil Brewer – President and CEO

Robert Pedersen – President and CEO, Textainer Equipment Management Limited


Michael Webber – Wells Fargo

Justin Yagerman – Deutsche Bank

Michael Webber – Wells Fargo

Justin Yagerman – Deutsche Bank

Bill Carcache – Nomura

John Mims – FBR Capital

Salvatore Vitale – Sterne, Agee

Doug Mewhirter – SunTrust



Welcome to the Textainer Group Holdings Third Quarter Earnings Conference Call. My name is John and I’ll be you’re operator for today’s call. (Operator Instructions).

I'd now like to turn the call over to Mr. Hilliard Terry. Sir, you may begin.

Hilliard Terry

Thank you and welcome to our third quarter earnings call.

Joining me on this morning on the call are Phil Brewer, TGH President and Chief Executive Officer and at the end of our prepared remarks, Robert Pedersen TEM President and Chief Executive Officer will join us for Q&A.

Before I turn the call over to Phil, I'd like to point out that this conference call contains forward-looking statements in accordance with U.S. Securities Laws. These statements involve risk and uncertainties are only prediction and may differ materially from the actual future events or results.

Finally, the company's estimates, views, 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.

Please see the company's annual report on Form 20FA for the year ended December 31, 2011 filed with the SEC on June 27, 2012 and the Form 6Ks and the company files quarterly with the SEC for additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements.

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

Now, I'd like to turn the call over to Phil.

Phil Brewer

Thanks Hilliard. Welcome to Textainer’s third quarter earnings conference call. I would especially like to welcome all of our new shareholders. Textainer set many new and impressive records during the third quarter. All of the following are new records. Total revenues of a $122.3 million an increase of 11.7% from the prior year quarter. Adjusted EBITDA of 97.4 million an increase of 12.4% from the prior quarter. More than $1 billion of CapEx of which 818 million was invested to acquire more than 300 TEU of new dry freight and refrigerated containers.

This is clear evidence of the increased reliance of shipping line on Textainer and other leasing companies to provide the containers they need and supports our focus on organic growth. A fleet of approximately 2.7 million TEU of which 81% is subject to either long term or financed leases does increase stability and visibility of our earnings.

And ownership level have reached 69% of our total fleet more than 10 percentage points higher than one year ago doing part to more than 159 million of purchases from our managed fleet during the quarter. Not only our owned containers far more profitable than managed containers but they are already on lease unlike investments and new containers.

A declared dividend of $0.44 per share for the fourth quarter of 2012 an increase of 5% from the second quarter and an increase of 19% year-to-date. This is our 11th consecutive quarterly increase and continues our record of maintaining stable or increasing dividend every quarter since our IPO.

Other results from the quarter while not records were nonetheless impressive. Maintained an average utilization of 97.9%, utilization is 97.2% currently given the fixed rate nature of more than three quarters of our fleet we do not expect to see dramatic changes in utilization over the coming year.

Achieved net income of $50.7 million or $0.99 per diluted common share an increase of 11% or $4.9 million compared to 45.8 million in the prior year quarter. Provided and annualized 2012 return on equity of 24%. Textainer has delivered an average annual return on equity of 23% since its IPO in 2007 which is even more impressive when knowing our low leverage relative to our peers.

Year-to-date the company has completed approximately $2.4 billion of financing in the debt and equity markets resulting in over $1.3 billion of net incremental funding providing us the liquidity and flexibility to take advantage of the attractive opportunities for growth in our industry.

We are very pleased with these results. We believe the secular change to an increased reliance on lessors makes this an ideal time to grow our own fleet. We expect that the lessors may purchase more than 65% of new containers in 2012, furthermore this change is occurring at the same time the new production is restrained. Probably less than 2.5 million TEU of dry containers will be manufactured in 2012 which is less than 2011’s output.

This limited level of new production support continued high utilization levels going forward. On the other hand we have seen some tightening of returns on new container investments during the year. The effect has been greater on reefers and dry containers as a result of which we have often been out bid by competitors on reefer deals.

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