Textainer reports FY 2012 results
Textainer Group Holdings Limited, the world's largest lessor of intermodal containers based on fleet size, yesterday reported results for the fourth quarter and full year ended December 31, 2012, company reports.
"The fourth quarter marked the close of a phenomenal year for Textainer. We reported record quarterly revenue of $127 million, record adjusted net income(1) of $58 million and record adjusted EBITDA(1) of $115 million," commented Philip K. Brewer, President and Chief Executive Officer of Textainer. "Not only did we achieve record performance for the quarter, but for the year as well with record revenues, income, and adjusted net income. We also set a new Textainer benchmark with $1.2 billion of annual capex in new and used containers. We also increased our dividend for the twelfth consecutive quarter. We are extremely pleased with Textainer's performance."
"We now own 73% of our total fleet reflecting our success in rapidly deploying capital raised during our September equity offering on revenue generating assets," continued Mr. Brewer. "Owning containers increases the value we deliver to our shareholders as we earn significantly more on owned containers than managed containers. Our 26% return on equity, which is impressive given that we are the least leveraged of all public container leasing companies, is a result of our focus on investing in immediately accretive assets that provide strong returns."
"Adjusted net income" and "adjusted EBITDA" are Non-GAAP Measures that are reconciled to GAAP measures in footnote 1. "Adjusted net income" is defined as net income attributable to Textainer Group Holdings Limited common shareholders before unrealized (gains) losses on interest rate swaps and caps, net, gain on sale of containers to NCI and related impact of reconciling items on net (loss) income attributable to the NCI. "Adjusted EBITDA" is defined as net income attributable to Textainer Group Holdings Limited common shareholders before interest income and interest expense, realized and unrealized losses (gains) on interest rate swaps and caps, net, income tax expense (benefit), net (loss) income attributable to the NCI, depreciation and amortization expense, gain on sale of containers to NCI and related impact of reconciling items on net (loss) income attributable to the NCI. Footnote 1 provides certain qualifications and limitations on the use of Non-GAAP Measures.
Textainer's adjusted net income(1) for the quarter and full year benefited from higher revenue from an increase in the size of the owned container fleet, offset by increased depreciation expense due to our record level of capex and higher new container prices, which averaged almost $2,400 per CEU in 2012, and an increase in interest expense due to an increase in debt required to fund the expansion of our owned fleet.
On December 20, 2012, Textainer acquired a 50.1% interest in TAP Funding Ltd., a company that owns an approximately 99,000 TEU ("twenty-foot equivalent unit") fleet of containers currently managed by Textainer, for cash consideration of approximately $21 million plus the value of TAP Funding Ltd.'s existing debt that remains outstanding. This fleet contains a well diversified mix of container types, including standard dry freight, refrigerated and specialized dry freight containers. Additionally, the fleet has high utilization and a diversified lessee mix consistent with Textainer's overall container fleet. Textainer has agreed with TAP Ltd., the other shareholder in TAP Funding Ltd., to continue to invest in new containers for this fleet, in order both to grow the portfolio and maintain the relatively young average age of the containers. As a result of the acquisition, the Company consolidated TAP Funding Ltd. and recorded a $9.4 million non-cash bargain purchase gain.
On December 31, 2012, Textainer also acquired approximately 24,000 TEU of standard dry freight containers from its managed fleet for approximately $33 million.
Textainer ended the year with a debt-to-equity ratio of 2.16:1. In 2012 the Company completed approximately $2.4 billion of financing in the debt and equity markets, resulting in over $1.3 billion in net incremental funding.
Outlook
"We believe the outlook for 2013 for our industry remains attractive. Shipping lines are likely to remain dependent on container lessors for the majority of their container needs due to limitations on both the cash they have available for investment and the funding provided by banks. Manufacturers are expected to produce 2.7 million TEU in 2013 compared to 2.5 million TEU during 2012, and lessors are expected to purchase 70% or more of total production versus 65% last year. Additionally, shipping lines are expected to continue their recent increase in disposals, which provides opportunities for purchase leaseback and trading business as well as increases in the demand for new replacement containers," commented Mr. Brewer. "These factors, coupled with our strong balance sheet and access to financing, position us to continue to grow our market share, provide consistent financial results and maintain our market leading position. We are off to a good start in 2013, with over $95 million already invested in new and used containers."
"Two other factors help support our positive outlook for 2013. First, we own a record 73% of our fleet. While we expect average utilization to be below last year's level, it should remain high since 82% of our fleet is subject to long-term and finance leases. Second, during the fourth quarter of 2012 we successfully closed several finance lease and purchase leaseback transactions and expect to further grow this business in 2013."
Dividend
On February 8, 2013, Textainer's Board of Directors approved and declared a quarterly cash dividend of $0.45 per share on Textainer's issued and outstanding common shares, payable on March 5, 2013 to shareholders of record as of February 22, 2013. This dividend is an increase of $0.01 per share from the prior quarter. The current dividend represents 44% of adjusted net income(1).
"We increased our dividend by 2% from the third quarter, resulting in a 44% payout ratio. This is our twelfth consecutive quarterly dividend increase, continues our record of either stable or increasing dividends every quarter since going public and is a 22% increase compared to the dividend declared for the fourth quarter of 2011," added Mr. Brewer. "We believe our dividend policy properly balances the need to fund growth while providing income to our shareholders."