Textainer’s ‘Successful Growth Strategy’
Bermuda-based Textainer Group Holdings Limited, the world’s largest lessor of intermodal containers based on fleet size, today [Feb. 10] reported results for the fourth quarter and full year ended December 31, 2010.
Headquartered in Century House on Par-la-ville Road, Textainer has operated since 1979. The company has a total of 1.5 million containers, representing about 2.3 million twenty-foot equivalent units (TEU), in its owned and managed fleet. Textainer leases containers to more than 400 shipping lines and other lessees.
It is also one of the largest purchasers of new containers among container lessors over the last 10 years and one of the largest sellers of used containers, having sold more than 77,000 containers last year to more than 1,100 customers.
Total revenue for the fourth quarter 2010 was $84.0 million, which was an increase of $16.7 million, or 25%, compared to $67.3 million for the prior year quarter.
For the year ended December 31, 2010, total revenue was $303.9 million, which was an increase of $64.9 million, or 27%, compared to $239.0 million for the prior year. EBITDA(1—see GAAP to non-GAAP reconciliations) for the fourth quarter 2010 was $65.3 million, which was an increase of $23.6 million, or 57%, compared to $41.7 million for the prior year quarter. The increase in EBITDA(1) for the fourth quarter 2010 compared to the prior year quarter was primarily due to an 11.6 percentage point improvement in utilization and a 13.4% increase in the Company’s owned fleet size. EBITDA(1) for the year ended December 31, 2010 was $219.0 million, which was an increase of $50.3 million, or 30%, compared to $168.7 million for the prior year. The increase in EBITDA(1) for the year ended December 31, 2010 compared to the prior year was primarily due to a 16.6% increase in the Company’s owned fleet size, an 8.2 percentage point improvement in utilization and a $15.3 million increase in gains on sales of containers, net, partially offset by a gain of $19.4 million in the prior year due to the early extinguishment of debt in 2009.
Net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) for the fourth quarter 2010 was $35.7 million, which was an increase of $13.6 million, or 61%, compared to $22.1 million for the prior year quarter. Net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) for the fourth quarter 2010 was positively affected by the improvement in utilization and the increase in the Company’s owned fleet size. Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share excluding unrealized (gains) losses on interest rate swaps, net(1) for the fourth quarter 2010 was $0.72 per share, which was an increase of $0.26 per share, or 57%, compared to $0.46 per share for the prior year quarter.
Net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) for the year ended December 31, 2010 was $123.5 million, which was an increase of $41.9 million, or 51%, compared to $81.6 million for the prior year. The increase in net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) was primarily due to the increase in the Company’s owned fleet size, the improvement in utilization and the increase in gains on sales of containers, net, partially offset by the gain due to the early extinguishment of debt in 2009. Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share excluding unrealized (gains) losses on interest rate swaps, net(1) for the year ended December 31, 2010 was $2.50 per share, which was an increase of $0.81 per share, or 48%, compared to $1.69 per share for the prior year.
Net income attributable to Textainer Group Holdings Limited common shareholders for the fourth quarter 2010 was $40.0 million, which was an increase of $14.7 million, or 58%, compared to $25.3 million for the prior year quarter. The increase in net income attributable to Textainer Group Holdings Limited common shareholders was primarily due to the improvement in utilization and the increase in the Company’s owned fleet size. Net income attributable to Textainer Group Holdings Limited common shareholders for the year ended December 31, 2010 was $120.0 million, which was an increase of $29.3 million, or 32%, compared to $90.8 million for the prior year. The increase in net income attributable to Textainer Group Holdings Limited common shareholders was primarily due to the increase in the Company’s owned fleet size, the improvement in utilization and the increase in gains on sales of containers, net, partially offset by the gain due to the early extinguishment of debt in 2009 and $4.0 million of unrealized losses on interest rate swaps, net in the year ended December 31, 2010 compared to $11.1 million of unrealized gains on interest rate swaps, net in the prior year.
Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share for the fourth quarter 2010 was $0.81, which was an increase of $0.29 per share, or 56%, from the $0.52 per share for the prior year quarter. Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share for the year ended December 31, 2010 was $2.43, which was an increase of $0.55 per share, or 29%, from the $1.88 per share for the prior year.
John A. Maccarone, president and CEO of Textainer, commented, “Our record financial results for 2010 demonstrate management’s continued successful execution of its growth strategy and further strengthens the Company’s industry leading position. During 2010, we significantly expanded our fleet with the acquisition of 214,000 TEU of new containers, which contributed to a 27.2% increase in total revenue and a 32.2% increase in net income attributable to Textainer Group Holdings Limited common shareholders compared to the prior year. Our results also benefited from a worldwide shortage of containers, which resulted in historically high utilization rates throughout the year. With 1,683,779 TEU, or 72.8%, of our fleet supported by long-term leases, we expect to be able to provide our shareholders with a sizeable contracted revenue stream. We also intend to utilize our considerable financial flexibility, including nearly $1 billion in total credit facilities with current liquidity of over $292 million, to capitalize on future growth opportunities that further expand our earnings power.”
Mr. Maccarone concluded, “As a result of our record results, balance sheet strength and the favorable market trends in the container leasing industry, Textainer’s Board declared a dividend increase for the fourth consecutive quarter. The $0.29 per share dividend for the three months ended December 31, 2010 represents a 7.4% increase from our previous quarterly payout and a 26.1% increase from the fourth quarter of 2009. In continuing our record of providing shareholders with sizeable and increasing cash distributions, we have now raised our quarterly payout a total of seven times since going public in October 2007 for a cumulative dividend of $3.29 per common share.”
Outlook
Industry
We expect new container production to be approximately 3.5 million TEU in 2011, compared to approximately 2.4 million TEU in 2010, due to stronger replacement demand, vessel capacity growth of approximately 6.8% and cargo volume growth of approximately 9.7%. In 2010, the container leasing industry purchased about two-thirds of all new container production as shipping lines were capital constrained. We expect the leasing sector to be major purchasers and suppliers of new containers again in 2011 as shipping lines continue to rely on leasing companies, such as Textainer, to meet their requirements for new containers. As a result of these positive trends, we expect utilization to remain in the high 90% range and the resale market for used containers to remain strong during 2011.
Strategic Focus
Our record year of new container purchases in 2010 consisted of 214,000 TEU at a cost of $503.7 million. Consistent with our strategy to increase the percentage of our owned fleet, approximately 90% of the new containers delivered in 2010 are owned by Textainer. Additionally, we purchased containers totaling 40,000 TEU that we had previously managed. Currently, our owned containers comprise 50.9% of Textainer’s total fleet as compared to 45.4% as of December 31, 2009. We generally earn significantly more income per TEU from containers that we own than from containers that we manage.
With the extension of the term of the securitization facility of Textainer Marine Containers Limited by two years and the increase in its size to a total revolving commitment of $750.0 million from $475.0 million in the second quarter of 2010, combined with a low debt-to-equity ratio of 1.3:1, we are in a strong position to continue to execute our growth strategy. We expect our capital expenditures for new container purchases in 2011 to be considerably higher than in 2010 as we seek to take full advantage of attractive market opportunities. We will also continue to pursue accretive acquisitions.
Dividend
On February 8, 2011, Textainer’s board of directors approved and declared a quarterly cash dividend of $0.29 per share on Textainer’s issued and outstanding common shares, payable on March 1, 2011 to shareholders of record as of February 22, 2011. This dividend is an increase of $0.02 per share from the prior quarter and will be the fourteenth consecutive quarterly dividend since Textainer’s October 2007 initial public offering. Combined, these dividends have averaged 46% of net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) during this period. The current dividend represents 40% of net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) for the fourth quarter and the last four quarterly dividends declared represent 41% of net income attributable to Textainer Group Holdings Limited common shareholders excluding unrealized (gains) losses on interest rate swaps, net(1) for the year ended December 31, 2010.
