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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO

RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

Commission File Number 001-33725

 

Textainer Group Holdings Limited

(Translation of Registrant’s name into English)

 

Century House

16 Par-La-Ville Road

Hamilton HM 08

Bermuda

(441) 296-2500

(Address of principal executive office)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, $0.01 par value

TGH

New York Stock Exchange

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☑    Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  Yes  ☐    No  ☑

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable

 

 

 

 

 

1

 

TEXTAINER GROUP HOLDINGS LIMITED

Quarterly Report on Form 6-K for the Three Months Ended March 31, 2020

Table of Contents

 

 

 

Page

 

 

 

Information Regarding Forward-Looking Statements; Cautionary Language

 

3

 

 

 

Item 1. Condensed Consolidated Financial Statements (Unaudited):

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2020 and 2019

 

4

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

 

5

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

7

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

30

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market and Credit Risk

 

41

 

 

 

Item 4. Risk Factors

 

42

 

 

 

Signature

 

44

 

 

2

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS; CAUTIONARY LANGUAGE

This Quarterly Report on Form 6-K, including the section entitled Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements within the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not statements of historical facts and may relate to, but are not limited to, expectations or estimates of future operating results or financial performance, capital expenditures, regulatory compliance, plans for growth and future operations, as well as assumptions relating to the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue” or the negative of these terms or other similar terminology. The forward-looking statements contained in this Quarterly Report on Form 6-K include, but are not limited to, statements regarding  (i) factors that are likely to continue to affect our performance and (ii) our belief that, assuming that our lenders remain solvent that our cash flow from operations, proceeds from the sale of containers and borrowing availability under our debt facilities are sufficient to meet our liquidity needs, including for the payment of dividends, for the next twelve months.

Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy, and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which cannot be foreseen. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including, among others, the risks we face that are described in the section entitled Item 3, “Key Information -- Risk Factors” included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 30, 2020 (our “2019 Form 20-F”).

We believe that it is important to communicate our expectations about the future to potential investors, shareholders and other readers. However, there may be events in the future that we are not able to accurately predict or control and that may cause actual events or results to differ materially from the expectations expressed in or implied by our forward-looking statements. The risk factors listed in Item 3, “Key Information -- Risk Factors” included in our 2019 Form 20-F, as well as any cautionary language in this Quarterly Report on Form 6-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you decide to buy, hold or sell our common shares, you should be aware that the occurrence of the events described in Item 3, “Key Information -- Risk Factors” included in our 2019 Form 20-F and elsewhere in this Quarterly Report on Form 6-K could negatively impact our business, cash flows, results of operations, financial condition and share price. Potential investors, shareholders and other readers are cautioned not to place undue reliance on our forward-looking statements.

Forward-looking statements regarding our present plans or expectations for fleet size, management contracts, container purchases, sources and availability of financing, and growth involve risks and uncertainties relative to return expectations and related allocation of resources, and changing economic or competitive conditions, as well as the negotiation of agreements with container investors, which could cause actual results to differ from present plans or expectations, and such differences could be material. Similarly, forward-looking statements regarding our present expectations for operating results and cash flow involve risks and uncertainties related to factors such as utilization rates, per diem rates, container prices, demand for containers by container shipping lines, supply and other factors discussed under Item 3, “Key Information -- Risk Factors” included in our 2019 Form 20-F or elsewhere in this Quarterly Report on Form 6-K, which could also cause actual results to differ from present plans. Such differences could be material.

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. The forward-looking statements contained in this Quarterly Report on Form 6-K speak only as of, and are based on information available to us on, the date of the filing of this Quarterly Report on Form 6-K. We assume no obligation to, and do not plan to, update any forward-looking statements after the date of this Quarterly Report on Form 6-K as a result of new information, future events or developments, except as expressly required by U.S. federal securities laws. You should read this Quarterly Report on Form 6-K and the documents that we reference and have furnished as exhibits with the understanding that we cannot guarantee future results, levels of activity, performance or achievements and that actual results may differ materially from what we expect.  

In this Quarterly Report on Form 6-K, unless otherwise specified, all monetary amounts are in U.S. dollars. To the extent that any monetary amounts are not denominated in U.S. dollars, they have been translated into U.S. dollars in accordance with our accounting policies as described in Item 18, “Financial Statements” included in our 2019 Form 20-F.

 

 

3

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended March 31, 2020 and 2019

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Lease rental income - owned fleet

 

$

130,072

 

 

$

128,973

 

Lease rental income - managed fleet

 

 

15,406

 

 

 

26,553

 

Lease rental income

 

 

145,478

 

 

 

155,526

 

 

 

 

 

 

 

 

 

 

Management fees - non-leasing

 

 

1,484

 

 

 

2,301

 

 

 

 

 

 

 

 

 

 

Trading container sales proceeds

 

 

9,585

 

 

 

13,300

 

Cost of trading containers sold

 

 

(8,936

)

 

 

(10,732

)

Trading container margin

 

 

649

 

 

 

2,568

 

  

 

 

 

 

 

 

 

 

Gain on sale of owned fleet containers, net

 

 

5,794

 

 

 

6,767

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Direct container expense - owned fleet (1)

 

 

13,264

 

 

 

11,580

 

Distribution expense to managed fleet container investors

 

 

14,163

 

 

 

24,480

 

Depreciation expense (2)

 

 

66,834

 

 

 

62,464

 

Amortization expense

 

 

564

 

 

 

602

 

General and administrative expense

 

 

10,138

 

 

 

9,830

 

Bad debt expense, net

 

 

2,045

 

 

 

159

 

Container lessee default recovery, net (1)

 

 

(12

)

 

 

(653

)

Total operating expenses

 

 

106,996

 

 

 

108,462

 

Income from operations

 

 

46,409

 

 

 

58,700

 

Other (expense) income:

 

 

 

 

 

 

 

 

Interest expense

 

 

(36,112

)

 

 

(37,516

)

Write-off of unamortized deferred debt issuance costs

 

 

(122

)

 

 

—

 

Interest income

 

 

400

 

 

 

638

 

Realized (loss) gain on derivative instruments, net

 

 

(1,526

)

 

 

1,444

 

Unrealized loss on derivative instruments, net

 

 

(14,937

)

 

 

(5,738

)

Other, net

 

 

(53

)

 

 

—

 

Net other expense

 

 

(52,350

)

 

 

(41,172

)

(Loss) income before income tax and noncontrolling interest

 

 

(5,941

)

 

 

17,528

 

Income tax benefit (expense)

 

 

833

 

 

 

(373

)

Net (loss) income

 

 

(5,108

)

 

 

17,155

 

Less: Net loss (income) attributable to the noncontrolling interest

 

 

729

 

 

 

(105

)

Net (loss) income attributable to Textainer Group Holdings Limited common shareholders

 

$

(4,379

)

 

$

17,050

 

Net (loss) income attributable to Textainer Group Holdings Limited common shareholders per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.30

 

Diluted

 

$

(0.08

)

 

$

0.30

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

Basic

 

 

56,455

 

 

 

57,475

 

Diluted

 

 

56,455

 

 

 

57,587

 

Other comprehensive (loss) income, before tax:

 

 

 

 

 

 

 

 

Change in derivative instruments designated as cash flow hedges

 

 

(8,858

)

 

 

—

 

Reclassification of realized gain on derivative instruments designated as cash flow hedges

 

 

(62

)

 

 

—

 

Foreign currency translation adjustments

 

 

(63

)

 

 

107

 

Comprehensive (loss) income, before tax

 

 

(14,091

)

 

 

17,262

 

Income tax benefit related to items of other comprehensive (loss) income

 

 

93

 

 

 

—

 

Comprehensive (loss) income, after tax

 

 

(13,998

)

 

 

17,262

 

Comprehensive loss (income) attributable to the noncontrolling interest

 

 

729

 

 

 

(105

)

Comprehensive (loss) income attributable to Textainer Group Holdings Limited common shareholders

 

$

(13,269

)

 

$

17,157

 

 

(1) Amounts for container write-off and recovery and container recovery costs from lessee default for the period ended March 31, 2019 have been reclassified out of the previously reported line item “container impairment” and “direct container expense – owned fleet”, respectively, and included within “container lessee default recovery, net” to conform with the 2020 presentation.

(2) Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “depreciation expense” to conform with the 2020 presentation.

 

See accompanying notes to condensed consolidated financial statements.

4

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

March 31, 2020 and December 31, 2019

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

 

2020

 

 

2019

 

Assets

 

.

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,664

 

 

$

180,552

 

Accounts receivable, net of allowance for credit losses of $8,026 and $6,299, respectively

 

 

118,905

 

 

 

109,384

 

Net investment in finance leases, net of allowance for credit losses of $186 and $0, respectively

 

 

40,164

 

 

 

40,940

 

Container leaseback financing receivable, net of allowance for credit losses of $90 and $0, respectively

 

 

20,661

 

 

 

20,547

 

Trading containers

 

 

12,894

 

 

 

11,330

 

Containers held for sale

 

 

46,902

 

 

 

41,884

 

Prepaid expenses and other current assets

 

 

14,367

 

 

 

14,816

 

Due from affiliates, net

 

 

2,112

 

 

 

1,880

 

Total current assets

 

 

384,669

 

 

 

421,333

 

Restricted cash

 

 

97,334

 

 

 

97,353

 

Containers, net of accumulated depreciation of $1,482,677 and $1,443,167, respectively

 

 

4,007,433

 

 

 

4,156,151

 

Net investment in finance leases, net of allowance for credit losses of $801 and $0, respectively

 

 

297,549

 

 

 

254,363

 

Container leaseback financing receivable, net of allowance for credit losses of $379 and $0, respectively

 

 

245,507

 

 

 

251,111

 

Fixed assets, net of accumulated depreciation of $12,465 and $12,266, respectively

 

 

1,108

 

 

 

1,128

 

Intangible assets, net of accumulated amortization of $45,923 and $45,359, respectively

 

 

4,727

 

 

 

5,291

 

Derivative instruments

 

 

-

 

 

 

135

 

Deferred taxes

 

 

1,388

 

 

 

1,388

 

Other assets

 

 

14,091

 

 

 

14,364

 

Total assets

 

$

5,053,806

 

 

$

5,202,617

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

21,499

 

 

$

23,404

 

Container contracts payable

 

 

5,294

 

 

 

9,394

 

Other liabilities

 

 

2,733

 

 

 

2,636

 

Due to container investors, net

 

 

19,151

 

 

 

21,978

 

Debt, net of unamortized costs of $6,293 and $8,120, respectively

 

 

239,066

 

 

 

242,433

 

Total current liabilities

 

 

287,743

 

 

 

299,845

 

Debt, net of unamortized costs of $21,160 and $21,446, respectively

 

 

3,426,079

 

 

 

3,555,296

 

Derivative instruments

 

 

37,500

 

 

 

13,778

 

Income tax payable

 

 

9,945

 

 

 

9,909

 

Deferred taxes

 

 

6,644

 

 

 

7,789

 

Other liabilities

 

 

29,546

 

 

 

30,355

 

Total liabilities

 

 

3,797,457

 

 

 

3,916,972

 

Equity:

 

 

 

 

 

 

 

 

Textainer Group Holdings Limited shareholders' equity:

 

 

 

 

 

 

 

 

Common shares, $0.01 par value. Authorized 140,000,000 shares; 58,326,555 shares issued and 54,870,475

   shares outstanding at 2020; 58,326,555 shares issued and 56,817,918 shares outstanding at 2019

 

 

583

 

 

 

583

 

Treasury shares, at cost, 3,456,080 and 1,508,637 shares, respectively

 

 

(33,223

)

 

 

(17,746

)

Additional paid-in capital

 

 

411,666

 

 

 

410,595

 

Accumulated other comprehensive loss

 

 

(9,401

)

 

 

(511

)

Retained earnings

 

 

861,194

 

 

 

866,458

 

Total Textainer Group Holdings Limited shareholders’ equity

 

 

1,230,819

 

 

 

1,259,379

 

Noncontrolling interest

 

 

25,530

 

 

 

26,266

 

Total equity

 

 

1,256,349

 

 

 

1,285,645

 

Total liabilities and equity

 

$

5,053,806

 

 

$

5,202,617

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

5

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

Three Months Ended March 31, 2020 and 2019

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

 

Textainer Group Holdings Limited Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

other

 

 

 

 

 

 

Textainer Group

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

Treasury shares

 

 

paid-in

 

 

comprehensive

 

 

Retained

 

 

Holdings Limited

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

earnings

 

 

shareholders' equity

 

 

interest

 

 

equity

 

Balances, December 31, 2018

 

 

58,032,164

 

 

$

581

 

 

 

(630,000

)

 

$

(9,149

)

 

$

406,083

 

 

$

(436

)

 

$

809,734

 

 

$

1,206,813

 

 

$

29,178

 

 

$

1,235,991

 

Share-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,056

 

 

 

—

 

 

 

—

 

 

 

1,056

 

 

 

—

 

 

 

1,056

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Textainer Group

   Holdings Limited common shareholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,050

 

 

 

17,050

 

 

 

—

 

 

 

17,050

 

Net income attributable to noncontrolling

   interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

105

 

 

 

105

 

Foreign currency translation adjustments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

107

 

 

 

—

 

 

 

107

 

 

 

—

 

 

 

107

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,262

 

Balances, March 31, 2019

 

 

58,032,164

 

 

$

581

 

 

 

(630,000

)

 

$

(9,149

)

 

$

407,139

 

 

$

(329

)

 

$

826,784

 

 

$

1,225,026

 

 

$

29,283

 

 

$

1,254,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2019

 

 

58,326,555

 

 

 

583

 

 

 

(1,508,637

)

 

 

(17,746

)

 

 

410,595

 

 

 

(511

)

 

 

866,458

 

 

 

1,259,379

 

 

 

26,266

 

 

 

1,285,645

 

Cumulative adjustment for adoption of

   ASU 2016-13

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(885

)

 

 

(885

)

 

 

(7

)

 

 

(892

)

Purchase of treasury shares

 

 

—

 

 

 

—

 

 

 

(1,947,443

)

 

 

(15,477

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,477

)

 

 

—

 

 

 

(15,477

)

Share-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,071

 

 

 

—

 

 

 

—

 

 

 

1,071

 

 

 

—

 

 

 

1,071

 

Comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Textainer Group

   Holdings Limited common shareholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,379

)

 

 

(4,379

)

 

 

—

 

 

 

(4,379

)

Net loss attributable to noncontrolling

   interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(729

)

 

 

(729

)

Change in derivative instruments designated

   as cash flow hedges

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,858

)

 

 

—

 

 

 

(8,858

)

 

 

—

 

 

 

(8,858

)

Reclassification of realized gain on derivative

   instruments designated as cash flow hedges

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(62

)

 

 

—

 

 

 

(62

)

 

 

—

 

 

 

(62

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(63

)

 

 

—

 

 

 

(63

)

 

 

—

 

 

 

(63

)

Income tax benefit related to items of other comprehensive (loss) income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

93

 

 

 

—

 

 

 

93

 

 

 

—

 

 

 

93

 

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,998

)

Balances, March 31, 2020

 

 

58,326,555

 

 

$

583

 

 

 

(3,456,080

)

 

$

(33,223

)

 

$

411,666

 

 

$

(9,401

)

 

$

861,194

 

 

$

1,230,819

 

 

$

25,530

 

 

$

1,256,349

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2020 and 2019

(Unaudited)

(All currency expressed in United States dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(5,108

)

 

$

17,155

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation expense (1)

 

 

66,834

 

 

 

62,464

 

Bad debt expense, net

 

 

2,045

 

 

 

159

 

Container recovery from lessee default, net (2)

 

 

(1

)

 

 

(720

)

Unrealized loss on derivative instruments, net

 

 

14,937

 

 

 

5,738

 

Amortization and write-off of unamortized deferred debt issuance costs and

   accretion of bond discounts

 

 

2,183

 

 

 

1,870

 

Amortization of intangible assets

 

 

564

 

 

 

602

 

Gain on sale of owned fleet containers, net

 

 

(5,794

)

 

 

(6,767

)

Share-based compensation expense

 

 

1,071

 

 

 

1,056

 

Changes in operating assets and liabilities

 

 

(3,009

)

 

 

25,552

 

Total adjustments

 

 

78,830

 

 

 

89,954

 

Net cash provided by operating activities

 

 

73,722

 

 

 

107,109

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of containers and fixed assets

 

 

(11,249

)

 

 

(119,335

)

Receipt of principal payments on container leaseback financing receivable

 

 

5,099

 

 

 

—

 

Proceeds from sale of containers and fixed assets

 

 

30,939

 

 

 

32,885

 

Net cash provided by (used in) investing activities

 

 

24,789

 

 

 

(86,450

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

—

 

 

 

60,000

 

Principal payments on debt

 

 

(134,697

)

 

 

(86,171

)

Principal repayments on container leaseback financing liability

 

 

(124

)

 

 

—

 

Purchase of treasury shares

 

 

(15,477

)

 

 

—

 

Debt issuance costs

 

 

(57

)

 

 

—

 

Net cash used in financing activities

 

 

(150,355

)

 

 

(26,171

)

Effect of exchange rate changes

 

 

(63

)

 

 

107

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(51,907

)

 

 

(5,405

)

Cash, cash equivalents and restricted cash, beginning of the year

 

 

277,905

 

 

 

224,928

 

Cash, cash equivalents and restricted cash, end of period

 

$

225,998

 

 

$

219,523

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest expense and realized loss (gain) on derivative instruments, net

 

$

35,657

 

 

$

33,826

 

Net income taxes paid

 

$

22

 

 

$

15

 

Receipt of payments on finance leases, net of income earned

 

$

8,664

 

 

$

14,428

 

Supplemental disclosures of noncash operating activities:

 

 

 

 

 

 

 

 

Initial recognition of operating lease liability from obtaining right-of-use assets

 

$

-

 

 

$

12,024

 

Supplemental disclosures of noncash investing activities:

 

 

 

 

 

 

 

 

(Decrease) increase in accrued container purchases

 

$

(4,100

)

 

$

50,555

 

Containers placed in finance leases

 

$

53,730

 

 

$

29,757

 

 

 

 

 

 

 

 

 

 

 

(1) Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “depreciation expense” to conform with the 2020 presentation.

(2) Amount for container write-off and recovery from lessee default for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “container recovery from lessee default, net” to conform with the 2020 presentation.  

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

7

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(1)

Nature of Business

Textainer Group Holdings Limited (“TGH”) is incorporated in Bermuda. TGH is the holding company of a group of companies, consisting of TGH and its subsidiaries (collectively, the “Company”), involved in the purchase, management, leasing and resale of a fleet of marine cargo containers. The Company manages and provides administrative support to the third-party owners’ (the “Container Investors”) container fleets.

The Company conducts its business activities in three main areas: Container Ownership, Container Management and Container Resale (see Note 10 “Segment Information”).

 

(2)    Accounting Policies and Recent Accounting Pronouncements

 

(a)

Basis of Accounting

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019 (“2019 Form 20-F”) filed with the Securities and Exchange Commission on March 30, 2020.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal and recurring adjustments) necessary to present fairly the Company’s condensed consolidated balance sheet as of March 31, 2020, the Company’s condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2020 and 2019, condensed consolidated statements of shareholders’ equity for the three months ended March 31, 2020 and 2019 and condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019. These condensed consolidated financial statements are not necessarily indicative of the results of operations or cash flows that may be reported for the remainder of the fiscal year ending December 31, 2020.

 

 

(b)

Principles of Consolidation and Variable Interest Entity

The condensed consolidated financial statements of the Company include TGH and all of its subsidiaries in which the Company has a controlling financial interest. All significant intercompany accounts and balances have been eliminated in consolidation.

TAP Funding

TAP Funding Ltd. (“TAP Funding”) (a Bermuda company) is a joint venture between the Company’s wholly-owned subsidiary, Textainer Limited (“TL”) (a Bermuda company) and TAP Ltd. (“TAP”) in which TL owns 50.1%, TAP owns 49.9% of the common shares of TAP Funding, and TAP Funding is a voting interest entity (“VME”).  The Company consolidates TAP Funding as the Company has a controlling financial interest in TAP Funding.

The equity owned by TAP in TAP Funding is shown as a noncontrolling interest on the Company’s condensed consolidated balance sheets and the net (loss) income attributable to the noncontrolling interest’s operations is shown as net (loss) income attributable to the noncontrolling interests on the Company’s condensed consolidated statements of comprehensive (loss) income.

 

 

 

(c)

Containers

Capitalized container costs include the container cost payable to the manufacturer and the associated transportation costs incurred in moving the Company’s containers from the manufacturer to the containers’ first destined port. Containers are depreciated using the straight-line method over their estimated useful lives to an estimated dollar residual value. Used containers are depreciated based upon their remaining useful lives at the date of acquisition to an estimated dollar residual value.

8

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The cost, accumulated depreciation and net book value of the Company’s container leasing equipment by equipment type as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Dry containers other than

   open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

$

1,594,605

 

 

$

(403,041

)

 

$

1,191,564

 

 

$

1,627,878

 

 

$

(396,247

)

 

$

1,231,631

 

40'

 

 

158,877

 

 

 

(57,123

)

 

 

101,754

 

 

 

167,011

 

 

 

(58,852

)

 

 

108,159

 

40' high cube

 

 

2,442,977

 

 

 

(609,710

)

 

 

1,833,267

 

 

 

2,510,937

 

 

 

(592,374

)

 

 

1,918,563

 

45' high cube

 

 

28,451

 

 

 

(11,784

)

 

 

16,667

 

 

 

28,670

 

 

 

(11,488

)

 

 

17,182

 

Refrigerated containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

 

20,437

 

 

 

(7,576

)

 

 

12,861

 

 

 

20,484

 

 

 

(7,258

)

 

 

13,226

 

20' high cube

 

 

5,140

 

 

 

(3,185

)

 

 

1,955

 

 

 

5,139

 

 

 

(3,090

)

 

 

2,049

 

40' high cube

 

 

1,051,945

 

 

 

(353,084

)

 

 

698,861

 

 

 

1,052,707

 

 

 

(338,068

)

 

 

714,639

 

Open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' folding flat

 

 

17,539

 

 

 

(4,692

)

 

 

12,847

 

 

 

17,617

 

 

 

(4,538

)

 

 

13,079

 

40' folding flat

 

 

50,757

 

 

 

(17,631

)

 

 

33,126

 

 

 

51,152

 

 

 

(17,278

)

 

 

33,874

 

20' open top

 

 

12,980

 

 

 

(1,646

)

 

 

11,334

 

 

 

13,259

 

 

 

(1,625

)

 

 

11,634

 

40' open top

 

 

23,155

 

 

 

(4,465

)

 

 

18,690

 

 

 

23,313

 

 

 

(4,351

)

 

 

18,962

 

Tank containers

 

 

83,247

 

 

 

(8,740

)

 

 

74,507

 

 

 

81,151

 

 

 

(7,998

)

 

 

73,153

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 

 

 

See Note 4 “Managed Container Fleet” for information on the managed fleet containers included above.

 

Impairment of Container Rental Equipment

The Company reviews its containers for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The Company compares the carrying value of the containers to the expected future undiscounted cash flows for the purpose of assessing the recoverability of the recorded amounts. If the carrying value exceeds expected future undiscounted cash flows, the assets are reduced to fair value. There was no such impairment of the Company’s leasing equipment for the three months ended March 31, 2020 and 2019.

 

Write-Off of Container Rental Equipment due to Lessees in Default

 

The Company evaluates the recoverability of the recorded amounts of containers that are unlikely to be recovered from lessees in default. The Company recorded impairment charges during the three months ended March 31, 2020 and 2019 of $0 and $11, respectively, to write-off containers that were unlikely to be recovered from lessees in default, net of gains associated with recoveries on containers previously estimated as lost with lessees in default. These amounts are recorded in the condensed consolidated statements of comprehensive income as “container lessee default recovery, net”.

 

9

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

Impairment of Containers Held for Sale

Containers identified as being available for sale are valued at the lower of carrying value or fair value, less costs to sell. The Company records impairment to write-down the value of containers held for sale to their estimated fair value, less cost to sell, under observable (Level 2) market inputs. The fair value was estimated based on recent gross sales proceeds for sales of similar containers. Any subsequent increase in fair value less costs to sell is recognized as a reversal of container impairment but not in excess of the cumulative loss previously recognized. The carrying value of containers held for sale that have been impaired to write down the value of the containers to their estimated fair value less cost to sell was $23,165 and $22,217 as of March 31, 2020 and December 31, 2019, respectively. When containers are retired or otherwise sold, the cost and related accumulated depreciation are removed, and any resulting gain or loss is recognized.

During the three months ended March 31, 2020 and 2019, the Company recorded container impairments of $4,586 and $1,520, respectively, to write down the value of containers held for sale to their estimated fair value less cost to sell, net of reversals of previously recorded impairments on containers held for sale due to rising used container prices, and was included in “depreciation expense” in the condensed consolidated statements of comprehensive (loss) income.

 

 

  (d)

Concentrations

The Company’s customers are mainly international shipping lines, which transport goods on international trade routes. Once the containers are on-hire with a lessee, the Company does not track their location. The domicile of the lessee is not indicative of where the lessee is transporting the containers. The Company’s business risk in its foreign concentrations lies with the creditworthiness of the lessees rather than the geographic location of the containers or the domicile of the lessees.

Except for the lessees noted in the tables below, no other single lessee made up greater than 10% of the Company’s lease rental income from its owned fleet for the three months ended March 31, 2020 and 2019 and more than 10% of the Company’s gross accounts receivable from its owned fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - owned fleet

 

2020

 

 

2019

 

Customer A

 

16.9%

 

 

13.6%

 

Customer B

 

13.2%

 

 

13.8%

 

 

Gross Accounts Receivable- owned fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

11.3%

 

 

17.1%

 

Customer B

 

16.1%

 

 

11.2%

 

 

Total fleet lease rental income, as reported in the condensed consolidated statements of comprehensive (loss) income, comprises revenue earned from leases on containers in the Company’s total fleet, including revenue earned from leases on containers in its managed fleet. Except for the lessees noted in the table below, no other single lessee accounted for more than 10% of the Company’s total fleet lease rental income for the three months ended March 31, 2020 and 2019, as well, there is no other single lessee that accounted for more than 10% of the Company’s gross accounts receivable from its total fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - total fleet

 

2020

 

 

2019

 

Customer A

 

16.5%

 

 

13.4%

 

Customer B

 

14.4%

 

 

13.8%

 

 

Gross Accounts Receivable- total fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

17.7%

 

 

16.6%

 

Customer B

 

19.2%

 

 

12.0%

 

 

 

10

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(e)   Net (Loss) Income Attributable to Textainer Group Holdings Limited Common Shareholders Per Common Share

 

Basic earnings per share (“EPS”) is computed by dividing net (loss) income attributable to Textainer Group Holdings Limited common shareholders by the weighted average number of shares outstanding during the applicable period. Diluted EPS reflects the potential dilution that could occur if all outstanding share options were exercised for, and all outstanding restricted share units were converted into, common shares. A reconciliation of the numerator and denominator of basic EPS with that of diluted EPS is reported as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Share amounts in thousands

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders

 

$

(4,379

)

 

$

17,050

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

56,455

 

 

 

57,475

 

Dilutive share options and restricted share units

 

 

—

 

 

 

112

 

Weighted average common shares outstanding - diluted

 

 

56,455

 

 

 

57,587

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders per common share

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.30

 

Diluted

 

$

(0.08

)

 

$

0.30

 

 

 

 

 

 

 

 

 

 

Share options and restricted share units excluded from

    the computation of diluted EPS because they were anti-dilutive

 

 

2,147

 

 

 

1,603

 

 

 

Given that the Company had a net loss attributable to Textainer Group Holdings Limited common shareholders for the three months ended March 31, 2020, there was no dilutive effect of share options and restricted share units.

 

 

 

(f)

Fair Value Measurements

 

The Company’s financial instruments include cash and cash equivalents; restricted cash; accounts receivable and payable; container leaseback financing receivable; net investment in finance leases; due from affiliates, net; container contracts payable; due to container investors, net; debt and derivative instruments. See Note 2 (c) “Containers” and Note 2 (g) “Derivative Instruments and Hedging” for further discussions on fair value of containers held for sale and fair value of derivative instruments, respectively.

At March 31, 2020 and December 31, 2019, the fair value of the Company’s financial instruments approximated the related book value of such instruments except that, the fair value of net investment in finance leases (including the short-term balance) was approximately $350,582 and $299,275 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $337,713 and $295,303 at March 31, 2020 and December 31, 2019, respectively. The fair value of container leaseback financing receivable (including the short-term balance) was approximately $267,353 and $267,551 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $266,168 and $271,658 at March 31, 2020 and December 31, 2019, respectively. The fair value of long-term debt (including current maturities) based on the borrowing rates available to the Company was approximately $3,410,284 and $3,798,683 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $3,665,145 and $3,797,729 at March 31, 2020 and December 31, 2019, respectively.

 

 

(g)

Derivative Instruments and Hedging

The Company has entered into various interest rate swap and cap agreements to mitigate its exposure associated with its variable rate debt. The Company has utilized the income approach to measure at each balance sheet date the fair value of its derivative instruments using observable (Level 2) market inputs. The valuation also reflects the credit standing of the Company and the counterparties to the derivative agreements. The credit valuation adjustment was determined to be

11

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

$589 and $167 (both were additions to the net fair value) as of March 31, 2020 and December 31, 2019, respectively. See Note 9 “Debt and Derivative Instruments” for further discussions.

Derivative instruments are designated or non-designated for hedge accounting purposes. The fair value of the derivative instruments is reflected on a gross basis on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

December 31, 2019

 

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swaps - not designated as hedges

 

$

—

 

 

$

135

 

 

Total

 

$

—

 

 

$

135

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Interest rate swaps - designated as hedges

 

$

9,037

 

 

$

117

 

 

Interest rate swaps - not designated as hedges

 

 

28,463

 

 

 

13,661

 

 

Total

 

$

37,500

 

 

$

13,778

 

 

 

Designated Derivative Instruments

As of March 31, 2020 and December 31, 2019, the Company has designated interest rate swap agreements for a total notional amount of $535,000 and $110,000, respectively, as a cash flow hedge for accounting purposes. The change in fair value of cash flow hedging instruments during the three months ended March 31, 2020 of $8,858 pre-tax loss was recorded on the condensed consolidated balance sheets in “accumulated other comprehensive (loss) income” and a $62 pre-tax gain was reclassified to “interest expense, net” when realized. As of March 31, 2019, none of the derivative instruments are designated by the Company for hedge accounting.

 

Non-Designated Derivative Instruments

As of March 31, 2020 and December 31, 2019, the Company has non-designated interest rate swap and cap agreements for a total notional amount of $778,750 and $920,500, respectively. The fair value of the non-designated derivative instruments is measured at each balance sheet date and the change in fair value during the three months ended March 31, 2020 and 2019 of $14,937 and $5,738, respectively, was recorded in the condensed consolidated statements of comprehensive (loss) income as “unrealized loss on derivative instruments, net.” The differentials between the fixed and variable rate payments under these agreements are recognized in “realized (loss) gain on derivative instruments, net” in the condensed consolidated statements of comprehensive (loss) income when realized.

 

 

(h)

Revenue Recognition

The components of the Company’s revenue as reported in the condensed consolidated statements of comprehensive (loss) income and in Note 10 “Segment Information” are as follows:

Lease Rental Income

Lease rental income arises principally from leasing containers to various international shipping lines and includes all rental charges billed to the lessees. Lease rental income - owned fleet comprises rental income for the container fleet owned by the Company. Lease rental income - managed fleet comprises rental income for the container fleet owned by the Container Investors. For lease accounting purposes, the management agreements with these Container Investors are deemed to convey to the Company the right to control the use of the managed containers and are therefore accounted for as “lease rental income - managed fleet” as reported in the condensed consolidated statements of comprehensive (loss) income (see Note 4 “Managed Container Fleet” for further information).

Revenue is earned and recognized evenly over the period that the equipment is on lease. Where minimum lease payments vary over the lease term, revenue is recognized on a straight-line basis over the term of the lease. Interest income from finance leases and sales-type leaseback arrangements that are accounted for as financing transactions are recognized using the effective interest method, which generates a constant rate of interest over the period of the arrangement.

 

12

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

Management Fees - Non-leasing

 

Under the Company’s management service agreements with Container Investors, fees are earned for the acquisition and sale of containers under management. Acquisition fees from purchases of containers for managed fleet are deferred and recognized as earned on a straight-line basis over the deemed lease term.

 

Trading Container Margin

 

The Company’s trading container sales proceeds arise from the resale of new and used containers to a wide variety of buyers. The related expenses represent the cost of trading containers sold as well as other selling costs that are recognized as incurred. Revenue is recorded when control of the containers is transferred to the customer, which typically occurs upon delivery to, or pick-up by, the customer and when collectability is reasonably assured.

 

Gain on Sale of Owned Fleet Containers, Net

 

The Company also generally sells containers at the end of their useful lives or when it is financially attractive to do so. The gain on sale of owned fleet containers is the excess of the sale price over the carrying value for these units at the time of sale. Revenue is recorded when control of the containers is transferred to the customer, which typically occurs upon delivery to, or pick-up by, the customer and when collectability is reasonably assured.

 

Gain on sale of owned fleet containers, net, also includes gains (losses) recognized at the inception of sales-type leases of our owned fleet, representing the excess (deficiency) of the estimated fair value of containers placed on sales-type leases over (below) their book value.

For further discussion on the Company’s revenue recognition accounting policy, please refer to Note 1 “Nature of Business and Summary of Significant Accounting Polices” in Item 18, “Financial Statements” in our 2019 Form 20-F.

 

 

(i)

Allowance for Credit Losses

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses over the life of the Company’s net investments in finance leases and container leaseback financing receivable. Operating lease receivables are accounted for under Topic 842, Leases and are not within the scope of Topic 326. The guidance requires the measurement of expected credit losses using a forward-looking approach based on relevant information from past events, current conditions, and reasonable and supportable forecasts that affect collectability.

 

The Company adopted ASU 2016-13 and all related amendments on the effective date of January 1, 2020 using the modified retrospective method by recognizing the cumulative effect adjustment to the opening balance of retained earnings at the adoption date. Periods prior to the adoption date that are presented for comparative purposes are not adjusted. As a result of the adoption of ASU 2016-13, the Company recognized a beginning balance transition adjustment to the allowance for credit losses on January 1, 2020 of $892, with a cumulative effect adjustment to the opening balance of retained earnings in the condensed consolidated balance sheet and condensed consolidated statement of stockholder’s equity as of March 31, 2020.

 

Accounts receivable, net investment in finance leases and container leaseback financing receivable are stated at amortized cost net of allowance for credit losses. The Company maintains allowances for credit losses resulting from the inability of its lessees to make required payments under operating leases, finance leases and container leaseback financing receivable. Changes in economic conditions or other events may necessitate additions or deductions to the allowance for credit losses (see Note 7 “Allowance for Credit Losses” for further information).

 

13

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

 

(j)

Recently Issued Accounting Standards

 

In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles - Goodwill and Other (Topic 350) - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).  The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019 and may be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. The Company adopted ASU 2018-15 during the three months ended March 31, 2020 using the prospective transition approach and the adoption of the standard did not result in a material impact on the Company’s condensed consolidated financial statements.

 

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met, that reference LIBOR or another rate that is expected to be discontinued due to reference rate reform. The amendments in ASU 2020-04 are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company will continue its review of the debt and derivative agreements during the transition period until the LIBOR cessation by the end of 2021. The Company expects the adoption of this guidance will not have a material impact on the Company’s condensed consolidated financial statements.

 

On April 10, 2020, the FASB issued a question-and-answer document regarding accounting for lease concessions and other effects of the coronavirus disease pandemic (“COVID-19”). The document clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Leases ASC 842. Instead, an entity that elects not to evaluate whether a concession is a modification can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election only when concessions related to the effects of COVID-19 do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Upon issuance of this document, the Company made the election to apply the practical expedient method to account for any concessions as if they were contemplated as part of our existing leases and will apply this election consistently for all leases. There were no material concessions related to the COVID-19 that were granted (as a lessor) or received (as a lessee) as of March 31, 2020.

 

  (3)   Insurance Receivable and Impairment

 

During the second quarter of 2019, one of the Company’s customers became insolvent and the total net book value of its owned containers leased to this insolvent customer was $63,120. The Company maintains insurance that covers a portion of the exposure related to the value of containers that are unlikely to be recovered from this customer, the cost to recover containers and up to 183 days of lost lease rental income. Based on prior recovery experience, the Company estimated that containers with a book value of $9,468 would not be recovered from this insolvent customer. Accordingly, the Company recorded impairment charges of $9,059 included in “container lessee default expense, net” as of December 31, 2019. The Company also recorded bad debt expense of $2,921 to fully reserve for this insolvent customer’s outstanding accounts receivable as of December 31, 2019. Container recovery costs of $170 was recorded as an insurance receivable and included in “container lessee default expense, net” for the three months ended March 31, 2020. An insurance receivable of $1,962 and $1,792, net of insurance deductible was recorded in the “prepaid expenses and other current assets” in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively.

In August 2016, one of the Company’s customers filed for bankruptcy. The Company entered into a final agreement with the insurance companies on December 31, 2018 and remaining payments totaling $9,814 for the Company’s owned fleet were received during the three months ended March 31, 2019. The Company recorded a $14,881 gain on insurance recovery and legal settlement on a net cash distribution from the bankruptcy estate for its owned fleet during the fourth quarter of 2019. As of

14

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

March 31, 2020 and December 31, 2019, there is no insurance receivable for the Company’s owned fleet related to this bankrupt customer.

 

 

(4)    Managed Container Fleet

 

Lease rental income and expenses from the managed fleet owned by Container Investors are reported on a gross basis. Lease rental income – managed fleet represents rental charges billed to the ultimate lessee for the managed fleet, including charges for handling fees, drop-off charges, pick-up charges, and charges for a damage protection plan that is set forth in the leases.

 

Management fees from non-leasing services are earned for acquiring new managed containers and sales commissions are earned from sales of the managed containers on behalf of the Container Investors, which are generally calculated as a fixed percentage of the cost of the managed containers purchased and the proceeds from the sale of the managed containers, respectively. Acquisition fees from purchases of containers for the managed fleet are deferred and recognized as earned on a straight-line basis over the deemed lease term. As of March 31, 2020 and December 31, 2019, deferred revenue from acquisition fees amounted to $2,583 and $3,109, respectively.

 

Containers - December 31, 2018 and Prior

 

Distribution expense to managed fleet container investors represents direct container expenses of the managed containers and the amounts distributed to the Container Investors, reduced by associated lease management fees earned and retained by the Company.

 

Managed containers in the Company’s managed fleet on or before December 31, 2018 are not included in the Company’s container leasing equipment in the Company’s condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019.

 

Container Purchases On or After January 1, 2019

 

Distribution expense to managed fleet container investors represents direct container expenses of the managed containers.

 

From an accounting perspective, in accordance with Topic 842 which is effective January 1, 2019 for the Company and under the above management arrangements, the Company is deemed to control the containers owned by the Container Investors before they are leased out. Furthermore, the deemed leaseback is considered a sales-type lease under Topic 842, with the Company as lessee and the Container Investors as lessors.

 

15

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

For accounting purposes, the Company is deemed to own the managed containers purchased by the Company on or after January 1, 2019 for and on behalf of Container Investors, notwithstanding the contractual management relationship which the Company has with the Container Investors. Accordingly, such managed containers are included in the Company’s container leasing equipment in the Company’s condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019 and depreciated using the straight-line method over their estimated useful lives to an estimated dollar residual value per the Company’s depreciation policy (see Note 2 (c) “Accounting Policies and Recent Accounting Pronouncements – Containers”). The purchase consideration paid by the Container Investors for such containers is reported as a deemed financial liability of the Company. Subsequent net operating income distributions made by the Company to the Container Investors are recorded as a reduction to the financial liability and as interest expense using the effective interest method. The net book value for these managed containers and the associated financial liability will reduce over time and will be removed upon container sale, irrespective of the amount realized in such sale.  

 

  As of March 31, 2020 and December 31, 2019, the Company’s deemed container leaseback financial liability to the Container Investor amounted to $17,319 and $17,449, respectively, which were reported as "other liabilities” in the condensed consolidated balance sheet.

The Company’s container leasing equipment includes such managed containers in the condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019, which consisted of the following:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Containers - owned fleet

 

$

5,474,139

 

 

$

(1,482,366

)

 

$

3,991,773

 

 

$

5,582,986

 

 

$

(1,442,986

)

 

$

4,140,000

 

Containers - managed fleet

 

 

15,971

 

 

 

(311

)

 

 

15,660

 

 

 

16,332

 

 

 

(181

)

 

 

16,151

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 

 

 

Total management fee income from the managed fleet, including management fees earned from acquisition fees and sales commissions during the three months ended March 31, 2020 and 2019 were as follows (see Note 5 “Transactions with Affiliates and Container Investors”):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Lease rental income - managed fleet

 

$

15,406

 

 

$

26,553

 

Less: distribution expense to managed fleet container investors

 

 

(14,163

)

 

 

(24,480

)

Less: depreciation and interest expense on managed containers

    purchased on or after January 1, 2019

 

 

(239

)

 

 

—

 

Management fees from leasing

 

 

1,004

 

 

 

2,073

 

Management fees from non-leasing services

 

 

1,484

 

 

 

2,301

 

     Total management fees

 

$

2,488

 

 

$

4,374

 

 

 

 

 

 

 

 

 

 

 

The Company’s condensed consolidated balance sheets also include the accounts receivable from the lessees of the managed fleet which are uncollected lease billings related to the containers managed by the Company for the Container Investors. Amounts billed under leases for the managed fleet (“sub-leases”) are recorded in accounts receivable with a corresponding credit to due to Container Investors. As sub-lessor, accounts receivable from the managed fleet represent receivables from lessees that the Company is required to remit, in terms of the management agreements, to the Container Investors once paid. The Company’s condensed consolidated balance sheets also include the prepaid expenses, accounts payable and accrued expenses and container contracts payable related to the containers managed by the Company for the Container Investors.

 

16

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The following table provides a reconciliation of the balance sheet accounts from the managed fleet to the total amount as of March 31, 2020 and December 31, 2019 in the condensed consolidated balance sheets (also, see Note 5 “Transactions with Affiliates and Container Investors”): 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts receivable - owned fleet

 

$

103,855

 

 

$

96,158

 

Accounts receivable - managed fleet

 

 

15,050

 

 

 

13,226

 

Total accounts receivable

 

$

118,905

 

 

$

109,384

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets - owned fleet

 

$

14,224

 

 

$

14,627

 

Prepaid expenses and other current assets - managed fleet

 

 

143

 

 

 

189

 

Total prepaid expenses and other current assets

 

$

14,367

 

 

$

14,816

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses - owned fleet

 

$

19,659

 

 

$

21,451

 

Accounts payable and accrued expenses - managed fleet

 

 

1,840

 

 

 

1,953

 

Total accounts payable and accrued expenses

 

$

21,499

 

 

$

23,404

 

 

 

 

 

 

 

 

 

 

Container contracts payable - owned fleet

 

$

5,294

 

 

$

9,394

 

Container contracts payable - managed fleet

 

 

—

 

 

 

—

 

Total container contracts payable

 

$

5,294

 

 

$

9,394

 

 

 


17

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(5)

Transactions with Affiliates and Container Investors

Due from affiliates, net of $2,112 and $1,880, as of March 31, 2020 and December 31, 2019, respectively, represents lease rentals on tank containers collected on behalf of and payable to the Company from the Company’s tank container manager, net of direct container expenses and management fees.

Total management fees earned from the Company’s managed fleet, including acquisition fees and sales commissions for the three months ended March 31, 2020 and 2019 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Fees from affiliated Container Investors

 

$

—

 

 

$

972

 

Fees from unaffiliated Container Investors

 

 

2,488

 

 

 

3,064

 

Fees from Container Investors

 

 

2,488

 

 

 

4,036

 

Other fees

 

 

—

 

 

 

338

 

Total management fees

 

$

2,488

 

 

$

4,374

 

 

 

The following table provides a summary of due to container investors, net at March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts receivable - managed fleet

 

$

15,050

 

 

$

13,226

 

Prepaid expenses and other current assets - managed fleet

 

 

143

 

 

 

189

 

Accounts payable and accrued expenses - managed fleet

 

 

(1,840

)

 

 

(1,953

)

Container contracts payable - managed fleet

 

 

—

 

 

 

—

 

 

 

 

13,353

 

 

 

11,462

 

Distributions due to container investors on lease rentals collected, net of

  container expenses paid and management fees

 

 

5,798

 

 

 

10,516

 

Due to container investors, net

 

$

19,151

 

 

$

21,978

 

 

There is no due to affiliated Container Investor as of March 31, 2020 and December 31, 2019.

 

 

(6)

Leases

 

 

(a)

Lessor

 

The Company’s lease rental income for the three months ended March 31, 2020 and 2019 were as follows:

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

 

Owned

 

 

Managed

 

 

Total

 

 

Owned

 

 

Managed

 

 

Total

 

Lease rental income - operating leases

$

115,803

 

 

$

14,514

 

 

$

130,317

 

 

$

118,283

 

 

$

25,070

 

 

$

143,353

 

Interest income on net investment in finance leases

 

5,284

 

 

 

—

 

 

 

5,284

 

 

 

2,997

 

 

 

—

 

 

 

2,997

 

Interest income on container leaseback financing receivable

 

4,006

 

 

 

—

 

 

 

4,006

 

 

 

—

 

 

 

—

 

 

 

—

 

Variable lease revenue

 

4,979

 

 

 

892

 

 

 

5,871

 

 

 

7,693

 

 

 

1,483

 

 

 

9,176

 

Total lease rental income

$

130,072

 

 

$

15,406

 

 

$

145,478

 

 

$

128,973

 

 

$

26,553

 

 

$

155,526

 

 

Variable lease revenue includes other charges set forth in the leases, such as handling fees, pick-up and drop-off charges and charges for damage protection plan.

 

For finance leases, the net selling loss recognized at lease commencement, representing the difference between the estimated fair value of containers placed on these leases and their net book value, in the amount of $9 and $297 for the three months ended

18

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

March 31, 2020 and 2019, respectively, are included in “gain on sale of owned fleet containers, net” in the condensed consolidated statements of comprehensive (loss) income.

 

Operating Leases

 

The following is a schedule, by year, of future minimum lease payments receivable under the long-term leases for the owned and managed container fleet as of March 31, 2020:

 

 

Owned

 

 

Managed

 

 

Total

 

Twelve months ending March 31:

 

 

 

 

 

 

 

 

 

 

 

2021

$

301,863

 

 

$

35,638

 

 

$

337,501

 

2022

 

229,468

 

 

 

20,669

 

 

 

250,137

 

2023

 

183,212

 

 

 

10,418

 

 

 

193,630

 

2024

 

136,845

 

 

 

8,174

 

 

 

145,019

 

2025 and thereafter

 

173,359

 

 

 

13,549

 

 

 

186,908

 

Total future minimum lease payments receivable

$

1,024,747

 

 

$

88,448

 

 

$

1,113,195

 

 

Net Investment in Finance Leases

 

The following table represents the components of the net investment in finance leases, which are reported in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Future minimum lease payments receivable

 

$

460,664

 

 

$

385,589

 

Residual value of containers

 

 

11,122

 

 

 

11,143

 

Less: unearned income

 

 

(133,086

)

 

 

(101,429

)

Net investment in finance leases (1)

 

$

338,700

 

 

$

295,303

 

Less: Allowance for credit losses

 

 

(987

)

 

 

—

 

Net investment in finance leases, net

 

$

337,713

 

 

$

295,303

 

Amounts due within one year

 

$

40,164

 

 

$

40,940

 

Amounts due beyond one year

 

 

297,549

 

 

 

254,363

 

Net investment in finance leases, net

 

$

337,713

 

 

$

295,303

 

 

(1) As of March 31, 2020, two major customers represented 54.0% and 14.0% of the Company’s finance leases portfolio. As of December 31, 2019, two major customers represented 44.3% and 16.1% of the Company’s finance leases portfolio. No other customer represented more than 10% of the Company’s finance leases portfolio as of March 31, 2020 and December 31, 2019.

 

 

Container Leaseback Financing Receivable

 

The Company’s container leaseback financing receivable pertains to containers purchased that were leased back to the seller-lessees through a sales-type leaseback arrangement. Under the provisions of Topic 842, these transactions from an accounting perspective are accounted for as financing transactions.

19

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The components of the container leaseback financing receivable, which are reported in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Future minimum payments receivable

 

$

368,869

 

 

$

377,917

 

Less: unearned income

 

 

(102,232

)

 

 

(106,259

)

Container leaseback financing receivable (1)

 

 

266,637

 

 

$

271,658

 

Less: Allowance for credit losses

 

 

(469

)

 

 

—

 

Container leaseback financing receivable, net

 

$

266,168

 

 

$

271,658

 

Amounts due within one year

 

 

20,661

 

 

 

20,547

 

Amounts due beyond one year

 

 

245,507

 

 

 

251,111

 

Container leaseback financing receivable, net

 

$

266,168

 

 

$

271,658

 

 

(1) As of March 31, 2020, two customers represented 83.4% and 16.6% of the Company’s container leaseback financing receivable portfolio. As of December 31, 2019, two customers represented 82.9% and 17.1% of the Company’s container leaseback financing receivable portfolio.

 

The following is a schedule, by year, of future minimum payments receivable under the net investment in finance leases and container leaseback financing receivable as of March 31, 2020:

 

Twelve months ending March 31:

 

Net Investment in Finance Leases

 

 

Container Leaseback Financing Receivable

 

 

Total

 

2021

 

$

61,638

 

 

$

36,017

 

 

$

97,655

 

2022

 

 

72,151

 

 

 

36,017

 

 

 

108,168

 

2023

 

 

50,390

 

 

 

36,017

 

 

 

86,407

 

2024

 

 

43,788

 

 

 

36,116

 

 

 

78,290

 

2025 and thereafter

 

 

232,697

 

 

 

224,702

 

 

 

459,013

 

Total future minimum lease payments receivable

 

$

460,664

 

 

$

368,869

 

 

$

829,533

 

 

 

See Note 2 (h) “Accounting Policies and Recent Accounting Pronouncements – Revenue Recognition”, Note 2 (i) “Accounting Policies and Recent Accounting Pronouncements – Allowance for Credit Losses”, Note 4 “Managed Container Fleet” and Note 7 “Allowance for Credit Losses” for further information.

 

20

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

 

 

(b)

Lessee

 

Right-of-use (“ROU”) lease assets and lease liability are recognized for the Company’s office space leases at the commencement date based on the present value of lease payments over the lease term. As of March 31, 2020 and December 31, 2019, ROU operating lease assets amounted to $10,888 and $11,276, respectively, which were reported in “other assets” in the condensed consolidated balance sheets.

 

As of March 31, 2020 and December 31, 2019, total lease liabilities amounted to $13,256 and $13,736, respectively, of which amounts due within one year of $1,719 and $1,706 were reported in “other liabilities – current.” As of March 31, 2020 and December 31, 2019, long-term lease obligations that are due beyond one year of $11,537 and $12,030, respectively, were reported in “other liabilities – non-current” in the condensed consolidated balance sheets.

 

Operating lease expense is recognized on a straight-line basis over the lease term and is reported in “general and administrative expense” in the condensed consolidated statements of comprehensive (loss) income. Other information related to the Company's operating leases are as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating lease cost

 

$

527

 

 

$

532

 

Short-term and variable lease cost

 

 

31

 

 

 

8

 

Total rent expense

 

$

558

 

 

$

540

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

623

 

 

$

534

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Weighted-average remaining lease term

 

5.3 years

 

 

5.4 years

 

Weighted-average discount rate

 

4.76%

 

 

4.17%

 

 

 

Future minimum lease payment obligations under the Company’s noncancelable operating leases at March 31, 2020 were as follows:

 

 

Operating Leases

 

Twelve months ending March 31:

 

 

 

 

2021

 

$

2,184

 

2022

 

 

2,133

 

2023

 

 

2,055

 

2024

 

 

2,119

 

2025 and thereafter

 

 

6,852

 

Total minimum lease payments

 

 

15,343

 

Less imputed interest

 

 

(2,087

)

Total present value of operating lease liabilities

 

$

13,256

 

 


 

21

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(7)

Allowance for Credit Losses

 

The Company’s allowance for credit losses are estimated based on historical losses, current economic conditions, and ongoing review of the credit worthiness, but not limited to, each lessee’s payment history, lessee credit ratings, management’s current assessment of each lessee’s financial condition and the recoverability. The Company considers an account past due when a payment has not been received in accordance with the terms of the lease agreement, and if the financial condition of the Company’s lessees deteriorates resulting in an impairment of their ability to make payments, additional allowances may be required.

 

Accounts Receivable

 

The Company maintains allowances, if necessary, for doubtful accounts against accounts receivables resulting from the inability of its lessees to make required payments related to billed amounts under the operating leases, finance leases and container leaseback financing receivable. The allowance for credit losses included in accounts receivable, net, amounted to $8,026 and $6,299 as of March 31, 2020 and December 31, 2019, respectively.

 

As of March 31, 2020 and December 31, 2019, the Company does not have an allowance for credit losses related to the billed amounts under the container leaseback financing receivable and does not have any past due balances relating to such transactions. As of March 31, 2020 and December 31, 2019, the allowance for credit losses related to the billed amounts under the finance leases and included in accounts receivable, net, amounted to $839 and $675, respectively.

 

Net Investment in Finance Leases and Container Leaseback Financing Receivable

 

On January 1, 2020, the Company adopted ASU 2016-13 by estimating current expected credit losses (“CECL”) over the contractual lease term of the finance leases and container leaseback financing receivable (see Note 2 (i) “Accounting Policies and Recent Accounting Pronouncements” for further information.) ASU 2016-13 requires that an allowance for credit loss is recognized to reflect the risk of credit loss even when risk is remote.

 

The Company maintains allowances for credit losses against net investment in finance leases and container leaseback financing receivable related to unbilled amounts under the finance leases and the sales-type leaseback arrangements accounted for as financing receivable. The allowance for credit losses related to unbilled amounts under finance leases and included in net investment in finance leases, net, amounted to $987 as of March 31, 2020. The allowance for credit losses related to unbilled amounts under the financing arrangements and included in container leaseback financing receivable, net, amounted to $469 as of March 31, 2020.

 

The Company estimates its potential future expected credit losses based on historical losses from lessee defaults, current economic conditions and reasonable and supportable forecasts that may affect the collectability of the reported amount. The Company evaluates its exposure by portfolio with similar risk characteristics based on the credit worthiness, external credit data and overall credit quality of its lessees.

The Company’s internal risk rating categories are “Tier 1” for the lowest level of risk which are typically the large international shipping lines with strong financial and asset base; “Tier 2” for moderate level of risk which includes lessees which are well-established in the market; and “Tier 3” for the highest level of risk which includes smaller shipping lines or lessees that exhibit high volatility in payments on a regular basis.

As of March 31, 2020, the Company’s net investment in finance leases and container leaseback financing receivable are primarily comprised of the largest shipping lines which represented 73% and 83%, respectively, of the Company’s portfolio.

22

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The following table presents the net investment in finance leases and container leaseback financing receivable by internal credit rating category and year of origination as of March 31, 2020:

 

 

 

Three Months Ended March 31, 2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Total

 

Tier 1

 

$

43,702

 

 

$

123,617

 

 

$

24,816

 

 

$

7,823

 

 

$

—

 

 

$

47,177

 

 

$

247,135

 

Tier 2

 

 

—

 

 

 

39,111

 

 

 

22,949

 

 

 

82

 

 

 

9,127

 

 

 

7,093

 

 

 

78,362

 

Tier 3

 

 

217

 

 

 

7,980

 

 

 

1,604

 

 

 

77

 

 

 

1,213

 

 

 

2,112

 

 

 

13,203

 

Net investment in finance leases

 

$

43,919

 

 

$

170,708

 

 

$

49,369

 

 

$

7,982

 

 

$

10,340

 

 

$

56,382

 

 

$

338,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1

 

$

—

 

 

$

222,285

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

222,285

 

Tier 2

 

 

—

 

 

 

44,352

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

44,352

 

Tier 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Container leaseback financing receivable

 

$

—

 

 

$

266,637

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

266,637

 

 

Subsequent changes in the estimated allowance for credit losses are recognized in “bad debt expense, net” in the condensed consolidated statements of comprehensive (loss) income. Subsequent changes in the estimated allowance for credit losses relating to the accounts receivable from managed container fleet are recognized in “distribution expense to managed fleet container investors” in the condensed consolidated statements of comprehensive (loss) income (See Note 4 “Managed Container Fleet” for further information). The changes in the carrying amount of the allowance for credit losses during the three months ended March 31, 2020 are as follows:

 

 

 

Accounts Receivable

 

 

Net Investment in Finance Leases

 

 

Container Leaseback Financing Receivable

 

 

Total Allowance for Credit Losses

 

Balance as of December 31, 2019

 

$

6,299

 

 

$

—

 

 

$

—

 

 

$

6,299

 

Adoption of ASU 2016-13 on January 1, 2020

 

 

—

 

 

 

636

 

 

 

256

 

 

 

892

 

Additions charged to expense

 

 

1,727

 

 

 

351

 

 

 

213

 

 

 

2,291

 

Balance as of March 31, 2020

 

$

8,026

 

 

$

987

 

 

$

469

 

 

$

9,482

 

 

 

 

(8)

Income Taxes

 

 

The Company’s effective income tax rates were 14.0% and 2.13% for the three months ended March 31, 2020 and 2019, respectively. The Company has computed its provision for income taxes based on the estimated annual effective income tax rate and is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income the Company earns in those jurisdictions.  It is also affected by the changes in discrete items that may occur in any given period. The change in the effective income tax rate for the three months ended March 31, 2020 versus the same period in 2019 was primarily due to an income tax benefit associated with discrete items and a net loss for the three months ended March 31, 2020.

 

 

23

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(9)

Debt and Derivative Instruments

The following represents the Company’s debt obligations as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

Outstanding

 

Average Interest

 

 

Outstanding

 

Average Interest

 

 

Final Maturity

TL Revolving Credit Facility

 

$

1,211,166

 

 

2.43

%

 

$

1,280,037

 

 

3.29

%

 

September 2023

TL 2019 Term Loan

 

 

155,833

 

 

3.50

%

 

 

158,371

 

 

3.50

%

 

December 2026

TMCL II Secured Debt Facility (1)

 

 

670,015

 

 

2.45

%

 

 

689,658

 

 

3.49

%

 

July 2026

TMCL V 2017-1 Bonds

 

 

307,733

 

 

3.91

%

 

 

316,395

 

 

3.91

%

 

May 2042

TMCL V 2017-2 Bonds

 

 

385,506

 

 

3.73

%

 

 

395,836

 

 

3.73

%

 

June 2042

TMCL VI Term Loan

 

 

244,383

 

 

4.30

%

 

 

249,421

 

 

4.30

%

 

February 2038

TMCL VII 2018-1 Bonds

 

 

222,236

 

 

4.14

%

 

 

227,624

 

 

4.14

%

 

July 2043

TMCL VII 2019-1 Bonds

 

 

320,754

 

 

4.02

%

 

 

327,563

 

 

4.02

%

 

April 2044

TAP Funding Revolving Credit Facility (2)

 

 

147,519

 

 

2.65

%

 

 

152,824

 

 

3.69

%

 

December 2021

Total debt obligations

 

$

3,665,145

 

 

 

 

 

$

3,797,729

 

 

 

 

 

 

Amount due within one year

 

$

239,066

 

 

 

 

 

$

242,433

 

 

 

 

 

 

Amounts due beyond one year

 

$

3,426,079

 

 

 

 

 

$

3,555,296

 

 

 

 

 

 

 

 

(1)

Final maturity of the TMCL II Secured Debt Facility is based on the assumption that the facility will not be extended on its associated conversion date.

  

 

(2)

In February 2020, the Company entered into an amendment of the TAP Funding Revolving Credit Facility which decreased the aggregate commitment amount from $190,000 to $155,000, reduced the advance rate from 80% to 78%, and revised certain of the covenants and restrictions. The Company wrote-off $122 of unamortized debt issuance costs during the three months ended March 31, 2020 related to the amendment of TAP Funding Revolving Credit Facility.

 

The Company’s debt agreements contain various restrictive financial and other covenants and the Company was in full compliance with these restrictive covenants at March 31, 2020.

 

24

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The following is a schedule of future scheduled repayments, by year, and borrowing capacities, as of March 31, 2020:

 

 

 

Twelve months ending March 31,

 

 

Available Borrowing,

 

 

Current

and Available

Borrowing,

 

 

 

 

 

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025 and

thereafter

 

 

Total

Borrowing

 

 

as limited by the Borrowing Base

 

 

as limited by the

Borrowing Base

 

 

Total Commitment

 

TL Revolving Credit Facility

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,217,000

 

 

$

—

 

 

$

1,217,000

 

 

$

183,924

 

 

$

1,400,924

 

 

$

1,500,000

 

TL 2019 Term Loan

 

 

10,616

 

 

 

10,993

 

 

 

11,384

 

 

 

11,789

 

 

 

112,622

 

 

 

157,404

 

 

 

—

 

 

 

157,404

 

 

 

157,404

 

TMCL II Secured Debt Facility

 

 

61,739

 

 

 

64,280

 

 

 

56,575

 

 

 

52,696

 

 

 

439,116

 

 

 

674,406

 

 

 

—

 

 

 

674,406

 

 

 

1,200,000

 

TMCL V 2017-1 Bonds

 

 

42,136

 

 

 

55,352

 

 

 

64,330

 

 

 

61,453

 

 

 

86,751

 

 

 

310,022

 

 

 

—

 

 

 

310,022

 

 

 

310,022

 

TMCL V 2017-2 Bonds (1)

 

 

45,734

 

 

 

58,676

 

 

 

70,222

 

 

 

81,144

 

 

 

132,615

 

 

 

388,391

 

 

 

—

 

 

 

388,391

 

 

 

388,391

 

TMCL VI Term Loan

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

144,236

 

 

 

246,236

 

 

 

—

 

 

 

246,236

 

 

 

246,236

 

TMCL VII 2018-1 Bonds (1)

 

 

18,601

 

 

 

18,655

 

 

 

18,655

 

 

 

18,655

 

 

 

152,190

 

 

 

226,756

 

 

 

—

 

 

 

226,756

 

 

 

226,756

 

TMCL VII 2019-1 Bonds (1)

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

212,333

 

 

 

324,333

 

 

 

—

 

 

 

324,333

 

 

 

324,333

 

TAP Funding Revolving Credit

   Facility

 

 

13,033

 

 

 

135,017

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

148,050

 

 

 

567

 

 

 

148,617

 

 

 

155,000

 

   Total (2)

 

$

245,359

 

 

$

396,473

 

 

$

274,666

 

 

$

1,496,237

 

 

$

1,279,863

 

 

$

3,692,598

 

 

$

184,491

 

 

$

3,877,089

 

 

$

4,508,142

 

 

 

(1)

Future scheduled payments for TMCL V 2017-2 Bonds, TMCL VII 2018-1 and TMCL VII 2019-1 Bonds exclude an unamortized discount of $42, $2,200 and $96, respectively.

 

(2)

Future scheduled payments for all debts exclude unamortized prepaid debt issuance costs in an aggregate amount of $25,115.

For further discussion on the Company’s debt instruments, please refer to Item 18, “Financial Statements – Note 9” in our 2019 Form 20-F.

 

Derivative Instruments and Hedging Activities

The following is a summary of the Company’s derivative instruments as of March 31, 2020:

 

 

 

Notional

 

Derivative instruments

 

amount

 

Interest rate swap contracts with several banks, with fixed rates between 1.39%

   and 2.94% per annum, amortizing notional amounts, with termination dates

   through January 15, 2023, non-designated

 

$

744,750

 

Interest rate swap contracts with several banks, with fixed rates between 0.43%

   and 1.58% per annum, amortizing notional amounts, with termination dates

   through March 15, 2025, designated

 

 

535,000

 

Interest rate cap contracts with several banks with fixed rates between 3.00%

   and 5.00% per annum, nonamortizing notional amounts, with termination dates

   through December 15, 2021, non-designated

 

 

34,000

 

      Total notional amount as of March 31, 2020

 

$

1,313,750

 

 

25

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The Company expects to reclassify an estimated net gain amount of $410 related to the designated interest rate swap agreements from “accumulated other comprehensive (loss) income” to “interest expense” in the condensed consolidated statements of comprehensive (loss) income over the next twelve months. The following table summarizes the pre-tax impact of derivative instruments on the condensed consolidated statements of comprehensive (loss) income during the three months ended March 31, 2020 and 2019:

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2020

 

 

2019

 

Derivative instruments

 

Financial Statement Caption

 

 

 

 

 

 

 

 

Non-designated derivative instruments

 

Realized (loss) gain on derivative instruments, net

 

$

(1,526

)

 

$

1,444

 

Non-designated derivative instruments

 

Unrealized loss on derivative instruments, net

 

$

(14,937

)

 

$

(5,738

)

Designated derivative instruments

 

Other comprehensive loss

 

$

(8,858

)

 

$

—

 

Designated derivative instruments

 

Interest and debt income (expense), net

 

$

62

 

 

$

—

 

 

For further discussion on the Company’s derivative instruments, please refer to Item 18, “Financial Statements – Note 9” in our 2019 Form 20-F.

 

(10)

Segment Information

The Company operates in three reportable segments: Container Ownership, Container Management and Container Resale. The following tables show segment information for the three months ended March 31, 2020 and 2019, reconciled to the Company’s (loss) income before income taxes and noncontrolling interests as shown in its condensed consolidated statements of comprehensive (loss) income:

 

 

 

 

Container

 

 

Container

 

 

Container

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

Ownership

 

 

Management

 

 

Resale

 

 

Other

 

 

Eliminations

 

 

Totals

 

Lease rental income - owned fleet

 

$

129,850

 

 

$

222

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

130,072

 

Lease rental income - managed fleet

 

 

-

 

 

 

15,406

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,406

 

Lease rental income

 

$

129,850

 

 

$

15,628

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

145,478

 

Management fees - non-leasing from external

   customers

 

$

98

 

 

$

555

 

 

$

831

 

 

$

-

 

 

$

-

 

 

$

1,484

 

Inter-segment management fees

 

$

-

 

 

$

9,745

 

 

$

2,421

 

 

$

-

 

 

$

(12,166

)

 

$

-

 

Trading container margin

 

$

-

 

 

$

-

 

 

$

649

 

 

$

-

 

 

$

-

 

 

$

649

 

Gain on sale of owned fleet containers, net

 

$

5,794

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,794

 

Depreciation expense

 

$

68,356

 

 

$

341

 

 

$

-

 

 

$

-

 

 

$

(1,863

)

 

$

66,834

 

Container lessee default recovery, net

 

$

12

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

12

 

Interest expense

 

$

35,956

 

 

$

156

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

36,112

 

Realized loss on derivative instruments, net

 

$

1,526

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,526

 

Unrealized loss on derivative instruments, net

 

$

14,937

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

14,937

 

Segment (loss) income before income tax and

   noncontrolling interests

 

$

(12,051

)

 

$

2,610

 

 

$

2,758

 

 

$

(1,062

)

 

$

1,804

 

 

$

(5,941

)

Total assets

 

$

4,954,452

 

 

$

154,857

 

 

$

17,198

 

 

$

8,293

 

 

$

(80,994

)

 

$

5,053,806

 

Purchase of containers and fixed assets

 

$

6,957

 

 

$

192

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

7,149

 

26

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

 

 

 

Container

 

 

Container

 

 

Container

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

Ownership

 

 

Management

 

 

Resale

 

 

Other

 

 

Eliminations

 

 

Totals

 

Lease rental income - owned fleet

 

$

128,599

 

 

$

374

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

128,973

 

Lease rental income - managed fleet

 

 

-

 

 

 

26,553

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26,553

 

Lease rental income

 

$

128,599

 

 

$

26,927

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

155,526

 

Management fees - non-leasing from external

   customers

 

$

52

 

 

$

978

 

 

$

1,271

 

 

$

-

 

 

$

-

 

 

$

2,301

 

Inter-segment management fees

 

$

-

 

 

$

12,491

 

 

$

2,527

 

 

$

-

 

 

$

(15,018

)

 

$

-

 

Trading container margin

 

$

-

 

 

$

-

 

 

$

2,568

 

 

$

-

 

 

$

-

 

 

$

2,568

 

Gain on sale of owned fleet containers, net

 

$

6,767

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

6,767

 

Depreciation expense

 

$

64,068

 

 

$

172

 

 

$

-

 

 

$

-

 

 

$

(1,776

)

 

$

62,464

 

Container lessee default recovery, net

 

$

653

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

653

 

Interest expense

 

$

37,516

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

37,516

 

Realized gain on derivative instruments, net

 

$

1,444

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,444

 

Unrealized loss on derivative instruments, net

 

$

5,738

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,738

 

Segment income (loss) before income tax and

   noncontrolling interests

 

$

6,749

 

 

$

6,862

 

 

$

5,163

 

 

$

(921

)

 

$

(325

)

 

$

17,528

 

Total assets

 

$

4,687,690

 

 

$

162,170

 

 

$

45,782

 

 

$

10,320

 

 

$

(82,244

)

 

$

4,823,718

 

Purchase of containers and fixed assets

 

$

169,817

 

 

$

73

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

169,890

 

 

(1) Container Ownership segment (loss) income before income tax and noncontrolling interests includes unrealized loss on derivative instruments, net of $14,937 and $5,738 for the three months ended March 31, 2020 and 2019, respectively, and write-off of unamortized deferred debt issuance costs and bond discounts of $122 and $0 for the three month ended March 31, 2020 and 2019, respectively.

 

General and administrative expenses are allocated to the reportable business segments based on direct overhead costs incurred by those segments. Amounts reported in the “Other” column represent activity unrelated to the active reportable business segments. Amounts reported in the “Eliminations” column represent inter-segment management fees between the Container Management and Container Resale segments and the Container Ownership segment.

Geographic Segment Information

Substantially all of the Company’s leasing related revenue is denominated in U.S. dollars. As all of the Company’s containers are used internationally, where no single container is domiciled in one particular place for a prolonged period of time, all of the Company’s long-lived assets are considered to be international with no single country of use.

27

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

The following table represents the geographic allocation of total fleet lease rental income and management fees from non-leasing services during the three months ended March 31, 2020 and 2019 based on customers’ and Container Investors’ primary domicile, respectively:

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

Percent

of Total

 

 

2019

 

 

Percent

of Total

 

Lease rental income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

72,795

 

 

 

50.0

%

 

$

83,275

 

 

 

53.5

%

Europe

 

 

64,727

 

 

 

44.5

%

 

 

62,221

 

 

 

40.0

%

North / South America

 

 

7,318

 

 

 

5.0

%

 

 

9,294

 

 

 

6.0

%

All other international

 

 

638

 

 

 

0.5

%

 

 

736

 

 

 

0.5

%

 

 

$

145,478

 

 

 

100.0

%

 

$

155,526

 

 

 

100.0

%

Management fees, non-leasing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bermuda

 

$

982

 

 

 

66.2

%

 

$

1,285

 

 

 

55.8

%

Europe

 

 

199

 

 

 

13.4

%

 

 

576

 

 

 

25.0

%

North / South America

 

 

4

 

 

 

0.3

%

 

 

340

 

 

 

14.8

%

Asia

 

 

3

 

 

 

0.2

%

 

 

4

 

 

 

0.2

%

All other international

 

 

296

 

 

 

19.9

%

 

 

96

 

 

 

4.2

%

 

 

$

1,484

 

 

 

100.0

%

 

$

2,301

 

 

 

100.0

%

 

The following table represents the geographic allocation of trading container sales proceeds and gain on sale of owned fleet containers, net during the three months ended March 31, 2020 and 2019 based on the location of sale:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

Percent

of Total

 

 

2019

 

 

Percent

of Total

 

Trading container sales proceeds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

5,778

 

 

 

60.2

%

 

$

8,917

 

 

 

67.0

%

North / South America

 

 

2,721

 

 

 

28.4

%

 

 

2,874

 

 

 

21.6

%

Europe

 

 

1,081

 

 

 

11.3

%

 

 

1,498

 

 

 

11.3

%

All other international

 

 

5

 

 

 

0.1

%

 

 

11

 

 

 

0.1

%

 

 

$

9,585

 

 

 

100.0

%

 

$

13,300

 

 

 

100.0

%

Gain on sale of owned fleet containers, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

2,446

 

 

 

42.2

%

 

$

2,453

 

 

 

36.3

%

North / South America

 

 

1,100

 

 

 

19.0

%

 

 

2,101

 

 

 

31.0

%

Europe

 

 

1,044

 

 

 

18.0

%

 

 

2,244

 

 

 

33.2

%

All other international

 

 

1,204

 

 

 

20.8

%

 

 

(31

)

 

 

(0.5

)%

 

 

$

5,794

 

 

 

100.0

%

 

$

6,767

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)

 

(11)

Commitments and Contingencies

(a) Restricted Cash

Restricted interest-bearing cash accounts were established by the Company as additional collateral for outstanding borrowings under certain of the Company’s debt facilities. The total balance of these restricted cash accounts was $97,334 and $97,353 as of March 31, 2020 and December 31, 2019, respectively.

 

(b)  Container Commitments

At March 31, 2020, the Company had commitments to purchase containers to be delivered subsequent to March 31, 2020 in the total amount of $258,732.

 

(c)   Distribution Expense to Managed Fleet Container Investors

The amounts distributed to the Container Investors are variable payments based upon the net operating income for each managed container (see Note 4 “Managed Container Fleet”). There are no future minimum lease payment obligations under the Company’s management agreements.

 

 

(12) Share Repurchase Program

 

In August 2019, the Company’s board of directors approved a share repurchase program of up to $25,000 of the Company’s common shares. Under the program, the Company may purchase its common shares from time to time in the open market, in privately negotiated transactions or such other manner as will comply with applicable laws and regulations. The authorization does not obligate us to acquire a specific number of shares during any period, but it may be modified, suspended or terminated at any time at the discretion of the Company’s board of directors. As of December 31, 2019, the Company repurchased 878,637 shares at an average price of $9.75 and for a total amount of $8,597, including commission paid.

 

In March 2020, the Company’s board of directors approved an amendment to the share repurchase program to increase from $25,000 to an aggregate of $50,000 of the Company’s common shares that may be repurchased under the program (including all common shares repurchased under the program prior to this amendment), commencing in September 2019 up to and including September 1, 2022.

 

During the three months ended March 31, 2020, the Company repurchased 1,947,443 shares at an average price of $7.91 for a total amount of $15,477, including commission paid. As of March 31, 2020, approximately $26,000 remained available for repurchases under the share repurchase program.

 

 

29

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Item 1, “Condensed Consolidated Financial Statements (Unaudited)” of this Quarterly Report on Form 6-K, as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 30, 2020 (our “2019 Form 20-F”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See “Information Regarding Forward-Looking Statements; Cautionary Language.” Factors that could cause or contribute to these differences include those discussed below and Item 3, “Key Information -- Risk Factors” included in our 2019 Form 20-F.

As used in the following discussion and analysis, unless indicated otherwise or the context otherwise requires, references to: (1) “the Company,” “we,” “us,” “our” or “TGH” refer collectively to Textainer Group Holdings Limited, the issuer of the publicly-traded common shares that have been registered pursuant to Section 12(b) of the U.S. Securities Exchange Act of 1934, as amended, and its subsidiaries; (2) “TEU” refers to a “Twenty-Foot Equivalent Unit,” which is a unit of measurement used in the container shipping industry to compare shipping containers of various lengths to a standard 20’ dry freight container, thus a 20’ container is one TEU and a 40’ container is two TEU; (3) “CEU” refers to a Cost Equivalent Unit, which is a unit of measurement based on the approximate cost of a container relative to the cost of a standard 20’ dry freight container, so the cost of a standard 20’ dry freight container is one CEU; the cost of a 40’ dry freight container is 1.6 CEU; and the cost of a 40’ high cube dry freight container (9’6” high) is 1.7 CEU; and the cost of a 40’ high cube refrigerated container is 8.0 CEU; (4) “our owned fleet” means the containers we own; (5) “our managed fleet” means the containers we manage that are owned by other container investors; (6) “our fleet” and our” total fleet” means our owned fleet plus our managed fleet plus any containers we lease from other lessors; and (7) “container investors” means the owners of the containers in our managed fleet.

Dollar amounts in this section of this Quarterly Report on Form 6-K are expressed in thousands. Per container amounts are in dollars.

Overview

We are one of the world’s largest lessors of intermodal containers based on fleet size, with a total fleet of approximately 2.3 million containers, representing 3.5 million TEU. Containers are an integral component of intermodal trade, providing a secure and cost-effective method of transportation because they can be used to transport freight by ship, rail or truck, making it possible to move cargo from point of origin to final destination without repeated unpacking and repacking.

We lease containers to approximately 250 shipping lines and other lessees, including most of the world’s top 20 container lines, as measured by the total TEU capacity of their container vessels. We believe that our scale, global presence, customer service, market knowledge and long history with our customers have made us one of the most reliable suppliers of leased containers. We have a long track record in the industry, operating since 1979, and have developed long-standing relationships with key industry participants. Our top 20 customers, as measured by revenues, have leased containers from us for 30 years.

We have provided an average of approximately 250,000 TEU of new containers per year for the past five years and have been one of the largest buyers of new containers over the same period. We are one of the largest sellers of used containers, having sold an average of approximately 140,000 containers per year for the last five years to more than 1,500 customers.

We provide our services worldwide via an international network of 14 regional and area offices and approximately 500 independent depots.

We operate our business in three core segments:

 

•

Container Ownership. As of March 31, 2020, we owned containers accounting for approximately 85.6% of our fleet.  

 

•

Container Management. As of March 31, 2020, we managed containers on behalf of 14 affiliated and unaffiliated container investors, providing acquisition, management and disposal services. As of March 31, 2020, total managed containers accounted for approximately 14.4% of our fleet.

 

•

Container Resale. We generally sell containers from our fleet when they reach the end of their useful lives in marine service or when we believe it is financially attractive for us to do so, considering the location, sale price, cost of repair and possible repositioning expenses. We also purchase and lease or resell containers from shipping line customers, container traders and other sellers of containers.

30

 

The table below summarizes the composition of our owned and managed fleets, in TEU and CEU, by type of containers, as of March 31, 2020:  

 

 

 

TEU

 

 

CEU

 

 

 

Owned

 

 

Managed

 

 

Total

 

 

Owned

 

 

Managed

 

 

Total

 

Standard dry freight

 

 

2,738,668

 

 

 

479,133

 

 

 

3,217,801

 

 

 

2,456,973

 

 

 

426,487

 

 

 

2,883,460

 

Refrigerated

 

 

157,734

 

 

 

9,690

 

 

 

167,424

 

 

 

637,324

 

 

 

39,267

 

 

 

676,591

 

Other specialized

 

 

55,775

 

 

 

9,680

 

 

 

65,455

 

 

 

87,200

 

 

 

14,557

 

 

 

101,757

 

Total fleet

 

 

2,952,177

 

 

 

498,503

 

 

 

3,450,680

 

 

 

3,181,497

 

 

 

480,311

 

 

 

3,661,808

 

Percent of total fleet

 

85.6%

 

 

14.4%

 

 

100.0%

 

 

86.9%

 

 

13.1%

 

 

100.0%

 

 

Our total fleet as of March 31, 2020, by lease type, as a percentage of total TEU on hire was as follows:

 

 

 

 

Percent of

 

 

 

Total On-

 

 

 

Hire Fleet

 

Term leases

 

74.6%

 

Master leases

 

12.1%

 

Finance leases

 

11.0%

 

Spot leases

 

2.3%

 

Total

 

100.0%

 

The following table summarizes our average total fleet utilization (CEU basis) for the three months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Utilization

 

96.2%

 

 

98.3%

 

 

We measure the utilization rate on the basis of CEU on lease, using the actual number of days on hire, expressed as a percentage of CEU available for lease, using the actual days available for lease. CEU available for lease excludes CEU that have been manufactured but have not yet been delivered to a lessee and CEU designated as held-for-sale units.

Our total revenues primarily consist of leasing revenues derived from the lease of owned and managed containers and, to a lesser extent, other non-leasing fees received for managing containers owned by third parties and equipment resale. The most important driver of our profitability is the extent to which revenues on our owned fleet and management fee income exceed our operating costs. The key drivers of our revenues are fleet size, rental rates, utilization and ancillary charges. Our operating costs primarily consist of direct container expenses – owned fleet, distribution expense to managed fleet container investors, depreciation of container rental equipment, amortization expense, general and administrative expenses, bad debt expense, net and container lessee default recovery, net. Our lessees are generally responsible for loss of or damage to a container beyond ordinary wear and tear, and they are required to purchase insurance to cover any other liabilities.

COVID-19 Impact

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, our compliance with these measures could disrupt our business and operations, as well as that of our customers, manufacturers, suppliers and other counterparties, for a prolonged period of time. In response to the pandemic, many businesses, including the Company, have implemented remote working arrangements to support the health and well-being of our employees, customers, partners and communities, that may continue for an extended period. The decrease in global trade volumes and economic activity due to the COVID-19 pandemic led to disruptions in global shipping and reduced container demand. We currently believe these disruptions are temporary and that global containerized trade volumes will improve when the pandemic is contained, and shelter-in-place orders are lifted.

31

 

 

Key Factors Affecting Our Performance

We believe there are a number of key factors that have affected, and are likely to continue to affect, our operating performance. These key factors include the following, among others:

 

•

the demand for leased containers;

 

•

lease rates;

 

•

prices of new and used containers and the impact of changing prices on containers held for sale and the residual value of our in-fleet owned containers;

 

•

steel prices;

 

•

interest rates;

 

•

our ability to lease our new containers shortly after we purchase them;

 

•

remarketing risk;

 

•

the creditworthiness of our customers;

 

•

further consolidation among shipping lines and/or container lessors;

 

•

further consolidation of container manufacturers and/or decreased access to new containers;

 

•

import/export tariffs, duties and restrictions;

 

•

governmental regulations, including environmental or maritime rules that impact container shipping; and

 

•

global and macroeconomic factors that affect trade generally, such as recessions, trade disputes, terrorist attacks, pandemics, such as the COVID-19 pandemic, or the outbreak of war and hostilities.

For further details regarding these and other factors that may affect our business and results of operations, see Item 3, “Key Information -- Risk Factors” included in our 2019 Form 20-F.

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019

The following table summarizes our total revenues for the three months ended March 31, 2020 and 2019 and the percentage changes between those periods:

 

 

 

Three Months Ended

 

 

% Change

 

 

 

March 31,

 

 

Between

 

 

 

2020

 

 

2019

 

 

2020 and 2019

 

 

 

(Dollars in thousands)

 

 

 

 

 

Lease rental income - owned fleet

 

$

130,072

 

 

$

128,973

 

 

 

0.9

%

Lease rental income - managed fleet

 

 

15,406

 

 

 

26,553

 

 

 

(42.0

%)

Lease rental income

 

$

145,478

 

 

$

155,526

 

 

 

(6.5

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees - non-leasing

 

$

1,484

 

 

$

2,301

 

 

 

(35.5

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading container sales proceeds

 

 

9,585

 

 

 

13,300

 

 

 

(27.9

%)

Cost of trading containers sold

 

 

(8,936

)

 

 

(10,732

)

 

 

-16.7

%

Trading container margin

 

$

649

 

 

$

2,568

 

 

 

(74.7

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of owned fleet containers, net

 

$

5,794

 

 

$

6,767

 

 

 

(14.4

%)

 

 

32

 

Lease rental income for the three months ended March 31, 2020 decreased $10,048 (-6.5%) compared to the three months ended March 31, 2019, primarily due to a $6,110 decrease, or 4.7% reduction in average per diem rental rates, a decrease of $5,704, or 5.1% reduction in our total operating fleet that was available for lease, and a $3,373 decrease, or 2.5% reduction in utilization, partially offset by a $6,223 increase in the growth of our fleet on finance leases. Lease rental income – managed fleet for the three ended March 31, 2020 decreased $11,147 (-42.0%) compared to the three months ended March 31, 2019, primarily due to our acquisition of a managed fleet at December 31, 2019.

 

Management fees – non-leasing for the three months ended March 31, 2020 decreased $817 (-35.5%) compared to the three months ended March 31, 2019 primarily due to a $440 decrease in sales commissions, a $338 decrease in military management fees and a $115 decrease in acquisition fees on container purchases for the managed fleet.

 

Trading container margin for the three months ended March 31, 2020 decreased $1,919 (-74.7%) compared to the three months ended March 31, 2019; $972 of the decrease was due to a reduction in unit sales volume and $947 decrease due to a reduction in per unit margin.

 

Gain on sale of owned fleet containers, net for the three months ended March 31, 2020 decreased $973 (-14.4%) compared to the three months ended March 31, 2019 primarily due to a $1,868 decrease resulting from a reduction in average gain per container sold, partially offset by a $616 increase resulting from an increase on containers being sold and a $279 decrease in net loss on sales-type leases.

The following table summarizes our total operating expenses for the three months ended March 31, 2020 and 2019 and the percentage changes between those periods:

 

 

 

Three Months Ended

 

 

% Change

 

 

 

March 31,

 

 

Between

 

 

 

2020

 

 

2019

 

 

2020 and 2019

 

 

 

(Dollars in thousands)

 

 

 

 

 

Direct container expense - owned fleet (1)

 

$

13,264

 

 

$

11,580

 

 

 

14.5

%

Distribution expense to managed fleet container investors

 

 

14,163

 

 

 

24,480

 

 

 

(42.1

%)

Depreciation expense (2)

 

 

66,834

 

 

 

62,464

 

 

 

7.0

%

Amortization expense

 

 

564

 

 

 

602

 

 

 

(6.3

%)

General and administrative expense

 

 

10,138

 

 

 

9,830

 

 

 

3.1

%

Bad debt expense, net

 

 

2,045

 

 

 

159

 

 

 

1186.2

%

Container lessee default recovery, net (1)

 

 

(12

)

 

 

(653

)

 

 

(98.2

%)

Total operating expenses

 

$

106,996

 

 

$

108,462

 

 

 

(1.4

%)

 

(1) Amounts for container write-offs and container recovery costs from lessee default for the three months ended March 31, 2019 have been reclassified out of the previously reported line item “container impairment” and “direct container expense – owned fleet”, respectively, and included within “container lessee default recovery, net” to conform with the 2020 presentation.

 

(2) Amounts to write-down the carrying value of containers held for sale to their estimated fair value less cost to sell for the three months ended March 31, 2019 have been reclassified out of the previously reported line item “container impairment” and included within “depreciation expense” to conform with the 2020 presentation.

 

Direct container expense – owned fleet for the three months ended March 31, 2020 increased $1,684 (14.5%) compared to the three months ended March 31, 2019 primarily due to a $3,107 increase in storage expense, partially offset by a $1,140 decrease in repositioning expense and a $495 decrease in insurance expense.

 

Distribution expense to managed fleet container investors for the three ended March 31, 2020 decreased $10,317 (-42.1%) compared to the three months ended March 31, 2019, primarily due to our acquisition of a managed fleet at December 31, 2019 and decrease in lease rental income on the managed fleet.

 

Depreciation expense for the three months ended March 31, 2020 increased $4,370 (7.0%) compared to the three months ended March 31, 2019; $1,283 increase was due to a net increase in the size of our owned depreciable fleet and $3,066 of the increase was due to a net increase to write down the value of containers held for sale to their estimated fair value less cost to sell.

33

 

  

Amortization expense represents the amortization of amounts paid to acquire the rights to manage the container fleets of Capital Lease Limited, Hong Kong (“Capital”); Amphibious Container Leasing Limited (“Amficon”); and Capital Intermodal Limited, Capital Intermodal GmbH, Capital Intermodal Inc., Capital Intermodal Assets Limited and Xines Limited (“Capital Intermodal”). Amortization expense for the three months ended March 31, 2020 decreased $38 (-6.3%) compared to the three months ended March 31, 2019, primarily due to an update in the estimates for management fee revenue.

 

General and administrative expense for the three months ended March 31, 2020 increased $308 (3.1%) compared to the three months ended March 31, 2019 primarily due to a $239 increase in professional fees.

 

Bad debt expense, net for the three months ended March 31, 2020 amounted to $2,045 compared to the $159 for the three months ended March 31, 2019. The changes were primarily due to an update on management’s assessment of the financial condition of certain lessees and their ability to make required payments and $563 on credit loss expense for the three months ended March 31, 2020 which related to our adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) on the effective date of January 1, 2020, see Note 2 (i) "Accounting Policies and Recent Accounting Pronouncements" in Item 1, "Financial Statements" in this Quarterly Report on Form 6-K for further information.

 

Container lessee default recovery, net for the three months ended March 31, 2020 decreased $641 (-98.2%) compared to the three months ended March 31, 2019; $729 of the decrease was primarily due to a reduction in gain associated with recoveries on containers previously estimated as lost with insolvent lessees.

 

The following table summarizes other (expense) income for the three months ended March 31, 2020 and 2019 and the percentage changes between those periods:

 

 

 

Three Months Ended

 

 

% Change

 

 

 

March 31,

 

 

Between

 

 

 

2020

 

 

2019

 

 

2020 and 2019

 

 

 

(Dollars in thousands)

 

 

 

 

 

Interest expense

 

$

(36,112

)

 

$

(37,516

)

 

 

(3.7

%)

Write-off of unamortized deferred debt issuance costs

 

 

(122

)

 

 

—

 

 

 

100.0

%

Interest income

 

 

400

 

 

 

638

 

 

 

(37.3

%)

Realized (loss) gain on derivative instruments, net

 

 

(1,526

)

 

 

1,444

 

 

 

(205.7

%)

Unrealized loss on derivative instruments, net

 

 

(14,937

)

 

 

(5,738

)

 

 

160.3

%

Other, net

 

 

(53

)

 

 

—

 

 

 

100.0

%

Net other expense

 

$

(52,350

)

 

$

(41,172

)

 

 

27.1

%

34

 

 

Interest expense for the three months ended March 31, 2020 decreased $1,404 (-3.7%) compared to the three months ended March 31, 2019; $5,215 decrease driven by a decline in average interest rates of 0.56 percentage points primarily due to a decrease in the market rate, partially offset by $3,655 increase from an increase in average debt balances of $332,474.

 

The write-off of unamortized deferred debt issuance costs for the three months ended March 31, 2020 amounted to $122, which related to the amendment of TAP Funding Limited’s credit facility.

 

Realized (loss) gain on derivative instruments, net changed from a net gain of $1,444 for the three months ended March 31, 2019 to a net loss of $1,526 for the three months ended March 31, 2020. This change was primarily due to a decrease in market rates as compared to spot strike rates in our contracts which caused a negative net settlement differential in 2020 compared to a positive net settlement differential in 2019.

 

Unrealized loss on derivative instruments, net for the three months ended March 31, 2020 increased $9,199 (160.3%) compared to the three months ended March 31, 2019. The increase was primarily due to a greater reduction on the value of the interest rate derivatives, between December 31, 2019 to March 31, 2020 compared to the decrease between December 31, 2018 to March 31, 2019, mainly resulting from a decrease in the forward LIBOR curve at the end of the respective period ends.

The following table summarizes income tax benefit (expense) and net (loss) income attributable to the noncontrolling interests for the three months ended March 31, 2020 and 2019 and the percentage changes between those periods:

 

 

 

Three Months Ended

 

 

% Change

 

 

 

March 31,

 

 

Between

 

 

 

2020

 

 

2019

 

 

2020 and 2019

 

 

 

(Dollars in thousands)

 

 

 

 

 

Income tax benefit (expense)

 

$

833

 

 

$

(373

)

 

 

(323.3

%)

Net (loss) income attributable to the noncontrolling interest

 

$

(729

)

 

$

105

 

 

 

(794.3

%)

 

Income tax benefit (expense) changed from an expense of $373 for the three months ended March 31, 2019 to a benefit of $833 for the three months ended March 31, 2020, primarily due to net income before tax and noncontrolling interest for the three months ended March 31, 2019 compared to net loss before tax and noncontrolling interest for the three months ended March 31, 2020.

Net (loss) income attributable to the noncontrolling interest changed from an income of $105 for the three months ended March 31, 2019 to a loss of $729 for the three months ended March 31, 2020.  Net loss attributable to the noncontrolling interest for the three months ended March 31, 2020 represents the noncontrolling interest’s portion of TAP Funding Limited’s (“TAP Funding”) net loss and the net loss position was primarily due to an unrealized loss on derivative instruments mentioned above. Net income attributable to the noncontrolling interests for the three months ended March 31, 2019 represents the noncontrolling interest’s portion of TAP Funding Limited’s (“TAP Funding”) net income. See Note 2 "Accounting Policies and Recent Accounting Pronouncements" in Item 1, "Financial Statements" in this Quarterly Report on Form 6-K for further information.

 

 

Segment Information

The following table summarizes our (loss) income before taxes and noncontrolling interests attributable to each of our business segments for the three months ended March 31, 2020 and 2019 (before inter-segment eliminations) and the percentage changes between those periods:

 

 

Three Months Ended

 

 

% Change

 

 

 

March 31,

 

 

Between

 

 

 

2020

 

 

2019

 

 

2020 and 2019

 

 

 

(Dollars in thousands)

 

 

 

 

 

Container ownership

 

$

(12,051

)

 

$

6,749

 

 

 

(278.6

%)

Container management

 

 

2,610

 

 

 

6,862

 

 

 

(62.0

%)

Container resale

 

 

2,758

 

 

 

5,163

 

 

 

(46.6

%)

Other

 

 

(1,062

)

 

 

(921

)

 

 

15.3

%

Eliminations

 

 

1,804

 

 

 

(325

)

 

 

(655.1

%)

(Loss) income before income tax and

   noncontrolling interests

 

$

(5,941

)

 

$

17,528

 

 

 

(133.9

%)

35

 

 

 (Loss) income before income taxes and noncontrolling interests attributable to the Container Ownership segment changed from an income of $6,749 for the three months ended March 31, 2019 to a loss of $12,051 for the three months ended March 31, 2020. The following table summarizes the variances included within this change:

 

Decrease in interest expense

 

$

1,438

 

 

Increase in lease rental income - owned fleet

 

 

1,251

 

 

Increase in unrealized loss on derivative instruments, net

 

 

(9,199

)

 

Increase in depreciation expense

 

 

(4,288

)

 

Change from realized gain on derivative instruments, net to realized loss on derivative instruments, net

 

 

(2,970

)

 

Increase in bad debt expense, net

 

 

(1,894

)

 

Increase in direct container expense

 

 

(1,162

)

 

Decrease in gain on sale of owned fleet containers, net

 

 

(973

)

 

Decrease in container lessee default recovery, net

 

 

(641

)

 

Other

 

 

(362

)

 

 

 

$

(18,800

)

 

 

Income before income taxes and noncontrolling interests attributable to the Container Management segment for the three months ended March 31, 2020 decreased $4,252 (-62.0%) compared to the three months ended March 31, 2019. The following table summarizes the variances included within this decrease:

 

Decrease in distribution expense to managed fleet container investors

 

$

10,317

 

 

Decrease in lease rental income - managed fleet

 

 

(11,147

)

 

Decrease in management fees

 

 

(3,168

)

 

Other

 

 

(254

)

 

 

 

$

(4,252

)

 

 

Income before income taxes and noncontrolling interests attributable to the Container Resale segment for the three months ended March 31, 2020 decreased $2,405 (-46.6%) compared to the three months ended March 31, 2019, primarily due to decreases of $1,916 in gains on container trading, net and $546 in management fees.

Loss before income taxes and noncontrolling interests attributable to Other activities unrelated to our reportable business segments for the three months ended March 31, 2020 increased $141 (15.3%) compared to the three months ended March 31, 2019, primarily due to an increase in general and administrative expense.

Segment eliminations change from a loss of $325 for the three months ended March 31, 2019 to an income of $1,804 for the three months ended March 31, 2020. This change consisted of a $2,045 decrease in acquisition fees received by our Container Management segment from our Container Ownership segment and a $84 increase in depreciation expense related to capitalized acquisition fees received by our Container Management segment from our Container Ownership segment. Our Container Ownership segment capitalizes acquisition fees billed by our Container Management segment as part of containers, net and records depreciation expense to amortize the acquisition fees over the useful lives of the containers, which is eliminated in consolidation.

 

Currency

Almost all of our revenues are denominated in U.S. dollars and approximately 73% of our direct container expenses – owned fleet for the three months ended March 31, 2020 were denominated in U.S. dollars. See the risk factor entitled “Because substantially all of our revenues are generated in U.S. dollars, but a significant portion of our expenses are incurred in other currencies, exchange rate fluctuations could have an adverse impact on our results of operations” under Item 3, “Key Information—Risk Factors” included in our 2019 Form 20-F. Our operations in non-U.S. dollar locations have some exposure to foreign currency fluctuations, and trade growth and the direction of trade flows can be influenced by large changes in relative currency values. For the three months ended March 31, 2020, our non-U.S. dollar operating expenses were spread among 14 currencies, resulting in some level of self-hedging. We do not engage in currency hedging.

36

 

Liquidity and Capital Resources

As of March 31, 2020, we had cash and cash equivalents (including restricted cash) of $225,998. Our principal sources of liquidity have been our cash flows from operations including the sale of containers and borrowings under debt facilities. As of March 31, 2020, we had the following outstanding borrowings and borrowing capacities per debt facility (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Borrowing, as

 

 

Current and

 

 

 

Current

 

 

Borrowing

 

 

Total

 

 

 

Current

 

 

limited by our

 

 

Available

 

Facility:

 

Borrowing

 

 

Commitment

 

 

Commitment

 

 

 

Borrowing

 

 

Borrowing Base

 

 

Borrowing

 

TL Revolving Credit Facility

 

$

1,217,000

 

 

$

283,000

 

 

$

1,500,000

 

 

 

$

1,217,000

 

 

$

183,924

 

 

$

1,400,924

 

TL 2019 Term Loan

 

 

157,404

 

 

 

—

 

 

 

157,404

 

 

 

 

157,404

 

 

 

—

 

 

 

157,404

 

TMCL II Secured Debt Facility

 

 

674,406

 

 

 

525,594

 

 

 

1,200,000

 

 

 

 

674,406

 

 

 

—

 

 

 

674,406

 

TMCL V 2017-1 Bonds

 

 

310,022

 

 

 

—

 

 

 

310,022

 

 

 

 

310,022

 

 

 

—

 

 

 

310,022

 

TMCL V 2017-2 Bonds (1)

 

 

388,391

 

 

 

—

 

 

 

388,391

 

 

 

 

388,391

 

 

 

—

 

 

 

388,391

 

TMCL VI Term Loan

 

 

246,236

 

 

 

—

 

 

 

246,236

 

 

 

 

246,236

 

 

 

—

 

 

 

246,236

 

TMCL VII 2018-1 Bonds (1)

 

 

226,756

 

 

 

—

 

 

 

226,756

 

 

 

 

226,756

 

 

 

—

 

 

 

226,756

 

TMCL VII 2019-1 Bonds (1)

 

 

324,333

 

 

 

—

 

 

 

324,333

 

 

 

 

324,333

 

 

 

—

 

 

 

324,333

 

TAP Funding Revolving Credit Facility (2)

 

 

148,050

 

 

 

6,950

 

 

 

155,000

 

 

 

 

148,050

 

 

 

567

 

 

 

148,617

 

Total (3)

 

$

3,692,598

 

 

$

815,544

 

 

$

4,508,142

 

 

 

$

3,692,598

 

 

$

184,491

 

 

$

3,877,089

 

(1)

Amounts on the TMCL V 2017-2 Bonds, TMCL VII 2018-1 Bonds and TMCL VII 2019-1 Bonds exclude an unamortized discount of $42, $2,200 and $96, respectively.

(2)

TAP Funding Revolving Credit facility was amended in February 2020 with total commitment amount decreased to $155,000.

(3)

Current borrowing for all debts excludes prepaid debt issuance costs in an aggregate amount of $25,115.

Our condensed consolidated financial statements do not reflect the income taxes that would be payable to foreign taxing jurisdictions if the earnings of a group of corporations operating in those jurisdictions were to be transferred out of such jurisdictions, because such earnings are intended to be permanently reinvested in those countries. At March 31, 2020, cumulative earnings of approximately $36,636 would be subject to income taxes of approximately $10,991 if such earnings of foreign corporations were transferred out of such jurisdictions in the form of dividends.

Assuming that our lenders remain solvent and lessees meet their lease payment obligations, we currently believe that our existing cash and cash equivalents, cash flows generated from operations, proceeds from the sale of containers and borrowing availability under our debt facilities are sufficient to meet our working capital needs and other capital and liquidity requirements for the next twelve months. We will continue to monitor our liquidity and the credit markets in light of the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic.

All of our debt facilities are secured by specific pools of containers and related assets owned by the Company. In addition to customary events of default as defined in our credit agreements and indenture and various restrictive financial covenants, the Company’s debt facilities also contain various other debt covenants and borrowing base minimums. As of March 31, 2020, we were in compliance with all of the applicable covenants.

Cash Flow

The following table summarizes cash flow information for the three months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

 

 

% Change

 

 

 

March 31,

 

 

Between

 

 

 

2020

 

 

2019

 

 

2020 and 2019

 

 

 

(Dollars in thousands)

 

 

 

 

 

Net cash provided by operating activities

 

$

73,722

 

 

$

107,109

 

 

(31.2%)

 

Net cash provided by (used in) investing activities

 

$

24,789

 

 

$

(86,450

)

 

(128.7%)

 

Net cash used in financing activities

 

$

(150,355

)

 

$

(26,171

)

 

474.5%

 

37

 

 

 Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2020 decreased $33,387 (-31.2%) compared to the three months ended March 31, 2019.  The following table summarizes the variances included within this decrease:

 

Decrease in net (loss) income adjusted for non-cash items

 

$

(12,299

)

Proceeds from insurance settlement received during the three months ended March 31, 2019

 

 

(9,814

)

Increase in accounts receivable, net during the three months ended March 31, 2020 compared to a decrease during the three months ended March 31, 2019

 

 

(9,595

)

Increase in trading containers during the three months ended March 31, 2020 compared to a decrease during the three months ended March 31, 2019

 

 

(6,420

)

Lower receipt of payments on finance leases, net of income earned during the three months ended March 31, 2020 compared to the three months ended March 31, 2019

 

 

(5,764

)

Decrease in prepaid expenses and other current assets during the three months ended March 31, 2020 compared to an increase during the three months ended March 31, 2019

 

 

5,327

 

Lower decrease in accounts payable and accrued expense during the three months ended March 31, 2020 compared to the three months ended March 31, 2019

 

 

3,742

 

Other

 

 

1,436

 

 

 

$

(33,387

)

 

Investing Activities

Net cash provided by (used in) investing activities changed from net cash used in investing activities of $86,450 for the three months ended March 31, 2019 to net cash provided by investing activities of $24,789 for the three months ended March 31, 2020 primarily due to a $108,086 decrease in payments for container and fixed asset purchases. The increase in cash provided by investing activities was also due to payments received on container leaseback financing receivable, partially offset by a lower amount of proceeds from the sale of containers and fixed assets.

 

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2020 increased $124,184 (474.5%) compared to the three months ended March 31, 2019. The change was primarily due to a decrease of $60,000 in proceeds from debt and increase of $48,526 in principal repayments of debt during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The increase in cash used in financing activities was also due to purchase of treasury shares under the Company’s share repurchase program which commenced in September 2019.

 

38

 

Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations by due date as of March 31, 2020:

 

 

 

Payments Due by Twelve Month Period Ending March 31,

 

 

 

Total

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

2026 and

thereafter

 

 

 

(Dollars in thousands)

 

 

 

(Unaudited)

 

Total debt obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TL Revolving Credit Facility

 

$

1,217,000

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,217,000

 

 

$

—

 

 

$

—

 

TL 2019 Term Loan

 

 

157,404

 

 

 

10,616

 

 

 

10,993

 

 

 

11,384

 

 

 

11,789

 

 

 

12,208

 

 

 

100,414

 

TMCL II Secured Debt Facility (1)

 

 

674,406

 

 

 

61,739

 

 

 

64,280

 

 

 

56,575

 

 

 

52,696

 

 

 

52,696

 

 

 

386,420

 

TMCL V 2017-1 Bonds

 

 

310,022

 

 

 

42,136

 

 

 

55,352

 

 

 

64,330

 

 

 

61,453

 

 

 

51,303

 

 

 

35,448

 

TMCL V 2017-2 Bonds (2)

 

 

388,391

 

 

 

45,734

 

 

 

58,676

 

 

 

70,222

 

 

 

81,144

 

 

 

68,993

 

 

 

63,622

 

TMCL VI Term Loan

 

 

246,236

 

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

144,236

 

 

 

—

 

TMCL VII 2018-1 Bonds (2)

 

 

226,756

 

 

 

18,601

 

 

 

18,655

 

 

 

18,655

 

 

 

18,655

 

 

 

18,655

 

 

 

133,535

 

TMCL VII 2019-1 Bonds (2)

 

 

324,333

 

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

184,333

 

TAP Funding Revolving Credit Facility

 

 

148,050

 

 

 

13,033

 

 

 

135,017

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Interest on obligations (3)

 

 

450,201

 

 

 

115,473

 

 

 

104,933

 

 

 

92,202

 

 

 

65,193

 

 

 

40,385

 

 

 

32,015

 

Interest rate swaps and caps

   payables (receivables), net (4)

 

 

17,709

 

 

 

8,884

 

 

 

7,146

 

 

 

2,635

 

 

 

(779

)

 

 

(177

)

 

 

—

 

Office lease obligations

 

 

15,343

 

 

 

2,184

 

 

 

2,133

 

 

 

2,055

 

 

 

2,119

 

 

 

2,152

 

 

 

4,700

 

Container contracts payable

 

 

5,294

 

 

 

5,294

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total contractual obligations (5) (6)

 

$

4,181,145

 

 

$

377,194

 

 

$

510,685

 

 

$

371,558

 

 

$

1,562,770

 

 

$

418,451

 

 

$

940,487

 

 

 

 

(1)

The estimated future scheduled repayments for TMCL II Secured Debt Facility is based on the assumption that the facility will not be extended on its associated conversion date.

(2)

Future scheduled payments for the TMCL V 2017-2 Bonds, TMCL VII 2018-1 Bonds and TMCL VII 2019-1 Bonds exclude an unamortized discount of $42, $2,200 and $96, respectively.

(3)

Using 0.99% which was one-month spot interest rate of London InterBank Offered Rate ("LIBOR") plus a margin rate that varies based on each debt facility. Weighted average interest rate at 3.20%.

(4)

Calculated based on the difference between our fixed contractual pay rates and the counterparties’ estimated average rate at 0.99% which was one-month spot interest of LIBOR rate as of March 31, 2020, for all periods, for all interest rate contracts outstanding as of March 31, 2020.

(5)

Future scheduled payments for all debts exclude prepaid debt issuance costs in an aggregate amount of $25,115.

(6)

Excluded container leaseback financing liability amounting to $17,319 as of March 31, 2020 which is accounted for as a financing transaction under FASB Accounting Standards Update No. 2016-02, Leases (“Topic 842”) (“ASU 2016-02”). This is excluded due to the uncertainty in the timing and variable amounts of future cash flows since the estimated future scheduled payments is dependent upon assumptions regarding the amounts distributed to the Container Investors which is based on net operating income of the managed fleet, reduced by the management fees earned. The Container Investors have no rights or recourse against the Company in the event of a lessee default or any other risk in respect of the managed containers.

Off Balance Sheet Arrangements

As of March 31, 2020, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


39

 

Critical Accounting Policies and Estimates

We have identified the policies and estimates in Item 5, “Operating and Financial Review and Prospects” included in our 2019 Form 20-F as among those critical to our business operations and the understanding of our results of operations. These policies and estimates are considered critical due to the existence of uncertainty at the time the estimate is made, the likelihood of changes in estimates from period to period and the potential impact that these estimates can have on our financial statements. These policies remain consistent with those reported in our 2019 Form 20-F. Please refer to Item 5, “Operating and Financial Review and Prospects” included in our 2019 Form 20-F.

We adopted Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”) on January 1, 2020. The changes in our accounting policies for credit losses under the new accounting standard are discussed in Note 2 "Accounting Policies and Recent Accounting Pronouncements" and in Note 7 “Allowance for Credit Losses” in Item 1, "Financial Statements" in this Quarterly Report on Form 6-K.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of May 15, 2020, the date of issuance of this Quarterly Report on Form 6-K. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

 

40

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET AND CREDIT RISK

Quantitative and Qualitative Disclosures About Market Risk

We could be exposed to market risk from future changes in interest rates and foreign exchange rates. At times, we may enter into various derivative instruments to manage certain of these risks. We do not enter into derivative instruments for speculative or trading purposes.

For the three months ended March 31, 2020, we did not experience any material changes in market risk that affect the quantitative and qualitative disclosures presented in Item 11, “Quantitative and Qualitative Disclosures About Market Risk—Foreign Exchange Risk” or in Item 11, “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” included in our 2019 Form 20-F. Updated interest rate swap and cap agreement information is set forth below.

Interest Rate Risk

We have entered into various interest rate swap and cap agreements to mitigate our exposure associated with our variable rate debt. The swap agreements involve payments by us to counterparties at fixed rates in return for receipts based upon variable rates indexed to the London InterBank Offered Rate. The differentials between the fixed and variable rate payments under these agreements are recognized in realized gains or losses on derivative instruments, net in the condensed consolidated statements of comprehensive (loss) income. As of March 31, 2020, certain of our interest rate swap agreements are designated as cash flow hedges for accounting purposes, and any unrealized gains or losses related to the changes in fair value are recognized in accumulated comprehensive (loss) income and re-classed to interest expense as they are realized.

The notional amount of the interest rate swap agreements was $1,279,750 as of March 31, 2020, with expiration dates between May 2020 and March 2025. We pay fixed rates between 0.43% and 2.94% under the interest rate swap agreements. The net fair value of these agreements was a liability of $37,500 as of March 31, 2020. The notional amount of the interest rate cap agreements was $34,000 as of March 31, 2020, with expiration dates between August 2021 and December 2021.  

Based on the average debt balances and derivative instruments as of March 31, 2020, it is estimated that a 1% increase in interest rates would result in a net increase of $2,852 in interest expense and realized gains on derivative instruments, net for the three months ended March 31, 2020. It would also result in an increase in the fair value of derivative instruments, net of $13,138. 

Quantitative and Qualitative Disclosures About Credit Risk

We monitor our container lessees’ performance and our lease exposures on an ongoing basis, and our credit management processes are aided by the long payment experience we have with most of our container lessees and our broad network of long-standing relationships in the shipping industry that provide current information about our container lessees. In managing this risk, we also make an allowance for doubtful accounts on our accounts receivable. The allowance for doubtful accounts is developed based on two key components:

 

•

specific reserves for receivables which are impaired for which management believes full collection is doubtful; and

 

•

general reserves for estimated losses inherent in the receivables based upon historical trends and age of the balances

An allowance for doubtful accounts of $8,026 has been established against accounts receivables as of March 31, 2020 for our owned fleet. Due to the COVID-19 pandemic, we may be unable to collect receivables from those shipping line customers that may be significantly impacted by COVID-19, thus we are closely monitoring our customers’ payment performance.

On January 1, 2020, we adopted ASU 2016-13 and an allowance for credit losses of $987 and $469 have been established to recognize expected lifetime credit losses against our net investment in finance leases and container leaseback financing receivable, respectively, as of March 31, 2020.

For the three months ended March 31, 2020, we did not experience any material changes in our credit risks that affect the quantitative and qualitative disclosures about credit risk presented in Item 11, “Quantitative and Qualitative Disclosures About Market Risk – Quantitative and Qualitative Disclosures About Credit Risk” included in our 2019 Form 20-F.

41

 

ITEM 4.

RISK FACTORS

Other than the matters noted below, there have been no material changes with respect to the risk factors disclosed in Item 3, “Key Information —Risk Factors” included in our 2019 Form 20-F that was filed with the Securities and Exchange Commission on March 30, 2020. Please refer to that section for disclosures regarding the risks and uncertainties related to the Company’s business and industry and the Company’s common shares. The following is a discussion of risks relating to the Novel Coronavirus (COVID-19) pandemic which could cause our future results to be materially adversely affected.

Global economic weakness has in the past and may in the future materially and negatively impact our business, results of operations, cash flows, financial condition and future prospects.

While domestic and global economic growth resumed and has continued following the global financial crisis in 2008 and 2009, continued sustainability of the international economic growth is uncertain particularly due to the ongoing COVID-19 pandemic. Any slowdown or reversal in U.S. and global trade growth could heighten a number of material risks to our business, results of operations, cash flows and financial condition, as well as our future prospects. The COVID-19 pandemic has added to uncertainty about container trade demand, freight rates and our lessees’ financial performance and solvency. As a result, we continue to face heightened risk that our financial performance and cash flow could be severely affected by defaults or payment delays by our customers.

Global demand growth for shipping is expected to slow with the overall market dominated by trade uncertainty and the impact of COVID-19, which will lead to slower overall GDP growth in 2020. The impact of COVID-19 and lower global GDP may result in lower container production than forecast and may alter the percentage of total production purchased by lessors. While new production inventory is currently below 800,000 TEU, depot inventory has remained relatively flat at very reasonable levels as evidenced by the continued high utilization rates throughout the industry. Deliveries of mega ships and introduction of IMO 2020 are expected to continuously generate a positive impact on leased container demand in 2020; however, the impact of COVID-19 and lower global GDP on our industry is uncertain and cannot be estimated at this time. Continued disruptions from COVID-19 may lead to increased credit concerns regarding our customers, reduced container demand, lower utilization of our fleet, lower lease rates, lower sale prices for our used containers, disruptions in the capital markets, increased risk of compliance with our debt covenants and operational and business process disruptions for us and our customers.

 

Uncertainties relating to COVID-19 include the duration of the outbreak, actions that may be taken to contain or treat its impact, by governments and others, including declarations of states of emergency, business closures, manufacturing restrictions and a prolonged period of travel and/or other similar restrictions and limitations. The magnitude of the COVID-19 pandemic, including the extent of any impact on our business, financial position, results of operations or liquidity, which could be material, cannot be reasonably determined at this time due to the rapid development and fluidity of the situation.

 

 

42

 

ITEM 5.

EXHIBITS

The following exhibits are filed as part of this Quarterly Report on Form 6-K:

 

Exhibit

Number

 

Description of Document

 

101.INS†

 

Inline XBRL Instance Document

 

 

 

101.SCH†

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL†

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF†

 

Inline XBRL Taxonomy Definition Linkbase Document

 

 

 

101.LAB†

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE†

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

†

Filed herewith.

 

43

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 15, 2020

 

Textainer Group Holdings Limited

 

 

/s/ Olivier Ghesquiere

Olivier Ghesquiere

President and Chief Executive Officer

 

 

 

44

 v3.20.1
Summary of Future Minimum Payments Receivable Under Net Investment in Finance Leases and Container Leaseback Financing Receivable (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
Net investment in finance leases, 2021 $ 61,638  
Net investment in finance leases, 2022 72,151  
Net investment in finance leases, 2023 50,390  
Net investment in finance leases, 2024 43,788  
Net investment in finance leases, 2025 and thereafter 232,697  
Net investment in finance leases, Total future minimum lease payments receivable 460,664 $ 385,589
Container leaseback financing receivable, 2021 36,017  
Container leaseback financing receivable, 2022 36,017  
Container leaseback financing receivable, 2023 36,017  
Container leaseback financing receivable, 2024 36,116  
Container leaseback financing receivable, 2025 and thereafter 224,702  
Container leaseback financing receivable, Total future minimum lease payments receivable 368,869 $ 377,917
Future minimum lease payments receivable, 2021 97,655  
Future minimum lease payments receivable, 2022 108,168  
Future minimum lease payments receivable, 2023 86,407  
Future minimum lease payments receivable, 2024 78,290  
Future minimum lease payments receivable, 2025 and thereafter 459,013  
Total future minimum lease payments receivable $ 829,533  
v3.20.1
Allowance for Credit Losses - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Allowance For Credit Losses [Line Items]    
Accounts receivable, allowance for credit losses $ 8,026 $ 6,299
'Container leaseback financing receivable, allowance for credit losses 9,482 6,299
Container Leaseback Financing Receivable    
Financing Receivable Allowance For Credit Losses [Line Items]    
'Container leaseback financing receivable, allowance for credit losses $ 469  
Container Leaseback Financing Receivable | Accounts Receivable | Credit Concentration Risk    
Financing Receivable Allowance For Credit Losses [Line Items]    
Concentration risk percentage 83.00%  
Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
'Container leaseback financing receivable, allowance for credit losses $ 987  
Finance Leases | Accounts Receivable | Credit Concentration Risk    
Financing Receivable Allowance For Credit Losses [Line Items]    
Concentration risk percentage 73.00%  
Billed    
Financing Receivable Allowance For Credit Losses [Line Items]    
Accounts receivable, allowance for credit losses $ 8,026 6,299
Billed | Container Leaseback Financing Receivable    
Financing Receivable Allowance For Credit Losses [Line Items]    
Accounts receivable, allowance for credit losses 0 0
Billed | Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
Accounts receivable, allowance for credit losses 839 $ 675
Unbilled | Container Leaseback Financing Receivable    
Financing Receivable Allowance For Credit Losses [Line Items]    
'Container leaseback financing receivable, allowance for credit losses 469  
Unbilled | Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
Net investment in finance leases, allowance for credit loss $ 987  
v3.20.1
Debt Obligation (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 3,665,145 $ 3,797,729
Amount due within one year 239,066 242,433
Amounts due beyond one year 3,426,079 3,555,296
TL Revolving Credit Facility    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 1,211,166 $ 1,280,037
Weighted average variable interest rate 2.43% 3.29%
Final Maturity Sep. 30, 2023  
TL 2019 Term Loan    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 155,833 $ 158,371
Weighted average variable interest rate 3.50% 3.50%
Final Maturity Dec. 31, 2026  
TMCL II Secured Debt Facility    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt [1] $ 670,015 $ 689,658
Weighted average variable interest rate [1] 2.45% 3.49%
Final Maturity [1] Jul. 31, 2026  
TMCL V 2017-1 Bonds    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 307,733 $ 316,395
Fixed interest rate 3.91% 3.91%
Final Maturity May 31, 2042  
TMCL V 2017-2 Bonds    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 385,506 $ 395,836
Fixed interest rate 3.73% 3.73%
Final Maturity Jun. 30, 2042  
TMCL VI Term Loan    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 244,383 $ 249,421
Weighted average variable interest rate 4.30% 4.30%
Final Maturity Feb. 28, 2038  
TMCL VII 2018-1 Bonds    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 222,236 $ 227,624
Fixed interest rate 4.14% 4.14%
Final Maturity Jul. 31, 2043  
TMCL VII 2019-1 Bonds    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt $ 320,754 $ 327,563
Fixed interest rate 4.02% 4.02%
Final Maturity Apr. 30, 2044  
TAP Funding Revolving Credit Facility    
Secured Debt Facilities, Revolving Credit Facilities, Term Loan and Bonds Payable    
Long term debt [2] $ 147,519 $ 152,824
Weighted average variable interest rate [2] 2.65% 3.69%
Final Maturity [2] Dec. 31, 2021  
[1] Final maturity of the TMCL II Secured Debt Facility is based on the assumption that the facility will not be extended on its associated conversion date.
[2] In February 2020, the Company entered into an amendment of the TAP Funding Revolving Credit Facility which decreased the aggregate commitment amount from $190,000 to $155,000, reduced the advance rate from 80% to 78%, and revised certain of the covenants and restrictions. The Company wrote-off $122 of unamortized debt issuance costs during the three months ended March 31, 2020 related to the amendment of TAP Funding Revolving Credit Facility.
v3.20.1
Summary of Reconciliation of Balance Sheet Accounts From the Managed Fleet to Total Amount in Condensed Consolidated Balance Sheets (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Reconciliation Of Current Assets And Liabilities [Line Items]    
Total accounts receivable $ 118,905 $ 109,384
Total prepaid expenses and other current assets 14,367 14,816
Total accounts payable and accrued expenses 21,499 23,404
Total container contracts payable 5,294 9,394
Owned Fleet    
Reconciliation Of Current Assets And Liabilities [Line Items]    
Total accounts receivable 103,855 96,158
Total prepaid expenses and other current assets 14,224 14,627
Total accounts payable and accrued expenses 19,659 21,451
Total container contracts payable 5,294 9,394
Managed Fleet    
Reconciliation Of Current Assets And Liabilities [Line Items]    
Total accounts receivable 15,050 13,226
Total prepaid expenses and other current assets 143 189
Total accounts payable and accrued expenses $ 1,840 $ 1,953
v3.20.1
Insurance Receivable and Impairment - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Leases Disclosure [Line Items]      
Containers, net book value $ 4,007,433,000 $ 4,156,151,000  
Bad debt expense $ 2,045,000   $ 159,000
Insurance payment received     $ 9,814,000
Gain on insurance recovery   14,881,000  
Insolvent Customer      
Leases Disclosure [Line Items]      
Lease loss recovery period by insurance 183 days    
Book value of containers that would not be recovered from insolvent customer $ 9,468,000    
Bad debt expense 2,921,000    
Recovery costs 170,000    
Insurance receivable 1,962,000 1,792,000  
Insolvent Customer | Owned Containers      
Leases Disclosure [Line Items]      
Containers, net book value 63,120,000    
Insolvent Customer | Container Unrecoverable in Lessees Insolvency      
Leases Disclosure [Line Items]      
Asset impairment charges 9,059,000    
Bankrupt Customer      
Leases Disclosure [Line Items]      
Insurance receivable $ 0 $ 0  
v3.20.1
Schedule of Concentration Risk of Total Fleet Lease Rental Income (Detail) - Total Fleet Lease Rental Income - Customer Concentration Risk
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Customer A    
Capital Leased Assets [Line Items]    
Percentage of lease rental income 16.50% 13.40%
Customer B    
Capital Leased Assets [Line Items]    
Percentage of lease rental income 14.40% 13.80%
v3.20.1
Leases
 3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Leases

(6)

Leases

 

 

(a)

Lessor

 

The Company’s lease rental income for the three months ended March 31, 2020 and 2019 were as follows:

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

 

Owned

 

 

Managed

 

 

Total

 

 

Owned

 

 

Managed

 

 

Total

 

Lease rental income - operating leases

$

115,803

 

 

$

14,514

 

 

$

130,317

 

 

$

118,283

 

 

$

25,070

 

 

$

143,353

 

Interest income on net investment in finance leases

 

5,284

 

 

 

—

 

 

 

5,284

 

 

 

2,997

 

 

 

—

 

 

 

2,997

 

Interest income on container leaseback financing receivable

 

4,006

 

 

 

—

 

 

 

4,006

 

 

 

—

 

 

 

—

 

 

 

—

 

Variable lease revenue

 

4,979

 

 

 

892

 

 

 

5,871

 

 

 

7,693

 

 

 

1,483

 

 

 

9,176

 

Total lease rental income

$

130,072

 

 

$

15,406

 

 

$

145,478

 

 

$

128,973

 

 

$

26,553

 

 

$

155,526

 

 

Variable lease revenue includes other charges set forth in the leases, such as handling fees, pick-up and drop-off charges and charges for damage protection plan.

 

For finance leases, the net selling loss recognized at lease commencement, representing the difference between the estimated fair value of containers placed on these leases and their net book value, in the amount of $9 and $297 for the three months ended

March 31, 2020 and 2019, respectively, are included in “gain on sale of owned fleet containers, net” in the condensed consolidated statements of comprehensive (loss) income.

 

Operating Leases

 

The following is a schedule, by year, of future minimum lease payments receivable under the long-term leases for the owned and managed container fleet as of March 31, 2020:

 

 

Owned

 

 

Managed

 

 

Total

 

Twelve months ending March 31:

 

 

 

 

 

 

 

 

 

 

 

2021

$

301,863

 

 

$

35,638

 

 

$

337,501

 

2022

 

229,468

 

 

 

20,669

 

 

 

250,137

 

2023

 

183,212

 

 

 

10,418

 

 

 

193,630

 

2024

 

136,845

 

 

 

8,174

 

 

 

145,019

 

2025 and thereafter

 

173,359

 

 

 

13,549

 

 

 

186,908

 

Total future minimum lease payments receivable

$

1,024,747

 

 

$

88,448

 

 

$

1,113,195

 

 

Net Investment in Finance Leases

 

The following table represents the components of the net investment in finance leases, which are reported in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Future minimum lease payments receivable

 

$

460,664

 

 

$

385,589

 

Residual value of containers

 

 

11,122

 

 

 

11,143

 

Less: unearned income

 

 

(133,086

)

 

 

(101,429

)

Net investment in finance leases (1)

 

$

338,700

 

 

$

295,303

 

Less: Allowance for credit losses

 

 

(987

)

 

 

—

 

Net investment in finance leases, net

 

$

337,713

 

 

$

295,303

 

Amounts due within one year

 

$

40,164

 

 

$

40,940

 

Amounts due beyond one year

 

 

297,549

 

 

 

254,363

 

Net investment in finance leases, net

 

$

337,713

 

 

$

295,303

 

 

(1) As of March 31, 2020, two major customers represented 54.0% and 14.0% of the Company’s finance leases portfolio. As of December 31, 2019, two major customers represented 44.3% and 16.1% of the Company’s finance leases portfolio. No other customer represented more than 10% of the Company’s finance leases portfolio as of March 31, 2020 and December 31, 2019.

 

 

Container Leaseback Financing Receivable

 

The Company’s container leaseback financing receivable pertains to containers purchased that were leased back to the seller-lessees through a sales-type leaseback arrangement. Under the provisions of Topic 842, these transactions from an accounting perspective are accounted for as financing transactions.

The components of the container leaseback financing receivable, which are reported in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Future minimum payments receivable

 

$

368,869

 

 

$

377,917

 

Less: unearned income

 

 

(102,232

)

 

 

(106,259

)

Container leaseback financing receivable (1)

 

 

266,637

 

 

$

271,658

 

Less: Allowance for credit losses

 

 

(469

)

 

 

—

 

Container leaseback financing receivable, net

 

$

266,168

 

 

$

271,658

 

Amounts due within one year

 

 

20,661

 

 

 

20,547

 

Amounts due beyond one year

 

 

245,507

 

 

 

251,111

 

Container leaseback financing receivable, net

 

$

266,168

 

 

$

271,658

 

 

(1) As of March 31, 2020, two customers represented 83.4% and 16.6% of the Company’s container leaseback financing receivable portfolio. As of December 31, 2019, two customers represented 82.9% and 17.1% of the Company’s container leaseback financing receivable portfolio.

 

The following is a schedule, by year, of future minimum payments receivable under the net investment in finance leases and container leaseback financing receivable as of March 31, 2020:

 

Twelve months ending March 31:

 

Net Investment in Finance Leases

 

 

Container Leaseback Financing Receivable

 

 

Total

 

2021

 

$

61,638

 

 

$

36,017

 

 

$

97,655

 

2022

 

 

72,151

 

 

 

36,017

 

 

 

108,168

 

2023

 

 

50,390

 

 

 

36,017

 

 

 

86,407

 

2024

 

 

43,788

 

 

 

36,116

 

 

 

78,290

 

2025 and thereafter

 

 

232,697

 

 

 

224,702

 

 

 

459,013

 

Total future minimum lease payments receivable

 

$

460,664

 

 

$

368,869

 

 

$

829,533

 

 

 

See Note 2 (h) “Accounting Policies and Recent Accounting Pronouncements – Revenue Recognition”, Note 2 (i) “Accounting Policies and Recent Accounting Pronouncements – Allowance for Credit Losses”, Note 4 “Managed Container Fleet” and Note 7 “Allowance for Credit Losses” for further information.

 

 

(b)

Lessee

 

Right-of-use (“ROU”) lease assets and lease liability are recognized for the Company’s office space leases at the commencement date based on the present value of lease payments over the lease term. As of March 31, 2020 and December 31, 2019, ROU operating lease assets amounted to $10,888 and $11,276, respectively, which were reported in “other assets” in the condensed consolidated balance sheets.

 

As of March 31, 2020 and December 31, 2019, total lease liabilities amounted to $13,256 and $13,736, respectively, of which amounts due within one year of $1,719 and $1,706 were reported in “other liabilities – current.” As of March 31, 2020 and December 31, 2019, long-term lease obligations that are due beyond one year of $11,537 and $12,030, respectively, were reported in “other liabilities – non-current” in the condensed consolidated balance sheets.

 

Operating lease expense is recognized on a straight-line basis over the lease term and is reported in “general and administrative expense” in the condensed consolidated statements of comprehensive (loss) income. Other information related to the Company's operating leases are as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating lease cost

 

$

527

 

 

$

532

 

Short-term and variable lease cost

 

 

31

 

 

 

8

 

Total rent expense

 

$

558

 

 

$

540

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

623

 

 

$

534

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Weighted-average remaining lease term

 

5.3 years

 

 

5.4 years

 

Weighted-average discount rate

 

4.76%

 

 

4.17%

 

 

 

Future minimum lease payment obligations under the Company’s noncancelable operating leases at March 31, 2020 were as follows:

 

 

Operating Leases

 

Twelve months ending March 31:

 

 

 

 

2021

 

$

2,184

 

2022

 

 

2,133

 

2023

 

 

2,055

 

2024

 

 

2,119

 

2025 and thereafter

 

 

6,852

 

Total minimum lease payments

 

 

15,343

 

Less imputed interest

 

 

(2,087

)

Total present value of operating lease liabilities

 

$

13,256

 

 
v3.20.1
Segment Information
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Segment Information

(10)

Segment Information

The Company operates in three reportable segments: Container Ownership, Container Management and Container Resale. The following tables show segment information for the three months ended March 31, 2020 and 2019, reconciled to the Company’s (loss) income before income taxes and noncontrolling interests as shown in its condensed consolidated statements of comprehensive (loss) income:

 

 

 

 

Container

 

 

Container

 

 

Container

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

Ownership

 

 

Management

 

 

Resale

 

 

Other

 

 

Eliminations

 

 

Totals

 

Lease rental income - owned fleet

 

$

129,850

 

 

$

222

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

130,072

 

Lease rental income - managed fleet

 

 

-

 

 

 

15,406

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,406

 

Lease rental income

 

$

129,850

 

 

$

15,628

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

145,478

 

Management fees - non-leasing from external

   customers

 

$

98

 

 

$

555

 

 

$

831

 

 

$

-

 

 

$

-

 

 

$

1,484

 

Inter-segment management fees

 

$

-

 

 

$

9,745

 

 

$

2,421

 

 

$

-

 

 

$

(12,166

)

 

$

-

 

Trading container margin

 

$

-

 

 

$

-

 

 

$

649

 

 

$

-

 

 

$

-

 

 

$

649

 

Gain on sale of owned fleet containers, net

 

$

5,794

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,794

 

Depreciation expense

 

$

68,356

 

 

$

341

 

 

$

-

 

 

$

-

 

 

$

(1,863

)

 

$

66,834

 

Container lessee default recovery, net

 

$

12

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

12

 

Interest expense

 

$

35,956

 

 

$

156

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

36,112

 

Realized loss on derivative instruments, net

 

$

1,526

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,526

 

Unrealized loss on derivative instruments, net

 

$

14,937

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

14,937

 

Segment (loss) income before income tax and

   noncontrolling interests

 

$

(12,051

)

 

$

2,610

 

 

$

2,758

 

 

$

(1,062

)

 

$

1,804

 

 

$

(5,941

)

Total assets

 

$

4,954,452

 

 

$

154,857

 

 

$

17,198

 

 

$

8,293

 

 

$

(80,994

)

 

$

5,053,806

 

Purchase of containers and fixed assets

 

$

6,957

 

 

$

192

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

7,149

 

 

 

 

Container

 

 

Container

 

 

Container

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

Ownership

 

 

Management

 

 

Resale

 

 

Other

 

 

Eliminations

 

 

Totals

 

Lease rental income - owned fleet

 

$

128,599

 

 

$

374

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

128,973

 

Lease rental income - managed fleet

 

 

-

 

 

 

26,553

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26,553

 

Lease rental income

 

$

128,599

 

 

$

26,927

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

155,526

 

Management fees - non-leasing from external

   customers

 

$

52

 

 

$

978

 

 

$

1,271

 

 

$

-

 

 

$

-

 

 

$

2,301

 

Inter-segment management fees

 

$

-

 

 

$

12,491

 

 

$

2,527

 

 

$

-

 

 

$

(15,018

)

 

$

-

 

Trading container margin

 

$

-

 

 

$

-

 

 

$

2,568

 

 

$

-

 

 

$

-

 

 

$

2,568

 

Gain on sale of owned fleet containers, net

 

$

6,767

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

6,767

 

Depreciation expense

 

$

64,068

 

 

$

172

 

 

$

-

 

 

$

-

 

 

$

(1,776

)

 

$

62,464

 

Container lessee default recovery, net

 

$

653

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

653

 

Interest expense

 

$

37,516

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

37,516

 

Realized gain on derivative instruments, net

 

$

1,444

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,444

 

Unrealized loss on derivative instruments, net

 

$

5,738

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,738

 

Segment income (loss) before income tax and

   noncontrolling interests

 

$

6,749

 

 

$

6,862

 

 

$

5,163

 

 

$

(921

)

 

$

(325

)

 

$

17,528

 

Total assets

 

$

4,687,690

 

 

$

162,170

 

 

$

45,782

 

 

$

10,320

 

 

$

(82,244

)

 

$

4,823,718

 

Purchase of containers and fixed assets

 

$

169,817

 

 

$

73

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

169,890

 

 

(1) Container Ownership segment (loss) income before income tax and noncontrolling interests includes unrealized loss on derivative instruments, net of $14,937 and $5,738 for the three months ended March 31, 2020 and 2019, respectively, and write-off of unamortized deferred debt issuance costs and bond discounts of $122 and $0 for the three month ended March 31, 2020 and 2019, respectively.

 

General and administrative expenses are allocated to the reportable business segments based on direct overhead costs incurred by those segments. Amounts reported in the “Other” column represent activity unrelated to the active reportable business segments. Amounts reported in the “Eliminations” column represent inter-segment management fees between the Container Management and Container Resale segments and the Container Ownership segment.

Geographic Segment Information

Substantially all of the Company’s leasing related revenue is denominated in U.S. dollars. As all of the Company’s containers are used internationally, where no single container is domiciled in one particular place for a prolonged period of time, all of the Company’s long-lived assets are considered to be international with no single country of use.

The following table represents the geographic allocation of total fleet lease rental income and management fees from non-leasing services during the three months ended March 31, 2020 and 2019 based on customers’ and Container Investors’ primary domicile, respectively:

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

Percent

of Total

 

 

2019

 

 

Percent

of Total

 

Lease rental income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

72,795

 

 

 

50.0

%

 

$

83,275

 

 

 

53.5

%

Europe

 

 

64,727

 

 

 

44.5

%

 

 

62,221

 

 

 

40.0

%

North / South America

 

 

7,318

 

 

 

5.0

%

 

 

9,294

 

 

 

6.0

%

All other international

 

 

638

 

 

 

0.5

%

 

 

736

 

 

 

0.5

%

 

 

$

145,478

 

 

 

100.0

%

 

$

155,526

 

 

 

100.0

%

Management fees, non-leasing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bermuda

 

$

982

 

 

 

66.2

%

 

$

1,285

 

 

 

55.8

%

Europe

 

 

199

 

 

 

13.4

%

 

 

576

 

 

 

25.0

%

North / South America

 

 

4

 

 

 

0.3

%

 

 

340

 

 

 

14.8

%

Asia

 

 

3

 

 

 

0.2

%

 

 

4

 

 

 

0.2

%

All other international

 

 

296

 

 

 

19.9

%

 

 

96

 

 

 

4.2

%

 

 

$

1,484

 

 

 

100.0

%

 

$

2,301

 

 

 

100.0

%

 

The following table represents the geographic allocation of trading container sales proceeds and gain on sale of owned fleet containers, net during the three months ended March 31, 2020 and 2019 based on the location of sale:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

Percent

of Total

 

 

2019

 

 

Percent

of Total

 

Trading container sales proceeds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

5,778

 

 

 

60.2

%

 

$

8,917

 

 

 

67.0

%

North / South America

 

 

2,721

 

 

 

28.4

%

 

 

2,874

 

 

 

21.6

%

Europe

 

 

1,081

 

 

 

11.3

%

 

 

1,498

 

 

 

11.3

%

All other international

 

 

5

 

 

 

0.1

%

 

 

11

 

 

 

0.1

%

 

 

$

9,585

 

 

 

100.0

%

 

$

13,300

 

 

 

100.0

%

Gain on sale of owned fleet containers, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

2,446

 

 

 

42.2

%

 

$

2,453

 

 

 

36.3

%

North / South America

 

 

1,100

 

 

 

19.0

%

 

 

2,101

 

 

 

31.0

%

Europe

 

 

1,044

 

 

 

18.0

%

 

 

2,244

 

 

 

33.2

%

All other international

 

 

1,204

 

 

 

20.8

%

 

 

(31

)

 

 

(0.5

)%

 

 

$

5,794

 

 

 

100.0

%

 

$

6,767

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
v3.20.1
Accounting Policies and Recent Accounting Pronouncements (Tables)
 3 Months Ended
Mar. 31, 2020
Schedule of Cost, Accumulated Depreciation and Net Book Value of the Company's Leasing Equipment by Equipment Type

The cost, accumulated depreciation and net book value of the Company’s container leasing equipment by equipment type as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Dry containers other than

   open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

$

1,594,605

 

 

$

(403,041

)

 

$

1,191,564

 

 

$

1,627,878

 

 

$

(396,247

)

 

$

1,231,631

 

40'

 

 

158,877

 

 

 

(57,123

)

 

 

101,754

 

 

 

167,011

 

 

 

(58,852

)

 

 

108,159

 

40' high cube

 

 

2,442,977

 

 

 

(609,710

)

 

 

1,833,267

 

 

 

2,510,937

 

 

 

(592,374

)

 

 

1,918,563

 

45' high cube

 

 

28,451

 

 

 

(11,784

)

 

 

16,667

 

 

 

28,670

 

 

 

(11,488

)

 

 

17,182

 

Refrigerated containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

 

20,437

 

 

 

(7,576

)

 

 

12,861

 

 

 

20,484

 

 

 

(7,258

)

 

 

13,226

 

20' high cube

 

 

5,140

 

 

 

(3,185

)

 

 

1,955

 

 

 

5,139

 

 

 

(3,090

)

 

 

2,049

 

40' high cube

 

 

1,051,945

 

 

 

(353,084

)

 

 

698,861

 

 

 

1,052,707

 

 

 

(338,068

)

 

 

714,639

 

Open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' folding flat

 

 

17,539

 

 

 

(4,692

)

 

 

12,847

 

 

 

17,617

 

 

 

(4,538

)

 

 

13,079

 

40' folding flat

 

 

50,757

 

 

 

(17,631

)

 

 

33,126

 

 

 

51,152

 

 

 

(17,278

)

 

 

33,874

 

20' open top

 

 

12,980

 

 

 

(1,646

)

 

 

11,334

 

 

 

13,259

 

 

 

(1,625

)

 

 

11,634

 

40' open top

 

 

23,155

 

 

 

(4,465

)

 

 

18,690

 

 

 

23,313

 

 

 

(4,351

)

 

 

18,962

 

Tank containers

 

 

83,247

 

 

 

(8,740

)

 

 

74,507

 

 

 

81,151

 

 

 

(7,998

)

 

 

73,153

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 

 
Schedule of Concentration Risk of Lease Rental Income/Gross Accounts Receivable Company’s lease rental income from its owned fleet for the three months ended March 31, 2020 and 2019 and more than 10% of the Company’s gross accounts receivable from its owned fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - owned fleet

 

2020

 

 

2019

 

Customer A

 

16.9%

 

 

13.6%

 

Customer B

 

13.2%

 

 

13.8%

 

 
Schedule of Concentration Risk of Total Fleet Lease Rental Income Except for the lessees noted in the table below, no other single lessee accounted for more than 10% of the Company’s total fleet lease rental income for the three months ended March 31, 2020 and 2019, as well, there is no other single lessee that accounted for more than 10% of the Company’s gross accounts receivable from its total fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - total fleet

 

2020

 

 

2019

 

Customer A

 

16.5%

 

 

13.4%

 

Customer B

 

14.4%

 

 

13.8%

 

 
Reconciliation of Numerator and Denominator of Basic Earnings Per Share ("EPS") With That of Diluted EPS A reconciliation of the numerator and denominator of basic EPS with that of diluted EPS is reported as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Share amounts in thousands

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders

 

$

(4,379

)

 

$

17,050

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

56,455

 

 

 

57,475

 

Dilutive share options and restricted share units

 

 

—

 

 

 

112

 

Weighted average common shares outstanding - diluted

 

 

56,455

 

 

 

57,587

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders per common share

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.30

 

Diluted

 

$

(0.08

)

 

$

0.30

 

 

 

 

 

 

 

 

 

 

Share options and restricted share units excluded from

    the computation of diluted EPS because they were anti-dilutive

 

 

2,147

 

 

 

1,603

 

 
Fair Value of Derivative Instruments Reflected on Gross Basis The fair value of the derivative instruments is reflected on a gross basis on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

December 31, 2019

 

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swaps - not designated as hedges

 

$

—

 

 

$

135

 

 

Total

 

$

—

 

 

$

135

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Interest rate swaps - designated as hedges

 

$

9,037

 

 

$

117

 

 

Interest rate swaps - not designated as hedges

 

 

28,463

 

 

 

13,661

 

 

Total

 

$

37,500

 

 

$

13,778

 

 

 
Accounts Receivable  
Schedule of Concentration Risk of Lease Rental Income/Gross Accounts Receivable

Gross Accounts Receivable- owned fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

11.3%

 

 

17.1%

 

Customer B

 

16.1%

 

 

11.2%

 

 
Schedule of Concentration Risk of Total Fleet Lease Rental Income

Gross Accounts Receivable- total fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

17.7%

 

 

16.6%

 

Customer B

 

19.2%

 

 

12.0%

 
v3.20.1
Allowance for Credit Losses (Tables)
 3 Months Ended
Mar. 31, 2020
Allowance For Credit Loss [Abstract]  
Summary of Net Investment in Finance Leases and Container Leaseback Financing Receivable

The following table presents the net investment in finance leases and container leaseback financing receivable by internal credit rating category and year of origination as of March 31, 2020:

 

 

 

Three Months Ended March 31, 2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Total

 

Tier 1

 

$

43,702

 

 

$

123,617

 

 

$

24,816

 

 

$

7,823

 

 

$

—

 

 

$

47,177

 

 

$

247,135

 

Tier 2

 

 

—

 

 

 

39,111

 

 

 

22,949

 

 

 

82

 

 

 

9,127

 

 

 

7,093

 

 

 

78,362

 

Tier 3

 

 

217

 

 

 

7,980

 

 

 

1,604

 

 

 

77

 

 

 

1,213

 

 

 

2,112

 

 

 

13,203

 

Net investment in finance leases

 

$

43,919

 

 

$

170,708

 

 

$

49,369

 

 

$

7,982

 

 

$

10,340

 

 

$

56,382

 

 

$

338,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1

 

$

—

 

 

$

222,285

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

222,285

 

Tier 2

 

 

—

 

 

 

44,352

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

44,352

 

Tier 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Container leaseback financing receivable

 

$

—

 

 

$

266,637

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

266,637

 
Summary of Changes in Carrying Amount of Allowance for Credit Losses The changes in the carrying amount of the allowance for credit losses during the three months ended March 31, 2020 are as follows:

 

 

Accounts Receivable

 

 

Net Investment in Finance Leases

 

 

Container Leaseback Financing Receivable

 

 

Total Allowance for Credit Losses

 

Balance as of December 31, 2019

 

$

6,299

 

 

$

—

 

 

$

—

 

 

$

6,299

 

Adoption of ASU 2016-13 on January 1, 2020

 

 

—

 

 

 

636

 

 

 

256

 

 

 

892

 

Additions charged to expense

 

 

1,727

 

 

 

351

 

 

 

213

 

 

 

2,291

 

Balance as of March 31, 2020

 

$

8,026

 

 

$

987

 

 

$

469

 

 

$

9,482

 

 
v3.20.1
Condensed Consolidated Statements Of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows from operating activities:    
Net (loss) income $ (5,108) $ 17,155
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation expense [1] 66,834 62,464
Bad debt expense, net 2,045 159
Container recovery from lessee default, net [2] (1) (720)
Unrealized loss on derivative instruments, net 14,937 5,738
Amortization and write-off of unamortized deferred debt issuance costs and accretion of bond discounts 2,183 1,870
Amortization of intangible assets 564 602
Gain on sale of owned fleet containers, net (5,794) (6,767)
Share-based compensation expense 1,071 1,056
Changes in operating assets and liabilities (3,009) 25,552
Total adjustments 78,830 89,954
Net cash provided by operating activities 73,722 107,109
Cash flows from investing activities:    
Purchase of containers and fixed assets (11,249) (119,335)
Receipt of principal payments on container leaseback financing receivable 5,099  
Proceeds from sale of containers and fixed assets 30,939 32,885
Net cash provided by (used in) investing activities 24,789 (86,450)
Cash flows from financing activities:    
Proceeds from debt   60,000
Principal payments on debt (134,697) (86,171)
Principal repayments on container leaseback financing liability (124)  
Purchase of treasury shares (15,477)  
Debt issuance costs (57)  
Net cash used in financing activities (150,355) (26,171)
Effect of exchange rate changes (63) 107
Net decrease in cash, cash equivalents and restricted cash (51,907) (5,405)
Cash, cash equivalents and restricted cash, beginning of the year 277,905 224,928
Cash, cash equivalents and restricted cash, end of period 225,998 219,523
Supplemental disclosures of cash flow information:    
Cash paid for interest expense and realized loss (gain) on derivative instruments, net 35,657 33,826
Net income taxes paid 22 15
Receipt of payments on finance leases, net of income earned 8,664 14,428
Supplemental disclosures of noncash operating activities:    
Initial recognition of operating lease liability from obtaining right-of-use assets   12,024
Supplemental disclosures of noncash investing activities:    
(Decrease) increase in accrued container purchases (4,100) 50,555
Containers placed in finance leases $ 53,730 $ 29,757
[1] Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “depreciation expense” to conform with the 2020 presentation.
[2] Amount for container write-off and recovery from lessee default for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “container recovery from lessee default, net” to conform with the 2020 presentation.
v3.20.1
Schedule of Cost, Accumulated Depreciation and Net Book Value of the Company's Leasing Equipment by Equipment Type (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Property, Plant and Equipment [Line Items]    
Containers, cost $ 5,490,110 $ 5,599,318
Containers, accumulated depreciation (1,482,677) (1,443,167)
Containers, net book value 4,007,433 4,156,151
Dry Containers Other Than Open Top And Flat Rack Containers, 20'    
Property, Plant and Equipment [Line Items]    
Containers, cost 1,594,605 1,627,878
Containers, accumulated depreciation (403,041) (396,247)
Containers, net book value 1,191,564 1,231,631
Dry Containers Other Than Open Top And Flat Rack Containers, 40'    
Property, Plant and Equipment [Line Items]    
Containers, cost 158,877 167,011
Containers, accumulated depreciation (57,123) (58,852)
Containers, net book value 101,754 108,159
Dry Containers Other Than Open Top And Flat Rack Containers, 40' High Cube    
Property, Plant and Equipment [Line Items]    
Containers, cost 2,442,977 2,510,937
Containers, accumulated depreciation (609,710) (592,374)
Containers, net book value 1,833,267 1,918,563
Dry Containers Other Than Open Top And Flat Rack Containers, 45' High Cube    
Property, Plant and Equipment [Line Items]    
Containers, cost 28,451 28,670
Containers, accumulated depreciation (11,784) (11,488)
Containers, net book value 16,667 17,182
Refrigerated Containers, 20'    
Property, Plant and Equipment [Line Items]    
Containers, cost 20,437 20,484
Containers, accumulated depreciation (7,576) (7,258)
Containers, net book value 12,861 13,226
Refrigerated Containers, 20' High Cube    
Property, Plant and Equipment [Line Items]    
Containers, cost 5,140 5,139
Containers, accumulated depreciation (3,185) (3,090)
Containers, net book value 1,955 2,049
Refrigerated Containers, 40' High Cube    
Property, Plant and Equipment [Line Items]    
Containers, cost 1,051,945 1,052,707
Containers, accumulated depreciation (353,084) (338,068)
Containers, net book value 698,861 714,639
Open Top and Flat Rack Containers, 20' Folding Flat Rack    
Property, Plant and Equipment [Line Items]    
Containers, cost 17,539 17,617
Containers, accumulated depreciation (4,692) (4,538)
Containers, net book value 12,847 13,079
Open Top And Flat Rack Containers, 40' Folding Flat Rack    
Property, Plant and Equipment [Line Items]    
Containers, cost 50,757 51,152
Containers, accumulated depreciation (17,631) (17,278)
Containers, net book value 33,126 33,874
Open Top And Flat Rack Containers, 20' Open Top    
Property, Plant and Equipment [Line Items]    
Containers, cost 12,980 13,259
Containers, accumulated depreciation (1,646) (1,625)
Containers, net book value 11,334 11,634
Open Top And Flat Rack Containers, 40' Open Top    
Property, Plant and Equipment [Line Items]    
Containers, cost 23,155 23,313
Containers, accumulated depreciation (4,465) (4,351)
Containers, net book value 18,690 18,962
Tank containers    
Property, Plant and Equipment [Line Items]    
Containers, cost 83,247 81,151
Containers, accumulated depreciation (8,740) (7,998)
Containers, net book value $ 74,507 $ 73,153
v3.20.1
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenues:    
Lease rental income $ 145,478 $ 155,526
Trading container margin 649 2,568
Gain on sale of owned fleet containers, net 5,794 6,767
Operating expenses:    
Distribution expense to managed fleet container investors 14,163 24,480
Depreciation expense [1] 66,834 62,464
Amortization expense 564 602
General and administrative expense 10,138 9,830
Bad debt expense, net 2,045 159
Container lessee default recovery, net [2] (12) (653)
Total operating expenses 106,996 108,462
Income from operations 46,409 58,700
Other (expense) income:    
Interest expense (36,112) (37,516)
Write-off of unamortized deferred debt issuance costs (122)  
Interest income 400 638
Realized (loss) gain on derivative instruments, net (1,526) 1,444
Unrealized loss on derivative instruments, net (14,937) (5,738)
Other, net (53)  
Net other expense (52,350) (41,172)
(Loss) income before income tax and noncontrolling interest (5,941) 17,528
Income tax benefit (expense) 833 (373)
Net (loss) income (5,108) 17,155
Less: Net loss (income) attributable to the noncontrolling interest 729 (105)
Net (loss) income attributable to Textainer Group Holdings Limited common shareholders $ (4,379) $ 17,050
Net (loss) income attributable to Textainer Group Holdings Limited common shareholders per share:    
Basic $ (0.08) $ 0.30
Diluted $ (0.08) $ 0.30
Weighted average shares outstanding (in thousands):    
Basic 56,455 57,475
Diluted 56,455 57,587
Other comprehensive (loss) income, before tax:    
Change in derivative instruments designated as cash flow hedges $ (8,858)  
Reclassification of realized gain on derivative instruments designated as cash flow hedges (62)  
Foreign currency translation adjustments (63) $ 107
Comprehensive (loss) income, before tax (14,091) 17,262
Income tax benefit related to items of other comprehensive (loss) income 93  
Comprehensive (loss) income, after tax (13,998) 17,262
Comprehensive loss (income) attributable to the noncontrolling interest 729 (105)
Comprehensive (loss) income attributable to Textainer Group Holdings Limited common shareholders (13,269) 17,157
Owned Fleet    
Revenues:    
Lease rental income 130,072 128,973
Operating expenses:    
Direct container expense - owned fleet [2] 13,264 11,580
Managed Fleet    
Revenues:    
Lease rental income 15,406 26,553
Operating expenses:    
Distribution expense to managed fleet container investors 14,163 24,480
Management Fees - Non-Leasing    
Revenues:    
Revenue 1,484 2,301
Trading Containers    
Revenues:    
Revenue 9,585 13,300
Cost of trading containers sold $ (8,936) $ (10,732)
[1] Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “depreciation expense” to conform with the 2020 presentation.
[2] Amounts for container write-off and recovery and container recovery costs from lessee default for the period ended March 31, 2019 have been reclassified out of the previously reported line item “container impairment” and “direct container expense – owned fleet”, respectively, and included within “container lessee default recovery, net” to conform with the 2020 presentation.
v3.20.1
Summary of Derivative Instruments (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Derivative [Line Items]    
Notional amounts $ 1,313,750  
Interest rate swaps    
Derivative [Line Items]    
Notional amounts 535,000 $ 110,000
Non-designated | Interest rate swaps | Amortizing    
Derivative [Line Items]    
Notional amounts 744,750  
Non-designated | Interest rate cap | Non-Amortizing    
Derivative [Line Items]    
Notional amounts 34,000  
Designated | Interest rate swaps | Amortizing    
Derivative [Line Items]    
Notional amounts $ 535,000  
v3.20.1
Segment Information - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2020
Segment
Segment Reporting [Abstract]  
Number of reportable segments 3
v3.20.1
Components of Container Leaseback Financing Receivable (Parenthetical) (Detail) - Customer
 3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Capital Leased Assets [Line Items]    
Number of customers represent container leaseback financing receivable portfolio 2 2
Customer One    
Capital Leased Assets [Line Items]    
Percentage of container leaseback financing receivable portfolio 83.40% 82.90%
Customer Two    
Capital Leased Assets [Line Items]    
Percentage of container leaseback financing receivable portfolio 16.60% 17.10%
v3.20.1
Schedule Future Minimum Lease Payments Receivable (Detail)
$ in Thousands
Mar. 31, 2020
USD ($)
Lessor Lease Description [Line Items]  
2021 $ 337,501
2022 250,137
2023 193,630
2024 145,019
2025 and thereafter 186,908
Total future minimum lease payments receivable 1,113,195
Owned Fleet  
Lessor Lease Description [Line Items]  
2021 301,863
2022 229,468
2023 183,212
2024 136,845
2025 and thereafter 173,359
Total future minimum lease payments receivable 1,024,747
Managed Fleet  
Lessor Lease Description [Line Items]  
2021 35,638
2022 20,669
2023 10,418
2024 8,174
2025 and thereafter 13,549
Total future minimum lease payments receivable $ 88,448
v3.20.1
Total Management Fees Earned from the Managed Fleet, Including Acquisition Fees and Sales Commissions (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Related Party Transaction [Line Items]    
Fees from affiliated Container Investors   $ 972
Fees from unaffiliated Container Investors $ 2,488 3,064
Total Management Fees    
Related Party Transaction [Line Items]    
Management fees 2,488 4,374
Total Management Fees | Fees from Container Investors    
Related Party Transaction [Line Items]    
Management fees $ 2,488 4,036
Total Management Fees | Other Fees    
Related Party Transaction [Line Items]    
Management fees   $ 338
v3.20.1
Nature of Business
 3 Months Ended
Mar. 31, 2020
Nature Of Business [Abstract]  
Nature of Business

(1)

Nature of Business

Textainer Group Holdings Limited (“TGH”) is incorporated in Bermuda. TGH is the holding company of a group of companies, consisting of TGH and its subsidiaries (collectively, the “Company”), involved in the purchase, management, leasing and resale of a fleet of marine cargo containers. The Company manages and provides administrative support to the third-party owners’ (the “Container Investors”) container fleets.

The Company conducts its business activities in three main areas: Container Ownership, Container Management and Container Resale (see Note 10 “Segment Information”).
v3.20.1
Schedule of Concentration Risk of Lease Rental Income (Detail) - Lease Rental Income - Customer Concentration Risk
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Customer A    
Concentration Risk [Line Items]    
Percentage of lease rental income 16.90% 13.60%
Customer B    
Concentration Risk [Line Items]    
Percentage of lease rental income 13.20% 13.80%
v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 128,664 $ 180,552
Accounts receivable, net of allowance for credit losses of $8,026 and $6,299, respectively 118,905 109,384
Net investment in finance leases, net of allowance for credit losses of $186 and $0, respectively 40,164 40,940
Container leaseback financing receivable, net of allowance for credit losses of $90 and $0, respectively 20,661 20,547
Trading containers 12,894 11,330
Containers held for sale 46,902 41,884
Prepaid expenses and other current assets 14,367 14,816
Due from affiliates, net 2,112 1,880
Total current assets 384,669 421,333
Restricted cash 97,334 97,353
Containers, net of accumulated depreciation of $1,482,677 and $1,443,167, respectively 4,007,433 4,156,151
Net investment in finance leases, net of allowance for credit losses of $801 and $0, respectively 297,549 254,363
Container leaseback financing receivable, net of allowance for credit losses of $379 and $0, respectively 245,507 251,111
Fixed assets, net of accumulated depreciation of $12,465 and $12,266, respectively 1,108 1,128
Intangible assets, net of accumulated amortization of $45,923 and $45,359, respectively 4,727 5,291
Derivative instruments   135
Deferred taxes 1,388 1,388
Other assets 14,091 14,364
Total assets 5,053,806 5,202,617
Current liabilities:    
Accounts payable and accrued expenses 21,499 23,404
Container contracts payable 5,294 9,394
Other liabilities 2,733 2,636
Due to container investors, net 19,151 21,978
Debt, net of unamortized costs of $6,293 and $8,120, respectively 239,066 242,433
Total current liabilities 287,743 299,845
Debt, net of unamortized costs of $21,160 and $21,446, respectively 3,426,079 3,555,296
Derivative instruments 37,500 13,778
Income tax payable 9,945 9,909
Deferred taxes 6,644 7,789
Other liabilities 29,546 30,355
Total liabilities 3,797,457 3,916,972
Textainer Group Holdings Limited shareholders' equity:    
Common shares, $0.01 par value. Authorized 140,000,000 shares; 58,326,555 shares issued and 54,870,475 shares outstanding at 2020; 58,326,555 shares issued and 56,817,918 shares outstanding at 2019 583 583
Treasury shares, at cost, 3,456,080 and 1,508,637 shares, respectively (33,223) (17,746)
Additional paid-in capital 411,666 410,595
Accumulated other comprehensive loss (9,401) (511)
Retained earnings 861,194 866,458
Total Textainer Group Holdings Limited shareholders’ equity 1,230,819 1,259,379
Noncontrolling interest 25,530 26,266
Total equity 1,256,349 1,285,645
Total liabilities and equity $ 5,053,806 $ 5,202,617
v3.20.1
Managed Container Fleet (Tables)
 3 Months Ended
Mar. 31, 2020
Revenue From Contract With Customer [Abstract]  
Schedule of Company's Leasing Equipment

The Company’s container leasing equipment includes such managed containers in the condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019, which consisted of the following:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Containers - owned fleet

 

$

5,474,139

 

 

$

(1,482,366

)

 

$

3,991,773

 

 

$

5,582,986

 

 

$

(1,442,986

)

 

$

4,140,000

 

Containers - managed fleet

 

 

15,971

 

 

 

(311

)

 

 

15,660

 

 

 

16,332

 

 

 

(181

)

 

 

16,151

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 
Summary of Total Lease Management Fee Income from Managed Fleet, Including Management Fees Earned from Acquisition Fees and Sales Commissions

Total management fee income from the managed fleet, including management fees earned from acquisition fees and sales commissions during the three months ended March 31, 2020 and 2019 were as follows (see Note 5 “Transactions with Affiliates and Container Investors”):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Lease rental income - managed fleet

 

$

15,406

 

 

$

26,553

 

Less: distribution expense to managed fleet container investors

 

 

(14,163

)

 

 

(24,480

)

Less: depreciation and interest expense on managed containers

    purchased on or after January 1, 2019

 

 

(239

)

 

 

—

 

Management fees from leasing

 

 

1,004

 

 

 

2,073

 

Management fees from non-leasing services

 

 

1,484

 

 

 

2,301

 

     Total management fees

 

$

2,488

 

 

$

4,374

 

 

 

 

 

 

 

 

 

 
Summary of Reconciliation of Balance Sheet Accounts From the Managed Fleet to Total Amount in Condensed Consolidated Balance Sheets

The following table provides a reconciliation of the balance sheet accounts from the managed fleet to the total amount as of March 31, 2020 and December 31, 2019 in the condensed consolidated balance sheets (also, see Note 5 “Transactions with Affiliates and Container Investors”): 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts receivable - owned fleet

 

$

103,855

 

 

$

96,158

 

Accounts receivable - managed fleet

 

 

15,050

 

 

 

13,226

 

Total accounts receivable

 

$

118,905

 

 

$

109,384

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets - owned fleet

 

$

14,224

 

 

$

14,627

 

Prepaid expenses and other current assets - managed fleet

 

 

143

 

 

 

189

 

Total prepaid expenses and other current assets

 

$

14,367

 

 

$

14,816

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses - owned fleet

 

$

19,659

 

 

$

21,451

 

Accounts payable and accrued expenses - managed fleet

 

 

1,840

 

 

 

1,953

 

Total accounts payable and accrued expenses

 

$

21,499

 

 

$

23,404

 

 

 

 

 

 

 

 

 

 

Container contracts payable - owned fleet

 

$

5,294

 

 

$

9,394

 

Container contracts payable - managed fleet

 

 

—

 

 

 

—

 

Total container contracts payable

 

$

5,294

 

 

$

9,394

 
v3.20.1
Debt and Derivative Instruments (Tables)
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Debt Obligation

The following represents the Company’s debt obligations as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

Outstanding

 

Average Interest

 

 

Outstanding

 

Average Interest

 

 

Final Maturity

TL Revolving Credit Facility

 

$

1,211,166

 

 

2.43

%

 

$

1,280,037

 

 

3.29

%

 

September 2023

TL 2019 Term Loan

 

 

155,833

 

 

3.50

%

 

 

158,371

 

 

3.50

%

 

December 2026

TMCL II Secured Debt Facility (1)

 

 

670,015

 

 

2.45

%

 

 

689,658

 

 

3.49

%

 

July 2026

TMCL V 2017-1 Bonds

 

 

307,733

 

 

3.91

%

 

 

316,395

 

 

3.91

%

 

May 2042

TMCL V 2017-2 Bonds

 

 

385,506

 

 

3.73

%

 

 

395,836

 

 

3.73

%

 

June 2042

TMCL VI Term Loan

 

 

244,383

 

 

4.30

%

 

 

249,421

 

 

4.30

%

 

February 2038

TMCL VII 2018-1 Bonds

 

 

222,236

 

 

4.14

%

 

 

227,624

 

 

4.14

%

 

July 2043

TMCL VII 2019-1 Bonds

 

 

320,754

 

 

4.02

%

 

 

327,563

 

 

4.02

%

 

April 2044

TAP Funding Revolving Credit Facility (2)

 

 

147,519

 

 

2.65

%

 

 

152,824

 

 

3.69

%

 

December 2021

Total debt obligations

 

$

3,665,145

 

 

 

 

 

$

3,797,729

 

 

 

 

 

 

Amount due within one year

 

$

239,066

 

 

 

 

 

$

242,433

 

 

 

 

 

 

Amounts due beyond one year

 

$

3,426,079

 

 

 

 

 

$

3,555,296

 

 

 

 

 

 

 

 

(1)

Final maturity of the TMCL II Secured Debt Facility is based on the assumption that the facility will not be extended on its associated conversion date.

  

 

(2)

In February 2020, the Company entered into an amendment of the TAP Funding Revolving Credit Facility which decreased the aggregate commitment amount from $190,000 to $155,000, reduced the advance rate from 80% to 78%, and revised certain of the covenants and restrictions. The Company wrote-off $122 of unamortized debt issuance costs during the three months ended March 31, 2020 related to the amendment of TAP Funding Revolving Credit Facility.

 
Future Scheduled Repayments

 

The following is a schedule of future scheduled repayments, by year, and borrowing capacities, as of March 31, 2020:

 

 

 

Twelve months ending March 31,

 

 

Available Borrowing,

 

 

Current

and Available

Borrowing,

 

 

 

 

 

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025 and

thereafter

 

 

Total

Borrowing

 

 

as limited by the Borrowing Base

 

 

as limited by the

Borrowing Base

 

 

Total Commitment

 

TL Revolving Credit Facility

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,217,000

 

 

$

—

 

 

$

1,217,000

 

 

$

183,924

 

 

$

1,400,924

 

 

$

1,500,000

 

TL 2019 Term Loan

 

 

10,616

 

 

 

10,993

 

 

 

11,384

 

 

 

11,789

 

 

 

112,622

 

 

 

157,404

 

 

 

—

 

 

 

157,404

 

 

 

157,404

 

TMCL II Secured Debt Facility

 

 

61,739

 

 

 

64,280

 

 

 

56,575

 

 

 

52,696

 

 

 

439,116

 

 

 

674,406

 

 

 

—

 

 

 

674,406

 

 

 

1,200,000

 

TMCL V 2017-1 Bonds

 

 

42,136

 

 

 

55,352

 

 

 

64,330

 

 

 

61,453

 

 

 

86,751

 

 

 

310,022

 

 

 

—

 

 

 

310,022

 

 

 

310,022

 

TMCL V 2017-2 Bonds (1)

 

 

45,734

 

 

 

58,676

 

 

 

70,222

 

 

 

81,144

 

 

 

132,615

 

 

 

388,391

 

 

 

—

 

 

 

388,391

 

 

 

388,391

 

TMCL VI Term Loan

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

144,236

 

 

 

246,236

 

 

 

—

 

 

 

246,236

 

 

 

246,236

 

TMCL VII 2018-1 Bonds (1)

 

 

18,601

 

 

 

18,655

 

 

 

18,655

 

 

 

18,655

 

 

 

152,190

 

 

 

226,756

 

 

 

—

 

 

 

226,756

 

 

 

226,756

 

TMCL VII 2019-1 Bonds (1)

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

212,333

 

 

 

324,333

 

 

 

—

 

 

 

324,333

 

 

 

324,333

 

TAP Funding Revolving Credit

   Facility

 

 

13,033

 

 

 

135,017

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

148,050

 

 

 

567

 

 

 

148,617

 

 

 

155,000

 

   Total (2)

 

$

245,359

 

 

$

396,473

 

 

$

274,666

 

 

$

1,496,237

 

 

$

1,279,863

 

 

$

3,692,598

 

 

$

184,491

 

 

$

3,877,089

 

 

$

4,508,142

 

 

 

(1)

Future scheduled payments for TMCL V 2017-2 Bonds, TMCL VII 2018-1 and TMCL VII 2019-1 Bonds exclude an unamortized discount of $42, $2,200 and $96, respectively.

 

(2)

Future scheduled payments for all debts exclude unamortized prepaid debt issuance costs in an aggregate amount of $25,115.
Summary of Derivative Instruments

The following is a summary of the Company’s derivative instruments as of March 31, 2020:

 

 

 

Notional

 

Derivative instruments

 

amount

 

Interest rate swap contracts with several banks, with fixed rates between 1.39%

   and 2.94% per annum, amortizing notional amounts, with termination dates

   through January 15, 2023, non-designated

 

$

744,750

 

Interest rate swap contracts with several banks, with fixed rates between 0.43%

   and 1.58% per annum, amortizing notional amounts, with termination dates

   through March 15, 2025, designated

 

 

535,000

 

Interest rate cap contracts with several banks with fixed rates between 3.00%

   and 5.00% per annum, nonamortizing notional amounts, with termination dates

   through December 15, 2021, non-designated

 

 

34,000

 

      Total notional amount as of March 31, 2020

 

$

1,313,750

 
Summary of Pre-tax Impact of Derivative Instruments on Condensed Consolidated Statements of Comprehensive (Loss) Income The following table summarizes the pre-tax impact of derivative instruments on the condensed consolidated statements of comprehensive (loss) income during the three months ended March 31, 2020 and 2019:

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2020

 

 

2019

 

Derivative instruments

 

Financial Statement Caption

 

 

 

 

 

 

 

 

Non-designated derivative instruments

 

Realized (loss) gain on derivative instruments, net

 

$

(1,526

)

 

$

1,444

 

Non-designated derivative instruments

 

Unrealized loss on derivative instruments, net

 

$

(14,937

)

 

$

(5,738

)

Designated derivative instruments

 

Other comprehensive loss

 

$

(8,858

)

 

$

—

 

Designated derivative instruments

 

Interest and debt income (expense), net

 

$

62

 

 

$

—

 

 
v3.20.1
Summary of Derivative Instruments (Parenthetical) (Detail)
 3 Months Ended
Mar. 31, 2020
Interest Rate Swaps | Non-designated  
Derivative [Line Items]  
Derivative term through January 15, 2023
Interest Rate Swaps | Non-designated | Minimum  
Derivative [Line Items]  
Fixed interest rate on derivative contracts 1.39%
Interest Rate Swaps | Non-designated | Maximum  
Derivative [Line Items]  
Fixed interest rate on derivative contracts 2.94%
Interest Rate Swaps | Designated  
Derivative [Line Items]  
Derivative term through March 15, 2025
Interest Rate Swaps | Designated | Minimum  
Derivative [Line Items]  
Fixed interest rate on derivative contracts 0.43%
Interest Rate Swaps | Designated | Maximum  
Derivative [Line Items]  
Fixed interest rate on derivative contracts 1.58%
Interest rate cap | Non-designated  
Derivative [Line Items]  
Derivative term through December 15, 2021
Interest rate cap | Non-designated | Minimum  
Derivative [Line Items]  
Floor interest rate on derivative contracts 3.00%
Interest rate cap | Non-designated | Maximum  
Derivative [Line Items]  
Fixed interest rate on derivative contracts 5.00%
v3.20.1
Segment Information Reconciled to (Loss) Income Before Income Taxes and Noncontrolling Interest (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Segment Reporting Information [Line Items]      
Lease rental income $ 145,478 $ 155,526  
Trading container margin 649 2,568  
Gain on sale of owned fleet containers, net 5,794 6,767  
Depreciation expense [1] 66,834 62,464  
Container lessee default recovery, net [2] 12 653  
Interest expense 36,112 37,516  
Realized (loss) gain on derivative instruments, net (1,526) 1,444  
Unrealized loss on derivative instruments, net (14,937) (5,738)  
Segment income (loss) before income tax and noncontrolling interests (5,941) 17,528  
Total assets 5,053,806 4,823,718 $ 5,202,617
Purchase of containers and fixed assets 7,149 169,890  
Owned Fleet      
Segment Reporting Information [Line Items]      
Lease rental income 130,072 128,973  
Managed Fleet      
Segment Reporting Information [Line Items]      
Lease rental income 15,406 26,553  
Container Ownership      
Segment Reporting Information [Line Items]      
Lease rental income 129,850 128,599  
Gain on sale of owned fleet containers, net 5,794 6,767  
Depreciation expense 68,356 64,068  
Container lessee default recovery, net 12 653  
Interest expense 35,956 37,516  
Realized (loss) gain on derivative instruments, net (1,526) 1,444  
Unrealized loss on derivative instruments, net (14,937) (5,738)  
Segment income (loss) before income tax and noncontrolling interests (12,051) 6,749  
Total assets 4,954,452 4,687,690  
Purchase of containers and fixed assets 6,957 169,817  
Container Ownership | Owned Fleet      
Segment Reporting Information [Line Items]      
Lease rental income 129,850 128,599  
Container Management      
Segment Reporting Information [Line Items]      
Lease rental income 15,628 26,927  
Depreciation expense 341 172  
Interest expense 156    
Segment income (loss) before income tax and noncontrolling interests 2,610 6,862  
Total assets 154,857 162,170  
Purchase of containers and fixed assets 192 73  
Container Management | Owned Fleet      
Segment Reporting Information [Line Items]      
Lease rental income 222 374  
Container Management | Managed Fleet      
Segment Reporting Information [Line Items]      
Lease rental income 15,406 26,553  
Container Resale      
Segment Reporting Information [Line Items]      
Trading container margin 649 2,568  
Segment income (loss) before income tax and noncontrolling interests 2,758 5,163  
Total assets 17,198 45,782  
Other      
Segment Reporting Information [Line Items]      
Segment income (loss) before income tax and noncontrolling interests (1,062) (921)  
Total assets 8,293 10,320  
Management Fees - Non-Leasing      
Segment Reporting Information [Line Items]      
Revenue 1,484 2,301  
Management Fees - Non-Leasing | External Customers      
Segment Reporting Information [Line Items]      
Revenue 1,484 2,301  
Management Fees - Non-Leasing | Container Ownership | External Customers      
Segment Reporting Information [Line Items]      
Revenue 98 52  
Management Fees - Non-Leasing | Container Management      
Segment Reporting Information [Line Items]      
Revenue 9,745 12,491  
Management Fees - Non-Leasing | Container Management | External Customers      
Segment Reporting Information [Line Items]      
Revenue 555 978  
Management Fees - Non-Leasing | Container Resale      
Segment Reporting Information [Line Items]      
Revenue 2,421 2,527  
Management Fees - Non-Leasing | Container Resale | External Customers      
Segment Reporting Information [Line Items]      
Revenue 831 1,271  
Eliminations      
Segment Reporting Information [Line Items]      
Depreciation expense (1,863) (1,776)  
Segment income (loss) before income tax and noncontrolling interests 1,804 (325)  
Total assets (80,994) (82,244)  
Eliminations | Management Fees - Non-Leasing      
Segment Reporting Information [Line Items]      
Revenue $ (12,166) $ (15,018)  
[1] Amount to write-down the carrying value of containers held for sale to their estimated fair value less costs to sell for the period ended March 31, 2019 has been reclassified out of the previously reported line item “container impairment” and included within “depreciation expense” to conform with the 2020 presentation.
[2] Amounts for container write-off and recovery and container recovery costs from lessee default for the period ended March 31, 2019 have been reclassified out of the previously reported line item “container impairment” and “direct container expense – owned fleet”, respectively, and included within “container lessee default recovery, net” to conform with the 2020 presentation.
v3.20.1
Leases - Lessor - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Lessor Disclosure [Abstract]    
Finance leases, net selling loss $ 9 $ 297
v3.20.1
Transactions with Affiliates and Container Investors - Additional Information (Detail) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Related Party Transaction [Line Items]    
Due from affiliates, net $ 2,112,000 $ 1,880,000
Due to container investors, net 19,151,000 21,978,000
Affiliated Container Investors    
Related Party Transaction [Line Items]    
Due to container investors, net $ 0 $ 0
v3.20.1
Components of Container Leaseback Financing Receivable (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
Future minimum payments receivable $ 368,869 $ 377,917
Less: unearned income (102,232) (106,259)
Container leaseback financing receivable [1] 266,637 271,658
Less: Allowance for credit losses (469)  
Container leaseback financing receivable, net 266,168 271,658
Amounts due within one year 20,661 20,547
Amounts due beyond one year $ 245,507 $ 251,111
[1] As of March 31, 2020, two customers represented 83.4% and 16.6% of the Company’s container leaseback financing receivable portfolio. As of December 31, 2019, two customers represented 82.9% and 17.1% of the Company’s container leaseback financing receivable portfolio
v3.20.1
Share Repurchase Program - Additional Information (Detail) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Aug. 31, 2019
Equity Class Of Treasury Stock [Line Items]      
Purchase of treasury shares (in shares) 1,947,443 878,637  
Common stock repurchased, average price per share $ 7.91 $ 9.75  
Purchase of treasury shares $ 15,477,000 $ 8,597,000  
Common stock repurchased program, amount remained available for repurchases 26,000,000    
Maximum      
Equity Class Of Treasury Stock [Line Items]      
Common stock repurchased program, authorized amount $ 50,000,000   $ 25,000,000
v3.20.1
Debt Obligation (Parenthetical) (Detail) - USD ($)
$ in Thousands
 1 Months Ended 3 Months Ended
Jan. 31, 2020
Feb. 29, 2020
Mar. 31, 2020
Debt Instrument [Line Items]      
Aggregate maximum commitment amount [1]     $ 4,508,142
TAP Funding Revolving Credit Facility      
Debt Instrument [Line Items]      
Aggregate maximum commitment amount $ 190,000 $ 155,000 155,000
Advance rate for finance lease containers 80.00% 78.00%  
Write off of unamortized debt issuance cost     $ 122
[1] Future scheduled payments for all debts exclude unamortized prepaid debt issuance costs in an aggregate amount of $25,115.
v3.20.1
Leases - Lessee - Additional Information (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Lessee Lease Description [Line Items]    
Right-of-use lease assets $ 10,888 $ 11,276
Operating lease liabilities 13,256 13,736
Other Liabilities – Current    
Lessee Lease Description [Line Items]    
Lease liabilities current 1,719 1,706
Other Liabilities – Non-Current    
Lessee Lease Description [Line Items]    
Long-term lease obligations $ 11,537 $ 12,030
v3.20.1
Allowance for Credit Losses - Summary of Net Investment in Finance Leases and Container Leaseback Financing Receivable (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Allowance For Credit Losses [Line Items]    
Net investment in finance leases, net $ 337,713 $ 295,303
Container leaseback financing receivable, net 266,168 $ 271,658
Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
Three Months Ended March 31, 2020 43,919  
2019 170,708  
2018 49,369  
2017 7,982  
2016 10,340  
Prior 56,382  
Net investment in finance leases, net 338,700  
Container Leaseback Financing Receivable    
Financing Receivable Allowance For Credit Losses [Line Items]    
2019 266,637  
Container leaseback financing receivable, net 266,637  
Tier 1 | Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
Three Months Ended March 31, 2020 43,702  
2019 123,617  
2018 24,816  
2017 7,823  
Prior 47,177  
Net investment in finance leases, net 247,135  
Tier 1 | Container Leaseback Financing Receivable    
Financing Receivable Allowance For Credit Losses [Line Items]    
2019 222,285  
Container leaseback financing receivable, net 222,285  
Tier 2 | Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
2019 39,111  
2018 22,949  
2017 82  
2016 9,127  
Prior 7,093  
Net investment in finance leases, net 78,362  
Tier 2 | Container Leaseback Financing Receivable    
Financing Receivable Allowance For Credit Losses [Line Items]    
2019 44,352  
Container leaseback financing receivable, net 44,352  
Tier 3 | Finance Leases    
Financing Receivable Allowance For Credit Losses [Line Items]    
Three Months Ended March 31, 2020 217  
2019 7,980  
2018 1,604  
2017 77  
2016 1,213  
Prior 2,112  
Net investment in finance leases, net $ 13,203  
v3.20.1
Fair Value of Derivative Instruments Reflected on Gross Basis (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets measured at fair value on gross basis   $ 135
Liabilities measured at fair value on a gross basis $ 37,500 13,778
Not Designated as Hedging Instrument | Interest Rate Swaps    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets measured at fair value on gross basis   135
Liabilities measured at fair value on a gross basis 28,463 13,661
Designated as Hedging Instrument | Interest Rate Swaps    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Liabilities measured at fair value on a gross basis $ 9,037 $ 117
v3.20.1
Schedule of Concentration Risk of Gross Accounts Receivable From Owned Fleet (Detail) - Accounts Receivable - Customer Concentration Risk
 3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Customer A    
Concentration Risk [Line Items]    
Percentage of lease rental income 11.30% 17.10%
Customer B    
Concentration Risk [Line Items]    
Percentage of lease rental income 16.10% 11.20%
v3.20.1
Summary of Total Lease Management Fee Income from Managed Fleet, Including Management Fees Earned from Acquisition Fees and Sales Commissions (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Disaggregation Of Revenue [Line Items]    
Lease rental income - managed fleet $ 15,406 $ 26,553
Less: distribution expense to managed fleet container investors (14,163) (24,480)
Less: depreciation and interest expense on managed containers purchased on or after January 1, 2019 (239)  
Leasing    
Disaggregation Of Revenue [Line Items]    
Revenue 1,004 2,073
Other Services    
Disaggregation Of Revenue [Line Items]    
Revenue 1,484 2,301
Total Management Fees    
Disaggregation Of Revenue [Line Items]    
Revenue $ 2,488 $ 4,374
v3.20.1
Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2020
Allowance For Credit Loss [Abstract]  
Allowance for Credit Losses

(7)

Allowance for Credit Losses

 

The Company’s allowance for credit losses are estimated based on historical losses, current economic conditions, and ongoing review of the credit worthiness, but not limited to, each lessee’s payment history, lessee credit ratings, management’s current assessment of each lessee’s financial condition and the recoverability. The Company considers an account past due when a payment has not been received in accordance with the terms of the lease agreement, and if the financial condition of the Company’s lessees deteriorates resulting in an impairment of their ability to make payments, additional allowances may be required.

 

Accounts Receivable

 

The Company maintains allowances, if necessary, for doubtful accounts against accounts receivables resulting from the inability of its lessees to make required payments related to billed amounts under the operating leases, finance leases and container leaseback financing receivable. The allowance for credit losses included in accounts receivable, net, amounted to $8,026 and $6,299 as of March 31, 2020 and December 31, 2019, respectively.

 

As of March 31, 2020 and December 31, 2019, the Company does not have an allowance for credit losses related to the billed amounts under the container leaseback financing receivable and does not have any past due balances relating to such transactions. As of March 31, 2020 and December 31, 2019, the allowance for credit losses related to the billed amounts under the finance leases and included in accounts receivable, net, amounted to $839 and $675, respectively.

 

Net Investment in Finance Leases and Container Leaseback Financing Receivable

 

On January 1, 2020, the Company adopted ASU 2016-13 by estimating current expected credit losses (“CECL”) over the contractual lease term of the finance leases and container leaseback financing receivable (see Note 2 (i) “Accounting Policies and Recent Accounting Pronouncements” for further information.) ASU 2016-13 requires that an allowance for credit loss is recognized to reflect the risk of credit loss even when risk is remote.

 

The Company maintains allowances for credit losses against net investment in finance leases and container leaseback financing receivable related to unbilled amounts under the finance leases and the sales-type leaseback arrangements accounted for as financing receivable. The allowance for credit losses related to unbilled amounts under finance leases and included in net investment in finance leases, net, amounted to $987 as of March 31, 2020. The allowance for credit losses related to unbilled amounts under the financing arrangements and included in container leaseback financing receivable, net, amounted to $469 as of March 31, 2020.

 

The Company estimates its potential future expected credit losses based on historical losses from lessee defaults, current economic conditions and reasonable and supportable forecasts that may affect the collectability of the reported amount. The Company evaluates its exposure by portfolio with similar risk characteristics based on the credit worthiness, external credit data and overall credit quality of its lessees.

The Company’s internal risk rating categories are “Tier 1” for the lowest level of risk which are typically the large international shipping lines with strong financial and asset base; “Tier 2” for moderate level of risk which includes lessees which are well-established in the market; and “Tier 3” for the highest level of risk which includes smaller shipping lines or lessees that exhibit high volatility in payments on a regular basis.

As of March 31, 2020, the Company’s net investment in finance leases and container leaseback financing receivable are primarily comprised of the largest shipping lines which represented 73% and 83%, respectively, of the Company’s portfolio.

The following table presents the net investment in finance leases and container leaseback financing receivable by internal credit rating category and year of origination as of March 31, 2020:

 

 

 

Three Months Ended March 31, 2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Total

 

Tier 1

 

$

43,702

 

 

$

123,617

 

 

$

24,816

 

 

$

7,823

 

 

$

—

 

 

$

47,177

 

 

$

247,135

 

Tier 2

 

 

—

 

 

 

39,111

 

 

 

22,949

 

 

 

82

 

 

 

9,127

 

 

 

7,093

 

 

 

78,362

 

Tier 3

 

 

217

 

 

 

7,980

 

 

 

1,604

 

 

 

77

 

 

 

1,213

 

 

 

2,112

 

 

 

13,203

 

Net investment in finance leases

 

$

43,919

 

 

$

170,708

 

 

$

49,369

 

 

$

7,982

 

 

$

10,340

 

 

$

56,382

 

 

$

338,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1

 

$

—

 

 

$

222,285

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

222,285

 

Tier 2

 

 

—

 

 

 

44,352

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

44,352

 

Tier 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Container leaseback financing receivable

 

$

—

 

 

$

266,637

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

266,637

 

 

Subsequent changes in the estimated allowance for credit losses are recognized in “bad debt expense, net” in the condensed consolidated statements of comprehensive (loss) income. Subsequent changes in the estimated allowance for credit losses relating to the accounts receivable from managed container fleet are recognized in “distribution expense to managed fleet container investors” in the condensed consolidated statements of comprehensive (loss) income (See Note 4 “Managed Container Fleet” for further information). The changes in the carrying amount of the allowance for credit losses during the three months ended March 31, 2020 are as follows:

 

 

 

Accounts Receivable

 

 

Net Investment in Finance Leases

 

 

Container Leaseback Financing Receivable

 

 

Total Allowance for Credit Losses

 

Balance as of December 31, 2019

 

$

6,299

 

 

$

—

 

 

$

—

 

 

$

6,299

 

Adoption of ASU 2016-13 on January 1, 2020

 

 

—

 

 

 

636

 

 

 

256

 

 

 

892

 

Additions charged to expense

 

 

1,727

 

 

 

351

 

 

 

213

 

 

 

2,291

 

Balance as of March 31, 2020

 

$

8,026

 

 

$

987

 

 

$

469

 

 

$

9,482

 

 

 
v3.20.1
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

(11)

Commitments and Contingencies

(a) Restricted Cash

Restricted interest-bearing cash accounts were established by the Company as additional collateral for outstanding borrowings under certain of the Company’s debt facilities. The total balance of these restricted cash accounts was $97,334 and $97,353 as of March 31, 2020 and December 31, 2019, respectively.

 

(b)  Container Commitments

At March 31, 2020, the Company had commitments to purchase containers to be delivered subsequent to March 31, 2020 in the total amount of $258,732.

 

(c)   Distribution Expense to Managed Fleet Container Investors

The amounts distributed to the Container Investors are variable payments based upon the net operating income for each managed container (see Note 4 “Managed Container Fleet”). There are no future minimum lease payment obligations under the Company’s management agreements.
v3.20.1
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common shares
Treasury shares
Additional Paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total Textainer Group Holdings Limited shareholders' equity
Noncontrolling interest
Beginning Balances at Dec. 31, 2018 $ 1,235,991 $ 581 $ (9,149) $ 406,083 $ (436) $ 809,734 $ 1,206,813 $ 29,178
Beginning Balances (in shares) at Dec. 31, 2018   58,032,164 (630,000)          
Share-based compensation expense 1,056     1,056     1,056  
Comprehensive (loss) income:                
Net income (loss) attributable to Textainer Group Holdings Limited common shareholders 17,050         17,050 17,050  
Net income (loss) attributable to noncontrolling interest 105             105
Foreign currency translation adjustments 107       107   107  
Total comprehensive income (loss) 17,262              
Ending Balances at Mar. 31, 2019 1,254,309 $ 581 $ (9,149) 407,139 (329) 826,784 1,225,026 29,283
Ending Balances (in shares) at Mar. 31, 2019   58,032,164 (630,000)          
Beginning Balances at Dec. 31, 2018 1,235,991 $ 581 $ (9,149) 406,083 (436) 809,734 1,206,813 29,178
Beginning Balances (in shares) at Dec. 31, 2018   58,032,164 (630,000)          
Purchase of treasury shares $ 8,597              
Purchase of treasury shares (in shares) 878,637              
Ending Balances at Dec. 31, 2019 $ 1,285,645 $ 583 $ (17,746) 410,595 (511) 866,458 1,259,379 26,266
Ending Balances (in shares) at Dec. 31, 2019   58,326,555 (1,508,637)          
Comprehensive (loss) income:                
Purchase of treasury shares $ (8,597)              
Purchase of treasury shares (in shares) (878,637)              
Cumulative adjustment for adoption | ASU 2016-03 $ (892)         (885) (885) (7)
Purchase of treasury shares $ 15,477   $ 15,477       15,477  
Purchase of treasury shares (in shares) 1,947,443   1,947,443          
Share-based compensation expense $ 1,071     1,071     1,071  
Net income (loss) attributable to Textainer Group Holdings Limited common shareholders (4,379)         (4,379) (4,379)  
Net income (loss) attributable to noncontrolling interest (729)             (729)
Change in derivative instruments designated as cash flow hedges (8,858)       (8,858)   (8,858)  
Reclassification of realized gain on derivative instruments designated as cash flow hedges (62)       (62)   (62)  
Foreign currency translation adjustments (63)       (63)   (63)  
Income tax benefit related to items of other comprehensive (loss) income 93       93   93  
Total comprehensive income (loss) (13,998)              
Ending Balances at Mar. 31, 2020 1,256,349 $ 583 $ (33,223) $ 411,666 $ (9,401) $ 861,194 1,230,819 $ 25,530
Ending Balances (in shares) at Mar. 31, 2020   58,326,555 (3,456,080)          
Comprehensive (loss) income:                
Purchase of treasury shares $ (15,477)   $ (15,477)       $ (15,477)  
Purchase of treasury shares (in shares) (1,947,443)   (1,947,443)          
v3.20.1
Document and Entity Information
 3 Months Ended
Mar. 31, 2020
Cover [Abstract]  
Document Type 6-K
Amendment Flag false
Document Period End Date Mar. 31, 2020
Entity Registrant Name Textainer Group Holdings Limited
Entity Central Index Key 0001413159
Current Fiscal Year End Date --12-31
Entity File Number 001-33725
Entity Address, Address Line One Century House
Entity Address, Address Line Two 16 Par-La-Ville Road
Entity Address, City or Town Hamilton
Entity Address, Postal Zip Code HM 08
Entity Address, Country BM
v3.20.1
Leases (Tables)
 3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Schedule of Lease Rental Income

The Company’s lease rental income for the three months ended March 31, 2020 and 2019 were as follows:

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

 

Owned

 

 

Managed

 

 

Total

 

 

Owned

 

 

Managed

 

 

Total

 

Lease rental income - operating leases

$

115,803

 

 

$

14,514

 

 

$

130,317

 

 

$

118,283

 

 

$

25,070

 

 

$

143,353

 

Interest income on net investment in finance leases

 

5,284

 

 

 

—

 

 

 

5,284

 

 

 

2,997

 

 

 

—

 

 

 

2,997

 

Interest income on container leaseback financing receivable

 

4,006

 

 

 

—

 

 

 

4,006

 

 

 

—

 

 

 

—

 

 

 

—

 

Variable lease revenue

 

4,979

 

 

 

892

 

 

 

5,871

 

 

 

7,693

 

 

 

1,483

 

 

 

9,176

 

Total lease rental income

$

130,072

 

 

$

15,406

 

 

$

145,478

 

 

$

128,973

 

 

$

26,553

 

 

$

155,526

 
Schedule Future Minimum Lease Payments Receivable

Operating Leases

 

The following is a schedule, by year, of future minimum lease payments receivable under the long-term leases for the owned and managed container fleet as of March 31, 2020:

 

 

Owned

 

 

Managed

 

 

Total

 

Twelve months ending March 31:

 

 

 

 

 

 

 

 

 

 

 

2021

$

301,863

 

 

$

35,638

 

 

$

337,501

 

2022

 

229,468

 

 

 

20,669

 

 

 

250,137

 

2023

 

183,212

 

 

 

10,418

 

 

 

193,630

 

2024

 

136,845

 

 

 

8,174

 

 

 

145,019

 

2025 and thereafter

 

173,359

 

 

 

13,549

 

 

 

186,908

 

Total future minimum lease payments receivable

$

1,024,747

 

 

$

88,448

 

 

$

1,113,195

 
Schedule of Components of Net Investment in Finance Leases

The following table represents the components of the net investment in finance leases, which are reported in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Future minimum lease payments receivable

 

$

460,664

 

 

$

385,589

 

Residual value of containers

 

 

11,122

 

 

 

11,143

 

Less: unearned income

 

 

(133,086

)

 

 

(101,429

)

Net investment in finance leases (1)

 

$

338,700

 

 

$

295,303

 

Less: Allowance for credit losses

 

 

(987

)

 

 

—

 

Net investment in finance leases, net

 

$

337,713

 

 

$

295,303

 

Amounts due within one year

 

$

40,164

 

 

$

40,940

 

Amounts due beyond one year

 

 

297,549

 

 

 

254,363

 

Net investment in finance leases, net

 

$

337,713

 

 

$

295,303

 

 

(1) As of March 31, 2020, two major customers represented 54.0% and 14.0% of the Company’s finance leases portfolio. As of December 31, 2019, two major customers represented 44.3% and 16.1% of the Company’s finance leases portfolio. No other customer represented more than 10% of the Company’s finance leases portfolio as of March 31, 2020 and December 31, 2019.
Schedule of Components of Container Leaseback Financing Receivable

The components of the container leaseback financing receivable, which are reported in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Future minimum payments receivable

 

$

368,869

 

 

$

377,917

 

Less: unearned income

 

 

(102,232

)

 

 

(106,259

)

Container leaseback financing receivable (1)

 

 

266,637

 

 

$

271,658

 

Less: Allowance for credit losses

 

 

(469

)

 

 

—

 

Container leaseback financing receivable, net

 

$

266,168

 

 

$

271,658

 

Amounts due within one year

 

 

20,661

 

 

 

20,547

 

Amounts due beyond one year

 

 

245,507

 

 

 

251,111

 

Container leaseback financing receivable, net

 

$

266,168

 

 

$

271,658

 

 

(1) As of March 31, 2020, two customers represented 83.4% and 16.6% of the Company’s container leaseback financing receivable portfolio. As of December 31, 2019, two customers represented 82.9% and 17.1% of the Company’s container leaseback financing receivable portfolio.

Summary of Future Minimum Payments Receivable Under Net Investment in Finance Leases and Container Leaseback Financing Receivable

The following is a schedule, by year, of future minimum payments receivable under the net investment in finance leases and container leaseback financing receivable as of March 31, 2020:

 

Twelve months ending March 31:

 

Net Investment in Finance Leases

 

 

Container Leaseback Financing Receivable

 

 

Total

 

2021

 

$

61,638

 

 

$

36,017

 

 

$

97,655

 

2022

 

 

72,151

 

 

 

36,017

 

 

 

108,168

 

2023

 

 

50,390

 

 

 

36,017

 

 

 

86,407

 

2024

 

 

43,788

 

 

 

36,116

 

 

 

78,290

 

2025 and thereafter

 

 

232,697

 

 

 

224,702

 

 

 

459,013

 

Total future minimum lease payments receivable

 

$

460,664

 

 

$

368,869

 

 

$

829,533

 
Schedule of Other Information Related to Operating Leases Other information related to the Company's operating leases are as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating lease cost

 

$

527

 

 

$

532

 

Short-term and variable lease cost

 

 

31

 

 

 

8

 

Total rent expense

 

$

558

 

 

$

540

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

623

 

 

$

534

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Weighted-average remaining lease term

 

5.3 years

 

 

5.4 years

 

Weighted-average discount rate

 

4.76%

 

 

4.17%

 

 
Minimum Lease Payment under Noncancelable Operating Leases

Future minimum lease payment obligations under the Company’s noncancelable operating leases at March 31, 2020 were as follows:

 

 

Operating Leases

 

Twelve months ending March 31:

 

 

 

 

2021

 

$

2,184

 

2022

 

 

2,133

 

2023

 

 

2,055

 

2024

 

 

2,119

 

2025 and thereafter

 

 

6,852

 

Total minimum lease payments

 

 

15,343

 

Less imputed interest

 

 

(2,087

)

Total present value of operating lease liabilities

 

$

13,256

 
v3.20.1
Insurance Receivable and Impairment
 3 Months Ended
Mar. 31, 2020
Loss Contingency [Abstract]  
Insurance Receivable and Impairment

 

  (3)   Insurance Receivable and Impairment

 

During the second quarter of 2019, one of the Company’s customers became insolvent and the total net book value of its owned containers leased to this insolvent customer was $63,120. The Company maintains insurance that covers a portion of the exposure related to the value of containers that are unlikely to be recovered from this customer, the cost to recover containers and up to 183 days of lost lease rental income. Based on prior recovery experience, the Company estimated that containers with a book value of $9,468 would not be recovered from this insolvent customer. Accordingly, the Company recorded impairment charges of $9,059 included in “container lessee default expense, net” as of December 31, 2019. The Company also recorded bad debt expense of $2,921 to fully reserve for this insolvent customer’s outstanding accounts receivable as of December 31, 2019. Container recovery costs of $170 was recorded as an insurance receivable and included in “container lessee default expense, net” for the three months ended March 31, 2020. An insurance receivable of $1,962 and $1,792, net of insurance deductible was recorded in the “prepaid expenses and other current assets” in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively.

In August 2016, one of the Company’s customers filed for bankruptcy. The Company entered into a final agreement with the insurance companies on December 31, 2018 and remaining payments totaling $9,814 for the Company’s owned fleet were received during the three months ended March 31, 2019. The Company recorded a $14,881 gain on insurance recovery and legal settlement on a net cash distribution from the bankruptcy estate for its owned fleet during the fourth quarter of 2019. As of

March 31, 2020 and December 31, 2019, there is no insurance receivable for the Company’s owned fleet related to this bankrupt customer.
v3.20.1
Accounting Policies and Recent Accounting Pronouncements - Additional Information (Detail)
 3 Months Ended 12 Months Ended
Jan. 01, 2020
USD ($)
Mar. 31, 2020
USD ($)
Lessee
Lease
Mar. 31, 2019
USD ($)
Lessee
Dec. 31, 2019
USD ($)
Lease
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Fair value of net investment in direct financing and sales-type leases   $ 350,582,000   $ 299,275,000
Net investment in direct financing and sales-type leases   337,713,000   295,303,000
Fair value of container leaseback financing receivable   267,353,000   267,551,000
Net of container leaseback financing receivable   266,168,000   271,658,000
Fair value of long-term debt   3,410,284,000   3,798,683,000
Long-term debt   3,665,145,000   3,797,729,000
Addition to net fair value   589,000   167,000
Notional amounts   1,313,750,000    
Pre-tax gain (loss) on cash flow hedging instruments   62,000    
Derivative instruments are designated   0    
Notional amount of non-designated interest rate swap and cap agreements   778,750,000   920,500,000
Unrealized (loss) gain on derivative instruments, net   14,937,000 $ 5,738,000  
Allowance for credit losses as result of adoption   892,000    
ASU 2016-03        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Allowance for credit losses as result of adoption $ 892,000      
Accumulated Gain (Loss), Cash Flow Hedge Instruments        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Pre-tax gain (loss) on cash flow hedging instruments   8,858,000    
Interest Rate Swaps        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Notional amounts   $ 535,000,000   $ 110,000,000
Lease Rental Income | Customer Concentration Risk        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Number of lessees who made greater than 10% of lease rental | Lessee   0 0  
Accounts Receivable | Customer Concentration Risk        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Number of lessees that accounted for more than 10% of gross accounts receivable | Lease   0   0
Containers held for sale | Fair Value, Inputs, Level 2        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Assets measured at fair value on non-recurring basis   $ 23,165,000   $ 22,217,000
Containers        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Impairment charges of long lived assets held for use   0 $ 0  
Impairment charges to write-off containers   0 11,000  
Containers for Sale        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Asset impairment charges   $ 4,586,000 $ 1,520,000  
TL        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Ownership percentage in TW Container Leasing, Ltd.   50.10%    
Tap Funding Limited        
Accounting Policies And Recent Accounting Pronouncements [Line Items]        
Ownership percentage in TW Container Leasing, Ltd.   49.90%    
v3.20.1
Components of Net Investment in Finance Leases (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
Future minimum lease payments receivable $ 460,664 $ 385,589
Residual value of containers 11,122 11,143
Less: unearned income (133,086) (101,429)
Net investment in finance leases [1] 338,700 295,303
Less: Allowance for credit losses (987)  
Net investment in finance leases, net 337,713 295,303
Amounts due within one year 40,164 40,940
Amounts due beyond one year $ 297,549 $ 254,363
[1] As of March 31, 2020, two major customers represented 54.0% and 14.0% of the Company’s finance leases portfolio. As of December 31, 2019, two major customers represented 44.3% and 16.1% of the Company’s finance leases portfolio. No other customer represented more than 10% of the Company’s finance leases portfolio as of March 31, 2020 and December 31, 2019.
v3.20.1
Summary of Due to Container Investors, Net (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Related Party Transaction [Line Items]    
Distributions due to container investors on lease rentals collected, net of container expenses paid and management fees $ 5,798 $ 10,516
Due to container investors, net 19,151 21,978
Managed Fleet    
Related Party Transaction [Line Items]    
Accounts receivable 15,050 13,226
Prepaid expenses and other current assets 143 189
Accounts payable and accrued expenses (1,840) (1,953)
Due from to related party $ 13,353 $ 11,462
v3.20.1
Future Scheduled Repayments (Parenthetical) (Detail)
$ in Thousands
Mar. 31, 2020
USD ($)
Debt Instrument [Line Items]  
Prepaid debt issuance costs $ 25,115
TMCL V 2017-2 Bonds  
Debt Instrument [Line Items]  
Debt instrument exclude an unamortized discount 42
TMCL VII 2018-1 Bonds  
Debt Instrument [Line Items]  
Debt instrument exclude an unamortized discount 2,200
TMCL VII 2019-1 Bonds  
Debt Instrument [Line Items]  
Debt instrument exclude an unamortized discount $ 96
v3.20.1
Summary of Pre-tax Impact of Derivative Instruments on Condensed Consolidated Statements of Comprehensive (Loss) Income (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Derivative Instruments Gain Loss [Line Items]    
Pre-tax impact of derivative instruments $ (1,526) $ 1,444
Realized (loss) gain on derivative instruments, net | Non-designated    
Derivative Instruments Gain Loss [Line Items]    
Pre-tax impact of derivative instruments (1,526) 1,444
Unrealized loss on derivative instruments, net | Non-designated    
Derivative Instruments Gain Loss [Line Items]    
Pre-tax impact of derivative instruments (14,937) $ (5,738)
Other comprehensive loss | Designated    
Derivative Instruments Gain Loss [Line Items]    
Pre-tax impact of derivative instruments (8,858)  
Interest and debt income (expense), net | Designated    
Derivative Instruments Gain Loss [Line Items]    
Pre-tax impact of derivative instruments $ 62  
v3.20.1
Segment Information Geographic Allocation of Lease Rental Income and Management Fees (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Segment Reporting Information [Line Items]    
Lease rental income $ 145,478 $ 155,526
Percent of Total, Lease rental income 100.00% 100.00%
Percent of Total, Management fees 100.00% 100.00%
Asia    
Segment Reporting Information [Line Items]    
Lease rental income $ 72,795 $ 83,275
Percent of Total, Lease rental income 50.00% 53.50%
Percent of Total, Management fees 0.20% 0.20%
Bermuda    
Segment Reporting Information [Line Items]    
Percent of Total, Management fees 66.20% 55.80%
Europe    
Segment Reporting Information [Line Items]    
Lease rental income $ 64,727 $ 62,221
Percent of Total, Lease rental income 44.50% 40.00%
Percent of Total, Management fees 13.40% 25.00%
North / South America    
Segment Reporting Information [Line Items]    
Lease rental income $ 7,318 $ 9,294
Percent of Total, Lease rental income 5.00% 6.00%
Percent of Total, Management fees 0.30% 14.80%
All other international    
Segment Reporting Information [Line Items]    
Lease rental income $ 638 $ 736
Percent of Total, Lease rental income 0.50% 0.50%
Percent of Total, Management fees 19.90% 4.20%
Total Management Fees    
Segment Reporting Information [Line Items]    
Revenue $ 2,488 $ 4,374
Total Management Fees | Non Leasing From External Customers    
Segment Reporting Information [Line Items]    
Revenue 1,484 2,301
Total Management Fees | Non Leasing From External Customers | Asia    
Segment Reporting Information [Line Items]    
Revenue 3 4
Total Management Fees | Non Leasing From External Customers | Bermuda    
Segment Reporting Information [Line Items]    
Revenue 982 1,285
Total Management Fees | Non Leasing From External Customers | Europe    
Segment Reporting Information [Line Items]    
Revenue 199 576
Total Management Fees | Non Leasing From External Customers | North / South America    
Segment Reporting Information [Line Items]    
Revenue 4 340
Total Management Fees | Non Leasing From External Customers | All other international    
Segment Reporting Information [Line Items]    
Revenue $ 296 $ 96
v3.20.1
Minimum Lease Payment under Noncancelable Operating Leases (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Operating Lease Liabilities Payments Due [Abstract]    
2021 $ 2,184  
2022 2,133  
2023 2,055  
2024 2,119  
2025 and thereafter 6,852  
Total minimum lease payments 15,343  
Less imputed interest (2,087)  
Total present value of operating lease liabilities $ 13,256 $ 13,736
v3.20.1
Income Taxes - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Tax Disclosure [Abstract]    
Effective income tax rates 14.00% 2.13%
v3.20.1
Segment Information Geographic Allocation of Trading Container Sales Proceeds and Gains on Sale of Owned Fleet Containers Net (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Segment Reporting Information [Line Items]    
Gain on sale of owned fleet containers, net $ 5,794 $ 6,767
Percent of Total, Trading container sales proceeds 100.00% 100.00%
Percent of Total, Gain on sale of containers, net 100.00% 100.00%
Trading Containers    
Segment Reporting Information [Line Items]    
Revenue $ 9,585 $ 13,300
Asia    
Segment Reporting Information [Line Items]    
Gain on sale of owned fleet containers, net $ 2,446 $ 2,453
Percent of Total, Trading container sales proceeds 60.20% 67.00%
Percent of Total, Gain on sale of containers, net 42.20% 36.30%
Asia | Trading Containers    
Segment Reporting Information [Line Items]    
Revenue $ 5,778 $ 8,917
North / South America    
Segment Reporting Information [Line Items]    
Gain on sale of owned fleet containers, net $ 1,100 $ 2,101
Percent of Total, Trading container sales proceeds 28.40% 21.60%
Percent of Total, Gain on sale of containers, net 19.00% 31.00%
North / South America | Trading Containers    
Segment Reporting Information [Line Items]    
Revenue $ 2,721 $ 2,874
Europe    
Segment Reporting Information [Line Items]    
Gain on sale of owned fleet containers, net $ 1,044 $ 2,244
Percent of Total, Trading container sales proceeds 11.30% 11.30%
Percent of Total, Gain on sale of containers, net 18.00% 33.20%
Europe | Trading Containers    
Segment Reporting Information [Line Items]    
Revenue $ 1,081 $ 1,498
All other international    
Segment Reporting Information [Line Items]    
Gain on sale of owned fleet containers, net $ 1,204 $ (31)
Percent of Total, Trading container sales proceeds 0.10% 0.10%
Percent of Total, Gain on sale of containers, net 20.80% (0.50%)
All other international | Trading Containers    
Segment Reporting Information [Line Items]    
Revenue $ 5 $ 11
v3.20.1
Transactions with Affiliates and Container Investors
 3 Months Ended
Mar. 31, 2020
Related Party Transactions [Abstract]  
Transactions with Affiliates and Container Investors

(5)

Transactions with Affiliates and Container Investors

Due from affiliates, net of $2,112 and $1,880, as of March 31, 2020 and December 31, 2019, respectively, represents lease rentals on tank containers collected on behalf of and payable to the Company from the Company’s tank container manager, net of direct container expenses and management fees.

Total management fees earned from the Company’s managed fleet, including acquisition fees and sales commissions for the three months ended March 31, 2020 and 2019 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Fees from affiliated Container Investors

 

$

—

 

 

$

972

 

Fees from unaffiliated Container Investors

 

 

2,488

 

 

 

3,064

 

Fees from Container Investors

 

 

2,488

 

 

 

4,036

 

Other fees

 

 

—

 

 

 

338

 

Total management fees

 

$

2,488

 

 

$

4,374

 

 

 

The following table provides a summary of due to container investors, net at March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts receivable - managed fleet

 

$

15,050

 

 

$

13,226

 

Prepaid expenses and other current assets - managed fleet

 

 

143

 

 

 

189

 

Accounts payable and accrued expenses - managed fleet

 

 

(1,840

)

 

 

(1,953

)

Container contracts payable - managed fleet

 

 

—

 

 

 

—

 

 

 

 

13,353

 

 

 

11,462

 

Distributions due to container investors on lease rentals collected, net of

  container expenses paid and management fees

 

 

5,798

 

 

 

10,516

 

Due to container investors, net

 

$

19,151

 

 

$

21,978

 

 

There is no due to affiliated Container Investor as of March 31, 2020 and December 31, 2019.

 
v3.20.1
Debt and Derivative Instruments
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Debt and Derivative Instruments

(9)

Debt and Derivative Instruments

The following represents the Company’s debt obligations as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

Outstanding

 

Average Interest

 

 

Outstanding

 

Average Interest

 

 

Final Maturity

TL Revolving Credit Facility

 

$

1,211,166

 

 

2.43

%

 

$

1,280,037

 

 

3.29

%

 

September 2023

TL 2019 Term Loan

 

 

155,833

 

 

3.50

%

 

 

158,371

 

 

3.50

%

 

December 2026

TMCL II Secured Debt Facility (1)

 

 

670,015

 

 

2.45

%

 

 

689,658

 

 

3.49

%

 

July 2026

TMCL V 2017-1 Bonds

 

 

307,733

 

 

3.91

%

 

 

316,395

 

 

3.91

%

 

May 2042

TMCL V 2017-2 Bonds

 

 

385,506

 

 

3.73

%

 

 

395,836

 

 

3.73

%

 

June 2042

TMCL VI Term Loan

 

 

244,383

 

 

4.30

%

 

 

249,421

 

 

4.30

%

 

February 2038

TMCL VII 2018-1 Bonds

 

 

222,236

 

 

4.14

%

 

 

227,624

 

 

4.14

%

 

July 2043

TMCL VII 2019-1 Bonds

 

 

320,754

 

 

4.02

%

 

 

327,563

 

 

4.02

%

 

April 2044

TAP Funding Revolving Credit Facility (2)

 

 

147,519

 

 

2.65

%

 

 

152,824

 

 

3.69

%

 

December 2021

Total debt obligations

 

$

3,665,145

 

 

 

 

 

$

3,797,729

 

 

 

 

 

 

Amount due within one year

 

$

239,066

 

 

 

 

 

$

242,433

 

 

 

 

 

 

Amounts due beyond one year

 

$

3,426,079

 

 

 

 

 

$

3,555,296

 

 

 

 

 

 

 

 

(1)

Final maturity of the TMCL II Secured Debt Facility is based on the assumption that the facility will not be extended on its associated conversion date.

  

 

(2)

In February 2020, the Company entered into an amendment of the TAP Funding Revolving Credit Facility which decreased the aggregate commitment amount from $190,000 to $155,000, reduced the advance rate from 80% to 78%, and revised certain of the covenants and restrictions. The Company wrote-off $122 of unamortized debt issuance costs during the three months ended March 31, 2020 related to the amendment of TAP Funding Revolving Credit Facility.

 

The Company’s debt agreements contain various restrictive financial and other covenants and the Company was in full compliance with these restrictive covenants at March 31, 2020.

 

The following is a schedule of future scheduled repayments, by year, and borrowing capacities, as of March 31, 2020:

 

 

 

Twelve months ending March 31,

 

 

Available Borrowing,

 

 

Current

and Available

Borrowing,

 

 

 

 

 

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025 and

thereafter

 

 

Total

Borrowing

 

 

as limited by the Borrowing Base

 

 

as limited by the

Borrowing Base

 

 

Total Commitment

 

TL Revolving Credit Facility

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,217,000

 

 

$

—

 

 

$

1,217,000

 

 

$

183,924

 

 

$

1,400,924

 

 

$

1,500,000

 

TL 2019 Term Loan

 

 

10,616

 

 

 

10,993

 

 

 

11,384

 

 

 

11,789

 

 

 

112,622

 

 

 

157,404

 

 

 

—

 

 

 

157,404

 

 

 

157,404

 

TMCL II Secured Debt Facility

 

 

61,739

 

 

 

64,280

 

 

 

56,575

 

 

 

52,696

 

 

 

439,116

 

 

 

674,406

 

 

 

—

 

 

 

674,406

 

 

 

1,200,000

 

TMCL V 2017-1 Bonds

 

 

42,136

 

 

 

55,352

 

 

 

64,330

 

 

 

61,453

 

 

 

86,751

 

 

 

310,022

 

 

 

—

 

 

 

310,022

 

 

 

310,022

 

TMCL V 2017-2 Bonds (1)

 

 

45,734

 

 

 

58,676

 

 

 

70,222

 

 

 

81,144

 

 

 

132,615

 

 

 

388,391

 

 

 

—

 

 

 

388,391

 

 

 

388,391

 

TMCL VI Term Loan

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

25,500

 

 

 

144,236

 

 

 

246,236

 

 

 

—

 

 

 

246,236

 

 

 

246,236

 

TMCL VII 2018-1 Bonds (1)

 

 

18,601

 

 

 

18,655

 

 

 

18,655

 

 

 

18,655

 

 

 

152,190

 

 

 

226,756

 

 

 

—

 

 

 

226,756

 

 

 

226,756

 

TMCL VII 2019-1 Bonds (1)

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

28,000

 

 

 

212,333

 

 

 

324,333

 

 

 

—

 

 

 

324,333

 

 

 

324,333

 

TAP Funding Revolving Credit

   Facility

 

 

13,033

 

 

 

135,017

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

148,050

 

 

 

567

 

 

 

148,617

 

 

 

155,000

 

   Total (2)

 

$

245,359

 

 

$

396,473

 

 

$

274,666

 

 

$

1,496,237

 

 

$

1,279,863

 

 

$

3,692,598

 

 

$

184,491

 

 

$

3,877,089

 

 

$

4,508,142

 

 

 

(1)

Future scheduled payments for TMCL V 2017-2 Bonds, TMCL VII 2018-1 and TMCL VII 2019-1 Bonds exclude an unamortized discount of $42, $2,200 and $96, respectively.

 

(2)

Future scheduled payments for all debts exclude unamortized prepaid debt issuance costs in an aggregate amount of $25,115.

For further discussion on the Company’s debt instruments, please refer to Item 18, “Financial Statements – Note 9” in our 2019 Form 20-F.

 

Derivative Instruments and Hedging Activities

The following is a summary of the Company’s derivative instruments as of March 31, 2020:

 

 

 

Notional

 

Derivative instruments

 

amount

 

Interest rate swap contracts with several banks, with fixed rates between 1.39%

   and 2.94% per annum, amortizing notional amounts, with termination dates

   through January 15, 2023, non-designated

 

$

744,750

 

Interest rate swap contracts with several banks, with fixed rates between 0.43%

   and 1.58% per annum, amortizing notional amounts, with termination dates

   through March 15, 2025, designated

 

 

535,000

 

Interest rate cap contracts with several banks with fixed rates between 3.00%

   and 5.00% per annum, nonamortizing notional amounts, with termination dates

   through December 15, 2021, non-designated

 

 

34,000

 

      Total notional amount as of March 31, 2020

 

$

1,313,750

 

 

The Company expects to reclassify an estimated net gain amount of $410 related to the designated interest rate swap agreements from “accumulated other comprehensive (loss) income” to “interest expense” in the condensed consolidated statements of comprehensive (loss) income over the next twelve months. The following table summarizes the pre-tax impact of derivative instruments on the condensed consolidated statements of comprehensive (loss) income during the three months ended March 31, 2020 and 2019:

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2020

 

 

2019

 

Derivative instruments

 

Financial Statement Caption

 

 

 

 

 

 

 

 

Non-designated derivative instruments

 

Realized (loss) gain on derivative instruments, net

 

$

(1,526

)

 

$

1,444

 

Non-designated derivative instruments

 

Unrealized loss on derivative instruments, net

 

$

(14,937

)

 

$

(5,738

)

Designated derivative instruments

 

Other comprehensive loss

 

$

(8,858

)

 

$

—

 

Designated derivative instruments

 

Interest and debt income (expense), net

 

$

62

 

 

$

—

 

 

For further discussion on the Company’s derivative instruments, please refer to Item 18, “Financial Statements – Note 9” in our 2019 Form 20-F.
v3.20.1
Accounting Policies and Recent Accounting Pronouncements (Policies)
 3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Accounting

 

(a)

Basis of Accounting

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019 (“2019 Form 20-F”) filed with the Securities and Exchange Commission on March 30, 2020.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal and recurring adjustments) necessary to present fairly the Company’s condensed consolidated balance sheet as of March 31, 2020, the Company’s condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2020 and 2019, condensed consolidated statements of shareholders’ equity for the three months ended March 31, 2020 and 2019 and condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019. These condensed consolidated financial statements are not necessarily indicative of the results of operations or cash flows that may be reported for the remainder of the fiscal year ending December 31, 2020.

Principles of Consolidation and Variable Interest Entity

 

(b)

Principles of Consolidation and Variable Interest Entity

The condensed consolidated financial statements of the Company include TGH and all of its subsidiaries in which the Company has a controlling financial interest. All significant intercompany accounts and balances have been eliminated in consolidation.

TAP Funding

TAP Funding Ltd. (“TAP Funding”) (a Bermuda company) is a joint venture between the Company’s wholly-owned subsidiary, Textainer Limited (“TL”) (a Bermuda company) and TAP Ltd. (“TAP”) in which TL owns 50.1%, TAP owns 49.9% of the common shares of TAP Funding, and TAP Funding is a voting interest entity (“VME”).  The Company consolidates TAP Funding as the Company has a controlling financial interest in TAP Funding.

The equity owned by TAP in TAP Funding is shown as a noncontrolling interest on the Company’s condensed consolidated balance sheets and the net (loss) income attributable to the noncontrolling interest’s operations is shown as net (loss) income attributable to the noncontrolling interests on the Company’s condensed consolidated statements of comprehensive (loss) income.
Containers

 

(c)

Containers

Capitalized container costs include the container cost payable to the manufacturer and the associated transportation costs incurred in moving the Company’s containers from the manufacturer to the containers’ first destined port. Containers are depreciated using the straight-line method over their estimated useful lives to an estimated dollar residual value. Used containers are depreciated based upon their remaining useful lives at the date of acquisition to an estimated dollar residual value.

The cost, accumulated depreciation and net book value of the Company’s container leasing equipment by equipment type as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Dry containers other than

   open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

$

1,594,605

 

 

$

(403,041

)

 

$

1,191,564

 

 

$

1,627,878

 

 

$

(396,247

)

 

$

1,231,631

 

40'

 

 

158,877

 

 

 

(57,123

)

 

 

101,754

 

 

 

167,011

 

 

 

(58,852

)

 

 

108,159

 

40' high cube

 

 

2,442,977

 

 

 

(609,710

)

 

 

1,833,267

 

 

 

2,510,937

 

 

 

(592,374

)

 

 

1,918,563

 

45' high cube

 

 

28,451

 

 

 

(11,784

)

 

 

16,667

 

 

 

28,670

 

 

 

(11,488

)

 

 

17,182

 

Refrigerated containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

 

20,437

 

 

 

(7,576

)

 

 

12,861

 

 

 

20,484

 

 

 

(7,258

)

 

 

13,226

 

20' high cube

 

 

5,140

 

 

 

(3,185

)

 

 

1,955

 

 

 

5,139

 

 

 

(3,090

)

 

 

2,049

 

40' high cube

 

 

1,051,945

 

 

 

(353,084

)

 

 

698,861

 

 

 

1,052,707

 

 

 

(338,068

)

 

 

714,639

 

Open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' folding flat

 

 

17,539

 

 

 

(4,692

)

 

 

12,847

 

 

 

17,617

 

 

 

(4,538

)

 

 

13,079

 

40' folding flat

 

 

50,757

 

 

 

(17,631

)

 

 

33,126

 

 

 

51,152

 

 

 

(17,278

)

 

 

33,874

 

20' open top

 

 

12,980

 

 

 

(1,646

)

 

 

11,334

 

 

 

13,259

 

 

 

(1,625

)

 

 

11,634

 

40' open top

 

 

23,155

 

 

 

(4,465

)

 

 

18,690

 

 

 

23,313

 

 

 

(4,351

)

 

 

18,962

 

Tank containers

 

 

83,247

 

 

 

(8,740

)

 

 

74,507

 

 

 

81,151

 

 

 

(7,998

)

 

 

73,153

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 

 

 

See Note 4 “Managed Container Fleet” for information on the managed fleet containers included above.

 

Impairment of Container Rental Equipment

The Company reviews its containers for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The Company compares the carrying value of the containers to the expected future undiscounted cash flows for the purpose of assessing the recoverability of the recorded amounts. If the carrying value exceeds expected future undiscounted cash flows, the assets are reduced to fair value. There was no such impairment of the Company’s leasing equipment for the three months ended March 31, 2020 and 2019.

 

Write-Off of Container Rental Equipment due to Lessees in Default

 

The Company evaluates the recoverability of the recorded amounts of containers that are unlikely to be recovered from lessees in default. The Company recorded impairment charges during the three months ended March 31, 2020 and 2019 of $0 and $11, respectively, to write-off containers that were unlikely to be recovered from lessees in default, net of gains associated with recoveries on containers previously estimated as lost with lessees in default. These amounts are recorded in the condensed consolidated statements of comprehensive income as “container lessee default recovery, net”.

 

Impairment of Containers Held for Sale

Containers identified as being available for sale are valued at the lower of carrying value or fair value, less costs to sell. The Company records impairment to write-down the value of containers held for sale to their estimated fair value, less cost to sell, under observable (Level 2) market inputs. The fair value was estimated based on recent gross sales proceeds for sales of similar containers. Any subsequent increase in fair value less costs to sell is recognized as a reversal of container impairment but not in excess of the cumulative loss previously recognized. The carrying value of containers held for sale that have been impaired to write down the value of the containers to their estimated fair value less cost to sell was $23,165 and $22,217 as of March 31, 2020 and December 31, 2019, respectively. When containers are retired or otherwise sold, the cost and related accumulated depreciation are removed, and any resulting gain or loss is recognized.

During the three months ended March 31, 2020 and 2019, the Company recorded container impairments of $4,586 and $1,520, respectively, to write down the value of containers held for sale to their estimated fair value less cost to sell, net of reversals of previously recorded impairments on containers held for sale due to rising used container prices, and was included in “depreciation expense” in the condensed consolidated statements of comprehensive (loss) income.

Concentrations

 

  (d)

Concentrations

The Company’s customers are mainly international shipping lines, which transport goods on international trade routes. Once the containers are on-hire with a lessee, the Company does not track their location. The domicile of the lessee is not indicative of where the lessee is transporting the containers. The Company’s business risk in its foreign concentrations lies with the creditworthiness of the lessees rather than the geographic location of the containers or the domicile of the lessees.

Except for the lessees noted in the tables below, no other single lessee made up greater than 10% of the Company’s lease rental income from its owned fleet for the three months ended March 31, 2020 and 2019 and more than 10% of the Company’s gross accounts receivable from its owned fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - owned fleet

 

2020

 

 

2019

 

Customer A

 

16.9%

 

 

13.6%

 

Customer B

 

13.2%

 

 

13.8%

 

 

Gross Accounts Receivable- owned fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

11.3%

 

 

17.1%

 

Customer B

 

16.1%

 

 

11.2%

 

 

Total fleet lease rental income, as reported in the condensed consolidated statements of comprehensive (loss) income, comprises revenue earned from leases on containers in the Company’s total fleet, including revenue earned from leases on containers in its managed fleet. Except for the lessees noted in the table below, no other single lessee accounted for more than 10% of the Company’s total fleet lease rental income for the three months ended March 31, 2020 and 2019, as well, there is no other single lessee that accounted for more than 10% of the Company’s gross accounts receivable from its total fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - total fleet

 

2020

 

 

2019

 

Customer A

 

16.5%

 

 

13.4%

 

Customer B

 

14.4%

 

 

13.8%

 

 

Gross Accounts Receivable- total fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

17.7%

 

 

16.6%

 

Customer B

 

19.2%

 

 

12.0%

 

 
Net (Loss) Income Attributable to Textainer Group Holdings Limited Common Shareholders Per Common Share

(e)   Net (Loss) Income Attributable to Textainer Group Holdings Limited Common Shareholders Per Common Share

 

Basic earnings per share (“EPS”) is computed by dividing net (loss) income attributable to Textainer Group Holdings Limited common shareholders by the weighted average number of shares outstanding during the applicable period. Diluted EPS reflects the potential dilution that could occur if all outstanding share options were exercised for, and all outstanding restricted share units were converted into, common shares. A reconciliation of the numerator and denominator of basic EPS with that of diluted EPS is reported as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Share amounts in thousands

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders

 

$

(4,379

)

 

$

17,050

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

56,455

 

 

 

57,475

 

Dilutive share options and restricted share units

 

 

—

 

 

 

112

 

Weighted average common shares outstanding - diluted

 

 

56,455

 

 

 

57,587

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders per common share

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.30

 

Diluted

 

$

(0.08

)

 

$

0.30

 

 

 

 

 

 

 

 

 

 

Share options and restricted share units excluded from

    the computation of diluted EPS because they were anti-dilutive

 

 

2,147

 

 

 

1,603

 

 

 

Given that the Company had a net loss attributable to Textainer Group Holdings Limited common shareholders for the three months ended March 31, 2020, there was no dilutive effect of share options and restricted share units.

Fair Value Measurements

 

(f)

Fair Value Measurements

 

The Company’s financial instruments include cash and cash equivalents; restricted cash; accounts receivable and payable; container leaseback financing receivable; net investment in finance leases; due from affiliates, net; container contracts payable; due to container investors, net; debt and derivative instruments. See Note 2 (c) “Containers” and Note 2 (g) “Derivative Instruments and Hedging” for further discussions on fair value of containers held for sale and fair value of derivative instruments, respectively.

At March 31, 2020 and December 31, 2019, the fair value of the Company’s financial instruments approximated the related book value of such instruments except that, the fair value of net investment in finance leases (including the short-term balance) was approximately $350,582 and $299,275 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $337,713 and $295,303 at March 31, 2020 and December 31, 2019, respectively. The fair value of container leaseback financing receivable (including the short-term balance) was approximately $267,353 and $267,551 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $266,168 and $271,658 at March 31, 2020 and December 31, 2019, respectively. The fair value of long-term debt (including current maturities) based on the borrowing rates available to the Company was approximately $3,410,284 and $3,798,683 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $3,665,145 and $3,797,729 at March 31, 2020 and December 31, 2019, respectively.
Derivative Instruments and Hedging

 

(g)

Derivative Instruments and Hedging

The Company has entered into various interest rate swap and cap agreements to mitigate its exposure associated with its variable rate debt. The Company has utilized the income approach to measure at each balance sheet date the fair value of its derivative instruments using observable (Level 2) market inputs. The valuation also reflects the credit standing of the Company and the counterparties to the derivative agreements. The credit valuation adjustment was determined to be

$589 and $167 (both were additions to the net fair value) as of March 31, 2020 and December 31, 2019, respectively. See Note 9 “Debt and Derivative Instruments” for further discussions.

Derivative instruments are designated or non-designated for hedge accounting purposes. The fair value of the derivative instruments is reflected on a gross basis on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

December 31, 2019

 

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swaps - not designated as hedges

 

$

—

 

 

$

135

 

 

Total

 

$

—

 

 

$

135

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Interest rate swaps - designated as hedges

 

$

9,037

 

 

$

117

 

 

Interest rate swaps - not designated as hedges

 

 

28,463

 

 

 

13,661

 

 

Total

 

$

37,500

 

 

$

13,778

 

 

 

Designated Derivative Instruments

As of March 31, 2020 and December 31, 2019, the Company has designated interest rate swap agreements for a total notional amount of $535,000 and $110,000, respectively, as a cash flow hedge for accounting purposes. The change in fair value of cash flow hedging instruments during the three months ended March 31, 2020 of $8,858 pre-tax loss was recorded on the condensed consolidated balance sheets in “accumulated other comprehensive (loss) income” and a $62 pre-tax gain was reclassified to “interest expense, net” when realized. As of March 31, 2019, none of the derivative instruments are designated by the Company for hedge accounting.

 

Non-Designated Derivative Instruments

As of March 31, 2020 and December 31, 2019, the Company has non-designated interest rate swap and cap agreements for a total notional amount of $778,750 and $920,500, respectively. The fair value of the non-designated derivative instruments is measured at each balance sheet date and the change in fair value during the three months ended March 31, 2020 and 2019 of $14,937 and $5,738, respectively, was recorded in the condensed consolidated statements of comprehensive (loss) income as “unrealized loss on derivative instruments, net.” The differentials between the fixed and variable rate payments under these agreements are recognized in “realized (loss) gain on derivative instruments, net” in the condensed consolidated statements of comprehensive (loss) income when realized.
Revenue Recognition

 

(h)

Revenue Recognition

The components of the Company’s revenue as reported in the condensed consolidated statements of comprehensive (loss) income and in Note 10 “Segment Information” are as follows:

Lease Rental Income

Lease rental income arises principally from leasing containers to various international shipping lines and includes all rental charges billed to the lessees. Lease rental income - owned fleet comprises rental income for the container fleet owned by the Company. Lease rental income - managed fleet comprises rental income for the container fleet owned by the Container Investors. For lease accounting purposes, the management agreements with these Container Investors are deemed to convey to the Company the right to control the use of the managed containers and are therefore accounted for as “lease rental income - managed fleet” as reported in the condensed consolidated statements of comprehensive (loss) income (see Note 4 “Managed Container Fleet” for further information).

Revenue is earned and recognized evenly over the period that the equipment is on lease. Where minimum lease payments vary over the lease term, revenue is recognized on a straight-line basis over the term of the lease. Interest income from finance leases and sales-type leaseback arrangements that are accounted for as financing transactions are recognized using the effective interest method, which generates a constant rate of interest over the period of the arrangement.

 

Management Fees - Non-leasing

 

Under the Company’s management service agreements with Container Investors, fees are earned for the acquisition and sale of containers under management. Acquisition fees from purchases of containers for managed fleet are deferred and recognized as earned on a straight-line basis over the deemed lease term.

 

Trading Container Margin

 

The Company’s trading container sales proceeds arise from the resale of new and used containers to a wide variety of buyers. The related expenses represent the cost of trading containers sold as well as other selling costs that are recognized as incurred. Revenue is recorded when control of the containers is transferred to the customer, which typically occurs upon delivery to, or pick-up by, the customer and when collectability is reasonably assured.

 

Gain on Sale of Owned Fleet Containers, Net

 

The Company also generally sells containers at the end of their useful lives or when it is financially attractive to do so. The gain on sale of owned fleet containers is the excess of the sale price over the carrying value for these units at the time of sale. Revenue is recorded when control of the containers is transferred to the customer, which typically occurs upon delivery to, or pick-up by, the customer and when collectability is reasonably assured.

 

Gain on sale of owned fleet containers, net, also includes gains (losses) recognized at the inception of sales-type leases of our owned fleet, representing the excess (deficiency) of the estimated fair value of containers placed on sales-type leases over (below) their book value.

For further discussion on the Company’s revenue recognition accounting policy, please refer to Note 1 “Nature of Business and Summary of Significant Accounting Polices” in Item 18, “Financial Statements” in our 2019 Form 20-F.
Allowance for Credit Losses

 

(i)

Allowance for Credit Losses

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses over the life of the Company’s net investments in finance leases and container leaseback financing receivable. Operating lease receivables are accounted for under Topic 842, Leases and are not within the scope of Topic 326. The guidance requires the measurement of expected credit losses using a forward-looking approach based on relevant information from past events, current conditions, and reasonable and supportable forecasts that affect collectability.

 

The Company adopted ASU 2016-13 and all related amendments on the effective date of January 1, 2020 using the modified retrospective method by recognizing the cumulative effect adjustment to the opening balance of retained earnings at the adoption date. Periods prior to the adoption date that are presented for comparative purposes are not adjusted. As a result of the adoption of ASU 2016-13, the Company recognized a beginning balance transition adjustment to the allowance for credit losses on January 1, 2020 of $892, with a cumulative effect adjustment to the opening balance of retained earnings in the condensed consolidated balance sheet and condensed consolidated statement of stockholder’s equity as of March 31, 2020.

 

Accounts receivable, net investment in finance leases and container leaseback financing receivable are stated at amortized cost net of allowance for credit losses. The Company maintains allowances for credit losses resulting from the inability of its lessees to make required payments under operating leases, finance leases and container leaseback financing receivable. Changes in economic conditions or other events may necessitate additions or deductions to the allowance for credit losses (see Note 7 “Allowance for Credit Losses” for further information).

 

The Company estimates its potential future expected credit losses based on historical losses from lessee defaults, current economic conditions and reasonable and supportable forecasts that may affect the collectability of the reported amount. The Company evaluates its exposure by portfolio with similar risk characteristics based on the credit worthiness, external credit data and overall credit quality of its lessees.

The Company’s internal risk rating categories are “Tier 1” for the lowest level of risk which are typically the large international shipping lines with strong financial and asset base; “Tier 2” for moderate level of risk which includes lessees which are well-established in the market; and “Tier 3” for the highest level of risk which includes smaller shipping lines or lessees that exhibit high volatility in payments on a regular basis.
Recently Issued Accounting Standards

 

(j)

Recently Issued Accounting Standards

 

In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles - Goodwill and Other (Topic 350) - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).  The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019 and may be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. The Company adopted ASU 2018-15 during the three months ended March 31, 2020 using the prospective transition approach and the adoption of the standard did not result in a material impact on the Company’s condensed consolidated financial statements.

 

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met, that reference LIBOR or another rate that is expected to be discontinued due to reference rate reform. The amendments in ASU 2020-04 are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company will continue its review of the debt and derivative agreements during the transition period until the LIBOR cessation by the end of 2021. The Company expects the adoption of this guidance will not have a material impact on the Company’s condensed consolidated financial statements.

 

On April 10, 2020, the FASB issued a question-and-answer document regarding accounting for lease concessions and other effects of the coronavirus disease pandemic (“COVID-19”). The document clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Leases ASC 842. Instead, an entity that elects not to evaluate whether a concession is a modification can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election only when concessions related to the effects of COVID-19 do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Upon issuance of this document, the Company made the election to apply the practical expedient method to account for any concessions as if they were contemplated as part of our existing leases and will apply this election consistently for all leases. There were no material concessions related to the COVID-19 that were granted (as a lessor) or received (as a lessee) as of March 31, 2020.
v3.20.1
Managed Container Fleet - Additional Information (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Property, Plant and Equipment [Line Items]    
Deferred revenue from acquisition fees $ 2,583 $ 3,109
Managed Containers    
Property, Plant and Equipment [Line Items]    
Containers, deemed financial liability $ 17,319 $ 17,449
v3.20.1
Schedule of Concentration Risk of Total Fleet Gross Accounts Receivable (Detail) - Gross Accounts Receivable - Customer Concentration Risk
 3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Customer A    
Concentration Risk [Line Items]    
Percentage of lease rental income 17.70% 16.60%
Customer B    
Concentration Risk [Line Items]    
Percentage of lease rental income 19.20% 12.00%
v3.20.1
Schedule of Other Information Related to Operating Leases (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Lessee Disclosure [Abstract]      
Operating lease cost $ 527 $ 532  
Short-term and variable lease cost 31 8  
Total rent expense 558 540  
Cash paid for amounts included in the measurement of lease liabilities $ 623 $ 534  
Weighted-average remaining lease term 5 years 3 months 18 days   5 years 4 months 24 days
Weighted-average discount rate 4.76%   4.17%
v3.20.1
Allowance For Credit Losses - Summary of Changes in Carrying Amount of Allowance for Credit Losses (Detail)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
USD ($)
Financing Receivable Allowance For Credit Losses [Line Items]  
Balance as of December 31, 2019 $ 6,299
Adoption of ASU 2016-13 on January 1, 2020 892
Additions charged to expense 2,291
Balance as of March 31, 2020 9,482
Accounts Receivable  
Financing Receivable Allowance For Credit Losses [Line Items]  
Balance as of December 31, 2019 6,299
Additions charged to expense 1,727
Balance as of March 31, 2020 8,026
Net Investment in Finance Leases  
Financing Receivable Allowance For Credit Losses [Line Items]  
Adoption of ASU 2016-13 on January 1, 2020 636
Additions charged to expense 351
Balance as of March 31, 2020 987
Container Leaseback Financing Receivable  
Financing Receivable Allowance For Credit Losses [Line Items]  
Adoption of ASU 2016-13 on January 1, 2020 256
Additions charged to expense 213
Balance as of March 31, 2020 $ 469
v3.20.1
Commitments and Contingencies - Additional Information (Detail) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Commitments And Contingencies Disclosure [Line Items]    
Restricted cash $ 97,334,000 $ 97,353,000
Containers orders placed 258,732,000  
Future minimum lease payment obligations 15,343,000  
Fleet Management Agreements    
Commitments And Contingencies Disclosure [Line Items]    
Future minimum lease payment obligations $ 0  
v3.20.1
Share Repurchase Program
 3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Share Repurchase Program

(12) Share Repurchase Program

 

In August 2019, the Company’s board of directors approved a share repurchase program of up to $25,000 of the Company’s common shares. Under the program, the Company may purchase its common shares from time to time in the open market, in privately negotiated transactions or such other manner as will comply with applicable laws and regulations. The authorization does not obligate us to acquire a specific number of shares during any period, but it may be modified, suspended or terminated at any time at the discretion of the Company’s board of directors. As of December 31, 2019, the Company repurchased 878,637 shares at an average price of $9.75 and for a total amount of $8,597, including commission paid.

 

In March 2020, the Company’s board of directors approved an amendment to the share repurchase program to increase from $25,000 to an aggregate of $50,000 of the Company’s common shares that may be repurchased under the program (including all common shares repurchased under the program prior to this amendment), commencing in September 2019 up to and including September 1, 2022.

 

During the three months ended March 31, 2020, the Company repurchased 1,947,443 shares at an average price of $7.91 for a total amount of $15,477, including commission paid. As of March 31, 2020, approximately $26,000 remained available for repurchases under the share repurchase program.
v3.20.1
Managed Container Fleet
 3 Months Ended
Mar. 31, 2020
Revenue From Contract With Customer [Abstract]  
Managed Container Fleet

(4)    Managed Container Fleet

 

Lease rental income and expenses from the managed fleet owned by Container Investors are reported on a gross basis. Lease rental income – managed fleet represents rental charges billed to the ultimate lessee for the managed fleet, including charges for handling fees, drop-off charges, pick-up charges, and charges for a damage protection plan that is set forth in the leases.

 

Management fees from non-leasing services are earned for acquiring new managed containers and sales commissions are earned from sales of the managed containers on behalf of the Container Investors, which are generally calculated as a fixed percentage of the cost of the managed containers purchased and the proceeds from the sale of the managed containers, respectively. Acquisition fees from purchases of containers for the managed fleet are deferred and recognized as earned on a straight-line basis over the deemed lease term. As of March 31, 2020 and December 31, 2019, deferred revenue from acquisition fees amounted to $2,583 and $3,109, respectively.

 

Containers - December 31, 2018 and Prior

 

Distribution expense to managed fleet container investors represents direct container expenses of the managed containers and the amounts distributed to the Container Investors, reduced by associated lease management fees earned and retained by the Company.

 

Managed containers in the Company’s managed fleet on or before December 31, 2018 are not included in the Company’s container leasing equipment in the Company’s condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019.

 

Container Purchases On or After January 1, 2019

 

Distribution expense to managed fleet container investors represents direct container expenses of the managed containers.

 

From an accounting perspective, in accordance with Topic 842 which is effective January 1, 2019 for the Company and under the above management arrangements, the Company is deemed to control the containers owned by the Container Investors before they are leased out. Furthermore, the deemed leaseback is considered a sales-type lease under Topic 842, with the Company as lessee and the Container Investors as lessors.

 

For accounting purposes, the Company is deemed to own the managed containers purchased by the Company on or after January 1, 2019 for and on behalf of Container Investors, notwithstanding the contractual management relationship which the Company has with the Container Investors. Accordingly, such managed containers are included in the Company’s container leasing equipment in the Company’s condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019 and depreciated using the straight-line method over their estimated useful lives to an estimated dollar residual value per the Company’s depreciation policy (see Note 2 (c) “Accounting Policies and Recent Accounting Pronouncements – Containers”). The purchase consideration paid by the Container Investors for such containers is reported as a deemed financial liability of the Company. Subsequent net operating income distributions made by the Company to the Container Investors are recorded as a reduction to the financial liability and as interest expense using the effective interest method. The net book value for these managed containers and the associated financial liability will reduce over time and will be removed upon container sale, irrespective of the amount realized in such sale.  

 

  As of March 31, 2020 and December 31, 2019, the Company’s deemed container leaseback financial liability to the Container Investor amounted to $17,319 and $17,449, respectively, which were reported as "other liabilities” in the condensed consolidated balance sheet.

The Company’s container leasing equipment includes such managed containers in the condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019, which consisted of the following:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Containers - owned fleet

 

$

5,474,139

 

 

$

(1,482,366

)

 

$

3,991,773

 

 

$

5,582,986

 

 

$

(1,442,986

)

 

$

4,140,000

 

Containers - managed fleet

 

 

15,971

 

 

 

(311

)

 

 

15,660

 

 

 

16,332

 

 

 

(181

)

 

 

16,151

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 

 

 

Total management fee income from the managed fleet, including management fees earned from acquisition fees and sales commissions during the three months ended March 31, 2020 and 2019 were as follows (see Note 5 “Transactions with Affiliates and Container Investors”):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Lease rental income - managed fleet

 

$

15,406

 

 

$

26,553

 

Less: distribution expense to managed fleet container investors

 

 

(14,163

)

 

 

(24,480

)

Less: depreciation and interest expense on managed containers

    purchased on or after January 1, 2019

 

 

(239

)

 

 

—

 

Management fees from leasing

 

 

1,004

 

 

 

2,073

 

Management fees from non-leasing services

 

 

1,484

 

 

 

2,301

 

     Total management fees

 

$

2,488

 

 

$

4,374

 

 

 

 

 

 

 

 

 

 

 

The Company’s condensed consolidated balance sheets also include the accounts receivable from the lessees of the managed fleet which are uncollected lease billings related to the containers managed by the Company for the Container Investors. Amounts billed under leases for the managed fleet (“sub-leases”) are recorded in accounts receivable with a corresponding credit to due to Container Investors. As sub-lessor, accounts receivable from the managed fleet represent receivables from lessees that the Company is required to remit, in terms of the management agreements, to the Container Investors once paid. The Company’s condensed consolidated balance sheets also include the prepaid expenses, accounts payable and accrued expenses and container contracts payable related to the containers managed by the Company for the Container Investors.

 

The following table provides a reconciliation of the balance sheet accounts from the managed fleet to the total amount as of March 31, 2020 and December 31, 2019 in the condensed consolidated balance sheets (also, see Note 5 “Transactions with Affiliates and Container Investors”): 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts receivable - owned fleet

 

$

103,855

 

 

$

96,158

 

Accounts receivable - managed fleet

 

 

15,050

 

 

 

13,226

 

Total accounts receivable

 

$

118,905

 

 

$

109,384

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets - owned fleet

 

$

14,224

 

 

$

14,627

 

Prepaid expenses and other current assets - managed fleet

 

 

143

 

 

 

189

 

Total prepaid expenses and other current assets

 

$

14,367

 

 

$

14,816

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses - owned fleet

 

$

19,659

 

 

$

21,451

 

Accounts payable and accrued expenses - managed fleet

 

 

1,840

 

 

 

1,953

 

Total accounts payable and accrued expenses

 

$

21,499

 

 

$

23,404

 

 

 

 

 

 

 

 

 

 

Container contracts payable - owned fleet

 

$

5,294

 

 

$

9,394

 

Container contracts payable - managed fleet

 

 

—

 

 

 

—

 

Total container contracts payable

 

$

5,294

 

 

$

9,394

 
v3.20.1
Income Taxes
 3 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

(8)

Income Taxes

 

 

The Company’s effective income tax rates were 14.0% and 2.13% for the three months ended March 31, 2020 and 2019, respectively. The Company has computed its provision for income taxes based on the estimated annual effective income tax rate and is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income the Company earns in those jurisdictions.  It is also affected by the changes in discrete items that may occur in any given period. The change in the effective income tax rate for the three months ended March 31, 2020 versus the same period in 2019 was primarily due to an income tax benefit associated with discrete items and a net loss for the three months ended March 31, 2020.
v3.20.1
Schedule of Company's Leasing Equipment (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Property, Plant and Equipment [Line Items]    
Containers, cost $ 5,490,110 $ 5,599,318
Containers, accumulated depreciation (1,482,677) (1,443,167)
Containers, net book value 4,007,433 4,156,151
Containers - Owned Fleet    
Property, Plant and Equipment [Line Items]    
Containers, cost 5,474,139 5,582,986
Containers, accumulated depreciation (1,482,366) (1,442,986)
Containers, net book value 3,991,773 4,140,000
Containers - Managed Fleet    
Property, Plant and Equipment [Line Items]    
Containers, cost 15,971 16,332
Containers, accumulated depreciation (311) (181)
Containers, net book value $ 15,660 $ 16,151
v3.20.1
Reconciliation of Numerator and Denominator of Basic Earnings per Share ("EPS") with that of Diluted EPS (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Numerator:    
Net income (loss) attributable to Textainer Group Holdings Limited common shareholders $ (4,379) $ 17,050
Weighted average shares outstanding (in thousands):    
Weighted average common shares outstanding - basic 56,455 57,475
Dilutive share options and restricted share units   112
Weighted average common shares outstanding - diluted 56,455 57,587
Net (loss) income attributable to Textainer Group Holdings Limited common shareholders per common share    
Basic $ (0.08) $ 0.30
Diluted $ (0.08) $ 0.30
Share options and restricted share units excluded from the computation of diluted EPS because they were anti-dilutive 2,147 1,603
v3.20.1
Transactions with Affiliates and Container Investors (Tables)
 3 Months Ended
Mar. 31, 2020
Related Party Transactions [Abstract]  
Total Management Fees Earned from the Managed Fleet, Including Acquisition Fees and Sales Commissions

Total management fees earned from the Company’s managed fleet, including acquisition fees and sales commissions for the three months ended March 31, 2020 and 2019 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Fees from affiliated Container Investors

 

$

—

 

 

$

972

 

Fees from unaffiliated Container Investors

 

 

2,488

 

 

 

3,064

 

Fees from Container Investors

 

 

2,488

 

 

 

4,036

 

Other fees

 

 

—

 

 

 

338

 

Total management fees

 

$

2,488

 

 

$

4,374

 
Summary of Due to Container Investors, Net

The following table provides a summary of due to container investors, net at March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts receivable - managed fleet

 

$

15,050

 

 

$

13,226

 

Prepaid expenses and other current assets - managed fleet

 

 

143

 

 

 

189

 

Accounts payable and accrued expenses - managed fleet

 

 

(1,840

)

 

 

(1,953

)

Container contracts payable - managed fleet

 

 

—

 

 

 

—

 

 

 

 

13,353

 

 

 

11,462

 

Distributions due to container investors on lease rentals collected, net of

  container expenses paid and management fees

 

 

5,798

 

 

 

10,516

 

Due to container investors, net

 

$

19,151

 

 

$

21,978

 
v3.20.1
Accounting Policies and Recent Accounting Pronouncements
 3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Accounting Policies and Recent Accounting Pronouncements

(2)    Accounting Policies and Recent Accounting Pronouncements

 

(a)

Basis of Accounting

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019 (“2019 Form 20-F”) filed with the Securities and Exchange Commission on March 30, 2020.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal and recurring adjustments) necessary to present fairly the Company’s condensed consolidated balance sheet as of March 31, 2020, the Company’s condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2020 and 2019, condensed consolidated statements of shareholders’ equity for the three months ended March 31, 2020 and 2019 and condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019. These condensed consolidated financial statements are not necessarily indicative of the results of operations or cash flows that may be reported for the remainder of the fiscal year ending December 31, 2020.

 

 

(b)

Principles of Consolidation and Variable Interest Entity

The condensed consolidated financial statements of the Company include TGH and all of its subsidiaries in which the Company has a controlling financial interest. All significant intercompany accounts and balances have been eliminated in consolidation.

TAP Funding

TAP Funding Ltd. (“TAP Funding”) (a Bermuda company) is a joint venture between the Company’s wholly-owned subsidiary, Textainer Limited (“TL”) (a Bermuda company) and TAP Ltd. (“TAP”) in which TL owns 50.1%, TAP owns 49.9% of the common shares of TAP Funding, and TAP Funding is a voting interest entity (“VME”).  The Company consolidates TAP Funding as the Company has a controlling financial interest in TAP Funding.

The equity owned by TAP in TAP Funding is shown as a noncontrolling interest on the Company’s condensed consolidated balance sheets and the net (loss) income attributable to the noncontrolling interest’s operations is shown as net (loss) income attributable to the noncontrolling interests on the Company’s condensed consolidated statements of comprehensive (loss) income.

 

 

 

(c)

Containers

Capitalized container costs include the container cost payable to the manufacturer and the associated transportation costs incurred in moving the Company’s containers from the manufacturer to the containers’ first destined port. Containers are depreciated using the straight-line method over their estimated useful lives to an estimated dollar residual value. Used containers are depreciated based upon their remaining useful lives at the date of acquisition to an estimated dollar residual value.

The cost, accumulated depreciation and net book value of the Company’s container leasing equipment by equipment type as of March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

 

Cost

 

 

Accumulated

Depreciation

 

 

Net Book

Value

 

Dry containers other than

   open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

$

1,594,605

 

 

$

(403,041

)

 

$

1,191,564

 

 

$

1,627,878

 

 

$

(396,247

)

 

$

1,231,631

 

40'

 

 

158,877

 

 

 

(57,123

)

 

 

101,754

 

 

 

167,011

 

 

 

(58,852

)

 

 

108,159

 

40' high cube

 

 

2,442,977

 

 

 

(609,710

)

 

 

1,833,267

 

 

 

2,510,937

 

 

 

(592,374

)

 

 

1,918,563

 

45' high cube

 

 

28,451

 

 

 

(11,784

)

 

 

16,667

 

 

 

28,670

 

 

 

(11,488

)

 

 

17,182

 

Refrigerated containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20'

 

 

20,437

 

 

 

(7,576

)

 

 

12,861

 

 

 

20,484

 

 

 

(7,258

)

 

 

13,226

 

20' high cube

 

 

5,140

 

 

 

(3,185

)

 

 

1,955

 

 

 

5,139

 

 

 

(3,090

)

 

 

2,049

 

40' high cube

 

 

1,051,945

 

 

 

(353,084

)

 

 

698,861

 

 

 

1,052,707

 

 

 

(338,068

)

 

 

714,639

 

Open top and flat rack containers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20' folding flat

 

 

17,539

 

 

 

(4,692

)

 

 

12,847

 

 

 

17,617

 

 

 

(4,538

)

 

 

13,079

 

40' folding flat

 

 

50,757

 

 

 

(17,631

)

 

 

33,126

 

 

 

51,152

 

 

 

(17,278

)

 

 

33,874

 

20' open top

 

 

12,980

 

 

 

(1,646

)

 

 

11,334

 

 

 

13,259

 

 

 

(1,625

)

 

 

11,634

 

40' open top

 

 

23,155

 

 

 

(4,465

)

 

 

18,690

 

 

 

23,313

 

 

 

(4,351

)

 

 

18,962

 

Tank containers

 

 

83,247

 

 

 

(8,740

)

 

 

74,507

 

 

 

81,151

 

 

 

(7,998

)

 

 

73,153

 

Total containers

 

$

5,490,110

 

 

$

(1,482,677

)

 

$

4,007,433

 

 

$

5,599,318

 

 

$

(1,443,167

)

 

$

4,156,151

 

 

 

See Note 4 “Managed Container Fleet” for information on the managed fleet containers included above.

 

Impairment of Container Rental Equipment

The Company reviews its containers for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The Company compares the carrying value of the containers to the expected future undiscounted cash flows for the purpose of assessing the recoverability of the recorded amounts. If the carrying value exceeds expected future undiscounted cash flows, the assets are reduced to fair value. There was no such impairment of the Company’s leasing equipment for the three months ended March 31, 2020 and 2019.

 

Write-Off of Container Rental Equipment due to Lessees in Default

 

The Company evaluates the recoverability of the recorded amounts of containers that are unlikely to be recovered from lessees in default. The Company recorded impairment charges during the three months ended March 31, 2020 and 2019 of $0 and $11, respectively, to write-off containers that were unlikely to be recovered from lessees in default, net of gains associated with recoveries on containers previously estimated as lost with lessees in default. These amounts are recorded in the condensed consolidated statements of comprehensive income as “container lessee default recovery, net”.

 

Impairment of Containers Held for Sale

Containers identified as being available for sale are valued at the lower of carrying value or fair value, less costs to sell. The Company records impairment to write-down the value of containers held for sale to their estimated fair value, less cost to sell, under observable (Level 2) market inputs. The fair value was estimated based on recent gross sales proceeds for sales of similar containers. Any subsequent increase in fair value less costs to sell is recognized as a reversal of container impairment but not in excess of the cumulative loss previously recognized. The carrying value of containers held for sale that have been impaired to write down the value of the containers to their estimated fair value less cost to sell was $23,165 and $22,217 as of March 31, 2020 and December 31, 2019, respectively. When containers are retired or otherwise sold, the cost and related accumulated depreciation are removed, and any resulting gain or loss is recognized.

During the three months ended March 31, 2020 and 2019, the Company recorded container impairments of $4,586 and $1,520, respectively, to write down the value of containers held for sale to their estimated fair value less cost to sell, net of reversals of previously recorded impairments on containers held for sale due to rising used container prices, and was included in “depreciation expense” in the condensed consolidated statements of comprehensive (loss) income.

 

 

  (d)

Concentrations

The Company’s customers are mainly international shipping lines, which transport goods on international trade routes. Once the containers are on-hire with a lessee, the Company does not track their location. The domicile of the lessee is not indicative of where the lessee is transporting the containers. The Company’s business risk in its foreign concentrations lies with the creditworthiness of the lessees rather than the geographic location of the containers or the domicile of the lessees.

Except for the lessees noted in the tables below, no other single lessee made up greater than 10% of the Company’s lease rental income from its owned fleet for the three months ended March 31, 2020 and 2019 and more than 10% of the Company’s gross accounts receivable from its owned fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - owned fleet

 

2020

 

 

2019

 

Customer A

 

16.9%

 

 

13.6%

 

Customer B

 

13.2%

 

 

13.8%

 

 

Gross Accounts Receivable- owned fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

11.3%

 

 

17.1%

 

Customer B

 

16.1%

 

 

11.2%

 

 

Total fleet lease rental income, as reported in the condensed consolidated statements of comprehensive (loss) income, comprises revenue earned from leases on containers in the Company’s total fleet, including revenue earned from leases on containers in its managed fleet. Except for the lessees noted in the table below, no other single lessee accounted for more than 10% of the Company’s total fleet lease rental income for the three months ended March 31, 2020 and 2019, as well, there is no other single lessee that accounted for more than 10% of the Company’s gross accounts receivable from its total fleet as of March 31, 2020 and December 31, 2019:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Lease Rental Income - total fleet

 

2020

 

 

2019

 

Customer A

 

16.5%

 

 

13.4%

 

Customer B

 

14.4%

 

 

13.8%

 

 

Gross Accounts Receivable- total fleet

 

March 31, 2020

 

 

December 31, 2019

 

Customer A

 

17.7%

 

 

16.6%

 

Customer B

 

19.2%

 

 

12.0%

 

 

 

(e)   Net (Loss) Income Attributable to Textainer Group Holdings Limited Common Shareholders Per Common Share

 

Basic earnings per share (“EPS”) is computed by dividing net (loss) income attributable to Textainer Group Holdings Limited common shareholders by the weighted average number of shares outstanding during the applicable period. Diluted EPS reflects the potential dilution that could occur if all outstanding share options were exercised for, and all outstanding restricted share units were converted into, common shares. A reconciliation of the numerator and denominator of basic EPS with that of diluted EPS is reported as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Share amounts in thousands

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders

 

$

(4,379

)

 

$

17,050

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

56,455

 

 

 

57,475

 

Dilutive share options and restricted share units

 

 

—

 

 

 

112

 

Weighted average common shares outstanding - diluted

 

 

56,455

 

 

 

57,587

 

Net (loss) income attributable to Textainer Group Holdings Limited

   common shareholders per common share

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.30

 

Diluted

 

$

(0.08

)

 

$

0.30

 

 

 

 

 

 

 

 

 

 

Share options and restricted share units excluded from

    the computation of diluted EPS because they were anti-dilutive

 

 

2,147

 

 

 

1,603

 

 

 

Given that the Company had a net loss attributable to Textainer Group Holdings Limited common shareholders for the three months ended March 31, 2020, there was no dilutive effect of share options and restricted share units.

 

 

 

(f)

Fair Value Measurements

 

The Company’s financial instruments include cash and cash equivalents; restricted cash; accounts receivable and payable; container leaseback financing receivable; net investment in finance leases; due from affiliates, net; container contracts payable; due to container investors, net; debt and derivative instruments. See Note 2 (c) “Containers” and Note 2 (g) “Derivative Instruments and Hedging” for further discussions on fair value of containers held for sale and fair value of derivative instruments, respectively.

At March 31, 2020 and December 31, 2019, the fair value of the Company’s financial instruments approximated the related book value of such instruments except that, the fair value of net investment in finance leases (including the short-term balance) was approximately $350,582 and $299,275 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $337,713 and $295,303 at March 31, 2020 and December 31, 2019, respectively. The fair value of container leaseback financing receivable (including the short-term balance) was approximately $267,353 and $267,551 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $266,168 and $271,658 at March 31, 2020 and December 31, 2019, respectively. The fair value of long-term debt (including current maturities) based on the borrowing rates available to the Company was approximately $3,410,284 and $3,798,683 at March 31, 2020 and December 31, 2019, respectively, compared to book values of $3,665,145 and $3,797,729 at March 31, 2020 and December 31, 2019, respectively.

 

 

(g)

Derivative Instruments and Hedging

The Company has entered into various interest rate swap and cap agreements to mitigate its exposure associated with its variable rate debt. The Company has utilized the income approach to measure at each balance sheet date the fair value of its derivative instruments using observable (Level 2) market inputs. The valuation also reflects the credit standing of the Company and the counterparties to the derivative agreements. The credit valuation adjustment was determined to be

$589 and $167 (both were additions to the net fair value) as of March 31, 2020 and December 31, 2019, respectively. See Note 9 “Debt and Derivative Instruments” for further discussions.

Derivative instruments are designated or non-designated for hedge accounting purposes. The fair value of the derivative instruments is reflected on a gross basis on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

December 31, 2019

 

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swaps - not designated as hedges

 

$

—

 

 

$

135

 

 

Total

 

$

—

 

 

$

135

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Interest rate swaps - designated as hedges

 

$

9,037

 

 

$

117

 

 

Interest rate swaps - not designated as hedges

 

 

28,463

 

 

 

13,661

 

 

Total

 

$

37,500

 

 

$

13,778

 

 

 

Designated Derivative Instruments

As of March 31, 2020 and December 31, 2019, the Company has designated interest rate swap agreements for a total notional amount of $535,000 and $110,000, respectively, as a cash flow hedge for accounting purposes. The change in fair value of cash flow hedging instruments during the three months ended March 31, 2020 of $8,858 pre-tax loss was recorded on the condensed consolidated balance sheets in “accumulated other comprehensive (loss) income” and a $62 pre-tax gain was reclassified to “interest expense, net” when realized. As of March 31, 2019, none of the derivative instruments are designated by the Company for hedge accounting.

 

Non-Designated Derivative Instruments

As of March 31, 2020 and December 31, 2019, the Company has non-designated interest rate swap and cap agreements for a total notional amount of $778,750 and $920,500, respectively. The fair value of the non-designated derivative instruments is measured at each balance sheet date and the change in fair value during the three months ended March 31, 2020 and 2019 of $14,937 and $5,738, respectively, was recorded in the condensed consolidated statements of comprehensive (loss) income as “unrealized loss on derivative instruments, net.” The differentials between the fixed and variable rate payments under these agreements are recognized in “realized (loss) gain on derivative instruments, net” in the condensed consolidated statements of comprehensive (loss) income when realized.

 

 

(h)

Revenue Recognition

The components of the Company’s revenue as reported in the condensed consolidated statements of comprehensive (loss) income and in Note 10 “Segment Information” are as follows:

Lease Rental Income

Lease rental income arises principally from leasing containers to various international shipping lines and includes all rental charges billed to the lessees. Lease rental income - owned fleet comprises rental income for the container fleet owned by the Company. Lease rental income - managed fleet comprises rental income for the container fleet owned by the Container Investors. For lease accounting purposes, the management agreements with these Container Investors are deemed to convey to the Company the right to control the use of the managed containers and are therefore accounted for as “lease rental income - managed fleet” as reported in the condensed consolidated statements of comprehensive (loss) income (see Note 4 “Managed Container Fleet” for further information).

Revenue is earned and recognized evenly over the period that the equipment is on lease. Where minimum lease payments vary over the lease term, revenue is recognized on a straight-line basis over the term of the lease. Interest income from finance leases and sales-type leaseback arrangements that are accounted for as financing transactions are recognized using the effective interest method, which generates a constant rate of interest over the period of the arrangement.

 

Management Fees - Non-leasing

 

Under the Company’s management service agreements with Container Investors, fees are earned for the acquisition and sale of containers under management. Acquisition fees from purchases of containers for managed fleet are deferred and recognized as earned on a straight-line basis over the deemed lease term.

 

Trading Container Margin

 

The Company’s trading container sales proceeds arise from the resale of new and used containers to a wide variety of buyers. The related expenses represent the cost of trading containers sold as well as other selling costs that are recognized as incurred. Revenue is recorded when control of the containers is transferred to the customer, which typically occurs upon delivery to, or pick-up by, the customer and when collectability is reasonably assured.

 

Gain on Sale of Owned Fleet Containers, Net

 

The Company also generally sells containers at the end of their useful lives or when it is financially attractive to do so. The gain on sale of owned fleet containers is the excess of the sale price over the carrying value for these units at the time of sale. Revenue is recorded when control of the containers is transferred to the customer, which typically occurs upon delivery to, or pick-up by, the customer and when collectability is reasonably assured.

 

Gain on sale of owned fleet containers, net, also includes gains (losses) recognized at the inception of sales-type leases of our owned fleet, representing the excess (deficiency) of the estimated fair value of containers placed on sales-type leases over (below) their book value.

For further discussion on the Company’s revenue recognition accounting policy, please refer to Note 1 “Nature of Business and Summary of Significant Accounting Polices” in Item 18, “Financial Statements” in our 2019 Form 20-F.

 

 

(i)

Allowance for Credit Losses

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses over the life of the Company’s net investments in finance leases and container leaseback financing receivable. Operating lease receivables are accounted for under Topic 842, Leases and are not within the scope of Topic 326. The guidance requires the measurement of expected credit losses using a forward-looking approach based on relevant information from past events, current conditions, and reasonable and supportable forecasts that affect collectability.

 

The Company adopted ASU 2016-13 and all related amendments on the effective date of January 1, 2020 using the modified retrospective method by recognizing the cumulative effect adjustment to the opening balance of retained earnings at the adoption date. Periods prior to the adoption date that are presented for comparative purposes are not adjusted. As a result of the adoption of ASU 2016-13, the Company recognized a beginning balance transition adjustment to the allowance for credit losses on January 1, 2020 of $892, with a cumulative effect adjustment to the opening balance of retained earnings in the condensed consolidated balance sheet and condensed consolidated statement of stockholder’s equity as of March 31, 2020.

 

Accounts receivable, net investment in finance leases and container leaseback financing receivable are stated at amortized cost net of allowance for credit losses. The Company maintains allowances for credit losses resulting from the inability of its lessees to make required payments under operating leases, finance leases and container leaseback financing receivable. Changes in economic conditions or other events may necessitate additions or deductions to the allowance for credit losses (see Note 7 “Allowance for Credit Losses” for further information).

 

 

(j)

Recently Issued Accounting Standards

 

In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles - Goodwill and Other (Topic 350) - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).  The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019 and may be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. The Company adopted ASU 2018-15 during the three months ended March 31, 2020 using the prospective transition approach and the adoption of the standard did not result in a material impact on the Company’s condensed consolidated financial statements.

 

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met, that reference LIBOR or another rate that is expected to be discontinued due to reference rate reform. The amendments in ASU 2020-04 are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company will continue its review of the debt and derivative agreements during the transition period until the LIBOR cessation by the end of 2021. The Company expects the adoption of this guidance will not have a material impact on the Company’s condensed consolidated financial statements.

 

On April 10, 2020, the FASB issued a question-and-answer document regarding accounting for lease concessions and other effects of the coronavirus disease pandemic (“COVID-19”). The document clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Leases ASC 842. Instead, an entity that elects not to evaluate whether a concession is a modification can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election only when concessions related to the effects of COVID-19 do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Upon issuance of this document, the Company made the election to apply the practical expedient method to account for any concessions as if they were contemplated as part of our existing leases and will apply this election consistently for all leases. There were no material concessions related to the COVID-19 that were granted (as a lessor) or received (as a lessee) as of March 31, 2020.
v3.20.1
Segment Information (Tables)
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Segment Information Reconciled to (Loss) Income Before Income Taxes and Noncontrolling Interest The following tables show segment information for the three months ended March 31, 2020 and 2019, reconciled to the Company’s (loss) income before income taxes and noncontrolling interests as shown in its condensed consolidated statements of comprehensive (loss) income:

 

 

 

Container

 

 

Container

 

 

Container

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

Ownership

 

 

Management

 

 

Resale

 

 

Other

 

 

Eliminations

 

 

Totals

 

Lease rental income - owned fleet

 

$

129,850

 

 

$

222

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

130,072

 

Lease rental income - managed fleet

 

 

-

 

 

 

15,406

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,406

 

Lease rental income

 

$

129,850

 

 

$

15,628

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

145,478

 

Management fees - non-leasing from external

   customers

 

$

98

 

 

$

555

 

 

$

831

 

 

$

-

 

 

$

-

 

 

$

1,484

 

Inter-segment management fees

 

$

-

 

 

$

9,745

 

 

$

2,421

 

 

$

-

 

 

$

(12,166

)

 

$

-

 

Trading container margin

 

$

-

 

 

$

-

 

 

$

649

 

 

$

-

 

 

$

-

 

 

$

649

 

Gain on sale of owned fleet containers, net

 

$

5,794

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,794

 

Depreciation expense

 

$

68,356

 

 

$

341

 

 

$

-

 

 

$

-

 

 

$

(1,863

)

 

$

66,834

 

Container lessee default recovery, net

 

$

12

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

12

 

Interest expense

 

$

35,956

 

 

$

156

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

36,112

 

Realized loss on derivative instruments, net

 

$

1,526

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,526

 

Unrealized loss on derivative instruments, net

 

$

14,937

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

14,937

 

Segment (loss) income before income tax and

   noncontrolling interests

 

$

(12,051

)

 

$

2,610

 

 

$

2,758

 

 

$

(1,062

)

 

$

1,804

 

 

$

(5,941

)

Total assets

 

$

4,954,452

 

 

$

154,857

 

 

$

17,198

 

 

$

8,293

 

 

$

(80,994

)

 

$

5,053,806

 

Purchase of containers and fixed assets

 

$

6,957

 

 

$

192

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

7,149

 

 

 

 

Container

 

 

Container

 

 

Container

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

Ownership

 

 

Management

 

 

Resale

 

 

Other

 

 

Eliminations

 

 

Totals

 

Lease rental income - owned fleet

 

$

128,599

 

 

$

374

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

128,973

 

Lease rental income - managed fleet

 

 

-

 

 

 

26,553

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26,553

 

Lease rental income

 

$

128,599

 

 

$

26,927

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

155,526

 

Management fees - non-leasing from external

   customers

 

$

52

 

 

$

978

 

 

$

1,271

 

 

$

-

 

 

$

-

 

 

$

2,301

 

Inter-segment management fees

 

$

-

 

 

$

12,491

 

 

$

2,527

 

 

$

-

 

 

$

(15,018

)

 

$

-

 

Trading container margin

 

$

-

 

 

$

-

 

 

$

2,568

 

 

$

-

 

 

$

-

 

 

$

2,568

 

Gain on sale of owned fleet containers, net

 

$

6,767

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

6,767

 

Depreciation expense

 

$

64,068

 

 

$

172

 

 

$

-

 

 

$

-

 

 

$

(1,776

)

 

$

62,464

 

Container lessee default recovery, net

 

$

653

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

653

 

Interest expense

 

$

37,516

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

37,516

 

Realized gain on derivative instruments, net

 

$

1,444

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,444

 

Unrealized loss on derivative instruments, net

 

$

5,738

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,738

 

Segment income (loss) before income tax and

   noncontrolling interests

 

$

6,749

 

 

$

6,862

 

 

$

5,163

 

 

$

(921

)

 

$

(325

)

 

$

17,528

 

Total assets

 

$

4,687,690

 

 

$

162,170

 

 

$

45,782

 

 

$

10,320

 

 

$

(82,244

)

 

$

4,823,718

 

Purchase of containers and fixed assets

 

$

169,817

 

 

$

73

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

169,890

 

 

(1) Container Ownership segment (loss) income before income tax and noncontrolling interests includes unrealized loss on derivative instruments, net of $14,937 and $5,738 for the three months ended March 31, 2020 and 2019, respectively, and write-off of unamortized deferred debt issuance costs and bond discounts of $122 and $0 for the three month ended March 31, 2020 and 2019, respectively.
Segment Information Geographic Allocation of Lease Rental Income and Management Fees

The following table represents the geographic allocation of total fleet lease rental income and management fees from non-leasing services during the three months ended March 31, 2020 and 2019 based on customers’ and Container Investors’ primary domicile, respectively:

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

Percent

of Total

 

 

2019

 

 

Percent

of Total

 

Lease rental income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

72,795

 

 

 

50.0

%

 

$

83,275

 

 

 

53.5

%

Europe

 

 

64,727

 

 

 

44.5

%

 

 

62,221

 

 

 

40.0

%

North / South America

 

 

7,318

 

 

 

5.0

%

 

 

9,294

 

 

 

6.0

%

All other international

 

 

638

 

 

 

0.5

%

 

 

736

 

 

 

0.5

%

 

 

$

145,478

 

 

 

100.0

%

 

$

155,526

 

 

 

100.0

%

Management fees, non-leasing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bermuda

 

$

982

 

 

 

66.2

%

 

$

1,285

 

 

 

55.8

%

Europe

 

 

199

 

 

 

13.4

%

 

 

576

 

 

 

25.0

%

North / South America

 

 

4

 

 

 

0.3

%

 

 

340

 

 

 

14.8

%

Asia

 

 

3

 

 

 

0.2

%

 

 

4

 

 

 

0.2

%

All other international

 

 

296

 

 

 

19.9

%

 

 

96

 

 

 

4.2

%

 

 

$

1,484

 

 

 

100.0

%

 

$

2,301

 

 

 

100.0

%
Segment Information Geographic Allocation of Trading Container Sales Proceeds and Gains on Sale of Owned Fleet Containers Net

The following table represents the geographic allocation of trading container sales proceeds and gain on sale of owned fleet containers, net during the three months ended March 31, 2020 and 2019 based on the location of sale:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

Percent

of Total

 

 

2019

 

 

Percent

of Total

 

Trading container sales proceeds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

5,778

 

 

 

60.2

%

 

$

8,917

 

 

 

67.0

%

North / South America

 

 

2,721

 

 

 

28.4

%

 

 

2,874

 

 

 

21.6

%

Europe

 

 

1,081

 

 

 

11.3

%

 

 

1,498

 

 

 

11.3

%

All other international

 

 

5

 

 

 

0.1

%

 

 

11

 

 

 

0.1

%

 

 

$

9,585

 

 

 

100.0

%

 

$

13,300

 

 

 

100.0

%

Gain on sale of owned fleet containers, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

2,446

 

 

 

42.2

%

 

$

2,453

 

 

 

36.3

%

North / South America

 

 

1,100

 

 

 

19.0

%

 

 

2,101

 

 

 

31.0

%

Europe

 

 

1,044

 

 

 

18.0

%

 

 

2,244

 

 

 

33.2

%

All other international

 

 

1,204

 

 

 

20.8

%

 

 

(31

)

 

 

(0.5

)%

 

 

$

5,794

 

 

 

100.0

%

 

$

6,767

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Accounts receivable, allowance for credit losses $ 8,026 $ 6,299
Net investment in finance leases, allowance for credit loss current 186 0
Container leaseback financing receivable, allowance for credit losses current 90 0
Containers, accumulated depreciation 1,482,677 1,443,167
Net investment in finance leases, allowance for credit loss non current 801 0
Container leaseback financing receivable, allowance for credit losses non current 379 0
Fixed assets, accumulated depreciation 12,465 12,266
Intangible assets, accumulated amortization 45,923 45,359
Debt, net of unamortized costs current 6,293 8,120
Debt, net of unamortized costs non current $ 21,160 $ 21,446
Common shares, par value $ 0.01 $ 0.01
Common shares, Authorized 140,000,000 140,000,000
Common shares, issued 58,326,555 58,326,555
Common shares, outstanding 54,870,475 56,817,918
Treasury shares, at cost, shares 3,456,080 1,508,637
v3.20.1
Components of Net Investment in Finance Leases (Parenthetical) (Detail) - Customer
 3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Capital Leased Assets [Line Items]    
Number of customers represent finance leases portfolio 2 2
Customer One    
Capital Leased Assets [Line Items]    
Percentage of finance leases portfolio 54.00% 44.30%
Customer Two    
Capital Leased Assets [Line Items]    
Percentage of finance leases portfolio 14.00% 16.10%
v3.20.1
Schedule of Lease Rental Income (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Lessor Lease Description [Line Items]    
Lease rental income - operating leases $ 130,317 $ 143,353
Interest income on net investment in finance leases 5,284 2,997
Interest income on container leaseback financing receivable 4,006  
Variable lease revenue 5,871 9,176
Total lease rental income 145,478 155,526
Owned Fleet    
Lessor Lease Description [Line Items]    
Lease rental income - operating leases 115,803 118,283
Interest income on net investment in finance leases 5,284 2,997
Interest income on container leaseback financing receivable 4,006  
Variable lease revenue 4,979 7,693
Total lease rental income 130,072 128,973
Managed Fleet    
Lessor Lease Description [Line Items]    
Lease rental income - operating leases 14,514 25,070
Variable lease revenue 892 1,483
Total lease rental income $ 15,406 $ 26,553
v3.20.1
Segment Information Reconciled to (Loss) Income Before Income Taxes and Noncontrolling Interest (Parenthetical) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Segment Reporting Information [Line Items]    
Unrealized loss on derivative instruments, net $ (14,937) $ (5,738)
Container Ownership    
Segment Reporting Information [Line Items]    
Unrealized loss on derivative instruments, net (14,937) (5,738)
Write-off of unamortized deferred debt issuance costs and bond discounts $ 122 $ 0
v3.20.1
Future Scheduled Repayments (Detail) - USD ($)
Mar. 31, 2020
Feb. 29, 2020
Jan. 31, 2020
Debt Instrument [Line Items]      
2021 [1] $ 245,359,000    
2022 [1] 396,473,000    
2023 [1] 274,666,000    
2024 [1] 1,496,237,000    
2025 and thereafter [1] 1,279,863,000    
Long Term Debt, Carrying Amount, Total [1] 3,692,598,000    
Available Borrowing, as Limited by the Borrowing Base [1] 184,491,000    
Current and Available Borrowing, as limited by the Borrowing Base [1] 3,877,089,000    
Total Commitment [1] 4,508,142,000    
TL Revolving Credit Facility      
Debt Instrument [Line Items]      
2024 1,217,000,000    
Long Term Debt, Carrying Amount, Total 1,217,000,000    
Available Borrowing, as Limited by the Borrowing Base 183,924,000    
Current and Available Borrowing, as limited by the Borrowing Base 1,400,924,000    
Total Commitment 1,500,000,000    
TL 2019 Term Loan      
Debt Instrument [Line Items]      
2021 10,616,000    
2022 10,993,000    
2023 11,384,000    
2024 11,789,000    
2025 and thereafter 112,622,000    
Long Term Debt, Carrying Amount, Total 157,404,000    
Current and Available Borrowing, as limited by the Borrowing Base 157,404,000    
Total Commitment 157,404,000    
TMCL II Secured Debt Facility      
Debt Instrument [Line Items]      
2021 61,739,000    
2022 64,280,000    
2023 56,575,000    
2024 52,696,000    
2025 and thereafter 439,116,000    
Long Term Debt, Carrying Amount, Total 674,406,000    
Current and Available Borrowing, as limited by the Borrowing Base 674,406,000    
Total Commitment 1,200,000,000    
TMCL V 2017-1 Bonds      
Debt Instrument [Line Items]      
2021 42,136,000    
2022 55,352,000    
2023 64,330,000    
2024 61,453,000    
2025 and thereafter 86,751,000    
Long Term Debt, Carrying Amount, Total 310,022,000    
Current and Available Borrowing, as limited by the Borrowing Base 310,022,000    
Total Commitment 310,022,000    
TMCL V 2017-2 Bonds      
Debt Instrument [Line Items]      
2021 [2] 45,734,000    
2022 [2] 58,676,000    
2023 [2] 70,222,000    
2024 [2] 81,144,000    
2025 and thereafter [2] 132,615,000    
Long Term Debt, Carrying Amount, Total [2] 388,391,000    
Current and Available Borrowing, as limited by the Borrowing Base [2] 388,391,000    
Total Commitment [2] 388,391,000    
TMCL VI Term Loan      
Debt Instrument [Line Items]      
2021 25,500,000    
2022 25,500,000    
2023 25,500,000    
2024 25,500,000    
2025 and thereafter 144,236,000    
Long Term Debt, Carrying Amount, Total 246,236,000    
Current and Available Borrowing, as limited by the Borrowing Base 246,236,000    
Total Commitment 246,236,000    
TMCL VII 2018-1 Bonds      
Debt Instrument [Line Items]      
2021 [2] 18,601,000    
2022 [2] 18,655,000    
2023 [2] 18,655,000    
2024 [2] 18,655,000    
2025 and thereafter [2] 152,190,000    
Long Term Debt, Carrying Amount, Total [2] 226,756,000    
Current and Available Borrowing, as limited by the Borrowing Base [2] 226,756,000    
Total Commitment [2] 226,756,000    
TMCL VII 2019-1 Bonds      
Debt Instrument [Line Items]      
2021 [2] 28,000,000    
2022 [2] 28,000,000    
2023 [2] 28,000,000    
2024 [2] 28,000,000    
2025 and thereafter [2] 212,333,000    
Long Term Debt, Carrying Amount, Total [2] 324,333,000    
Current and Available Borrowing, as limited by the Borrowing Base [2] 324,333,000    
Total Commitment [2] 324,333,000    
TAP Funding Revolving Credit Facility      
Debt Instrument [Line Items]      
2021 13,033,000    
2022 135,017,000    
Long Term Debt, Carrying Amount, Total 148,050,000    
Available Borrowing, as Limited by the Borrowing Base 567,000    
Current and Available Borrowing, as limited by the Borrowing Base 148,617,000    
Total Commitment $ 155,000,000 $ 155,000,000 $ 190,000,000
[1] Future scheduled payments for all debts exclude unamortized prepaid debt issuance costs in an aggregate amount of $25,115.
[2] Future scheduled payments for TMCL V 2017-2 Bonds, TMCL VII 2018-1 and TMCL VII 2019-1 Bonds exclude an unamortized discount of $42, $2,200 and $96, respectively.
v3.20.1
Debt and Derivative Instruments - Additional Information (Detail)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
USD ($)
Designated | Interest rate swaps  
Debt Instrument [Line Items]  
Estimated amount to be reclassified from AOCI to interest expense $ 410