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Transcript of Q3 2013 Earnings Call Presentation - TRAC Intermodal · Copyright 2014 TRAC Intermodal Forward...
Copyright 2014 TRAC Intermodal
TRAC Intermodal Earnings Call
Year Ended December 31, 2013
March 20, 2014
Copyright 2014 TRAC Intermodal
Forward Looking Statements and Use of Non-GAAP Information
FORWARD LOOKING STATEMENTS
• The Presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which
reflect our current views with respect to, among other things, future events (including, but not limited to, import container growth, chassis supply
trends and the shift to the motor carrier model) and financial performance. Readers can identify these forward-looking statements by the use of
forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,”
“intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements
contained in the Presentation are based upon our historical performance and on our current plans, estimates and expectations. The inclusion of this
forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations
contemplated by us will be achieved. Such forward-looking statements are subject to various risks, uncertainties and assumptions relating to our
operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or
uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these
statements. Accordingly, you should not place undue reliance on any forward-looking statements.
• Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the
following: the volume of world trade due to economic, political, or other factors; increased operating costs; increased regulatory costs; defaults by our
customers; and, the demand for chassis. More information about potential factors that could affect our business and financial results is included in
our filings with the SEC, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
• The Company undertakes no obligation to update the forward-looking information or any of the information contained in the Presentation.
USE OF NON-GAAP INFORMATION
• There are non-GAAP measures used in this communication, including Adjusted EBITDA, Adjusted net income and free cash flow. The Company
believes that such non-GAAP measures are appropriate measures of the operating performance of the Company. Additionally, certain of the
Company’s debt covenant calculations use Adjusted EBITDA. The Company’s calculation of these measures may differ from the methodology used
by other companies and, accordingly, may not be comparable to other companies. Adjusted EBITDA is defined as income (loss) before income
taxes, interest expenses (net of interest income), depreciation and amortization expense, impairment of assets and leasing equipment, other
expense (income) mainly related to loss (gain) from sale of equipment, and loss on retirement of debt, remanufacturing expenses, non-cash stock
compensation and principal collections on direct finance leases. Adjusted net (loss) income is defined as net (loss) income before non-cash interest
expense related to deferred financing fees, non-cash stock compensation, loss on retirement of debt, and terminations, modification, and fair value
adjustments of derivative instruments. Free cash flow is defined as Adjusted EBITDA less Cash Interest Accrued. Adjusted EBITDA, Adjusted net
(loss) income and free cash flow are not measures recognized under GAAP and are therefore unlikely to be comparable to similar measures
presented by other companies and do not have a standardized meaning prescribed by GAAP. Management uses Adjusted EBITDA, Adjusted net
(loss) income and free cash flow to provide comparative information about performance. A reconciliation of Adjusted EBITDA, Adjusted net (loss)
income and free cash flow to project income is provided on slide15.
2
Copyright 2014 TRAC Intermodal
• Revenue grew $100.7 million or 24% in 2013 vs. 2012, and by $20.3 million or 18% in Q4
• Adjusted EBITDA¹ increased $3.1 million or 2% in 2013 vs. 2012, and decreased by $1.0
million in Q4
- Excluding Q4 2012 non-recurring revenues, Q4 2013 adjusted EBITDA¹ grew $1.2 million or 3%
• Marine segment adjusted EBITDA impacted by the shift from term leases and subscriptions
to daily rentals in chassis pools
• Domestic segment adjusted EBITDA favorably impacted from organic growth
Executive Summary – Q4 and Full Year 2013
3
Financial
Performance
• Average on-hire fleet increased by approximately 27,500 chassis or 13% in 2013
• Active fleet utilization increased to 92.3% for the year ended December 31, 2013 from 92.1%
for the year ended December 31, 2012
• Marine pool revenues billed to motor carriers increased from 30% in 2012 to 44% in 2013
• Executing cost controls
• In-sourcing service centers – opened Chicago and Los Angeles / Long Beach in 2013, opening
other centers in 2014
Chassis Fleet
Key Initiatives
1 See slide 15 for a reconciliation of Adjusted EBITDA
Copyright 2014 TRAC Intermodal
Summary of Financial Performance – Q4 and Full Year 2013
• Revenues grew 24% in 2013 vs. 2012, and by 18% for Q4 vs. last year
– Marine Market segment revenues grew $90.1 million or 35% in 2013 vs. 2012, $16.6 million growth or 22% in Q4
– Domestic Market segment revenues grew $14.2 million or 10% in 2013 vs. 2012, $4.4 million growth or 11% in Q4
• Adjusted EBITDA¹ increased 2% in 2013 vs. 2012, and by -2% for Q4 vs. last year
– Direct operating expenses were up 35% and the average number chassis operating in our Marine and Domestic pools
was up 43%
4
Quarter ended December 31st Year ended December 31st
NM – not meaningful
1 See slide 15 for a reconciliation of Adjusted EBITDA and Adjusted Net Income
$ millions B / (W) vs. 2012 B / (W) vs. 2012
2013 $ % 2013 $ %
Revenue 136.1$ 20.3$ 18% 515.2$ 100.7$ 24%
Direct operating expenses 74.4 (15.8) -27% 289.8 (75.6) -35%
All other expenses 62.5 (5.2) -9% 236.6 (31.0) -15%
Net income (loss) before tax (0.8) (0.7) -639% (11.2) (5.9) -113%
Net income (loss) (21.4)$ (21.4)$ NM (29.4)$ (26.3)$ NM
Adjusted EBITDA¹ 44.4$ (1.0)$ -2% 163.0$ 3.1$ 2%
Adjusted net income (loss)¹ 4.8$ (1.3)$ -21% 9.8$ (2.8)$ -22%
Copyright 2014 TRAC Intermodal
International Domestic Total
2013 Q1 3.0% 10.4% 6.6%
2013 Q2 -1.3% 8.6% 3.1%
2013 Q3 2.4% 8.9% 5.5%
2013 Q4 5.9% 8.5% 7.6%
2013 2.4% 8.9% 5.7%
2014 2.1% 7.7% 4.6%
Market Review – Q4 and Full Year 2013
5
• Total U.S. intermodal volumes grew 5.7% in 2013 vs. 2012 - comprised of 2.4% growth in international volumes and
8.9% growth in domestic volumes, according to FTR
• U.S. containerized imports were up 3.0% in 2013 vs. 2012, according to figures from PIERS / Journal Of Commerce
• Total U.S. intermodal volumes grew 7.6% in Q4 2013 vs. Q4 2012 - comprised of 5.9% growth in international volumes
and 8.5% growth in domestic volumes, according to FTR
• U.S. international volume growth is expected to be 2.1% in 2014 and domestic volume growth of 7.7% in 2014, according
to FTR
U.S. Containerized Imports U.S. Intermodal Load Growth
Source – FTR (Intermodal volume in loads, March 2014)
Sources: PIERS / JOC February 2013
2013 Annual Growth 3.0% 1
1 – Domestic container loads, excludes intermodal trailer loads
Copyright 2014 TRAC Intermodal
2012 2013 Variance % Change 2012 2013 Variance % Change
Marine Market segment
Pool Statistics
Per Diem Revenue ¹ $ 52,359 $ 76,844 $ 24,485 47% $ 164,375 $ 273,391 $109,016 66%
Average Total Fleet ² 86,548 133,117 46,569 54% 70,011 120,079 50,068 72%
Average Daily Revenue per Chassis $6.58 $6.27 -$0.30 -5% $6.41 $6.24 -$0.17 -3%
Term Lease Statistics
Per Diem Revenue $ 15,588 $ 9,221 $ (6,367) -41% $ 69,886 $ 45,782 $ (24,104) -34%
Average Total Fleet 69,092 42,302 (26,790) -39% 77,270 50,890 (26,380) -34%
Average Daily Revenue per Chassis $2.45 $2.37 -$0.08 -3% $2.47 $2.46 -$0.01 0%
Domestic Market segment
Pool Statistics
Per Diem Revenue ¹ $ 33,324 $ 36,931 $ 3,607 11% $ 120,691 $ 135,171 $ 14,480 12%
Average Total Fleet ² 59,042 60,062 1,020 2% 55,998 59,903 3,905 7%
Average Daily Revenue per Chassis $6.13 $6.68 $0.55 9% $5.89 $6.18 $0.29 5%
Term Lease Statistics
Per Diem Revenue $ 4,683 $ 4,574 $ (109) -2% $ 18,108 $ 18,227 $ 119 1%
Average Total Fleet 14,304 13,660 (644) -5% 14,070 13,947 (123) -1%
Average Daily Revenue per Chassis $3.56 $3.64 $0.08 2% $3.52 $3.58 $0.06 2%
Year Ended December 31,Quarter Ended December 31,
Revenue Drivers – Marine and Domestic Market Segments
6
¹ Per Diem Revenue in $ thousands - represents revenues billed under operating leases and excludes amounts billed to lessees for maintenance and repair, positioning and handling,
and other ancillary charges
² Average Total Fleet in units - based upon the total fleet at each month end,
• Revenue growth is primarily driven by our Marine and Domestic neutral chassis pools
– In 2013, Marine Pool per diem revenue grew by 66% and the Domestic Pool per diem revenue grew by 12%
• Marine chassis customers have continued to shift from term leases to pools
– Industry shift has resulted in non-recurring transition costs for repositioning, repairs, the establishment of new pools
Key Metrics - Q4 2013 Key Metrics - FY 2013
Copyright 2014 TRAC Intermodal
$38.5
$43.0
$35.5
$39.2 $40.5
$36.4
$45.4 $44.4
$25
$30
$35
$40
$45
$50
Q1 12 Q1 13 Q2 12 Q2 13 Q3 12 Q3 13 Q4 12 Q4 13
10.0 9.7 12.0 9.8 10.4 15.0 8.7 8.5
83.2 86.197.8 106.0 107.5
112.0 125.5 127.6
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13
Other Revenue and Financing Revenue Equipment Leasing Revenue
Quarterly Revenue and Adjusted EBITDA Trends
• Strong chassis leasing revenue growth driven by both rate mix and volume contributions in Q4 2013
– 18% revenue growth in Q4 2013 vs.Q4 2012
• Adjusted EBITDA¹ for Q4 2013 decreased 2% vs. Q4 2012
– 18% increase in costs driven primarily from higher repairs during peak season and from increased size of pool fleet
– Excluding Q4 2012 non-recurring revenues, Q4 2013 adjusted EBITDA¹ grew $1.2 million or 3%
7
Quarterly Revenue
($ millions)
Quarterly Adjusted EBITDA¹
($ millions)
$93.2 $95.8
$109.8 $115.8 $117.9
$134.2 $127.0
$136.1 $2.2M non-
recurring
revenue
1 See slide 15 for a reconciliation of Adjusted EBITDA
Copyright 2014 TRAC Intermodal
Year ended
Q4 '12 Q4 '13 2012 2013
Adjusted EBITDA¹ 45.4$ 44.4$ 159.9$ 163.0$
Cash Interest Expense (15.4) (16.2) (59.6) (64.8)
Free Cash Flow¹ 30.0$ 28.2$ 100.3$ 98.2$
Year ended
Q4 '12 Q4 '13 2012 2013
Domestic Chassis 26.5$ 0.7$ 50.5$ 38.3$
Marine Chassis 46.5 8.9 52.5 102.8
Purchase of Leasing
Assets 73.0$ 9.6$ 103.0$ 141.1$
Capital Expenditures
Capital Expenditures and Free Cash Flow
• Invested $141.1 million of capital for chassis in 2013
– Marine chassis purchases from steamship lines
– Domestic chassis purchases primarily to buyout existing operating leases
• $98.2 million of free cash flow¹ generated in 2013
– Similar level of cash generation versus 2012
– Fleet maintenance spending is captured in the income statement
8
($ millions)
Free Cash Flow¹
($ millions)
Note – Cash Interest Expense excludes non-cash interest expense items, including deferred
financing fees and interest rate swap termination deferred charges. Bond interest which is paid Q1
and Q3 is accrued in Cash Interest Expense.
1 See slide 15 for a reconciliation of Adjusted EBITDA and Free Cash Flow
Copyright 2014 TRAC Intermodal
at Close 12/31/2012 12/31/2013
ABL Facility Size 725.0$ 845.0$ 950.0$
Available 221.0 236.0 237.0
Cash 23.7$ 26.6$ 11.8$
Cash Rate Maturity
ABL Facility Libor + 275 Aug '17 504.0 609.0 713.0
Capital Leases 5.0% Various 266.7 199.4 151.1
2nd Lien Notes 11.0% Aug '19 300.0 300.0 300.0
Total Debt 5.4% ¹ 1,070.7$ 1,108.4$ 1,164.1$
Member's Interest ² 542.0$ 538.9$ 523.7$
Total Debt and Equity 1,612.7$ 1,647.3$ 1,687.8$
LTM Adjusted EBITDA³ 146.3 159.9 163.0
Total Debt / LTM Adj. EBITDA 7.3x 6.9x 7.1x
Capital Structure
• Leverage ratio increased slightly from 2012 to 2013 due to capital deployed to purchase steamship line chassis
– Total debt increased by $55.7 million
– In compliance with all covenants across the ABL Facility, Capital Leases and Notes
9
Capital Structure
($ millions)
¹ Weighted cash interest rate at 12/31/2013 – includes cash impact of interest rate swap
² Member’s interest is the equivalent of shareholder’s equity for LLC entities
³ See slide 15 for a reconciliation of Adjusted EBITDA
Note – ‘at Close’ refers to the date to which the ABL Facility and 2nd Lien Notes closed, both in August of 2012
Copyright 2014 TRAC Intermodal
For More Information
10
Investor Relations:
Blake Morris
+1 609.986.0270
TRAC Intermodal LLC,
211 College Rd East,
Princeton, NJ, 08540
www.tracintermodal.com
+1 609.452.8900
TRAC Intermodal is the world’s largest provider of
marine and domestic chassis, measured by total
assets, operating throughout the United States,
Canada and Mexico. TRAC Intermodal provides long
term chassis leasing and short term rentals through
extensive chassis pool programs and pool/fleet
management through the utilization of its proprietary
PoolStat® system. TRAC Intermodal’s fleet consists of
approximately 309,000 chassis. TRAC Intermodal has
a broad operating footprint with 563 marine, 152
domestic and 61 depot locations across North America
and is the leader in providing chassis solutions to the
intermodal industry.
Contact us to learn how our chassis products can help
customers increase supply chain efficiency, control
costs, and promote safety.
Copyright 2014 TRAC Intermodal
2012 2013 Variance 2012 2013 Variance
Revenues:
Equipment leasing revenue 105,955$ 127,569$ 20% 373,060$ 472,571$ 27%
Finance revenue 1,166 690 -41% 5,116 3,254 -36%
Other revenue 8,674 7,810 -10% 36,417 39,419 8%
Total Revenues 115,795$ 136,069$ 18% 414,593$ 515,244$ 24%
Expenses:
Direct operating expense 58,633$ 74,431$ -27% 214,125$ 289,767$ -35%
Selling, general and administrative expenses 12,101 16,033 -32% 46,038 58,031 -26%
Depreciation expense 16,633 18,667 -12% 66,052 71,791 -9%
Other expense, net 3,328 4,985 -50% 9,834 15,152 -54%
Interest expense, net 22,801 22,748 0% 74,959 90,798 -21%
Loss on modification and extinquishment of debt and
capital lease obligatiions2,407 3 NM 8,850 904 90%
Income (loss) before benefit for income taxes (108)$ (798)$ -639% (5,265)$ (11,199)$ -113%
(Benefit) / Provision for income taxes (128) 20,563 NM (2,175) 18,154 NM
Net income (loss) 20$ (21,361)$ NM (3,090)$ (29,353)$ -850%
Adjusted EBITDA¹
EBITDA 42,996$ 42,670$ -1% 150,293$ 156,077$ 4%
Plus: DFL collections 1,939 1,444 -26% 7,836 5,706 -27%
Plus: Non-cash stock compensation 454 308 -32% 1,765 1,181 -33%
Adjusted EBITDA¹ 45,389$ 44,422$ -2% 159,894$ 162,964$ 2%
Adjusted Net Income¹ 6,032$ 4,779$ -21% 12,609$ 9,798$ -22%
Three months ended December 31, Year ended December 31,
Income Statement
12
Consolidated Income Statement
($ thousands)
¹ See slide 15 for a reconciliation of Adjusted EBITDA and Adjusted Net Income
NM – not meaningful
Copyright 2014 TRAC Intermodal
December 31, December 31,
2012 2013
Assets
Cash and cash equivalents 26,556$ 11,843$
Accounts receivable, net 80,620 113,138
Net investment in direct finance leases 40,729 25,026
Leasing equipment, net 1,325,383 1,394,088
Goodwill 251,907 251,907
Other assets 43,268 45,908
Total assets 1,768,463$ 1,841,910$
Liabilities and member's interest
Accounts payable and accrued expenses 47,590$ 54,784$
Deferred income taxes, net 73,569 99,331
Debt and capital lease obligations:
Current portion 25,884 34,029
Non-current portion 1,082,513 1,130,108
Total debt and capital lease obligations 1,108,397 1,164,137
Total liabilities 1,229,556 1,318,252
Member's interest
Member's interest 590,883 562,006
Accumulated other comprehensive loss (51,976) (38,348)
Total member's interest 538,907 523,658
Total liabilities and member's interest 1,768,463$ 1,841,910$
Balance Sheet
13
Consolidated Balance Sheet
($ thousands)
Copyright 2014 TRAC Intermodal
Three months ended December 31, Year ended December 31,
2012 2013 2012 2013
Cash flows from operating activities
Net Income (Loss) 20$ (21,361)$ (3,090)$ (29,353)$
Depreciation and amortization 16,722 18,724 66,471 72,026
Other adjustments to reconcile net loss to net cash provided by operating activities 11,126 32,021 (59,285) 62,130
Changes in assets and liabilities (132) 5,545 (12,367) (38,047)
Net cash provided by (used in) operating activities 27,736$ 34,929$ (8,271)$ 66,756$
Cash flows from investing activities
Collections on net investment in direct finance leases, net of interest earned 1,939$ 1,444$ 7,836$ 5,706$
Purchase of leasing equipment (72,955) (9,604) (102,989) (141,113)
Other investing activities 620 497 2,101 2,841
Net cash used in investing activities (70,396)$ (7,663)$ (93,052)$ (132,566)$
Cash flows from financing activities
Proceeds from long-term debt 116,000$ -$ 932,397$ 142,000$
Repayments of long-term debt (68,162) (23,784) (800,738) (87,290)
Cash paid for debt issuance fees (2,282) - (32,588) (2,267)
Other financing activities 20 (238) (307) (747)
Net cash (used in) provided by financing activities 45,576$ (24,022)$ 98,764$ 51,696$
Effects of changes in exchange rates on cash and cash equivalents (51) (334) 110 (599)
Net decrease in cash and cash equivalents 2,865$ 2,910$ (2,449)$ (14,713)$
Cash and cash equivalents, beginning of period 23,691$ 8,933$ 29,005$ 26,556$
Cash and cash equivalents, end of period 26,556$ 11,843$ 26,556$ 11,843$
Cash Flow Statement
14
Cash Flows
($ thousands)
Copyright 2014 TRAC Intermodal
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013
Net income (loss) 1,525$ 36$ (4,671)$ 20$ (435)$ (1,233)$ (6,324)$ (21,361)$
Income tax (benefit) expense 1,128 26 (3,201) (128) (315) (821) (1,273) 20,563
Interest expense 16,143 15,820 20,304 22,835 22,722 22,688 22,926 22,749
Depreciation expense 16,524 16,477 16,418 16,633 17,274 17,689 18,161 18,667
Impairment of leasing equipment 1,375 617 3,081 1,433 2,133 431 1,065 2,228
Loss on retirement of debt 21 128 6,294 2,407 647 248 6 3
Other income, net (136) (415) (89) (169) (798) (1,192) 94 (178)
Interest income (15) (6) (87) (35) (2) (269) (15) (1)
Non-cash stock compensation - 879 432 454 281 252 340 308
Principal collections on direct finance leases, net of interest earned 1,944 1,941 2,012 1,939 1,460 1,401 1,401 1,444
Adjusted EBITDA 38,509$ 35,503$ 40,493$ 45,389$ 42,967$ 39,194$ 36,381$ 44,422$
Cash interest accrued (14,563) (14,343) (15,285) (15,363) (15,986) (16,181) (16,437) (16,158)
Free cash flows 23,946$ 21,160$ 25,208$ 30,026$ 26,981$ 23,013$ 19,944$ 28,264$
Net income (loss) 1,525$ 36$ (4,671)$ 20$ (435)$ (1,233)$ (6,324)$ (21,361)$
Non-cash interest expense, net of tax 503 499 781 904 951 943 980 982
Non-cash stock compensation, net of tax - 527 260 272 169 151 204 185
Loss on modification and extinguishment of debt and capital leases,
net of tax 522 528 6,067 4,836 3,518 3,144 2,951 2,868
Non-cash tax expense - capital gain on related party stock distribution - - - - - - - 22,105
Adjusted Net Income 2,550$ 1,590$ 2,437$ 6,032$ 4,203$ 3,005$ (2,189)$ 4,779$
Reconciliation of Non GAAP Measures
15
Adjusted EBITDA and Adjusted Net Income and Free Cash Flow Reconciliation
($ thousands)
Note - Adjusted EBITDA, Free cash flows and Adjusted Net Income are not U.S. GAAP measures, see note on page 2
Copyright 2014 TRAC Intermodal
Fleet Composition
16
Total Fleet by Lease Type
At December 31, 2013
Units NBV of owned fleet % of on-
Total fleet by lease type # of units % of total $ millions % of total hire fleet
Term lease 55,701 18% 290$ 20% 22%
Direct finance lease 6,463 2% 25 2% 2%
Marine neutral chassis pool 132,906 43% 531 38% 52%
Domestic neutral chassis pool 60,057 19% 397 28% 24%
On-hire fleet 255,127 82% 1,243 88% 100%
Available fleet 21,389 7% 89 6%
Active fleet 276,516 89% 1,332 94%
Units available for remac 32,641 11% 87 6%
Total fleet 309,157 100% 1,419$ 100%