Part I [Key Information](index=4&type=section&id=Item%203.%20Key%20Information) This section presents selected five-year financial data and outlines key business, industry, and share ownership risks [Selected Financial Data](index=4&type=section&id=A.%20Selected%20Financial%20Data) Provides key financial and operational metrics from 2014 to 2018, showing performance trends and a recovery in 2018 Selected Financial Data (2014-2018) (in thousands, except per share data and utilization rate) | Indicator | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Lease Rental Income** | $612,704 | $549,454 | $565,938 | $646,505 | $656,241 | | **Income from Operations** | $194,426 | $143,866 | $26,210 | $211,819 | $272,749 | | **Net Income (Loss) Attributable to Shareholders** | $50,378 | $19,365 | $(52,483) | $108,408 | $190,555 | | **Diluted EPS** | $0.88 | $0.34 | $(0.93) | $1.90 | $3.34 | | **Cash Dividends per Share** | $— | $— | $0.51 | $1.65 | $1.88 | | **Total Assets** | $4,744,296 | $4,380,342 | $4,294,026 | $4,365,312 | $4,334,748 | | **Long-term Debt** | $3,409,827 | $2,990,308 | $3,038,297 | $3,003,648 | $2,974,311 | | **Utilization Rate** | 98.10% | 96.40% | 94.70% | 96.80% | 96.10% | [Risk Factors](index=6&type=section&id=D.%20Risk%20Factors) Details significant risks affecting the company's business, financial condition, and common shares [Risks Related to Our Business and Industry](index=6&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Outlines industry-specific risks including global trade dependency, lessee credit risk, and regulatory changes - Demand for leased containers is highly dependent on factors beyond the company's control, such as the **rate of growth of world trade**, economic conditions, and customers' 'lease vs buy' decisions[27](index=27&type=chunk)[29](index=29&type=chunk) - The August 2016 bankruptcy of Hanjin Shipping Co, which represented approximately **4.8% of the company's total fleet**, resulted in substantial costs and significantly impacted financial performance[37](index=37&type=chunk) - A significant portion of lease billings comes from a limited number of lessees, with the **top 20 customers accounting for 82.8% of total fleet billings** in 2018, concentrating credit risk[52](index=52&type=chunk)[54](index=54&type=chunk) - The company operates with **significant debt, totaling $3,437.8 million** as of December 31, 2018, which reduces financial flexibility[57](index=57&type=chunk)[58](index=58&type=chunk) - New International Maritime Organization (IMO) rules effective January 1, 2020, will reduce permitted sulphur oxide emissions, **potentially increasing costs for shipping line customers** and weakening their financial performance[45](index=45&type=chunk) [Risks Related to Our Common Shares](index=30&type=section&id=Risks%20Related%20to%20Our%20Common%20Shares) Covers risks for common shareholders, including price volatility and concentrated ownership influence - The market price of common shares has been **highly volatile**, fluctuating from an intra-day low of $4.23 to a high of $43.96 since the IPO[147](index=147&type=chunk) - Trencor Limited, a South African company, owns approximately **47.5% of outstanding common shares**, giving it significant influence over shareholder matters and the ability to prevent a change in control[150](index=150&type=chunk) - As a foreign private issuer, the company is **exempt from certain NYSE corporate governance rules**, such as the requirement for a majority of independent directors on the board[159](index=159&type=chunk)[160](index=160&type=chunk) - The company's bye-laws contain provisions that may **discourage a change of control**, such as a supermajority vote requirement and a classified board with staggered terms[165](index=165&type=chunk) [Information on the Company](index=35&type=section&id=Item%204.%20Information%20on%20the%20Company) Details the company's history, business segments, competitive position, and organizational structure [History and Development of the Company](index=35&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Highlights significant corporate events from 2016 to 2018, including the Hanjin bankruptcy impact and major financing activities - In August 2016, the bankruptcy of Hanjin Shipping Co led to a **$22.1 million impairment charge** and a **$19.0 million bad debt expense** for the company in that year[173](index=173&type=chunk)[174](index=174&type=chunk) - In 2017, the company issued **$920 million in Fixed Rate Asset Backed Notes** to repay existing debt and for other corporate purposes[176](index=176&type=chunk) - In September 2018, the TL Revolving Credit Facility was amended, **increasing its commitment from $700 million to $1.5 billion** and extending its maturity to 2023[186](index=186&type=chunk) - In October 2018, the company purchased the remaining **75% of TW Container Leasing Ltd** from Wells Fargo Container Corp for $29.7 million[189](index=189&type=chunk) Capital Expenditures and Proceeds from Asset Sales (2016-2018) | Year | Capital Expenditures | Proceeds from Sale of Assets | | :--- | :--- | :--- | | 2018 | $854.4 million | $147.3 million | | 2017 | $300.1 million | $135.3 million | | 2016 | $505.5 million | $126.6 million | [Business Overview](index=38&type=section&id=B.%20Business%20Overview) Describes the company's position as a leading container lessor, its fleet composition, lease types, and strategic focus - The company operates a total fleet of approximately 2.2 million containers, representing **almost 3.4 million TEU**, making it one of the world's largest lessors[195](index=195&type=chunk) - The business is structured into three core segments: **Container Ownership (79% of fleet)**, **Container Management (21% of fleet)**, and **Container Resale**[198](index=198&type=chunk)[201](index=201&type=chunk) - As of December 31, 2018, approximately **81% of the company's total on-hire fleet was on long-term leases**, providing predictable revenue streams[216](index=216&type=chunk) - Key business strategies include leveraging its scale, being a reliable supplier, pursuing acquisitions, maintaining high utilization and operating efficiency, and growing the container resale business[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[231](index=231&type=chunk) Top Intermodal Leasing Companies by TEU (Jan 2018) | Company | TEU (000's) | Percent of Total | | :--- | :--- | :--- | | Triton International Limited | 5,650 | 27.2% | | Florens Leasing | 3,700 | 17.8% | | **Textainer** | **3,355** | **16.1%** | | SeaCo Global | 2,400 | 11.5% | | Beacon Intermodal Leasing | 1,320 | 6.3% | [Organizational Structure](index=52&type=section&id=C.%20Organizational%20Structure) Outlines the corporate structure, key subsidiaries, and the significant ownership stake held by Trencor Limited - Textainer Group Holdings Limited is a holding company with two main direct subsidiaries: **Textainer Equipment Management Limited (TEML)** and **Textainer Limited (TL)**[170](index=170&type=chunk) - The principal shareholder, **Trencor Limited, held 47.5%** of the company's outstanding shares as of December 31, 2018[284](index=284&type=chunk) [Property, Plant and Equipment](index=53&type=section&id=D.%20Property%2C%20Plant%20and%20Equipment) Details the company's global office locations, all of which are operated under lease agreements - The company operates through **14 regional and area offices in 13 countries**, with its headquarters in Bermuda and an administrative office in San Francisco[285](index=285&type=chunk) - All office spaces are leased, with the **San Francisco lease expiring in May 2027** and the Bermuda office lease expiring in December 2020[286](index=286&type=chunk) [Operating and Financial Review and Prospects](index=53&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Provides management's analysis of financial results, liquidity, capital resources, and contractual obligations [Operating Results](index=57&type=section&id=A.%20Operating%20Results) Analyzes operating results for 2016-2018, highlighting revenue growth, expense drivers, and segment performance - **Lease rental income increased by 11.5%** from 2017 to 2018, primarily due to a 2.9% increase in average per diem rental rates, a 2.0% increase in utilization, and a 6.5% increase in the total fleet[315](index=315&type=chunk) - **Container impairment increased by 231.7%** from 2017 to 2018, primarily due to increased impairment for containers unlikely to be recovered from defaulting lessees[324](index=324&type=chunk) - **Interest expense rose 17.8%** from 2017 to 2018 due to a higher average debt balance and higher average interest rates[328](index=328&type=chunk) Revenue and Gain on Sale of Containers (2016-2018) (in thousands) | (In thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Lease rental income** | $612,704 | $549,454 | $565,938 | | **Management fees - non-leasing** | $8,529 | $7,146 | $5,937 | | **Trading container margin** | $3,450 | $1,456 | $(276) | | **Gain on sale of owned fleet containers, net** | $36,071 | $26,210 | $6,761 | Operating Expenses (2016-2018) (in thousands) | (In thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Direct container expense - owned fleet** | $58,813 | $60,321 | $62,596 | | **Depreciation expense** | $235,705 | $231,043 | $236,144 | | **Container impairment** | $26,775 | $8,072 | $94,623 | | **General and administrative expense** | $44,317 | $39,677 | $34,540 | | **Bad debt expense, net** | $2,697 | $477 | $21,166 | | **Gain on insurance recovery** | $(8,692) | $— | $— | | **Total operating expenses** | $466,328 | $440,400 | $552,150 | [Liquidity and Capital Resources](index=67&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Details the company's sources of liquidity, debt facilities, cash flow trends, and dividend payment restrictions - The company is a holding company and depends on dividends and other payments from its subsidiaries to meet financial obligations and pay dividends, which are subject to certain limits[372](index=372&type=chunk) Debt Facilities as of Dec 31, 2018 (in thousands) | Facility | Current Borrowing | Total Commitment | Available Borrowing | | :--- | :--- | :--- | :--- | | TMCL II Secured Debt Facility | $657,637 | $1,200,000 | $— | | TL Revolving Credit Facility | $1,280,000 | $1,500,000 | $136,637 | | TAP Funding Revolving Credit Facility | $173,000 | $190,000 | $2,798 | | TMCL VI Term Loan | $278,724 | $278,724 | $— | | 2017-1 Bonds | $357,210 | $357,210 | $— | | 2017-2 Bonds | $439,915 | $439,915 | $— | | 2018-1 Bonds | $251,327 | $251,327 | $— | | **Total** | **$3,437,813** | **$4,217,176** | **$139,435** | Historical Cash Flow Summary (in thousands) | Cash Flow Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $252,272 | $250,975 | $277,894 | | Net cash used in investing activities | $(672,940) | $(85,364) | $(280,430) | | Net cash provided by (used in) financing activities | $408,154 | $(70,372) | $(4,619) | [Tabular Disclosure of Contractual Obligations](index=74&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) Summarizes the company's total contractual obligations of approximately $4.12 billion as of December 31, 2018 Contractual Obligations as of December 31, 2018 (in thousands) | Obligation Type | Total | Due in 2019 | Due in 2020-2021 | Due in 2022-2023 | | :--- | :--- | :--- | :--- | :--- | | Total debt obligations | $3,437,813 | $197,427 | $554,277 | $1,509,945 | | Interest on obligations | $625,417 | $138,470 | $250,490 | $200,367 | | Office lease obligations | $17,621 | $2,186 | $4,222 | $3,930 | | Container contracts payable | $42,710 | $42,710 | $— | $— | | **Total** | **$4,120,940** | **$377,125** | **$809,634** | **$1,714,242** | [Directors, Senior Management and Employees](index=75&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) Provides information on the company's leadership, compensation, board practices, and employee base - As of March 4, 2019, the board of directors consisted of eight members, with **two new executive appointments in 2018**: Olivier Ghesquiere as President and CEO, and Michael K Chan as EVP and CFO[411](index=411&type=chunk)[417](index=417&type=chunk)[428](index=428&type=chunk) - **Aggregate direct compensation** paid to executive officers as a group (four persons) for 2018 was approximately **$3.7 million**[430](index=430&type=chunk)[434](index=434&type=chunk) - The company's 2015 Share Incentive Plan allows for the grant of share options and other awards, with **330,060 shares available for future issuance** as of December 31, 2018[435](index=435&type=chunk) - As of December 31, 2018, the company had **178 employees** and is not a party to any collective bargaining agreements[450](index=450&type=chunk) [Major Shareholders and Related Party Transactions](index=80&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) Details the company's ownership structure and transactions with related parties, including its largest shareholder - The company has a management agreement with LAPCO, an indirect subsidiary of major shareholder Trencor, from which it received **$2.5 million in management fees** in 2018[467](index=467&type=chunk) - A **Voting Limitation Deed** is in place with Trencor to ensure that, for IFRS purposes, Trencor is not considered to have control or significant influence over the company[464](index=464&type=chunk) Major Shareholders as of March 4, 2019 | Holder | Beneficially Owned Shares | Percentage | | :--- | :--- | :--- | | Trencor Limited | 27,278,802 | 47.5% | | Isam K. Kabbani | 3,653,250 | 6.4% | | All directors and executive officers as a group (9 persons) | 29,489,553 | 51.4% | [Financial Information](index=84&type=section&id=Item%208.%20Financial%20Information) Confirms the inclusion of audited financial statements and outlines the company's dividend policy - The company's audited consolidated financial statements for the years ended December 31, 2018, 2017, and 2016 are included in the report[472](index=472&type=chunk) - The company **suspended its dividend payments after the third quarter of 2016**, with future payments subject to board discretion and debt covenants[474](index=474&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk) Dividends Declared (2015-2016) (in thousands) | Date Declared | Dividend per Share | Total Dividend | | :--- | :--- | :--- | | February 2015 | $0.47 | $26,781 | | April 2015 | $0.47 | $26,783 | | July 2015 | $0.47 | $26,796 | | October 2015 | $0.24 | $13,719 | | February 2016 | $0.24 | $13,479 | | April 2016 | $0.24 | $13,577 | | August 2016 | $0.03 | $1,698 | [The Offer and Listing](index=86&type=section&id=Item%209.%20The%20Offer%20and%20Listing) Provides details about the trading market and historical stock price for the company's common shares - The company's common shares are listed on the **New York Stock Exchange (NYSE)** under the symbol **'TGH'**[480](index=480&type=chunk) Annual Stock Price Range (High/Low) | Year | High | Low | | :--- | :--- | :--- | | 2018 | $25.85 | $9.30 | | 2017 | $23.55 | $8.50 | | 2016 | $15.72 | $7.05 | | 2015 | $34.44 | $13.48 | | 2014 | $39.87 | $29.25 | [Additional Information](index=87&type=section&id=Item%2010.%20Additional%20Information) Provides supplementary corporate, tax, and regulatory information relevant to the company and its shareholders - The company is an **exempted company incorporated under the laws of Bermuda**[489](index=489&type=chunk) - Major shareholder Trencor is subject to **South African exchange control regulations**, which could restrict the company's ability to issue new shares[492](index=492&type=chunk) - The company has obtained an assurance from the Bermuda Minister of Finance that it will **not be subject to any tax on profits, income, or capital gains in Bermuda until March 31, 2035**[497](index=497&type=chunk) - A portion of the company's income is subject to U.S. federal income tax, and the company does not believe it was a **Passive Foreign Investment Company (PFIC)** for its prior taxable year[507](index=507&type=chunk)[531](index=531&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=96&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to foreign exchange and interest rate risks and its strategies for mitigation - The company's primary market risks are **foreign exchange rate risk** and **interest rate risk**[561](index=561&type=chunk) - In 2018, **19% of direct container expenses were paid in up to 20 different foreign currencies**, and the company does not hedge this exposure[562](index=562&type=chunk) - To mitigate interest rate risk, the company uses interest rate swaps, collars, and caps, with a **total notional amount of $1.23 billion** as of December 31, 2018[563](index=563&type=chunk)[568](index=568&type=chunk)[569](index=569&type=chunk) - A hypothetical **1% increase in interest rates** would result in a net increase of **$10.4 million in interest expense**[571](index=571&type=chunk) Part II [Controls and Procedures](index=98&type=section&id=Item%2015.%20Controls%20and%20Procedures) Discloses a material weakness in internal control over financial reporting and its impact on disclosure controls - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2018[581](index=581&type=chunk) - A **material weakness was identified** in internal control over financial reporting related to the accounting for management agreements for the managed fleet[585](index=585&type=chunk) - The control deficiency resulted in an immaterial restatement of prior period financial statements to change the presentation of managed fleet revenue and expenses from a 'net' to a 'gross' basis[582](index=582&type=chunk)[583](index=583&type=chunk)[586](index=586&type=chunk) - The independent auditor, KPMG LLP, issued an **adverse opinion on the effectiveness of the company's internal control** over financial reporting as of December 31, 2018[588](index=588&type=chunk) [Corporate Governance and Other Information](index=100&type=section&id=Item%2016A-G.%20Corporate%20Governance%20and%20Other%20Information) Covers various governance topics, including audit committee experts, codes of conduct, and accountant fees - The board has determined that Messrs Shwiel and Cottingham are **audit committee financial experts**[592](index=592&type=chunk) - The company has adopted a **Code of Business Conduct and Ethics** applicable to all directors and employees[593](index=593&type=chunk) - As a foreign private issuer, the company follows Bermuda corporate governance practices in lieu of certain NYSE requirements, such as **not having a majority of independent directors** on its board[604](index=604&type=chunk)[605](index=605&type=chunk) Principal Accountant Fees (in thousands) | Fee Category | 2018 | 2017 | | :--- | :--- | :--- | | Audit Fees | $1,835 | $1,766 | | Audit-Related Fees | $173 | $195 | | Tax Fees | $14 | $22 | | **Total Fees** | **$2,022** | **$1,983** | Part III [Financial Statements](index=104&type=section&id=Item%2018.%20Financial%20Statements) Contains the audited consolidated financial statements and the independent auditor's report for 2016-2018 - The independent auditor, KPMG LLP, issued an **unqualified opinion on the consolidated financial statements**, stating they present fairly the financial position of the company[614](index=614&type=chunk) - KPMG LLP issued an **adverse opinion on the company's internal control over financial reporting** as of December 31, 2018, due to a material weakness[619](index=619&type=chunk)[621](index=621&type=chunk) - Note 2 details an immaterial reclassification and adjustment of prior periods to present revenue and expenses for the managed fleet on a **'gross' basis instead of 'net'**, with no impact on net income[737](index=737&type=chunk)[738](index=738&type=chunk)[739](index=739&type=chunk) - Note 12 provides a detailed breakdown of the company's **$3.41 billion in debt obligations** as of December 31, 2018[778](index=778&type=chunk)