Hilliard Terry - Executive Vice President and Chief Financial Officer Philip Brewer - President and Chief Executive Officer Robert Pedersen - President and Chief Executive Officer, Textainer Equipment Management Limited

Michael Webber - Wells Fargo John Mims - FBR Capital Markets Ken Hoexter - Bank of America Sal Vitale - Sterne, Agee Justin Yagerman - Deutsche Bank Bill Carcache - Nomura Securities Helane Becker - Cowen & Company Doug Mewhirter - SunTrust Robinson

Welcome to the Textainer third quarter 2013 earnings conference call. My name is Richard, and I will be your operator for today's call. (Operator Instructions) I will now turn the call over to Hilliard Terry, Executive Vice President and Chief Financial Officer. You may begin.

Thank you. And welcome to our 2013 third quarter earnings conference call. Joining me on this morning's call are Philip Brewer, TGH President and Chief Executive Officer. At the end of our prepared remarks, Robert Pedersen, TEM President and Chief Executive Officer will join us for the Q&A. Before I turn the call over to Phil, I'd like to point out that this call contains forward-looking statements in accordance with U.S. securities laws. These statements involve risk and uncertainties are only predictions and may differ materially from actual future events or results. Finally, the company's views, estimates, plans and outlook as described within this call may change subsequent to this discussion. The company is under no obligation to modify or update any or all of the statements that are made. Please see the company's Annual Report on Form 20-F for the year ended December 31, 2012, filed with the Securities and Exchange Commission on March 15, 2013, and any subsequent quarterly filings on Form 6-K for additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements. I would also like to point out that during this call, we will discuss non-GAAP financial measures, as such measures are not prepared in accordance with Generally Accepted Accounting Principles, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure will be provided either on this conference call or can be found in today's earnings press release. At this point, I would now like to turn the call over to Phil for his opening comments.

Thank you, Hilliard. Welcome to Textainer's third quarter 2013 earnings conference call. During the third quarter we saw strong increases in revenues and EBITDA. Total revenues increased 8.4% compared to the year ago quarter, setting a new quarterly record. More impressively, lease revenue increased 21%, even though utilization averaged 94.1%, more than 3% below its level of one year ago. Another positive note is that interest expense was almost flat compared to third quarter 2012, even though our average debt balance increased by almost 15%. We enjoyed a significant reduction in our average interest cost compared to the prior year quarter, as a result of the refinancings we have completed this year. Our growth in EBITDA was in line with our revenue growth, demonstrating our strong cash flow. Net income was negatively affected by the increase in depreciation expense, resulting from a reserve for container write-offs, the fact that older fully depreciated containers are being disposed from our fleet, while we are adding newer higher cost containers, and purchased leaseback containers often must be depreciated over only a few years. Net income was also affected by $4.3 million of bad debt expense by 3x the usual amount. The container write-offs and part of the bad debt expense relate to six small lessees, which are in default. These lessees account for less than 0.5% of our fleet. Historically, in default situations we recover more than 90% of our containers with about 80% being recovered within the first six months and the remaining 10% to 20% recovered during the subsequent six to 12 months. For these specific lessees, we believe the recovery may not follow this pattern, because containers are in locations where recovery is often uneconomical due to heavy damage, liens for storage cost and repositioning expenses. Nonetheless, we still expect to recover more than a majority of the containers on lease to these lessees. We believe this issue is isolated to a few small lessees located in Asia, primarily China. We do not see any indication that we might see similar container write-offs with our top lessees or with lessees in other locations. Indeed, last quarter we recorded an increase in bad debt expense related to a regional agent shipping line, which declared bankruptcy. Even though recovery efforts only began five months ago, today we have recovered 95% of the previously on-lease units from this customer. We have always focused on lessee diversification. We have found that limiting the percentage of our fleet on-lease to any single lessee, results in increased demand for depot containers, reduces the credit and operating risk of our overall fleet and limits our dependence on our largest customers. Indeed, as a result of our lessee diversification efforts, some of the containers which were recently recovered from the defaulting lessees were immediately put on lease to other smaller, but more creditworthy lessees. It is also worth noting that some of the defaulting lessees came from fleets we acquired over the past several years. Notwithstanding these defaults, these acquisitions have proven to be very successful and profitable transaction for Textainer. We've invested $827 million in new and used containers for lease-out in 2013, $629 million of which has been invested this year. Our fleet is just shy of 3 million TEU. Our own fleet by itself exceeds 2.2 million TEU, which we believe is larger than any other container lessor. We continue to see a decline in trading container sales, as shipping lines dispose the containers by a purchased leaseback transactions instead of trading deals. Purchased leaseback containers are considered in-fleet containers and the sales are reflected in gain loss on sale of containers. Indicative of the strength of our cash flow and commitment to shareholders, we announced a dividend of $0.47 per share. We remain focused on paying a dividend, which is both sustainable and provides the proper mix, between rewarding shareholders and maintaining capital for future investments. Unlike others in our industry, we have maintained or increased our dividend every quarter since going public in 2007. We did see an increase in container demand from May through mid-August. Since the beginning of the second quarter, we have leased out more containers than were turned in. Utilization has remained relatively steady, because we added more containers than we disposed. Utilization averaged 94.1% for the third quarter. However, it has increased slightly to 94.2% currently and is 0.4% above the lowest level we saw during the quarter. Utilization is within 1% of its level at the start of the second quarter, an indication of how stable utilization has been for most of the year. Similar to the comments made by our competitors during their earnings calls, we expect container demand to remain muted and to see a similar utilization level for the fourth quarter. Returns remain under pressure, due in part to the ease with which all lessors can borrow at attractive rates and buy new containers. Prior to 2012, four container lessors had accessed asset-backed market, raising a totaled of $1.9 billion. Since the beginning of 2012, a total of $4.8 billion has been raised by 10 companies. Surprisingly to us, the borrowing cost differ very little, regardless of the size, experience, financial strength or past performance of the lessor. Add to this the fact, that the manufacturers can deliver ordered containers in less than two months, and it is obvious why the competition for every lease-out opportunity is very strong. We expect these highly competitive market conditions to continue for the near-term, while we remain selective in the deals that we pursue, we are focused on maintaining or growing our market share. New container prices remain below $2,100 per CEU. Used container prices are 10% to 20% below, where they were one year ago, but the rate of decline in prices has slowed down and prices have leveled off in certain regions. We expect both new and used prices to remain around current levels for the near-term. Total dry freight container production in 2013 is projected to be approximately 2.2 million TEU with lessors expected to purchase about half of this amount. Last quarter we mentioned the need for prudent investing by container lessors. At the time we made that statement, we estimated that new-build factory inventory totaled in excess of 1 million TEU. Today that level is approximately 580,000 TEU, of which we estimate slightly more than 80% is for leasing companies. This level of inventory is not considered excessive. Lessors have begun showing that they exercise prudent investing in new containers, when there is sufficient demand to justify such purchases. Our industry has long benefited from disciplined investing and continues to do so. We expect rental rates to remain under pressure and our performance to be flat or slightly down in the fourth quarter. As a result, we will continue to drive economies of scale. Achieving a 3 million TEU fleet is not just a major milestone in the history of the container leasing industry, but it also help us achieve what we believe is the lowest overhead cost per CEU of any major lessor. With our low operating costs 83% of fleet subject to long-term and finance leases and only 2.2x or 2.3x leverage, we believe we are very well-positioned to take advantage of market developments during the fourth quarter and in 2014. I will now turn the call over to Hilliard.

Thank you, Phil. Turning to the quarterly results. We recorded $133 million of total revenue. Revenue grew by 9% compared to the year ago period. The primary driver of our revenue growth was a 21% increase in lease rental income, as a result of the large increase in the size of our owned fleet, when compared to last year. As Phil mentioned, our owned fleet now totals 2.2 million TEU. The increase in lease rental income was partially offset by lower per diem rates and a decrease in utilization of our owned fleet. This quarter's revenue was also dampened by lower management fees due to the decrease in the size of our managed fleet from our third to less than a quarter of our total fleet, given the number of managed fleet acquisitions that occurred towards the end of last year. We also saw a large decrease in the sales of trading containers due to a smaller number of containers we were able to source and sell. Gains on sale of containers decreased 14% due to a decrease in average sales proceeds and was partially offset by an increase in the volume of containers sold versus last year. Total operating expenses were up 30% year-over-year. About half of this increase was due to the provision for bad debt, above our normal run rate and a charge in the quarter for the unrecoverable container assets. Excluding these unusual items and using a normalized run rate for bad debt expense, operating expenses would have been up 16%. The primary driver of OpEx growth was the increased depreciation expense, which is the largest component of total operating expenses. Also direct container expenses increased, as storage cost, handling expenses, maintenance and repair expenses increased due to lower utilization rates in the quarter coupled with the fact that we own a larger percentage of our total fleet versus the year ago quarter. Depreciation expense was $42 million for the quarter. However, excluding the unusual item, depreciation expense was up 11% or 40% year-over-year, as a result of our larger owned fleet and a few factors that impact depreciation expense. These factors include PLBs becoming the primary source of supply for our resale business. And in most cases, we depreciate these containers over a short depreciation period, which results in higher depreciation expense initially. Additionally, older in-fleet units we sell are often fully depreciated, while they are replaced by higher cost units with higher deprecation. Lastly, when compared to dry containers, as higher percentage of refrigerated containers price is depreciated annually and as the percentage of refrigerated containers in our fleet increases, so does deprecation expense. If you look at overall annualized deprecation expense as a percent of gross container asset value its 4% this quarter. Over the past two years, our annualized depreciation expense has ranged between 3.5% and 4.5% of gross value. As we've stated in previous quarters, depending on the mix of dry and reefer business going forward and our new container prices, we expect depreciation to trend within this range. Bad debt expense was $4 million, roughly about $2.9 million above our normalized run rate of 1% of revenues. This overage was primarily related to a single customer, as Phil mentioned earlier. And was specifically for the cost involved in the recovery of assets. Counterparty risk is always at the top of our mind and something we managed day-in and day-out. We continue to be very vigilant in our credit and collection processes. In fact, our DSO has improved by 8% over the past year, a testament to our collection efforts. In certain cases, we have been proactive in reducing supply and redeploying our assets leased to certain customers. We remain comfortable with the overall risk profile of counterparties in our fleet. In spite of the provision recorded this quarter, we continue to believe the normalized run rate for bad debt expense should trend around 0.5% to 1% of revenue on a longer-term basis and we expect our positive DSO trends to continue. Below the operating income line, our interest expense line item was $20 million for the quarter versus $19 million in the year ago quarter. While our debt balance has increased by 35% from Q3 of last year, interest expense was only up by 3% due to our ability to lower the company's funding cost. Our average effective interest rate is currently at 3.55%, down 29 basis points when compared to the second quarter and down 121 basis points when compared to the year ago quarter. We successfully lowered our funding cost and locked in attractive long-term debt. Early in the quarter, we established a $300 million asset-backed revolving credit facility for older containers at LIBOR plus 225 basis points. In early September, we issued $300 million of asset-backed term notes with a coupon of 3.90%, using a new trust structure. Both financings increased our future financing flexibility and liquidity. Periods of softness often times gives rise to the best opportunities. We have the lowest leverage than any of our public company competitors, and that provides dry powder to take advantage of growth opportunities. Increasing our leverage can help improve our return on equity, an option not available to more highly levered competitors. For every half turn in our leverage, we can effectively increase our return on equity by 2.5 percentage points. The flexibility we have built into our low-cost funding provides us the ability to lever up for the right opportunity. Income taxes for the quarter were a little less than $1 million compared to a benefit in the year ago quarter. Our effective tax rate varies from quarter-to-quarter due to discreet one-time items. As a result, the effective tax rate recognized on a single quarter is not necessarily indicative of the effective tax rate for the full year. We do not expect our annual effective tax rate for 2013 to differ materially from historical effective rates. Adjusted EBITDA of $106 million was up 9% year-over-year, a clear indication of our continued strong cash generation. Adjusted net income, which excludes unrealized gains on interest rate swaps for the quarter was $39 million, resulting in adjusted EPS of $0.70 for the quarter. Excluding the unusual items and assuming a normalized bad debt expense, adjusted EPS would have been $0.83 for the quarter. We declared a dividend of $0.47 per share, while we continue to target a dividend level of approximately 50% of adjusted net income. This payout is higher, at 67%. If you adjust for the unusual items in Q3, the dividend payout would have been within the targeted payout range. We believe it's important to provide our shareholders with stable and sizeable dividends and our yield is currently around 5%. Even in periods, where we experienced unusual items, the board is willing to look through those items and maintain dividends even at higher absolute payout. We are focused on the long-term outlook and remain committed to our policy of stable or increasing dividends. Turning to our balance sheet. As of September 30, our cash position was $137 million. Our total assets were $3.9 billion, and our leverage ratio was 3.3 to 1 Thank you for you attention. And now I'd like to open up the call to questions. Operator, can you inform the participants of the procedures to participate in the Q&A.

(Operator Instructions) Our first question on line comes from Mr. Michael Webber from Wells Fargo. Michael Webber - Wells Fargo: I wanted to jump in and talk about the competitive pricing environment. And your all's commentary is in line with what we've been hearing all quarter. I'm just curious as to maybe how that's trended, you quoted a date even, that maybe since we hit the summer period to now. Has that eased off after things got a bit more competitive to start the year or has that kind of been more of a consistent easing in terms of both per diems, and then I would guess, kind of net spreads?

I would say pricing has remained pretty consistent throughout the year. It's been competitive all the time. The supply demand picture has been pretty stable, I would say. The picture we have seen is there have been more availability than deal size out there. And that means that every time we compete on a transaction we have five, six, seven competitors competing for the same volume, and that has clearly made the market more competitive. And I think that's been the story all year and I think that's a story right now as well. Michael Webber - Wells Fargo: Phil, in your prepared remarks, you mentioned a little under 600,000 in terms of new inventory, about 80% of which is owned by lessors. Last year, we saw a bit of a pre-buy in early Q4, not huge, but a bit of an uptick from what we've seen in the past. Just it seems like most industry participants were bit more comfortable with where were our asset values were potentially going to trend. Do you think we could see that this year or is that new inventory leveled enough to kind of keep that in check?

Well, Mike, I think part of the reason we saw stronger buying in the fourth quarter in the last couple of years is because there was an expectation that container prices would rise going into the following year. Right now, I'd say that expectation is not quite so strong, given that it's very difficult to predict whether it is going to be strong buying in the fourth quarter or not. I'd say, right now the outlook looks like its less likely than in the past years, but it's difficult to say at the moment. Michael Webber - Wells Fargo: One more for you, and this just is probably difficult to say at the moment, but if we kind of just think about the way things have trended in the space, it's more competitive, topline growth has been relatively needed, and it seems like, and as we look at 2014, we would probably need to see both of those things ease in terms of the environment getting a bit less competitive. And we probably need to see an uptick in top line topline growth for returns to really kind of reverse course here. Obviously, you have no control over pricing from smaller players and your competitors, but when you just kind of look at what would you might have a view on in terms of topline growth, what do you think we would need to see to see profitability turn, just from an opportunity set perspective? I mean is it 3 million TEU of new box demand next year? Do you think that's enough to give everyone enough room to kind of turn things around and ease this pressure or do you think it's more?

Mike, I think you asked the exact same question that some of our competitors [ph] would like. I'd like to say that there was a very simple answer. I think part of the answer is this, as we see greater demand for containers, then the individual deal sizes also increase. Right now, many of the deals we're seeing in the market are relatively small. So anyone of the leasing companies can provide, most, if not all, of the containers that have been requested. As the demand increases we see deal sizes increase, as well. And that frankly, plays to the hand of the larger container leasing companies, where we're able to meet the demands to provide most, if not all the containers with the very large deals. Generally the shipping lines prefer not to deal with six, seven different lessees or lessors at one time. So that certainly is advantageous to us when the deal sizes are larger. I think there is a few other things to keep in mind, and one is in this environment some of the things that are very, very important are, for example economies of scale, and we believe we have the lowest overhead cost per container of any of the lines. Another factor to keep in mind is that we've seen this change from trading containers to purchase leaseback containers over the past two years and that has led to the muted trading results among those of the container leasing companies that are active in that business. And the purchase leaseback containers generally have gone on lease for a year, two year, three year. We'll start to see some of those containers coming off of their leases over the next, I would say, probably a year from now starting, about that half a year, a year from now and then going forward. And as that happens, I would expect you'll start to see if we priced these yields properly, gains on sales as we dispose of the containers and that will also be beneficial moving forward for those of us who are active in that business. Michael Webber - Wells Fargo: That's really helpful, and that that increased leverage to return for larger players is interesting.

Can I just add one point to that question there? I think there is one key number you need to keep in mind and that is the fact that earlier this year inventory at factories was more than 1 million TEU, and that's like less than 600,000 TEU right now. Actually the last number we heard was less than 580,000 TEU. With 82% of that inventory being leasing company inventory, and if we worked those numbers back to our situation, more than half of that is actually booked out. That is the different environment. That is the more positive outlook. That means that the leasing industry has refrained from just buying big, sitting on massive numbers and potentially being more desperate to activate stuff they've already purchased. It's a different story when you buy for demand than just buying for stuff that you already have, that you want to place, but that is really a very big important number, the fact that we went from 1.2 million TEU to less than 600,000 TEU.

Our next question online comes from Mr. John Mims from FBR Capital Markets. John Mims - FBR Capital Markets: Just as a quick point of clarification. The six little shipping lines that were in default, and I know it's a small percentage of your fleet, but how many other small lines are out there that are inside of your customer base?

Well, the total exposure we have to this group, this type of shipping line remains very, very small percentage of our fleet. Similar to I believe all of the competitors in our industry, we follow the 18-20 rule where our top-twenty lessees comprised about 80% of our fleet. So the amount you'll on lease to these type of lessees is extremely small. I would just add that we believe we have gone far in accommodating the needs to recognize the impairment and the bad debt reserve for these lessees. In fact, I think it's quite likely that some of the containers that we've currently listed as impaired we may ultimately recover. We had a very unique situation here where there was one lessee that frankly engaged in fraud. He was not even a lessee, that had been on our problem accounts report, was paying normally when the owner of the shipping line disappeared and that led to some confusion in terms of identifying where our containers were located because the staff at the shipping line also, many of them also left. Our team in China has been going to the depots and going to terminals and we've been able to identify the location of the majority of the containers. Some of them we've concluded are simply uneconomical to recover, that's the reason for this. So we view it as a pretty unique situation. Our total exposure in this area even beyond those six lessees is simply a very small percentage of our fleet. John Mims - FBR Capital Markets: I know you do a lot on the credit side as far as reviewing these guys, so the fraud part definitely makes sense. Phil, let me ask you another on the pricing, just to go back to there when you said you expect pricing to remain flat in the near-term. What's near term for you? Is that just more of a uncertainty about fourth quarter or are you willing to venture any kind of projections into what pricing could do in the beginning of the year

Right now we think that container prices are likely to remain -- but both new container prices and used container prices are likely to remain relatively stable through the end of the first quarter, given the early Chinese New Year this year, and then after Chinese New Year generally we have a relatively slow period. So I would say our visibility right now would go to the end of the first quarter, which we expect still relatively stable prices through that time. John Mims - FBR Capital Markets: And then one last one for me and I'll turn it back over, but when you look at that flat pricing environment, and to Hilliard's comments on your leverage and kind of where you stack up as kind of the least levered in the space, at what point, what do you need to see before you're willing to go ahead and pull the trigger and make some opportunistic purchases to take advantage of the pricing environment? Now, do you think prices could come in some or are you waiting to see a little bit more on the demand side before you willing to go back on spec a little more?

Well, we're always looking at the market and looking at container prices and making exactly that decision as to whether or not we should be buying, we should be holding. I think there's still a bit of uncertainty in the market. So it's very hard for us to say what's the right time, but I can promise you that if we think that it makes sense for us to be buying containers based on the prices we're being offered and where we see demand that we will act.

Our next question on line comes from Mr. Ken Hoexter from Bank of America. Ken Hoexter - Bank of America: I think you talked about opportunities or maybe it was Hilliard, on terms of large scale, talked about opportunities in the market. Are you thinking about large-scale type acquisitions or is it still kind of tuck-in like the sale leasebacks you engaged in last year? I mean do you think we could see if you're getting some over ordering and maybe too much pressure? Is now the time you want, if you got leverage capability, is that a direction you would want to head in, in terms of consolidating the market?

I think all of us in the industry feel that some level of consolidation in the market, in our industry would be positive. Certainly if you look at the recent past, when there has been transactions they haven't resulted in consolidation. I believe that some point in the future, I am not sure of the time is now, but at some point in the future we will see consolidation. But believe me if there is opportunities out there, whether it's a purchase leaseback, whether it's new containers, whether it's buying parts of our own fleet or frankly any type of acquisition opportunity, we will be aggressively looking at it.

Ken, I would just add, my point was for the right reason we have the ability to increase leverage. If you look at sort of the return on equity that we have been able to deliver, it's been I think consistent and in some cases above some of our peers, and that's been based on the lower leverage. If you look at some of the deals that we've done from a financing front, all that we've done is increased our flexibility, be it through the new trust allocation, the allocation trust structure that we issued and the bonds that we just issued or even the facility for used containers, all this provides more flexibility and enables us to increase leverage for the right reason. Ken Hoexter - Bank of America: So given that I guess, you're still not seeing those returns structurally decline. If you've got now -- I think somebody mentioned earlier, Robert, I think mentioned five to seven bidders per contract versus it used to be one, two or three. Are you seeing those level of returns structurally decline?

I am not sure I understand the question, Ken, but if you're asking, are we seeing the level of returns on individual lease out transactions decline? Yes, of course, I mean everybody in the industry said exactly that and certainly they have. I think they have reached the level of stability, we haven't seen further declines over the past, say couple of quarters, is that your question? Ken Hoexter - Bank of America: I guess it's a more of a pricing issues I guess, but whether it becomes structural at this point, if you have that many more containers with that or competitors with that much more access to capital. So let me jump on just to a quick follow-up, I guess clean up question. You were talking about you recovered 95% of the on-leased units for the bankrupt customers, does that mean there are still leased units out to the customers?

Let me be clear on that, and I think this is an important point I'd like to emphasize, so I appreciate you bringing it up. So the point out there, we don't see any fundamental change in the historical recovery rates for containers in default situations. I mentioned we had an unfortunate experience with one lessee here, where it was example of essentially a fraud, but you take another lessee, which was quite public default in the second quarter, our Korean lessee. And we only started recovering those containers five months ago and we have already recovered 95% of those containers. So it's just demonstrating that our ability to recover in the default situation is still following the historical pattern. So the containers are not on lease to that customer. The customer has been put in default. We're looking to recover the containers. We have filed a claim with the bankruptcy proceedings in Korea in that particular instance, including for our recovery costs, but we're currently now involved in recovering the containers. Ken Hoexter - Bank of America: I guess if I could just one more on in terms of the liner customers. I guess at the beginning of this year, they had kind of stepped up, maybe increasing their participation in purchasing boxes that are maybe ahead of the typical kind of 50-50 split, have you seen that? It sounds like you keep mentioning the 50% level, have we seen their entrance in some market decline, and are they back to normal buying cycles or do you anticipate any change as you move into the beginning of the year?

Well, we are actually not surprised about the situation and we're not surprised about the situation the way they ended up this year here. We kind of always thought that it was going to end up about 50-50 at the end of the year. What happened earlier in the year was we had a later Chinese New Year. You had what everybody had perceived just cheap container prices, and there was quite a lot of lower costs capital being offered to certain shipping lines that they really opportunistically decided to go out and activate. And when we got through second and third quarter, particularly third quarter, purchases were dominated by leasing companies, and I think there is an uptick in purchases in the fourth quarter, I think you'll also see that on behalf of leasing companies. So the fact that we end up about 50-50, that I think was predictable.

Our next question online comes from Sal Vitale from Sterne, Agee. Sal Vitale - Sterne, Agee: So just first on the $4.7 million charge for the impairment of containers, so if I heard you correctly early, you said you believe that you may have over reserved for them, so would you expect at some point, I guess in your P&L, in the future, some kind of reversal of a portion of that $4.7 million charge?

Sal, what I meant to say is that we reserved what we feel was the appropriate amount based on the information we have currently. It's just that every day we're monitoring this situation. And when we made the reserve, it was our best estimate, as to the level of container recovers, we'd be able to achieve with this particular lessee. But each day, as we approach the point in time in which we had to finally make a decision, we found we were identifying more containers. But we had to make a cutoff at some point and make a decision. Should we end up recovering more containers than we thought, first of from an accounting perspective, no I don't think there is any write-back of assets, as I understand it. But second, I don't expect it to be material in any event. Sal Vitale - Stern, Agee: And then, switching to the bad debt expense of $4.3 million, just a clarification there, you basically you've recovered 95% of the containers for that bankruptcy at this point, correct?

Yes. Sal Vitale - Stern, Agee: And so I guess where I'm getting at is, going forward, we shouldn't see any more increase in your bad debt or any more bad debt expense related to that. Is that safe to assume or is that material?

We don't think you'll see anything material. Sal Vitale - Stern, Agee: And then, I think Hilliard, earlier you've mention that the sales on gains were down sequentially due to a combination of lower sales prices, partially offset by higher volume. Can you give us a sense of what the sequential decline and the average sales price was?

Give me a quick second.

I can tell you that used container prices, Sal, have declined between 10% to 20% year-to-year. But right now, unfortunately we're seeing that the rate of decline has leveled-off, while I believe used container prices could trend down slightly. I also think that if they're not at a bottom, they're very close to bottom. We expect them to remain stable, relatively stable through the end of this year and into the first quarter next quarter. It's unlikely that used container prices are going to start increasing until we start seeing increases in new container prices. Right now, there is enough containers available in the used container market that buyers are not really buying for inventory purposes, because they know that if they need the containers, they can turnaround and get them immediately. So as a result we don't see that pool to pull the prices up over the next few quarters. Sal Vitale - Stern, Agee: And then just on the current factory inventory. You mention there is close to about 580,000 now. If I look at the size of the fleet that comes out to about less than 2% of the size of the global fleet. Can you give me a sense for, at this point in the year, what it is typically? Is that typically above below-trend?

This is definitely below, where we would normally see inventory, and it's probably about two, three months of consumption in a normal market. So this is low. We think the number is low, because the lead times at factories is also short. You can probably buy, placing the order today and get containers three, four weeks from now. Shipping lines know that leasing companies know that, and I think that's probably holding some buyers back. So they don't have to make big decisions right now, because they feel that if they place an order tomorrow, it will probably be only be three, four weeks and they'll have the equipment available. Sal Vitale - Stern, Agee: And then just a last question on the container impairment. Given this experience or is there any high-end level of scrutiny I guess in the lease portfolios of your smaller lessees?

I think we noted earlier, when we started off that in fact our DSO has improved dramatically since third quarter last year. And we think the overall credit profile of lessee and of our fleet, it's actually much better than it was several years ago, for example, during 2009, when our industry went through a pretty severe downturn. Having said that though, yes, as we've gone through this process, we sit back and said, is there anything that we need to do that we're not doing. Hilliard and I have been involved in discussions with both, our credit department in-house as well as our regional offices, to explore how we're handling the credit. And it's important to note that our marketing staff are responsible for collection themselves, which we think in the past has worked and continues to work well to minimize our credit risk. But doing business, we also maintain a philosophy that we don't want any single lessee to be more than, in fact more than 15%. Right now, we don't have anyone more than 14% of our entire fleet and only two that are above 10%. We try to diversify our exposure among lessees. We've never let anyone get to the 18%, 19% of our fleet for example. We think that this policy has served us well overtime. And even in this situation, we're talking about now, where we are trying to recover containers from what we'll call off the grid locations. We found other lessees that are willing to take those containers, once we've identified them and recovered them. And we think that our broad exposure among a group of lessees has helped us in that regard. So, yes, every once while you have a problem, like we've faced right now, as I mentioned, these few small lessees, although one is responsible for the bulk of that charge, and as I mentioned it was a fraud situation. But we don't think overall it indicates that we have a problem with our credit policy. In fact, we recognize that these kind of things might happen once a while when you also try to maintain the worse group of lessees.

Our next question comes from Mr. Justin Yagerman from Deutsche Bank. Justin Yagerman - Deutsche Bank: Just wanted a couple points of clarification. As I think about the fourth quarter and your commentary around the environment, I mean I'm assuming you're basing that off of an operational number, which would exclude the write-downs in the quarter. So when I think about the transition from Q3 to Q4 that that kind of flat-to-down-ish environment is just on a strictly operational basis. And we're not at this point thinking about any residual from these claims going over?

Correct, Jess. We sort of took those out, when we thought about that. Justin Yagerman - Deutsche Bank: And then in terms of just CapEx thoughts here, as we get to the end of year, at this point where do you think '13 ends from a CapEx standpoint? And then looking at your '14, obviously crystal ball is pretty tough, given the environment. But I'd be curious about initial thoughts on capital that you'd like to put out next year?

Obviously, Jess. At the moment it's pretty difficult for us to make any predictions. We've already said that we -- I know, in one of the very first questions I was asked, it was about leasing company, purchases of containers in the fourth quarter. I think it's very difficult to say where that will go, given that nobody really expect container prices to rise dramatically in the beginning of next year. And as Robert mentioned, right now, it's very easy to buy containers and have them delivered in a very short period to time. So where our CapEx ends out through the end of the year, it will be higher than where it is now, certainly. I am sure we will invest some amount in containers in the fourth quarter, but honestly it's difficult to predict that amount. And I think it wouldn't be surprising if CapEx going into the first quarter of next year is also somewhat muted. Beyond that really my crystal ball isn't bright enough to see into the second and third quarters of next year. Justin Yagerman - Deutsche Bank: And Phil, I thought it was interesting on the back of Mike's question, where you talked a little bit about, I'd say your leasebacks can kind of turn into gains on containers as we look out. So when I think about that conversion, how do you think about that from an accretion standpoint? Is that going to show up in trading container sales or is that just where new buy containers and then dispose them? How should we be thinking about where that shows up and what kind of accretions you could get from that in '14?

Well, from an accounting perspective it's going to show up on gain on sale containers, not on a trading container line, because once we do purchase leaseback, those containers are considered part of our fleet and not trading containers fleet. Because there obviously, they're owned by us and they're on-lease to a shipping line. We've seen this movement from change from trading business to purchase leaseback activity, generally occurring over the last two years. And many of the purchased leaseback transactions were for minimum on higher periods of two, three, four years. So four years would be at the upper-end. I would say most of them were two and three years. So you'll start to see those containers at least the leases ending, the minimum on a higher period ending, I would say starting towards the later half of next year and then going forward. Now, it doesn't mean that the shipping line has to return the containers at that time, only that they're able to do so. I can't speak for my competitors, but we certainly price these deals with the expectation that when we get those containers back, we'll recognize a reasonably attractive gain on the disposal of the asset. Justin Yagerman - Deutsche Bank: And Phil or Hilliard, can you guys talk through a little bit, as we face an environment where interest rates probably start going up as oppose to down next year, we'll see. But can you talk a little bit about how you think about the impacts to your overall business? Obviously, there is a flow-through in terms of the lease yield and also in terms of in any kind of floating debt that you guys are holding at this point. So maybe if you could talk about those two pieces of the equation and how your business is usually faired in a rising interest environment, since we've only seen the opposite of that for the past several years?

As interest go up, overall we think it's very beneficial. The primary reason of this beneficial is because we're looking to do a few things. We're looking to put new containers on lease. We're also looking to rollover containers that are currently on-lease under maturing term leases and we're looking to lease-out containers that are currently in depots. For the latter two, as interest rates move up and then the rentals rates on new containers move up, as you can imagine, it becomes easier and more attractive to lease-out a depot container or your negations on the extension of a term lease becomes somewhat easier as well because the environment for new container rental rates has also increased.

And just to add to that, you asked about just our debt and sort of I think how we're hedged, if you look at sort of the average I think remaining lease term, I think it's around 40 month or somewhere between three to four years. If you look at our debt, although it shows only 30% of our debt being fixed, the floating rate of our debt is also hedged. And if you look at the remaining duration of those hedges and the remaining duration of our debt, it's slightly longer than the remaining lease term, so I think we're protected. And given what Phil, said there is probably a little bit of a lag and we're protected I think for that lag. Justin Yagerman - Deutsche Bank: Last question, Phil, I think in the release or in your prepared remarks, you kind of mentioned the recent modest pickup in demand. I was curious if that's just kind of observations on kind of rates on liners, as we've seen November 1, GRIs going to affect, or if you think there is something else driving that? Or if it's just kind of normal holiday season, but that feels like that would be kind of late. What do you think is driving that as you think about where we are on demand herein in early November?

When you look at the two last years '11 and '12, the demand picture quarter-by-quarter was different than its being historically. Peak season during those three years was actually the second quarter. This year we were back to a normal traditionally year where the third quarter was the peak. The peak wasn't extreme, but it was a lot better than the previous two quarters when you compare to this year. And we look at our container intake, it was significant in the third quarter ended and the bookings that we were awarded were significant as well. Clearly that has slowed off a little bit here as the Christmas cargo has been shipped from Asia, but demand when I talked to the shipping lines has actually continued a little bit longer than they expected. And that kind of leads me into the second question, the GRI issue and vessel capacity issue. As you know that the lines have gone out in the big Asia, Europe trade and introduced some pretty hefty GRI's effective the November 1. It should be noted and I think, Mike Weber wrote that up this morning here and I think he was correct in his write-up that, price rates dropped a lot, pre this GRI, and the net effect will be more muted than what we actually see, but I would also say that there is still a surplus of vessels slot capacity out there. The lines, even if they have started laying up some of the larger vessels, and when I'm talking about larger vessels, I'm talking about the 7,000 or 8,000 TEU vessels, that did not happen last year, that did not happen earlier this year, but they are actually being laid up right now. And that's a good sign, meaning that the lines are showing signs that they want to do more capacity managements to stimulate the supply demand situation, and thereby get freight rates up to better level. And importantly in the Europe, Asia trade actually keep a nice piece of that November 1 GRI up. Do I think it will stick a 100%? Absolutely not, none of the previous GRI this year has done that, but I actually think some of it will stick this time.

Our next question in line comes from Bill Carcache from Nomura Securities. Bill Carcache - Nomura Securities: I think almost everything has been covered, I just had one question, I was hoping that perhaps you could comment on whether you're seeing any kind of deviation in the relative attractiveness of returns on the different types of containers? You talked about your plan to invest in tank containers in the coming months and I wondered if you could maybe just go through and talk about, I guess if not necessarily quantifying, but perhaps just qualitatively give us some perspective on relative attractiveness?

Sure. Let me just first comment on the tank situations. Right now, we have committed to invest a little bit more than $10 million in tanks through the end of this year. Some of them probably won't be delivered until the early part of next year. What we see in the tank market is that the tank market is equally as competitive as reefer market that we're in and as the dry freight market that we're in. I would say the level of competition among those three equipment types and including the specials in, which we also having our fleet, it's high. The level of competition is high across all the asset classes. Bill Carcache - Nomura Securities: And one last question I would love to get your thoughts on. We've seen over three years a consistent increase on your dividend as we've seen earnings increase. Now that your comments this quarter on being committed to maintaining the current dividend and what we've seen given the outlook for kind of the operating outlook that you mentioned, is it for modeling purposes? Would you say that it's prudent to the upward trajectory in the dividend certainly doesn't continue? It's kind of flattish from here. Is that fair?

Every single quarter we make a decision on our dividend based on our performance that quarter. And I know our board is committed and it's certainly demonstrated that commitment over the time that we've been public to pay a fair and appropriate return to the shareholders. For example, in 2009 when our results were under pressure we never cut our dividend, we maintained our dividend. I certainly defer to the board and its ability to make that decision on a quarterly basis, but I see our earnings. We've already mentioned how we see our earnings going forward. I think that our dividend performance should be similar to our earnings performance going forward. The board will make that decision on a quarterly basis.

Our next question on line comes from Helane Becker from Cowen & Company. Helane Becker - Cowen & Company: Actually all my questions have been asked and answered, at least more than once.

Our next question on line comes from Doug Mewhirter from SunTrust Robinson. Doug Mewhirter - SunTrust Robinson: I just have one last question on my list. Looking at the box factories, obviously their production levels have been dropping, probably even below a replacement rate for the fleet. Is there a certain breaking point for them, where they would be willing to shut down or radically scale back production, are we close to that? Can you see like a certain price per 20-foot dry box as sort of a point of no return for them or an uncle point or do you think that there's still a lot of lead way that they have where they can still make adjustments without having to dramatically scale back production?

Something we discussed internally all the time. I mean the manufactures have reduced capacity, and we think that the theoretical production capacity is between 5.5 million TEU and 6 million TEU a year and they are producing 2.2 million TEU or something like that. So clearly that's way below capacity. We know for a fact that some of the manufactures have shutdown certain production lines. Some of them have reduced capacity by 20%, 30%. Everybody wants to try to avoid a shutdown. Shutting down a production line is expensive. It's also a question mark, can you maintain the skilled workers, particularly the welders during that period. So they really want to try to avoid that situation. Having said that, we don't expect container prices to drop significantly and I think that we have seen manufacturers actually be prepared to extend shutdown periods, maintenance periods, times immediately after Chinese New Year, for example to stimulate demand, and we would probably see that happening before prices being slashed further.

And we have no further questions at this time. Please go ahead with your final remarks.

I would like to thank everybody for taking the time to attend our third quarter earnings conference call. And we look forward to speaking to you in a few months as we wrap up the year. Thank you very much and wish you the best for your holiday season.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.