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

Greg Lewis - Credit Suisse Michael Weber - Wells Fargo Advisors Conor Cunningham - Cowen & Co. Steven Kwok - Keefe, Bruyette & Woods, Inc. Ken Hoexter - Bank of America Merrill Lynch Amit Mehrotra - Deutsche Bank Douglas Mewhirter - SunTrust Robinson Humphrey Doug Mewhirter - SunTrust Robinson Humphrey Vincent Caintic - Macquarie Research Art Hatfield - Raymond James

Welcome to the Second Quarter 2015 Earnings Conference Call. My name is Adrienne, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. I will now turn the call over to Executive Vice President and Chief Financial Officer, Hilliard Terry. Mr. Terry, you may begin.

Thank you, Adrienne. And welcome to Textainer's 2015 second quarter earnings conference call. Joining me on this morning's call are Phil Brewer, TGH President and Chief Executive Officer; and 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 conference call contains forward-looking statements in accordance with U.S. securities laws. These statements involve risks 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 the 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, 2014 filed with the Securities and Exchange Commission on March 13, 2015, and going forward, 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'd now like to turn the call over to Phil for his opening comments.

Thank you, Hilliard, and welcome to Textainer’s second quarter 2015 earnings call. Textainer posted solid results for the quarter. Our lease rental income increased 3.8% from the prior year quarter to $128 million. Our utilization has remained high, averaging 97.3% for the quarter and 96.6% currently. Our current utilization represents a decline of only 0.9 percentage points since the beginning of the year. Adjusted net income was $37.7 million for the quarter, or $0.66 per diluted common share. We continue to benefit from refinancing that’s completed over the previous 12-month. Our average interest rate was 50 basis points lower than the year-ago quarter resulting in a decline in our interest expense, even though our debt level increased. Our high utilization or reduced costs of debt have mitigated some of the impact of declining rental rates and disposal prices. Our annualized adjusted return on equity was 12.6%, which is especially impressive when considering our leverage is only 2.4 times, much lower than our public peers. We continued our strong pace of expansion with more than $570 million of CapEx for a lease out in 2015. We purchased more than 225,000 TEU of new and used containers, 97% of which was for our own fleet. Compared to previous years, we invested relatively more reefers and less in dry freight containers. At $3.3 million TEU, we remain the largest lessor in the industry by a significant margin. 84% of our fleet is subject to finance leases and long-term leases, with an average remaining life of 39 months, providing stability to our cash flows. Our size is a competitive advantage. We have the lowest operating cost per container of any of our public competitors. Economies of scale are critical in our industry, especially now when rental rates and margins are under pressure. Furthermore, as we have been a consistent buyer of containers over the years, only 6% of our term lease fleet matures this year. We continue to work with lessees to extend those leases. We declared a quarterly dividend of $0.47 per share. New container prices continue to decline, and are approximately $1,600 per CEU currently. Steel prices have declined 39% year-to-year. Container prices have fallen approximately 24% over that same period and indicate us that they could fall further. Used container prices also continue to decline, down 5% to 10% over the last six months. We do not expect used container prices to recover prior to an increase in new container prices. Container demand during 2015 has proven to be less than expected at the start of the year. The IMF reduced its forecast for global economic growth from 3.5% to 3.3%, which is slightly below the 3.4% growth rate achieved last year. Analysts have similarly lowered their projections for 2015 trade growth, generally by about 1% from 5.5% to 4.5%. We have not seen a traditional peak session this year and expect container demand to remain muted through year-end. Two positive factors going forward are: the utilization for all major lessors remains high; and the quantity of containers being disposed is increasing. Our resale team has sold more than 95,000 TEU of older in fleet and purchased lease back containers year-to-date, a record pace of sales. Additionally, the level of new factory dry container inventory - a new dry container inventory at factories is slightly over 1 million TEU and has remained relatively constant for the last three months. Lessors are again showing restraint, not ordering new containers, unless and until they see an increase in demand. Furthermore, we recently heard that some of the major container manufacturers plan to stop production at least through September. With high utilization, high rates of disposal and no continued build-up of new inventory, the industry is in a position to react to an increase in demand. While we do not see such an increase occurring prior to year-end, we would note that just counting vessels larger than 14,000 TEU more than 2 million TEU of new vessel capacity has been or will be delivered between 2015 to 2017 and more vessels are expected to be ordered. We’re investing containers only when the projected returns meet or exceed our investment criteria. We continue to believe containers purchased today will generate strong returns over their life especially when container prices and/or interest rates increase, and these containers are re-leased under stronger market conditions. We have the largest fleet and lowest operating costs in the industry. 84% of our fleet is subject to long-term and finance leases. Our low leverage provides operational flexibility. We offer a dividend yield above 8%. We believe we are well-positioned that we’ll continue to return solid financial results. I would now like to turn the call over to Hilliard.

Thank you, Phil. As Phil, already noted, lease rental income grew 3.8% year-over-year. This increase was due to an 8.4% increase in the size of our own fleet and 1.9 percentage point increase in average utilization, but partially offset by 4% decrease in average premium rental rates. It’s worth noting that, while rental rates on new containers fell by approximately 25% over the past year, the decline in our average rental rates was significantly less, because first, when the leases re-price they generally do not re-price at the rate per new container lease outs due to repair, repositioning and related costs. And second only 6% to 8% of our term lease fleet expires in 2015 and 2016, and lower percentages in the following years. Separately, in addition to lease rental income, resale prices continue to result in reduced gains on sales of containers. Direct container expenses decreased 28%, in spite of an 8% increase in the size of our own fleet, as higher utilization resulted in lower storage costs, repair and recovery costs for our slow paying and bankrupt lessees also declined. Depreciation expense was $49 million for the quarter, up $7 million year-over-year, largely as a result of our larger owned fleet. Annualized depreciation expense of 4.4% of average gross container asset value remained relatively unchanged sequentially. Our bad debt expense was 0.8% of revenue. We saw a three-day improvement in DSO versus the second quarter last year, reflecting our continued diligence over our credit and collection processes. Our interest expense including realized hedging costs, but excluding the write-off of unamortized bank fees and unrealized losses on interest rate swaps was $22 million for the quarter, down 2% versus the year-ago quarter, in spite of a 15% increase in our average debt balance. We continue to benefit from our refinancing activities over the past year or so, our average effective interest rate, which includes realized hedging cost is currently 2.89%, a decline of 50 basis points when compared to the year-ago quarter. During the quarter, we completed the refinancing of our five-year $700 million revolving facility, lowering our borrowing costs by 25 basis points to LIBOR plus 125 basis points. Additionally, we just completed a new five-year $190 million revolving facility to finance primarily or purchase leaseback transactions. We are able to achieve an extremely attractive financing rate of LIBOR plus 130 basis points. Our financing costs are very low and reflect the strong support we receive from banks and other institutional investors as well as our lower leverage. We will continue to see the savings from these recent financing activities as we move through 2015. As of quarter-end, 82% of debt was fixed or hedged, consistent with the percentage of our owned fleet subject to long-term and finance leases. Income tax expense for the quarter was $1.2 million resulting in an effective tax rate of 2.6% for the quarter. Our effective tax rate can vary from quarter-to-quarter, due to discreet one-time items. However, as we’ve stated in previous quarters, we expect our annual effective tax rate to be in the low- to mid-single digits. Adjusted, EBITDA was $111 million in Q2, up 5% from last year. Adjusted net income, which excludes unrealized gains and losses on interest rate swaps, and the write-off of unamortized bank fees, was $37.7 million for the quarter resulting in an adjusted EPS of $0.66. Turning to the balance sheet, as of June 30, our cash position was $93 million, with standby liquidity of approximately $400 million. Total assets were $4.5 billion, and worth noting container contracts payable are down year-over-year, due to the lower level of container purchases. During the second-half of the year, we expect our CapEx to trend below the first-half run rate. As Phil mentioned earlier, our dividend is $0.47 per share. As a remainder, some or all of such distributions may be treated by U.S. shareholders as a return of capital rather than dividend. Our dividends averaged around 60% of adjusted net income over the past 12 quarters. In this quarter the payout percentage is 71%. The current dividend yield is surprisingly over 8% and to preempt questions about the sustainability of our dividend, let me make a few points. While the payout ratio is a bit higher this quarter, our board has demonstrated a commitment to a consistent dividend policy. We have paid a stable or increasing dividend since our IPO, striking a balance between the need to invest in our business, while also providing an ongoing and consistent return to our shareholders. Moreover, in periods of lower investment, such as we’re experiencing now, Textainer’s ability to sustain the dividend increases in spite of the higher payout levels. Thank you for your attention. And now, I’d like to open the call for questions. Adrienne, can you inform the participants of the procedures for the Q&A.

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] And we have first question from Greg Lewis from Credit Suisse. Please go ahead.

Yes. Thank you, and good morning.

Hi, Greg.

Hi. As we - it sounds like the market, clearly, volumes haven’t really been maybe where we expected. But as we think about that and you mentioned that the shipyards or the box manufacturers are going to be slowing down potentially production. Do you have any sort of gauge on where box prices are today? And the reason I mentioned is, it looks like we’re finally seeing some stabilization in the iron ore and steel pricing. And I’m just wondering, if that has been having any impact on box pricing either for new box orders or and/or for second-hand like sales?

Hi, Greg, it’s Robert here. I mean, have we tested the market for the lowest possible price for the standard container out there in the recent months? No, we have not. As Philip, mentioned there’s between a 1 millionand 1.1 million TEU of new containers on the ground, out of which 33% of those are shipping line boxes and 67% are leasing company boxes. When we see 67% of a little more than a 1 TEU, we stop buying and so has most of our competitors. However, if you were to go out and place a significant order, we’re pretty sure we can get below $1,600 a CEU, but we have not done that. And I - so the manufacturers have decided for good reasons that, they’re going to produce their existing orders, sit back, take a breather in August and September and see what happens afterwards. And does that mean, they’re completely shutting down probably not, because, they can resume production pretty quickly. But at least it’s a good sign that they really do not want prices to drop significantly more than the level we’ve already seen.

Okay, great.

Greg, and you also - part of your question was about resale prices, and I would just note that while reducing resale prices continue to decline, the rate of that decline has slowed down. But I don’t expect to see any real improvement in resale prices until we start to see new container prices level off and/or increase.

Okay. And then just as we think about resales that you mentioned you’ve been able to manage taking expenses through resales. As we look out at 2015, should we expect this to be in terms of, and I imagine you can probably only speak about Textainer, but given you are the largest owner of boxes, as you go, I have to imagine as goes the market. Should we expect this to be a year in which we see an above the average level of fleet attrition from the market, or are we thinking more of on a normalized fleet attrition rate?

Well, you’re right, Greg. I can only speak for Textainer, but we’re selling containers at a higher rate than we have in the past year. Last year, for example, was one of our strongest resale years ever, and right now we’re on pace to exceed last year by probably 20% or so. So I know we will be selling more containers than we have. If this rate continues, we’ll sell more containers than we have in any year.

Okay, great. And then just one final one from me. We’re now in August as we approach the winter season. You mentioned that there really wasn’t a traditional box peak season this year. Is there a potential for, I guess, could you just give us a little bit of an update on the reefer market. Do we think that there is going to be opportunities to deploy capital in the reefer market later this year, or is that also you’re going to be a little bit more tougher to grow in that business in the winter season of 2015, 2016?

Yes, you really have to separate the dry container in the reefer sector, because this year has been significantly different. Leasing companies and shipping lines bought ahead on the dry container side, started all right into the fourth quarter last year in preparation for late Chinese New Year and expectation of a peak that should start in May/June. While we didn’t see the peak at pre-Chinese New Year and we didn't see the peak in May/June, and quite frankly, haven’t seen it yet. And when you are into August, you’ve got another two, three months. We are seeing some activity, but there is enough containers on the ground, our shipping line customers have enough containers on the ground that they really don't need to go out and pickup large numbers of the marginal box - the marginal lease box at this stage here. The reefers on the other hand have been strong all year. And while the traditional peak season for reefer equipment is fourth quarter and first quarter, we’ve seen a healthy demand every month. And that’s one of the reasons, our CapEx has been more reefer oriented this year than dry container oriented.

Okay, great. Thank you very much for the time.

Thank you, Greg.

And the next question comes from Michael Weber from Wells Fargo. Please go ahead.

Hi. Good morning, guys. How are you?

Hi, Mike. Hi, how are you?

Hey, good. Phil, I wanted to drill in on, I guess, your comments around major producers kind of shuttering production and forgive me if you mentioned this in the very beginning of your answer to Greg’s question. But would this be - if I were to look at kind of the market share in terms of production, this would be both of the major manufacturers’ containers thinking along these lines, or they just one of them and some of the smaller ones like SkyXE [ph], or can you give any color on who is looking to do this?

Well, we don’t quite think it is as organized as it was a couple of years ago. I think, honestly, it’s just the matter of lack of orders right now. And I don’t think it’s a hostile event in anyway. It’s just a natural event. There are shipping lines and leasing companies, enough leasing orders at this very moment. We all have enough containers on the ground and we’re doing a decent job and trying to make sure, we don’t over-flood the market with containers. So whether they shut down or don't produce quite frankly, the end result is the same. There’s probably nobody that’s going to place large orders in August, September anyway.

Right.

They’re not mothballing the factory. It's not like they are sending all the workers home. I'm sure that if somebody came with a large order, they could produce them in two, three weeks. But so far the official word is that, we’re not shutting down, but we’re not quoting new deals.

Gotcha, okay. Yes, that’s kind of - that’s what I meant, I was going to use the generic term in terms of shutting down, but you delineated that earlier. The - I guess, Phil and I guess, Rob, I guess, how should we put what’s happening right now in the context relative to, if I look at the last, call it, 15 years, if I go back and now look at some of the like the late 90s kind of in the early odds, where we saw prices dropped to 1,500 or below for an extended period of time. Do we see this kind of reaction from the box manufacturers, and granted, they haven’t officially shuttered capacity, they’re just not going to be producing. But I guess, if you could help us kind of put what’s happening right now in the context whether you're seeing systemic force kick in a little earlier and then whether or not you guys wouldn’t even draw the similarities, would be very helpful?

There is a lot of pieces to your question, Mike. And I'm going to try and answer some of them. But if I miss them, I mean, please feel free to remind me what I have missed.

No problem.

When you look back - when you say, look back over 10 years, 15 years, I think there is a few things you really need, we all need to keep in mind. One is the fact that we’re starting from a period of very high utilization and we continue to be in a period of very high utilization. High utilization has only dropped 0.9 percentage points over the course of what has been a very challenging year. So first, it’s important to keep in mind that utilization has remained quite high. I think another point that’s very important to remember is that, we have only 6% of our fleet repricing this year. So we see downward pressure on rates. But our average rental rate has declined 4% this year. New container rates have declined somewhere on new orders, say, 20%, 25%, perhaps, more over the course of the year. So, again, when you look back as what’s happened in the past when compared to today, it’s dramatically different. This is certainly a slower year than we expected, but the impact on us is not as dramatic as it would have been years ago when we were far more of a mass release fleet lessor. Robert, is there anything you would like to add?

Yes, Mike, maybe I should just add. I mean, when you look at the macro environment, it’s not like there is no cargo moving. This is not 2009, there is lots of cargo moving. But with the increased sale of vessel capacity with slot utilization rates and high 80’s, low 90’s, it’s been pretty easy for our shipping line customers to move their equipment back to the demand locations and thereby avoid those peak requirements, which we usually see. And I think that’s been very important there. Now, as you know, from your shipping line coverage that they start pulling out strings in this service and that service and taking out capacity. Clearly, that’s going to have an impact on turnaround time of containers as well. But not this year, because they’ve already put enough containers in the ground in the key spots in Asia, and particularly China, that if they do run short, it’s running short one or two, maximum three weeks.

Okay. That’s very helpful. And we are starting to see that, we’ve already seen three strings or three strings pulled out of Asia to Europe already?

Yes.

So, I guess, one more and I’ll turn it over, and I don’t want to kind of harp on this. But just to go back to the commentary around producers not producing new boxes kind of through the end of September. And around their economic decision, do you get the sense that their margins have actually been squeezed to zero, or is this a just a function of them protecting existing margin at 1,600 per TEU. We’ve seen box prices slide a bit more slowly than say, steel value. So it seems like there would be a bit more margin for them to protect. I’m just curious as to where you think they are to make that decision?

Well, we do think there is more margin that they could lose, and I think that’s exactly what they’re trying to avoid by not taking orders right now. I mean, if there is no pull, why continue to be out there selling when their customers don’t have requirements. And so, they’re really working against themselves. I think it was a prudent decision, and it’s certainly not a hostile decision. And we don’t know what will trigger them to come back pull scale, whether it’s hey, we won't produce unless prices are X, or we will come whenever we get an healthy order intake and can justify keeping these lines open. So this has not just happened overnight. Let’s face it, gradually the manufacturers have already shutdown both lines and even certain locations that did not have orders. So but it is a little bit more dramatic than that, because it is a across the board, but this was coming, it’s been coming for a couple of months.

Gotcha. Okay. Thank you, guys. I appreciate your time.

Thank you, Mike.

And next question comes from Helane Becker from Cowen and Company. Please go ahead.

Hey, guys. It’s actually Conor Cunningham in for Helane. So, you talked about the pricing on MX [ph] beinga little bit worse than - or worse than you initially expected. Can you just talk about, has there been any discussion about moving to a shorter-term lease rather than a long-term lease, in an attempt to - earlier an attempt to kind of hope the market improves later out?

Conor, those are opportunities that were there, we would pursue them right away. And the fact of the matter is as I’ve explained before, shipping lines have enough containers on the ground themselves. They have their own depot inventory. Some of those lines have been buying containers and take advantages of these low prices as well. So the fact of the matter is, there is not the pull, and it doesn’t matter whether it’s a 180-day lease or a three-year term, or whatever. There is just not the strong underlying demand right now.

Okay. And then in terms of the $570 million investment that you’ve made so far this year, can you just tell us what the breakdown between new and used is? And then off the new containers, how much of that still remains to be picked up?

Well, on the total volume, generally, we are comfortable keeping between $150 and $250 million of unallocated CapEx. And right now, we’re in that range probably towards the high-end. And you also asked about this flip between new and used. The vast majority of the equipment of that CapEx is for new equipment. So there haven’t been that many purchase lease back opportunities this year, although, we have secured a few.

Okay. And then in terms of the - your interest rate, you guys have done a pretty good job of moving that lower. Is there still room for downside on that, or have we kind of bottom in terms of that?

Well, Conor, I think, every quarter I suggest that we may have bottomed on that. I would say, the only thing that we have outstanding that sort of for renewal or that’s callable is a bond that is callable in September. That has an interest rate on it of 3.9%, and the market is currently below that. So we will look to see if we could generate some savings from that refinancing of that bond.

Okay, great. Thank you.

Thank you, Conor.

The next question comes from Steven Kwok from KBW. Please go ahead.

Great. Thanks for taking my questions. Most of them have been answered. I just want to touch upon two points. One is, are there - what are the signs that we should look forward to see improvements within whether the lease rate environment or new container prices? And secondarily, given the challenging environment that’s being faced today, are there signs where some of your competitors whether they’re pulling back or exiting from the space? Thanks.

To address the first part of your question, obviously, some of the things that we’d be looking forward to seeing improvement would be a pickup in trade. Right now, many of the statistics are - many of the analysts are saying that they, in fact, expect the level of trade this year to decline slightly from what they were expecting earlier in the year-end, perhaps, even at a level that’s slightly less than the growth last year. But the positive things they can impact us will be a rise in container price. Certainly, as asset values go up, that helps us both in terms of new container lease out and in terms of residual values. And then the other one would be increase in interest rate, which you might have a better view on when that might happen than I, but it certainly looks like an increase in interest rates is likely someone where over the next six months.

Steven, maybe I can add to that. I mean, I think you should focus on rest of the utilization rate. If slightly utilization rates get to a higher level, even a 100%, the shipping line start roll in cargo, that’s a very good sign. And then you need a focus on Asia, Europe. I mean, our market will not take off before we see a healthier trade pattern between Asia and Europe.

Got it. And then, just as to the competition within the space?

I wouldn’t say that, I think you asked whether we’ve seen a drop off in competition, I’m sorry, we missed that part of your question, drop off in competition given the market conditions. No, I would say that our industry remains an extremely competitive industry than, there is certainly not been a drop off in competition, every opportunity for lease-out is very hotly contested.

Great. Thanks for taking my questions.

Thank you.

And our next question comes from Ken Hoexter from Merrill Lynch. Please go ahead.

Great. Good morning. This is Ken Hoexter. I guess, Phil, you talked before about the strong utilization rates remaining robust and only dropping just a touch down, but they increased at the beginning of last year, they came down sequentially, as you noted. Is that more due to the global trade, or is there anything else driving the utilization decline as we move forward here? And I guess where do you expect that to go, given the market?

Well, utilization decline this year is due to the fact that we have had more containers turned in than we’ve leased out, that’s a simple math. Over the remainder of the year, we expect the utilization will decline, but probably just decline marginally, we don’t expect a dramatic decline in utilization between now and end of the year?

Is there a relationship, can you pullback on your utilization and keep pricing high or I just want to understand that, can you make that decision to keep the boxes and try to keep those lease rates, the per diem rates a little higher, or I guess, I just want to understand what kind of level you could see the per diem rates fall to, if we’re down about 8%, 9%?

Well, I mean, we take negotiation-by-negotiation and case-by-case, and it’s different a story, whether it’s our general fleet or 2010, 2011 vintage that were sourced and leased out higher rates. But underlying factor comes down to what’s the general demand. Does the shipping line need the boxes? And, I mean, especially, since we have some of these explorations, the containers are only five years old. The shipping line really, they don’t want to return a container that new if they can get reasonable terms. You try to find a compromise between what they’re actually paying and what the current market is and, hopefully you can find some sort of win-win level. What we have seen is the shipping lines have generally used this downturn to go through a fleet renewal process. So, most of our re-deliveries are actually older containers. A very percentage of our re-deliveries end up as disposals. And eventually all those containers will have to be replaced.

Great. And, Hilliard, you mentioned before, well, maybe it was, Phil mentioned before, one of the opportunities is, obviously, if interest rates rise on the lease rate side, what changes for the industry as lease rates? Is that just you’re then presuming that the rate of boxes goes up, your lease rate as a percent allows you to get higher per diem? Walk me through what changes with the higher rates.

Well, the rates on new containers are pretty much a function of two factors, and those factors are the price of the new container and the borrowing costs of the lessors. So as interest rates increase, borrowing costs will increase, you will see rates go up on new containers. That may not say anything with respect to the margin that the lessors are earning on the new container. That margin may remain the same. But the effect it does have is that - as the level of rates on new containers rise, it certainly makes renegotiating leases that are coming due at that same time easier, and the possibly of getting a higher rate on the renewal of the expiring leases.

Phil, do you see that then pushing out as the prior question, do you see that maybe straining some of the competition, or you think there’s still enough capital hanging out there that that's not the direct effect?

I said today, we haven’t seen that there is a problem of liquidity among container lessors.

Okay. And, Hilliard, just a question on G&A, it seemed to pick up year-on-year as a percent of revenues about $1 million higher. Is that just based on the size of your fleet growth or is there some other factor driving that?

No, I mean, the fleet growth wouldn’t impact G&A expense. It’s about $700,000 increase. And I would say it’s a bunch of small items that make that up, nothing in particular to highlight.

Okay. But you’d expect it to stay more at this level than last year’s level?

Yes.

Okay. And then, just another one for you, Hilliard, on leverage; you mentioned the kind of 2.4 on the debt-to-cap ratio, and I guess on a debt-to-EBITDA basis you’re about six times, would you consider that a proper level? Do you want to lower that? What are your thoughts on leverage?

I mean, we - Ken, we think we are - we have a very low leverage and we could actually increase our leverage. It’s just, right now, given the fact that we’re not purchasing assets on the same rate that we've been in the past, you tend to de-lever as opposed to levering up. If there is an opportunity to lever up, we would have the capacity to do that.

And I just - to read into your last commentary on the dividends, I presume, you said, I’m going to head off some commentary. Have you gotten a lot of questions on the sustainability of the dividend? I just want to understand your thought on kind of making sure to stick that point on the sustainable…?

Well, we have one advantage, I suppose, which is that, of the three public leasing companies, we report last. And so we can read the transcripts from the earnings calls for our competitors. Well, one of them doesn’t pay dividend, the other one does. And we could see that they were asked questions about the sustainability of their dividend. So we thought we expect that that we would be asked similar questions, and thus we tried to address it in the opening remarks.

And, Ken, we just wanted to be clear, I mean, in a period where there is lower capital investment. I mean, it actually tends to make it easier to pay your dividend, as opposed to making it more difficult, which I think was some of the confusion on the earlier calls.

And I would just like to add a little bit to this too beyond what I just said initially, which is we have never cut nor reduced our dividend since we’ve gone public and see that remained the same or it’s been - or it’s increased. I think that’s a very firm example that our board takes our - the payment of our dividend very seriously. 2009 was a challenging year. We continued that performance. I have to say that, I don't think that public leasing companies that do pay dividends get the proper amount of respect and credit for the dividends that they pay when you look at their share price-valuations.

Wonderful, Robert, Phil, Hilliard; I appreciate your time with us this morning.

Thank you.

And our next question comes from Amit Mehrotra from Deutsche Bank. Please go ahead.

Yes. Excuse me. Thank you for taking my questions. Just want to follow up on a couple points that have been made. One is just on the interest rate discussion. I understand why it would be a positive catalyst, but is there any way to sort of isolate or estimate what type of impact that can specifically have. I just imagine that the more important driver would be underlying demand or your end-utilization level. So if you can just sort of help us to try to frame how beneficial that could specifically be, that would be helpful, I guess, given that we’re getting pretty close to that catalyst happening. If you could, just elaborate on that.

Amit, I think your assumption that supply and demand is a critical parameter as well. But what we have seen in the last 9 to 12 months is that the general requirements of the shipping lines have not been significant. They have not been large. At this time of year, we used to seeing inquiries for 50,000, 60,000, 70,000 TEU; instead, we’re getting inquiries for 3,000, 4,000, 5,000 TEU. You don't have to be a major leasing company to cater for those requirements. So that just confirms your point, that supply and demand is as important as any other parameter. However, as we dig down in our stacks of inventory, we also want to start replenishing and we want to replenish it in a profitable manner. If we can't - don't think we can make money on investing in these assets. We won't buy them and thereby try to stimulate pricing in an upward direction. So, certainly the interest rate is one parameter, but it is only one. It is supply-and-demand, timing, customer and just the overall demand.

Right, okay. Can I just ask couple of more questions? One is, you guys have been really good about sort of discipline about investing, I guess, during the downturn or this weaker period; which, I guess, positions you very well for when maybe some of the headwinds will turn into tailwinds. And like every headwind will ultimately turn into a tailwind. Can you just sort of talk about what type of improvement you see maybe in your returns or your earnings power when maybe you finally get some of the tailwinds working for you in light of all the investments that you’ve made?

Well, look at our performance right now. As we’ve already discussed a few times, I think, we’re pretty relatively lowly levered, only 2.4 times. Yet, our return on equity year-to-date is 12% to 13%. And I think it’s a pretty respectable performance given the market conditions that we see right now and the leverage that we have. So, when you’re asking what can happen if the headwinds turning to tailwinds, this industry traditionally has enjoyed well above average returns compared to most other asset leasing industries. And I think that’s exactly what you would continue to see. I mean, it’s - I would say it’s quite possible that our ROE could decline slightly - that would decline slightly over the remainder of this year, assuming that the market conditions we’re predicting remain. But as we see a turnaround, we can certainly see stability or see the ROE turnaround and going the other direction.

Right. Okay, that's good. One last question and you alluded to sort of at the end of the last question about valuation. And forgive me, I’m just going to ask about the stock price, I mean, the dividend yield is 10%, your earnings power really sequentially has been pretty consistent from first quarter to second quarter, be at over that period, you’re seeing the share price or the market value decline by about a third. I know that’s got to be frustrating and it's completely out of your control. And I understand from previous calls the float - the limited float is sort of in your back of your mind. But is there just anything that you can do, maybe an accelerated share repurchase, or something to that effect that you could invest or take advantage of this sort of dislocation for the benefit of sort of the longer-term shareholders?

Well, with using the cash we generate, we think the best thing we can do with that cash is to invest in assets. After investing in assets, we pay a dividend. I think we pay an extremely attractive dividend. And as I’ve already said, I think the market simply continues to discount the dividends paid by Textainer. After that is a share repurchase possible, you’re right in the past we’ve noted that we have concerns about the relatively limited flow in our shares. But that is not going to preclude us from doing something. If our share price reaches a level that we think is for lack of a better word just a funny share price, it simply doesn’t make sense to us. We’ll absolutely consider repurchasing our shares. It’s been discussed before at the board level. We have a board meeting coming up, I suspect it will be discussed again.

Okay. All right. That’s all I had. Thank you very much for answering my questions. I appreciate it.

Thank you.

And the next question comes from Doug Mewhirter from SunTrust. Please go ahead.

Good morning. Most of my questions have been answered. Just maybe one or two smaller questions. First, you’re selling containers - is that sort of a more of a housekeeping, it sounds like you’re selling the order, maybe damage containers. Are you selling any - also containers as a way to sort of help utilizations, so maybe a mid or three-quarter life container coming off lease that are more remote location that you’re also getting rid-off, because maybe you wouldn’t able to get it back to a pickup location? Just trying to figure out what you’re doing with this plan right now?

Doug, thank you very much for asking that question. And I think, I should have been made that clear, when I first mentioned the level of container sales we’re seeing, because that’s an excellent question and the answer is no, we are selling older containers. The average age at which we’re disposing containers in our - disposing of the containers in our fleet remains very high. These are containers that are coming off lease that are at the right age to be disposed and we’re selling those containers.

Okay, great. Thanks for that. And that’s all my questions. Thanks.

Thank you.

And the next question comes from Vincent Caintic from Macquarie. Please go ahead.

Hey, thanks, guys. Good morning. You have a very helpful slide in your presentation deck Slide 32 would be a lease expiration overview. And I just have two questions. First, on the - what the current market rate is, I believe, it’s around $0.40, but just wanted you to confirm. And then secondly, you’d spoken in the past that your lease renewals are better than market rate. And I just kind of wanted to get a sense of what drives that and maybe a scale of how much better it can be versus the lease renewals can be versus from market rate? Thanks.

Well, it’s - just answer the first question, I answer the first question. The current market rate is probably below $0.40 right now for sure, probably more $0.37, $0.38 or something like that. So, obviously, there’s a big difference between some of those expirations out in the year from 2010 and 2011 sourcing. It really comes down to the customer situation and do they have been underlying general demand for containers, or do they not? If they don’t, doesn’t matter what rate you do. You get the containers back over time. You don’t necessarily get them back immediately or very fast for that sake, because the containers are perfectly good. However, there is a cost involved in a shipping line returning a container. But you have to repair the container. You have to put it in the right location. And 2010 and 2011 was really sellers’ market. We negotiated - besides high rates, we negotiated some really good return schedule. So those containers generally have to come back in most of the shipping lines and locations. Just by that the shipping line has to invest money to get the containers back to those demand locations, and then say, hey, we don’t need it. That’s a pretty tough decision to make for many of our customers. So, generally, they try to go with the second best, that is negotiated rate that can be acceptable to both sides. And exactly where that is really depends on the shipping line and how good a job. We did in negotiating the return schedule, and what the underlying demand is for the shipping line. I really can’t guide you more than that.

But just to reflect back on a point we’ve already made here, I think that shown very well by the fact that the decline in our average rental rate is nowhere near as dramatic as the decline in the rates on new containers. So you can see that when we are renegotiating leases, where you end up on that lease is not at the low level where new containers are being leased out.

Okay. I got it. That’s really helpful, guys. And just one more from me, your utilization rate has been fairly strong with - but presumably there is a relationship between the utilization rate and the current market rate. How do you think about utilization going forward with the market rates low? Is there a point in which you would think to maybe hold back on utilization and wait for a better period or just generally how you think about that? Thanks.

Well, there are different ways to answer that. I mean, principally, when we lease out a container we never want to see it again. We prefer it just continues to float and we don’t take that chance of getting the container back in a depot and have to remarket it to anybody else. Some of our customers actually have the same aspiration. And we can balance that pretty well. Yet, you do have customers that really like brand new containers. And especially when you can get rates at less than $0.40 right now, you will have some shipping lines that would use this opportunity to go through a fleet renewal. And there - from a practical aspect it really doesn’t matter what rates you offer, they want to get rid of those containers. And you have to take the chance. But generally, we don’t speculate much of that. We would rather keep the container out and going, and invest in another asset and put that on lease subsequently.

Got it; very helpful. Thanks so much, guys.

Thank you.

And our last question comes from Art Hatfield from Raymond James, please go ahead.

Hey, good morning, everyone. And then pretty much all of my questions have been answered. But I just want to ask one thing, and I don’t recall you addressing this; and if you did, I apologize. But you had mentioned in your prepared comments an effort to get some early extensions on - with some of your out expiring leases. Can you put some context around that kind of what years you’re looking at and kind of what level of success you’re having in that area?

Well, it’s a good question. Again, it comes back to what you think you can achieve. If the concession is too generous, we don’t want to look out too far. We would rather play the market a little bit and hope for an improvement down the line, which is going to happen at some stage here. The trade between Asia and Europe is not going to remain at that level and the shipping lines will not continue to accept to lose the amount of money that they are at this stage here. And they will take further investment capacity out of their services, so there is a total economic package that will decide, when is the right time to do it. So with all that in mind and with the shipping lines reduce requirements for containers, we have been really focusing on the expirations that have happened in the past years and this year. And originally, you’re absolutely right; our aspiration was to look at some of the outer month, 2015 month year’s expirations. But as it has happened, we really negotiated just pre or just after - just post the expirations. So that front-end loaded negotiation, the underlying demand has just not allowed us to do that in an acceptable manner.

And just if you look at the data, we only have 8% of our fleet renewing this year and 8% next year, and after that, in fact, the percentages decline from 8% going forward. So there is not an enormous incentive on our part either to start renegotiating leases that are paying above market rates right now.

Great. That’s very helpful color. Thanks for the time this morning.

Thank you, Art.

Thank you. And I’ll now turn the call back over to Hilliard Terry for closing remarks.

Well, thank you everyone for joining us for our second quarter earnings call. And we look forward to talking to you as we progress through the third quarter. Thanks again.

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