Triton International Limited
Q1 2013 Earnings Call Transcript

Published: 25 Apr 2013

[Operator:]

Good morning and welcome to the TAL Group First Quarter 2013 Earnings Release and Conference Call. All participants will be a listen-only mode. (Operator Instructions). After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Jeff Casucci. Please go ahead.

[Jeffrey Casucci:]

Thank you. Good morning and thank you for joining us on today’s call. We are here to discuss TAL’s first quarter 2013 results which we reported yesterday evening. Joining me on this morning’s call from TAL are Brian Sondey, President and Chief Executive Officer and John Burns, Senior Vice President and Chief Financial Officer. Before I turn the call over to Brian and John. I would like to point out that this conference may contain forward-looking statements as that term is defined under the Private Securities Litigation Reform Act of 1995 regarding expectations for future financial performance. It is possible that the company’s future financial performance may differ from expectations due to a variety of factors. Any forward-looking statements made on this call are based on certain assumptions and analysis made by the company in light of its experience and perception of historical trends, current conditions, expected future development and other factors it believes are appropriate. Any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected. 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 is made herein despite any subsequent changes the company may make in its views, estimates, plans or outlook for the future. These statements involve risks and uncertainties and are only predictions and may differ materially from actual future events or results. For a discussion of such risks and uncertainties, please see the Risk Factors located in the company’s annual report filed with the SEC. With these formalities out of the way, I’d now like to turn the call over to Brian Sondey. Brian?

[Brian Sondey:]

Thanks Jeff. Welcome to TAL International’s first quarter 2013 earnings conference call. TAL’s results in the first quarter of 2013 provide a solid start what we think will be another year of strong operational and financial performance. In the first quarter, our leasing revenue increased 11% from the first quarter 2012 to the ongoing growth in our contain fleet and our adjusted pre-tax income increase 14% to reach a record level of a $1.63 per share. Our record level of profitability this quarter was mainly driven by the strong growth in our contain fleet continued very high levels of utilization and historically high sale prices for our used containers. Our profitability in the first quarter also benefited from an unusual $2.5 million gain from lost containers and slower growth and depreciation expense to the changes in our depreciation expense calculations. Our strong operating and financial performance continues to be supported by a favorable global supply and demand balance for containers. Containerized trade growth in the last few years is been moderate, but most of our shipping line customers have significantly reduced the direct container purchases, hoping to constraint the growth of the global container fleet. The resulting tight supply of containers continues to allow us to operate our container fleet at close to full utilization and also help support the current high sale prices for our older used containers. Despite the fact that the first quarter is typically our weakest quarter of the year. Our utilization averaged 97.7% for the quarter and currently stands at 97.6%. Our used container sale prices for remained well above historical norms and we continue to generate sizeable gains in selling our older used containers. We expect the global supply and demand balance to continue to gradually normalize over time, but it should remain tight throughout 2013 and support continued strong financial performance for TAL. The environment for new container investment seems likely to be less robust this year. Global containerized trade growth is currently projected to be in the 5% range for 2013. Slightly above the growth rate in 2012. However, pickups of container committed to lease happened fairly slow after the Chinese New Year holiday. We’ve also seen more shipping lines purchased containers directly this year and expect a leasing share of new procurement that fall below the roughly two-third level that we saw in 2012. Leasing rates for new container transactions remain aggressive, perhaps due to the widespread availability of attractively priced long-term financing. Well market conditions have cooled somewhat for new container transactions. We still expect to have a successful year investing and in growing our fleet. More shipping lines are purchased and containers directly this year, few [ph] were doing so aggressively and we continue to expect leasing companies to purchase some majority of new containers in 2013. We also think shipping lines will continue to be interested in sale lease back transactions for their existing containers. Year-to-date we have purchased roughly $350 million of new and sale lease back containers for delivery in 2013. As mentioned in the press release, we are increasing our dividend again this quarter to $0.66 per share. This increase reflects our continued strong performance and our expectations that market conditions will remain favorable for some time. The increased dividend also reflects the growth of our long-term lease portfolio and the growing share of our profitability coming from our occurring leasing revenues. I will now hand the call over to John Burns, our CFO.

[John Burns:]

Thank you Brian. As we noted in our earnings release adjusted pre-tax income for the first quarter was $54.7 million or a $1.63 per share, up 14% from the first quarter last year. The increase in pre-tax results from the prior year first quarter was largely result of over 11% increase in leasing revenue, due to by our ongoing investment in new and sale lease back containers. In addition, we have benefited from several items that limited growth of our ownership cost. First, depreciation expense grew more slowly than our leasing revenue, due to the change in residual values used in our container depreciation calculations implemented in the fourth quarter. This change reduced depreciation expense by $4.9 million compared to what it would have been under the prior year residual estimates. We will have a similar positive impact going forward. Secondly, in the fourth quarter we changed the start date for depreciation to the date of on-hire, which reduced depreciation expense by $1.6 million when compared to the prior year and third, interest expense grew more slowly than our fleet in revenue as we benefited from lower interest rates on new debt [ph] facilities and the replacements of portions of our swap portfolio at current low market rates. Our gain on sale remains strong at $10.3 million. As a roughly 8% decline in container disposal prices from the prior years’ first quarter was largely offset by a gain of $2.5 million due to a customer declaring approximately 1,400 units lost. Decline in sale price was further offset by an increase in disposal volumes of approximately 9%. As we noted, interest expense grew more slowly than our fleet as we benefited from the issuance of new debt at very low rates and the rebalancing of our swap portfolio. Overall, our average effective interest rate in the first quarter was 4.35% or 50 basis points lower than the prior year quarter, looking forward we expect our overall effective interest to decline by roughly another 20 basis points in the second quarter, as we benefit from the new facilities closed in the first quarter that have interest rates well below our portfolio average. In addition at the end of the quarter, we’ve replaced nearly our entire interest rate swap portfolio with new swaps at current low rates and at the same time extended the duration of the swap portfolio to nearly seven years. Going forward, we expect to have further opportunities to refinance existing debt facilities at lower interest rates. As Brian noted, we have increased our quarterly dividend to $0.56 representing a relatively high payout ratio our adjusted net income but representing only a 40% payout ratio of adjusted pre-tax income. We based our dividend payout on pre-tax income as we have not paid cash taxes and do not expect to pay cash taxes for a long time because of the accelerated tax deprecation on our container fleet. This beneficial tax position also results in our dividend distribution typically qualifying as a return on capital rather than a taxable dividend for U.S. tax purposes. As always, investors should consult with the tax advisor to determine the proper treatment of TAL’s dividend distribution. I will now return you to Brian for some additional comments.

[Brian Sondey:]

Thanks John. It currently seems that TAL’s strong operating and financial performance will continue to wrap 2013, supported by continued favorable global supply and demand balance for containers. Pickup volumes after the Chinese New Year have been relatively slow. We expect pickups to accelerate as we move through the second quarter and expect our leasing revenue to grow as containers go on higher and larger numbers. We also expect a reduction in our average effective interest rate to offset much of the pressure we are facing on our leasing rates over the next several quarter. We do not expect to repeat the gain in lost containers that we recorded in the first quarter, but we still expect our Adjusted pre-tax income to hold steady or increase slightly from the first quarter of 2013 to the second quarter as we benefit from seasonally improved leasing and disposal activity. In summary, we are pleased with our solid start in 2013. We have started 2013, with a record quarter of profitability and expect market conditions to remain favorable for TAL to continue to achieve strong operational and financial results. We expect our adjusted pre-tax income to hold steady or increase slightly from the first quarter of 2013 to the second and we have increased our dividend again this quarter to $0.66 per share. I will now open up the call for questions.

[Operator:]

(Operator Instructions) The first question comes from Greg Lewis with Credit Suisse.

[Greg Lewis:]

Yes, thank you and good morning Brian, John. Brian, I guess my first question is you mentioned the activity in the sale and lease market or the purchase and lease back market from your perspective and you also mentioned that clearly your customers are making a move back into ordering new equipment, is this something where they’re just sort of renewing their fleets, where we are seeing – you’re seeing customers do purchase a lease back transactions with you and then turnaround in taking that money and buying new equipment or they’re really still two different customers that you’re dealing with, one that is looking at reducing the owned fleet and one that is looking at expanding their owned fleet?

[Brian Sondey:]

Yes, with some cases it’s the same customers, in some cases it’s different. In fact, I don’t think there is a direct connection between the motivation for customers to do sale lease back transactions and the reason why they’ve perhaps increased their purchases a little bit this year. First thing I would say is that while we have seen more customers buying containers this year? We haven’t seen any customers really being very aggressive with that and I think really the main motivation for a number of these customers was that they really hadn’t purchased almost nothing in 2012 and some of that even in 2010 and ‘11 and so when container prices dipped a bit in the fourth quarter, I think we just saw some customers taking the opportunity to, try to take advantage of that price dip and maybe just do some rebalancing of their portfolio of newer equipment away from lease towards purchased and because of that again, we do say maybe that leasing will be a lower share this year than it was last year, but we still think it’s going to be higher than it was historically and still probably majority purchases by leasing companies. In terms of the sale lease back market, I think shipping lines continue to see that as an attractive way to both raise financing but also improve their operating efficiency. Leasing companies tend to focus much more on selling old containers effectively and perhaps get higher prices because of that which we can factor in to the pricing for the sale lease back transactions and other customers just continue to see an attractive source of fund as they try to manage another difficult probable year of profitability for them because of the consistent excess vessel capacity.

[Greg Lewis:]

Okay, great and I know you typically believe you typically don’t disclose – can you sort of have an estimate of the average age of the boxes that you acquired on – in purchase on lease backs?

[Brian Sondey:]

Yes, sure I mean typically for most of our customers. The sale lease back containers are toward the back end of the containers life but there is still quite a range. We buy some containers that say a more mid age, somewhere between five and 10 years old. I’d say more the containers that we purchased are probably 10 years and older, but we’ve also done some transaction with young containers as well. Where customers are looking to, get kind of almost reverse decisions they have made to purchased containers and push them off into the leasing market. So it can be a wide variety but generally I would say, it’s towards the back half of the container life.

[Greg Lewis:]

And just sticking with that, with residual this second-hand sale transactions. What sort of that mean, I know we saw peak sale [ph] a lot I mean, is that just sort of been slowly trending lower than the residual asset prices or is that sort of is stabilized a little bit.

[Brian Sondey:]

I think it continues to trend down. The sale prices for used equipment peak in the summer of 2011 effectively as there was no inventory available for sale. I’d say they fell probably from summer of 2011 to summer of 2012. Probably somewhere in the range of 10% to 15% lower and then it continued to drift slowly down from the summer of 2012, but at a relatively moderate pace and so we continue to expect historically high prices to linger on here for a while longer.

[Greg Lewis:]

Okay, great and then just one question shifting gears. I mean it seems like we are starting to see the ability for the (refa) manufacturing in South America. I guess could you provide an update, I mean is that something where those manufacturers are up and running and company like TAL could go around and order (refa’s) in South America or is that still a little waves off?

[Brian Sondey:]

So the factory as I understand it, is still in the progress of being constructed. My basic understanding is that factory will be opened for relatively high volume commercial sales sometime beginning in 2014. The main reason for that factory is just there’s a fair bit of a seasonal cargo coming out of South America and today with all the new containers being built in China. Often time the shipping lines have to do an initial positioning out of the factory, moving the new boxes from China to South America for that seasonal cargo and by building in South America you just avoid that, the cost to that initial move. I think that factory will be willing to sell to anybody including leasing companies but in fact we don’t expect it to be, it’s not a huge share of the global production volume out there and we don’t expect it to be – have a dramatic impact on the dynamics of (refa) market for us.

[Greg Lewis:]

Okay perfect guys. Thank you very much for the time.

[Brian Sondey:]

Thanks, Greg.

[Operator:]

Your next question comes from Steven Kwok with KBW.

[Steven Kwok:]

Hi guys, thanks for taking my question. I guess you guys talked about the opportunity to lower your funding cost further. I was just wondering if you could just expand upon that how much additional room do you have to move down on the interest rate fund. Thanks.

[Brian Sondey:]

First I’ll start off, maybe then John will add on to it. It really depends on how long interest last as low as they’re I think John mentioned that our average effective rate was what.

[John Burns:]

4.35.

[Brian Sondey:]

4.35 in the first quarter. Today our most recent ABS financing was at 2.85 and so that still pretty good gap. Lot of our facilities that we do have a period, where you can’t call the facility or at least we don’t have the ability to force a refinancing and as time goes by, most of the restrictions come away and so really, how low we can go it really just depend [ph] by how long rates, stay as low as they are and how we get opportunities over time to refinance the existing facilities.

[Steven Kwok:]

Right, are there any specific charges that maybe up for refinancing over the near term?

[Brian Sondey:]

There is obviously being lot of different facilities that we are looking at, we don’t want to get into sort of too publicly exactly what our plan is to do overtime, but we do in fact as John mentioned have ongoing opportunities for a while here.

[Steven Kwok:]

Great, thanks for taking my question.

[Operator:]

The next question comes from Michael Webber with Wells Fargo.

[Michael Webber:]

Hey, good morning guys. How are you?

[Brian Sondey:]

Hi, Mike.

[Michael Webber:]

I wanted to talk about the refabric [ph] entering, but I want to zero back in on the restart of some of these container purchased programs and I guess a little bit more color there. You mentioned some of that could just be kind of pre [ph] buy I think we saw of that with some of the less orders [ph] as well, with you guys as well that you know of cheap container prices be more comfortable with the asset cycle on to that has waived [ph] to aligned as well. If they started restarting their purchase programs. I guess maybe it is a bit more color to how you think about that, do you think that we could see I guess in more established and more legitimate purchasing program for some of this, maybe some smaller Asian [ph] lines, maybe some of smaller European lines to kind of inch that incremental split from 65, 35 range of that closer to either 55%, 60% range and I guess maybe where would you put that number if you had to for 2013?

[Brian Sondey:]

I’d say it’s generally, it’s pretty hard to predict a specific number. The leasing share since 2010 has probably averaged somewhere in the high 50s range was particularly high in 2012. At almost two-thirds least and I think that reflected really just a – the very difficult operating environment and financial environment for the shipping lines in 2011. As I said, take a number of shipping lines took the opportunity to place some orders in the fourth quarter of 2012 and early in the first quarter of this year. My guess would be but it really is just a guess, that more of the incremental orders in 2013 will be from leasing companies and so as growth hopefully materializes and progresses through the year, the top up orders will be more leasing heavy I think, but again that’s just our guess at this point. I think in general, we continue to see leasing companies be a larger share of the market than they use to be, say before the crisis but exactly how big it’s going to be at any given years is very tough to predict.

[Michael Webber:]

Right, now that’s more of us in line with what we hear from all your competitors last night that seems pretty fair. I mean, I guess outside to say the mix shift and your ability to grab share to some top line demand perspective. Can you maybe – can you try to put a number on where you think global production levels are going to come in at this year kind of given what you’re seeing very, very early and fix even and maybe a little bit of read in terms of what your customers are saying and then what their capacity [ph] look like for?

[John Burns:]

The overall production of containers is really just going to be driven by what happens in trade growth. You know I think if right now whatever most forecasters that you read and let’s say most customers we have with our customers. So I’d say are based around a feeling that volume, growth is going to be somewhat similar to what it was in 2012 maybe a hair [ph] better, which would imply growth around 5%. If that’s the case, I’d expect production of new containers to not be demand [ph] or different than it was last year, but really very much dependent on what happens to trade growth.

[Michael Webber:]

Got you, all right that’s fair. Along those lines around trade growth, freight rates have not found the footing that they found last year and some of that seems like it’s around a bit of a more a competitive environment particularly from some of the Chinese lines, have you guys seen given week freight rates to this point in the cycle? Have you guys seen kind of uptick in any of the minor affording [ph] risk you guys take up then you guys evaluate. I mean, I know tangibly it’s still very low but are you seeing any sort of movement there at all specifically to some of the smaller lines?

[Brian Sondey:]

We are always, it’s a big customer base we have especially among the smaller customers and there is always some movement on what customer pays you this month and so on, as you point out our payment history is generally very good and our credit performance is held up really well through some pretty difficult shipping markets, to me it doesn’t come as any great surprise that freight rates are weak again in the first quarter of this year and into the second quarter. The shipping lines continue to struggle with excess vessel capacity and they did a lot a very good thing last year about laying up capacity and maintaining focus on rates, but with 5% or more of the market of vessel market park [ph] and idle [ph] there is always going to be pressure on freight rates and certainly we expect to have periods where they’re somewhat successful in raising rates and periods, where they’re less successful. I think, this is something we are going to see probably for a while here.

[Michael Webber:]

Got you. All right, that’s helpful. I guess one from me, I’ll turn it over it’s around that refi opportunity that you guys talked a bit about and we heard about a little bit earlier. Around those that ABS market, last couple of deals are a bit wider than the last one, you guys did in terms of where you sense [ph] to the market is. Do you think, if you guys were to go in and try to refi, you could do it sub three or do you think allocating the last couple of deals generally or relatively smaller operators within your Textainer is kind of have. I guess where’s your sense on where that market is right now?

[John Burns:]

It’s John. I’d say the last couple of guys that came out where issue in low threes. You never know until you’re actually out there where the deal out and apprised [ph] because it’s hard to say, but again the last couple benchmarks that were out there is in the low threes and I would say there hasn’t been a significant differentiation between us in the second state guys from a rate perspective.

[Brian Sondey:]

But really hard to say, we still think the rates are very aggressive just how aggressive again you need to wait, until you’re out there.

[Michael Webber:]

Right, no that’s there and that the refi opportunity certainly looks like it’s pretty meaningful. Okay, that’s all I have got I will turn it over. Thanks for the time guys.

[Operator:]

The next question comes from Sal Vitale with Sterne Agee.

[Sal Vitale:]

Good morning, gentlemen.

[Brian Sondey:]

Hi, Sal?

[Sal Vitale:]

Just the quick question, quick housekeeping question. If I look at the operating lease what was the leasing fees other component in that directly?

[Brian Sondey:]

About $5.3 million for the first quarter.

[Sal Vitale:]

5.3.

[Brian Sondey:]

Depending [ph] where it is.

[Sal Vitale:]

Okay and then just going back just a clarification. Did you say that on the effective interest rate that we should expect that, roughly 20 basis point sequential decline in 2Q from the 4.35%.

[John Burns:]

That’s correct, Sal. Based on some of the things we did both in the first quarter and at the end of the first quarter.

[Sal Vitale:]

Okay and just beyond that. Should be expect somewhere assuming no further refinancing activity, should we expect you know that level to remain flat throughout the year?

[Brian Sondey:]

Really, it kind of what happens with rates and so even if we didn’t refinance we do expect to do incremental and new financing, now which will have the effect of bringing the rate down, although little more slowly but again, it really just depends on how rates evolve overtime. If they stay as low as they’re today, I think we would be able to continue to lower it overtime through both the impact of new financing at lower than our average rates as well additional refinancing opportunities.

[Sal Vitale:]

Okay, great and then on the $350 million of CapEx year-to-date. Can you provide any breakdown there on the sale lease back versus new container portion?

[Brian Sondey:]

Now we are always a little reluctant to do that. We don’t get to hold too many cards close to our chest, but it’s one of the ones we like to but I’d say it’s relatively similar mix to our CapEx that we had last year. Where the sale lease backs are minority of our investments but a meaningful one.

[Sal Vitale:]

Okay, does it counterintuitive to you? Maybe you can just reconcile it for me. You seem to see more sale lease back opportunities which is essentially a financing opportunity for the shipping lines. So they’re in need of capital given the neck tighter lending environment relative to few years back but at the same time. They seem to be stepping up their purchases of new containers. You would expect for that relationship to be consistent that the lesser portion of new box purchases will continue to rise a little bit.

[Brian Sondey:]

Actually it’s I guess maybe a little inconsistent but I think, I’ll make a couple of points again. First is the new purchases are not huge and so what we are seeing is a number of the shipping lines that have been on the sidelines for a couple of years starting to buy some containers not that they have decided to stop leasing or decided to go back to only buying or something like that, they’ve just started buying some containers and we always expect that all shipping lines are going to have a mixed of owned and leased containers. The other thing I would say again is just emphasize that there is, that the fair lease back transactions are not purely a financial transaction that leasing companies especially bigger guys like us or Textainer. We put a lot of people in resources and time and energy into our operations that sell used containers effectively. Most of the shipping lines do not have those kind of operations and so to some extent we are probably a better seller of used containers and again we can price that sale price premium into our offers for sale lease back transactions.

[Sal Vitale:]

Okay, that’s helpful and then on the sale lease back deals. You said that typically, while it ranges a little bit but you said typically the purchases that you make are little older 10 years or older. I would assume in terms of the accounting returns on those types of transactions that the returns will be pretty substantial given that the boxes are mostly depreciated. There is not too much depreciation left, is that the right way to think about it.

[Brian Sondey:]

I’ll tell you historically it was or maybe not so much right now. When these days given the high sale value of the containers. Typically we are purchasing the containers, even though they’re old, their price is well above our accounting residuals and so you actually have a fair bid of depreciation left for the older containers that we are buying given the prices, we are paying today.

[Sal Vitale:]

Okay and then just if I can just ask one last question. Do you – can you give a read [ph] on what you’re seeing in terms of new box prices currently on 20-foot dry’s and what per diem lease rates are right now?

[Brian Sondey:]

Yes, new box prices again never, truly know until you place an order but somewhere in the middle 2000, 200s and per diem rates are fairly aggressive right now relative to the price of the box. I don’t want to give a specific number on what our view is for per diem rates the moment, but they’re lower because container prices are lower than they were over the last few years on average. Plus with the very low interest rates and the competitive market for new building transactions right now. Their per diem’s are pretty aggressive relative to their box price.

[Sal Vitale:]

It sounds like the cash-on-cash unlevered [ph] return on 20-foot dry’s is probably lower than 10% at this point.

[Brian Sondey:]

Again, I don’t want to give a specific number but it’s tight relative to box price for sure.

[Sal Vitale:]

Fair enough, just one last question for modeling purposes. Can you give a sense for the 350 of CapEx on that starts to generate revenue? So one of those boxes picked up.

[Brian Sondey:]

The way we do a lot of our early year transactions as to give a fair bid of pick up time flexibility and so we in fact [ph] most of those containers that we’ve already committed to lease to go on hire sometime between beginning of the year and say end of June, but again it really will be driven by just trade volumes pick up and when our customers need those boxes.

[Sal Vitale:]

Okay, thank you very much.

[Operator:]

Your next question comes from Doug Mewhirter with SunTrust.

[Doug Mewhirter:]

Hi good morning, most of my questions been answered just two small ones. First Brian when you talk to your customers or you see a customer activity and you said that, the pickup rate is been lower than expected. Do you see that as a sign of maybe some caution on the shipping lines or do you see that where it’s their perception of the market or do you see that more of this is based on real conditions where they’re actually reacting to their real demand?

[Brian Sondey:]

Well again sometimes it’s hard for us to know exactly why customers either pickup or don’t pickup containers. We don’t get to see their actual trade movements on any given day. Our sense is, that there is a fair bit of caution out there, as I mention our customers continue to struggle with significant excess vessel capacity, their freight rates have been volatile and right now are weakish [ph]. What you think does add to their caution, they don’t want to over commit to boxes or over pickup boxes just because of the revenue picture for them looks weaker. In terms of is there any implication for trade growth this year, this time of year it’s very hard to say usually we find that January and February are the slowest months of the year kind of the shadow of demand after the peak season and then once we go through the Chinese New Year holidays. We start to see some seasonally increased activity kind of building towards a peak activity time for us in the summer but it really is quite variable year-to-year on exactly landing [ph] and how fast and how much the volume start to build towards the summer. Certainly we’d be happier if we saw pickup activity being higher than it was in March and April but right now it’s really hard for us to make a call on whether this is ultimately a symbol or a sign of trade growth [ph] can be lower than expected or if it’s on a cautious you point out or kind of delayed peak. It’s very hard to know at this point.

[Doug Mewhirter:]

That’s fair enough and just the second question much more related to your, the debt side of the balance sheet to beat the dead horse a little bit. Just can you remind me how much of your debt portfolio is fixed versus floating and you could either swap adjust that or not?

[John Burns:]

Doug about 60% of the portfolio is fixed rate debt of the 40% is about 85% of the 40% floating is fixed by swaps.

[Brian Sondey:]

So put those together and it’s 90% vast [ph] fixed.

[Doug Mewhirter:]

And that’s about fixed for roughly weighted average of five to six years.

[John Burns:]

Exactly right about there.

[Doug Mewhirter:]

Great, thanks. Those are all my questions.

[Operator:]

Your next question comes from Daniel Furtado with Jefferies.

[Daniel Furtado:]

Thanks for the opportunity everybody. I only have one a relatively simple question and Brian, if you have a ballpark estimate for what percent of your fleet is up for renewal over the balance of the year?

[Brian Sondey:]

I’d say this year is not a particularly large year for renewal. Well one way to think about it is most of our units that we buy in the factory, we put our leases that are somewhere between five and seven years long. If you roll the clock back at that time back in sort of about 2007, 2008 production years and while they were reasonably good investment years for us. They were nowhere near the size of the volumes we produced in 2010, ‘11 and ‘12 and so there’s a not lot up for renewal now. The renewals will start to increase as we get out to 2015, ‘16, ‘17 as the big production years come off kind of five, six year or seven year cycle.

[Daniel Furtado:]

Excellent, thanks for the time Brian.

[Brian Sondey:]

Thanks.

[Operator:]

Your next question comes from Michael Webber with Wells Fargo.

[Michael Webber:]

Hey guys, just wanted to jump back in with a follow-up. Brian, you mentioned more competitive pricing in the release and you talked about a bit earlier just maybe you can give a little bit more color around on what’s driving that specifically and maybe if you can quantify around not necessarily where per diem rates or maybe kind of yields and then within I were [ph] seeing that as new to the low end of double-digits and maybe even high single-digits and maybe just similar color on around what’s happening on the pricing front?

[Brian Sondey:]

Yes, I mean in terms of the motivation for it obviously that’s hard for us to know for sure. We are just one part of the market, it’s hard for us to know exactly how our competitors are viewing the returns that they’re getting on their investments or what their motivation is, I’d say in general though there’s been an emphasis by a lot of the companies in our space on growth and investment and for few years coming out of the crisis. Certainly I’d say to the middle of 2011 and maybe even a little longer. There was a real differentiation access to financing. Where the bigger players like us and Textainer and Triton were able to access sufficient funds pretty quickly after the crisis. Where the mid-sized smaller players, didn’t really gain competitive access maybe even until last year and I think to some extent a bunch of those guys are trying to play catch up, but also just taking advantage of the fact that the spread of their financing cost and ours is smaller and so they’re either seeing more players on more even playing field and a variety of players chasing growth. I think that might, we will see what happens. It’s hard to say, how long that dynamic sticks or it doesn’t in terms of the yield again. We don’t like to quote, specifically our view of market rates out there, but again, we see pricing being down both because of interest rates but also even down relative to interest rates and relative to equipment cost.

[Michael Webber:]

Got you. If I just think about where the historical band is for yield are we still, within that historical band and just pushing the lower limit to that or do you think, we could actually breakthrough that given what’s going on?

[Brian Sondey:]

To be honest, I haven’t gone back and looked at exactly how low the historical band had gone but I don’t think with event, now even back in the day, when we were doing RAP [ph] securitizations and so financing ourselves at 20 basis points over swaps, interest rates were higher, then be all and effective rate was close to five back in 2006 and so on and so now with the all and effective rate down below three or at three, that really does drive the cash yield down in order to the asset.

[Michael Webber:]

Right, okay. That’s fair. Thanks for the time guys.

[Brian Sondey:]

Thanks, Mike.

[Operator:]

Your next question comes from Ken Hoexter with Bank of America.

[Ken Hoexter:]

Great, good morning. Brian, maybe you can just I know you addressed this early on a question with respect to the liner companies getting more aggressive but is this a structural shift in terms of how they’re going about, reentering the market and focusing the capital back on the container ships. I’m just want to get a little bit more color on your commentary there.

[Brian Sondey:]

Again it’s hard to predict just what they’re in the future but we don’t think that we are going to see any real push back to ownership by our customers. Again we do think, there was a couple of customers that hadn’t bought for while, that wanted to do some purchasing especially when they saw prices dip in the fall and early winter and then took advantage of that divide seasonally. They thought again I think do see volumes increase this year. We’ll see that a lot go to the leasing market. So I think last year it was probably little on the high side with leasing buying almost two-thirds of the production and I think naturally it’s going to drift down from there a little bit but we do think again it’s going to remain historically high. Historically leasing companies bought 40% to 45%, we do think it’s going to say well on top of that for a while.

[Ken Hoexter:]

Wonderful and if you can, I guess my last one I just if you can maybe give a little more color in terms of how the market. How you see the market progressing, I know you commented on where box prices are today? Where do you – I guess where is that trending in terms of the market currently?

[Brian Sondey:]

Sure, well box prices they probably bottomed out a little bit, maybe from below 2,200 in the fall. It then pushed upwards through the first quarter as people started to get more and more interested in buying and pushed over 2,300 probably in fact did push over 2,300. Now they’ve come off a little bit, really I think just been a pause in ordering as everybody wage to see that seasonal volumes pick up.

[Ken Hoexter:]

Until [ph] the economics change in terms of when they get that low that the others are entering or is that just a factor of desire of those carriers to be back in the market?

[Brian Sondey:]

I think it was a combination of things that number of carriers again had really purchased nothing for several years wanted to have some newer units that they owned and thought it was a good time to do that as prices dipped in the fall and winter.

[Ken Hoexter:]

All right, appreciate that.

[Brian Sondey:]

It’s very hard to predict how they’re going to act going forward.

[Ken Hoexter:]

Okay, thanks. Brian.

[Brian Sondey:]

Ken. Thanks.

[Operator:]

(Operator Instructions). This concludes our question-and-answer. I would like to turn the conference back over to Mr. Brian Sondey. Please go ahead.

[Brian Sondey:]

Just want to thank everybody again for their time today and support of TAL and we look forward to speaking with you all in the future. Thank you.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation, you may now disconnect.