CAI International
Feb 14,2017

CAI International, Inc. Reports Results for the Fourth Quarter and Full Year of 2016

SAN FRANCISCO--(BUSINESS WIRE)-- CAI International, Inc. (CAI) (NYSE:CAI), one of the world's leading transportation finance and logistics companies, today reported results for the fourth quarter and full year of 2016.

Highlights

  • CAI reported revenue for the fourth quarter of 2016 of $77.3 million, an increase of $11.6 million compared to the fourth quarter of 2015. The increase in revenue was primarily due to acquisitions made by our logistics business in 2016. Lease-related revenue for the fourth quarter of 2016 was $57.5 million, compared to $59.7 million in the fourth quarter of 2015. Lease-related revenue for the full year decreased 2% to $232.8 million.
  • Net income attributable to CAI common stockholders for the fourth quarter of 2016 was $0.7 million, or $0.04 per fully diluted share. Included in the fourth quarter results is a $2.8 million credit as a result of adjusting the Company's contingent consideration. Excluding this credit, adjusted net loss attributable to CAI common stockholders was $1.7 million, or $0.09 per fully diluted share, a decrease of $12.2 million compared to the adjusted net income attributable to CAI common stockholders for the fourth quarter of 2015.1
  • Net income attributable to CAI common stockholders for the year ended December 31, 2016 was $6.1 million, or $0.32 per fully diluted share. Adjusted net income attributable to CAI common stockholders for the year ended December 31, 2016 was $8.8 million or $0.46 per fully diluted share, a decrease of $41.4 million compared to 2015.1
  • Average container utilization for our owned fleet during the fourth quarter of 2016 was 94.3% (on a CEU basis) compared to 91.9% for the fourth quarter of 2015, and 94.0% for the third quarter of 2016. On February 14, 2017 owned container utilization was 95.6%.
  • Average railcar utilization during the fourth quarter of 2016 was 95.0% compared to 97.6% for the fourth quarter of 2015, and 96.2% for the third quarter of 2016.
  • During the fourth quarter of 2016, CAI increased the number of railcars in its fleet to 6,459, with the delivery of 326 new railcars for $34.4 million.

Revenue for the fourth quarter of 2016 was $77.3 million, compared to $65.7 million for the fourth quarter of 2015, an increase of 18%. Revenue from CAI's railcar assets increased over the same period by $2.4 million to $8.0 million as a result of growth in the railcar fleet, whereas revenue from the container leasing business decreased by $4.3 million to $48.9 million, reflecting $1.8 million of lost revenue from the previously reported bankruptcy of Hanjin, as well as a decrease in the size of the owned container fleet and a reduction in lease rates during the period. Management fee revenue for the fourth quarter of 2016 was $0.5 million, a decrease of $0.3 million, compared to the fourth quarter of 2015, primarily due to the decrease in size of the managed fleet. Logistics revenue for the fourth quarter of 2016 was $19.8 million, compared to $6.0 million for the fourth quarter of 2015, primarily arising from our acquisitions during the past twelve months.

Net income attributable to CAI common stockholders for the fourth quarter of 2016 was $0.7 million, or $0.04 per fully diluted share, compared to a net loss of $12.6 million, or $0.62 per fully diluted share, for the fourth quarter of 2015.

Net income attributable to CAI common stockholders for the year ended December 31, 2016 was $6.1 million, or $0.32 per fully diluted share, compared to $26.6 million, or $1.27 per fully diluted share, for the year ended December 31, 2015.

Victor Garcia, President and Chief Executive Officer of CAI, commented, "Our financial results for the quarter and year reflect the impact of the weak economic environment over the past several months. However, we have continued to see improvement in the underlying fundamental trends in the business. One of our primary objectives has been to reposition idle container equipment for sale or lease. As a result, a significant factor in this quarter's results is the $4.7 million loss on equipment sales and the incentives we have provided to reposition containers. These costs decreased during the latter half of the fourth quarter and we expect that trend to continue into 2017 as we have been increasing sale prices across the network and have a much-reduced level of inventory, particularly in low demand locations.

"We expect our focus on eliminating idle assets and increasing utilization will benefit our results in the coming quarters. Our utilization of owned equipment has increased from 93.9% at the end of the third quarter, to 95.6% today. We have reduced our idle fleet by over 50% from the peak in the first quarter of 2016. With current trends and commitments for lease and sale, we expect our utilization to increase further to 97% to 98% in the coming months. We expect to have the benefit of increased revenue, lower operating costs and better results on the sale of equipment. Our storage cost in December decreased by over 40% compared to the peak in the first quarter of 2016 and we expect that monthly amount to decline further in each of the coming months as utilization increases, leading to significant annualized cost savings. We also expect repositioning costs to reduce in the coming months, as sales volumes decrease from their peak in the fourth quarter of 2016.

"Many of the underlying trends that negatively affected the container industry have reversed over the past three quarters. Container prices have increased 60% from the low levels experienced in early 2016 and currently stand at around $2,100 for a 20ft container. Per diem rates on new and depot equipment have doubled as demand for equipment has strengthened along with the increase in utilization and new container prices. These positive trends are expected to reduce the pressure on renewal rates on expiring contracts. We believe that the tightness of the market and improved rate environment will continue over the coming months, particularly if, as expected, some container factories close for several weeks in the second quarter to retool for the changeover to waterborne paint production. The changeover is occurring during the period in time when demand for container production begins to increase, which could create a significant, though temporary, shortage of equipment."

Mr. Garcia continued, "The rail market remains very challenging but we see some improving fundamental trends. We believe production capacity for new railcars is being significantly reduced and there is limited incremental ordering of equipment. Rail velocity, which is an important factor in rail car demand, has also slowed due to weather related issues and from improving energy related traffic, including coal shipments. The level of inquiry for our equipment has increased over the past few weeks. During the fourth quarter we leased out 200 railcars and we are focused on placing the equipment we have on order on attractive leases. The utilization of our railcar fleet remained strong at 95% for the quarter and most of our railcars remain under long term leases that are expected to provide steady revenue and earnings over the coming quarters.

"During the quarter, our logistics business faced a challenging market environment due to the slow growth of the U.S. economy and low freight rates by shipping lines. As a result, the peak season freight demand has been limited and competition has remained strong. However, we are making steady progress in growing each of our logistics services and cross-marketing opportunities amongst our companies. We continue to see our logistics capabilities as providing us a competitive advantage in increasing our asset utilization and returns."

Mr. Garcia concluded, "We are excited about how we are positioned for what we foresee as an improving market. We have a lot of momentum in our utilization and expect improvements in our financial results. Based on the ongoing congestion and capacity issues we are encountering in many depot locations around the world, we believe we are in a relatively better position in reducing idle equipment as compared to the industry as a whole. We will remain disciplined in looking at new investment to achieve attractive returns and remain focused on enhancing our overall cash flow."

1 Refer to the Reconciliation of GAAP Amounts and Non-GAAP Amounts set out below.

   
CAI International, Inc.
Consolidated Balance Sheets
(In thousands, except share information)
(UNAUDITED)
 
December 31, December 31,
2016 2015
Assets
Current assets
Cash $ 15,685 $ 17,447
Cash held by variable interest entities 30,449 35,106

Accounts receivable, net of allowance for doubtful accounts of $1,340 and $548 at December 31, 2016 and December 31, 2015, respectively

63,745 55,284
Current portion of direct finance leases 19,959 21,158
Prepaid expenses and other current assets   5,315     2,155  
Total current assets 135,153 131,150
Restricted cash 6,192 7,212

Rental equipment, net of accumulated depreciation of $421,153 and $349,810 at December 31, 2016 and December 31, 2015, respectively

1,806,940 1,748,211
Net investment in direct finance leases 80,582 82,210
Goodwill 15,794 2,905

Intangible assets, net of accumulated amortization of $2,681 and $1,237 at December 31, 2016 and December 31, 2015, respectively

9,691 1,223

Furniture, fixtures and equipment, net of accumulated depreciation of $2,833 and $2,027 at December 31, 2016 and December 31, 2015, respectively

550 674
Other non-current assets   962     -  
Total assets $ 2,055,864   $ 1,973,585  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 13,804 $ 11,962
Accrued expenses and other current liabilities 9,959 4,813
Due to container investors 6,746 5,801
Unearned revenue 10,944 11,990
Current portion of debt 95,527 169,249
Rental equipment payable   25,207     10,901  
Total current liabilities 162,187 214,716
Debt 1,380,499 1,250,560
Deferred income tax liability 53,436 48,204
Other long term liabilities   2,121     -  
Total liabilities   1,598,243     1,513,480  
 
Stockholders' equity

Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 19,057,217 and 20,132,706 shares at December 31, 2016 and December 31, 2015, respectively

2 2
Additional paid-in capital 141,058 148,523
Accumulated other comprehensive loss (8,132 ) (7,922 )
Retained earnings   324,693     318,579  
Total CAI stockholders' equity 457,621 459,182
Non-controlling interest   -     923  
Total stockholders' equity   457,621     460,105  
Total liabilities and stockholders' equity $ 2,055,864   $ 1,973,585  
 

       
CAI International, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(UNAUDITED)
 
Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
Revenue
Container lease income $ 48,916 $ 53,231 $ 200,186 $ 217,505
Rail lease income 8,028 5,663 30,490 17,433
Logistics revenue 19,793 6,028 61,536 11,502
Management fee revenue   537   770     2,142   3,227
Total revenue   77,274   65,692     294,354   249,667
 
Operating expenses
Depreciation of rental equipment 26,968 47,683 104,369 113,590
Storage, handling and other expenses 9,264 8,357 36,440 30,194
Logistics transportation costs 16,853 5,284 51,980 10,172
Loss on sale of used rental equipment 4,721 891 12,671 654
Administrative expenses   6,928   6,077     35,678   27,617
Total operating expenses   64,734   68,292     241,138   182,227
 
Operating income (loss)   12,540   (2,600 )   53,216   67,440
 
Other expenses
Net interest expense 11,219 9,290 42,754 36,271
Other expense   247   121     654   182
Total other expenses   11,466   9,411     43,408   36,453
 
Net income (loss) before income taxes and
non-controlling interest 1,074 (12,011 ) 9,808 30,987
Income tax expense   337   581     3,657   4,252
 
Net income (loss) 737 (12,592 ) 6,151 26,735
Net income attributable to non-controlling interest   -   38     37   134
Net income (loss) attributable to CAI
common stockholders $ 737 $ (12,630 ) $ 6,114 $ 26,601
 
 
Net income (loss) per share attributable to
CAI common stockholders
Basic $ 0.04 $ (0.63 ) $ 0.32 $ 1.28
Diluted $ 0.04 $ (0.62 ) $ 0.32 $ 1.27
 
Weighted average shares outstanding
Basic 18,992 20,163 19,318 20,773
Diluted 19,081 20,271 19,393 20,988
 

   
CAI International, Inc.
Consolidated Statements of Cash Flows
(In thousands, except per share data)
(UNAUDITED)
 

Year Ended
December 31,

2016 2015
Cash flows from operating activities
Net income $ 6,151 $ 26,735
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 104,728 114,003
Amortization of debt issuance costs 2,975 2,943
Amortization of intangible assets 1,443 232
Stock-based compensation expense 1,732 1,915
Reduction in contingent consideration (3,789 ) -
Unrealized loss on foreign exchange 276 251
Loss on sale of used rental equipment 12,671 654
Loss on disposal of subsidiary 146 -
Deferred income taxes 2,770 4,967
Bad debt expense 3,151 448
Changes in other operating assets and liabilities:
Accounts receivable

(3,247

) 4,733
Prepaid expenses and other assets (2,691 ) (81 )
Accounts payable, accrued expenses and other current liabilities 1,753 (3,654 )
Due to container investors 945 (7,183 )
Unearned revenue  

(1,784

)

  1,406  
Net cash provided by operating activities  

127,230

    147,369  
Cash flows from investing activities
Purchase of rental equipment (250,587 ) (389,331 )
Acquisitions, net of cash acquired (15,599 ) (4,100 )
Net proceeds from sale of used rental equipment

66,073

66,150
Disposal of subsidiary, net of cash disposed of (460 ) -
Purchase of furniture, fixtures and equipment (82 ) (83 )
Receipt of principal payments from direct financing leases   21,081     22,116  
Net cash used in investing activities  

(179,574

)

  (305,248 )
Cash flows from financing activities
Proceeds from debt 552,540 748,731
Principal payments on debt (496,270 ) (581,739 )
Debt issuance costs (1,515 ) (3,226 )
Decrease in restricted cash 1,020 1,020
Repurchase of stock (9,176 ) (12,997 )
Exercise of stock options - 4,744
Excess tax benefit from share-based compensation awards   -     3  
Net cash provided by financing activities   46,599     156,536  
Effect on cash of foreign currency translation   (674 )   75  
Net decrease in cash (6,419 ) (1,268 )
Cash at beginning of the period   52,553     53,821  
Cash at end of the period $ 46,134   $ 52,553  
 

       
CAI International, Inc.
Fleet Data
(UNAUDITED)
 
As of December 31,
2016 2015
 
Owned container fleet in TEUs 921,694 984,085
Managed container fleet in TEUs 162,582   198,093  
Total container fleet in TEUs 1,084,276   1,182,178  
 
Owned container fleet in CEUs 1,014,078 1,029,117
Managed container fleet in CEUs 146,258   177,958  
Total container fleet in CEUs 1,160,336   1,207,075  
 
Owned railcar fleet in units 6,459   5,096  
 
 
Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
Average Utilization
Container fleet utilization in CEUs 93.8 % 91.1 % 92.8 % 92.5 %
Owned container fleet utilization in CEUs 94.3 % 91.9 % 93.5 % 93.4 %
Railcar fleet utilization in units 95.0 % 97.6 % 95.7 % 96.1 %
 
As of December 31,
2016 2015
Period Ending Utilization
Container fleet utilization in CEUs 94.9 % 90.7 %
Owned container fleet utilization in CEUs 95.2 % 91.6 %
Railcar fleet utilization in units 93.3 % 96.2 %
Utilization is computed by dividing total units on lease in CEUs (cost equivalent units), by the total units in our fleet in CEUs, excluding new units not yet leased and off-hire units designated for sale. CEU is a ratio used to convert the actual number of containers in our fleet to a figure based on the relative purchase prices of our various equipment types to that of a standard 20 foot dry van container. For example, the CEU ratio for a standard 40 foot dry van container is 1.6, and a 40 foot high cube container is 1.7.

       
Reconciliation of GAAP Amounts to Non-GAAP Amounts
(In thousands, except per share data)
(UNAUDITED)
 
Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
Net income (loss) attributable to CAI common stockholders $ 737 $ (12,630 ) $ 6,114 $ 26,601
Non-recurring write-off of accounts receivable from bankrupt customer - - 2,530 -

Non-recurring estimate of irrecoverable equipment from bankrupt customer, net of insurance

- - 2,000 -
Tax effect of non-recurring costs related to bankrupt customer - - (75 ) -
Adjustment to contingent consideration (2,789 ) - (3,789 ) -
Tax effect of adjustment to contingent consideration 355 - 695 -
Non-recurring tax charge related to the sale of a subsidiary - - 1,360 -
Impairment of rental equipment - 24,481 - 24,481
Tax effect of impairment of rental equipment - (1,385 ) - (1,385 )
Non-recurring container management charge - - - 828
Tax effect of non-recurring management charge   -     -     -     (298 )
Adjusted net (loss) income attributable to

CAI common stockholders

$ (1,697 ) $ 10,466   $ 8,835   $ 50,227  
 
 

Diluted net income (loss) per share attributable to CAI common stockholders

$ 0.04 $ (0.62 ) $ 0.32 $ 1.27

Diluted adjusted net (loss) income per share attributable to CAI common stockholders

$ (0.09 ) $ 0.52 $ 0.46 $ 2.39
 
Weighted average number of common shares used to calculate (in thousands)

Diluted net income (loss) per share and diluted adjusted net (loss) income per share attributable to CAI common stockholders

19,081 20,271 19,393 20,988
 

Conference Call

A conference call to discuss the financial results for the fourth quarter of 2016 will be held on Tuesday, February 14, 2017 at 5:00 p.m. ET. The dial-in number for the teleconference is 1-888-398-8098; outside of the U.S., call 1-707-287-9363. The call may be accessed live over the internet (listen only) under the "Investors" tab of CAI's website, www.capps.com, by selecting "Q4 2017 Earnings Conference Call." A webcast replay will be available for 30 days on the "Investors" tab of our website.

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, and includes net income and earnings per share adjusted to reflect the impact of a non-recurring write-off of accounts receivable from a bankrupt customer, a non-recurring estimate of irrecoverable equipment from a bankrupt customer, tax effect of non-recurring costs related to a bankrupt customer, additional depreciation expense caused by a decrease in container residual values and related tax effect, adjustment to contingent consideration and related tax effect, a non-recurring tax charge related to the sale of a subsidiary, and a non-recurring container management charge and related tax effect. These measures are not in accordance with, or an alternative for, generally accepted accounting principles, or GAAP, and may be different from non-GAAP financial measures used by other companies. We believe the presentation of non-GAAP financial measures provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of our ongoing operating performance. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for GAAP financial measures. To the extent this release contains historical non-GAAP financial measures, we have also provided a reconciliation to the corresponding GAAP financial measures for comparative purposes.

About CAI International, Inc.

CAI is one of the world's leading transportation finance and logistics companies. As of December 31, 2016, CAI operated a worldwide fleet of approximately 1.2 million CEUs of containers, and owned a fleet of 6,459 railcars that it leases within North America. CAI operates through 23 offices located in 13 countries including the United States.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and the future performance of CAI, including but not limited to, the statements regarding management's business outlook on the container leasing business, management's outlook for growth of CAI's railcar leasing investments and the outlook, benefits and synergies expected from the acquisitions of ClearPointt, Challenger and Hybrid. These statements and others herein are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and involve risks and uncertainties that could cause actual results of operations and other performance measures to differ materially from current expectations including, but not limited to, utilization rates, expected economic conditions, expected growth of international trade, availability of credit on commercially favorable terms or at all, customer demand, container investment levels, container prices, lease rates, increased competition, volatility in exchange rates, growth in world trade and world container trade, the ability of CAI to convert letters of intent with its customers to binding contracts, potential to sell CAI's securities to the public and others.

CAI refers you to the documents that it has filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2015, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. These documents contain additional important factors that could cause actual results to differ from current expectations and from forward-looking statements contained in this press release. Furthermore, CAI is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements contained in this press release whether as a result of new information, future events or otherwise, unless required by law.

CAI International, Inc.
Tim Page, 415-788-0100
Chief Financial Officer
tpage@capps.com

Source: CAI International, Inc.

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