CAI International
Oct 19,2017
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CAI International, Inc. Reports Results for the Third Quarter of 2017

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 19, 2017-- CAI International, Inc. (CAI) (NYSE: CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the third quarter of 2017.

Highlights

  • Strong fundamentals in the container leasing market in the third quarter of 2017 resulted in continued revenue and net income growth.
  • Lease-related revenue for the third quarter of 2017 was $69.1 million, an increase of 21% compared to the third quarter of 2016, and 10% compared to the second quarter of 2017.
  • Net income for the third quarter of 2017 was $17.6 million, or $0.90 per fully diluted share, compared to a net loss per fully diluted share of $0.28 in the third quarter of 2016, and net income per fully diluted share of $0.65 in the second quarter of 2017.
  • Average utilization for our owned container fleet during the third quarter of 2017 was 98.2% (on a CEU basis) compared to 94.0% for the third quarter of 2016, and 97.2% for the second quarter of 2017. Current utilization is 98.8%.
  • Average railcar utilization, excluding new railcars not yet leased, during the third quarter of 2017 was 89.3% compared to 96.2% for the third quarter of 2016, and 91.0% for the second quarter of 2017.
  • CAI acquired $253 million containers in the third quarter of 2017, $217 million of which were new containers. Virtually all of these containers have already been leased.
  • On July 6, 2017, CAI issued $253 million of asset-backed securitized notes at a weighted-average interest rate of 3.7%.

Revenue for the third quarter of 2017 was $90.2 million, compared to $78.5 million for the third quarter of 2016, an increase of 15%. Revenue from CAI’s container leasing business was $61.9 million, compared to $49.7 million for the third quarter of 2016, an increase of 25%, primarily due to investment in the owned fleet and an increase in utilization.

Net income for the third quarter of 2017 was $17.6 million, or $0.90 per fully diluted share, compared to a net loss of $5.5 million, or $0.28 per fully diluted share, for the third quarter of 2016, and net income of $12.6 million, or $0.65 per fully diluted share, for the second quarter of 2017. Net income for the third quarter of 2017 benefitted from the recognition of $1.5 million of pre-tax insurance proceeds related to previously recorded repair costs from the bankruptcy of Hanjin, and the pre-tax release of an earn-out liability of $1.6 million associated with acquisitions in the logistics business completed in prior periods. These were partially offset by a foreign exchange loss of $0.5 million caused by the settlement of Euro denominated intercompany loans.

Additional information on CAI's results, as well as the state of the industry, is available in a presentation posted today on the "Investors" section of CAI's website, www.capps.com.

Victor Garcia, President and Chief Executive Officer of CAI, commented, “The momentum in our business has continued as the year has developed, with the third quarter being particularly strong. For the quarter, we reported net income of $17.6 million, or $0.90 per fully diluted share. That compares to $12.6 million, or $0.65 per fully diluted share in the second quarter of 2017. During the quarter, we benefitted from the recognition of insurance proceeds related to the bankruptcy of Hanjin and the release of an earn-out liability associated with acquisitions made in prior periods, partially offset by a significant foreign exchange loss. These items increased our net income for the quarter by $2.2 million.

“We are very pleased with the momentum in our business and the rapid improvement in our results. The core fundamentals in our container leasing business remain strong as can be seen by the average utilization of our owned container fleet which was 98.2% in the third quarter of 2017 and is currently 98.8%, effectively fully utilized. Our available inventory for lease or sale is at historic lows and we expect utilization to remain at these elevated levels for the coming months as there is limited new investment in containers by lessors who remain constrained in their ability to deploy capital. We believe those constraints will keep supply and demand for containers tight over the coming months assuming a continued steady demand for containerized cargo around the globe. Most of our new leases have required that equipment be returned to high demand areas in China which we expect will enable us to redeploy the equipment if it is returned.”

Mr. Garcia continued, “For the year-to-date, we have committed investment in containers of $470 million, virtually all of which are subject to long-term leases with an average lease duration of over 8 years. Of the container investment made this year, $253 million was delivered in the third quarter. We have an additional $64 million of containers to be delivered in the fourth quarter, all of which are fully booked under attractive long-term leases. We expect our fourth quarter results to see some benefit from the full quarter effect of the equipment placed on lease during the third quarter. Because we have limited equipment available for sale, we expect our gain on sale to decrease in the coming quarter. However, the price of containers in the secondary market continues to rise due to limited supply and, as a result, we expect the average gain per unit to increase.

“Our rail segment continues to work through a difficult market environment. Leases on new equipment continue to be priced aggressively as we believe other lessors are prioritizing having units on lease rather than on overall lease rental rates. However, we have diversified equipment being delivered and we continue to try and reach a broad market of customers to place our equipment. Our focus on the rail segment is to delay equipment deliveries where possible and place as much equipment on short-term leases to bridge to a potentially better market in the future. We do not intend to invest uncommitted, incremental capital in our rail segment until the market opportunity improves. We expect all uncommitted, incremental capital investment to be focused on our container segment where returns are currently higher and demand is clearly stronger.

“We have made leadership changes in our logistics business to better integrate our various product offerings and to streamline our processes. The results for the logistics segment have been below our expectations and we believe the leadership changes were necessary for the long-term growth of the segment. Overall, the underlying market demand for logistics services has improved significantly over the course of the third quarter and we expect to pick up momentum with our existing customers in the fourth quarter.”

Mr. Garcia, concluded, “We have great momentum in our operating results, and with equipment due to be delivered in the coming quarters on committed leases, we expect to maintain growth in our utilization and revenue for the remainder of the year. We will continue to look for opportunities to increase our overall return on capital by increasing the utilization and returns on our equipment.”

CAI International, Inc.
Consolidated Balance Sheets
(In thousands, except share information)
(UNAUDITED)
   
September 30, December 31,
2017 2016
Assets
Current assets
Cash $ 12,508 $ 15,685
Cash held by variable interest entities 22,445 30,449

Accounts receivable, net of allowance for doubtful accounts of $1,636 and $1,340 at September 30, 2017 and December 31, 2016, respectively

69,478 63,745
Current portion of net investment in direct finance leases 27,947 19,959
Prepaid expenses and other current assets   5,016     5,315  
Total current assets 137,394 135,153
Restricted cash 12,217 6,192

Rental equipment, net of accumulated depreciation of $484,428 and $421,153 at September 30, 2017 and December 31, 2016, respectively

1,979,012 1,807,010
Net investment in direct finance leases 199,994 80,582
Goodwill 15,794 15,794

Intangible assets, net of accumulated amortization of $2,974 and $2,681 at September 30, 2017 and December 31, 2016, respectively

8,156 9,691

Furniture, fixtures and equipment, net of accumulated depreciation of $3,131 and $2,833 at September 30, 2017 and December 31, 2016, respectively

370 550
Other non-current assets   3,220     962  
Total assets $ 2,356,157   $ 2,055,934  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 6,320 $ 13,804
Accrued expenses and other current liabilities 13,540 11,778
Due to container investors 4,119 7,077
Unearned revenue 8,361 10,613
Current portion of debt 133,322 95,527
Rental equipment payable   190,180     25,207  
Total current liabilities 355,842 164,006
Debt 1,450,588 1,380,499
Deferred income tax liability 51,193 51,804
Other long term liabilities   -     2,121  
Total liabilities   1,857,623     1,598,430  
 
Stockholders' equity

Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 19,268,083 and 19,057,217 shares at September 30, 2017 and December 31, 2016, respectively

2 2
Additional paid-in capital 143,845 141,058
Accumulated other comprehensive loss (6,390 ) (8,132 )
Retained earnings   361,077     324,576  
Total stockholders' equity   498,534     457,504  
Total liabilities and stockholders' equity $ 2,356,157   $ 2,055,934  

CAI International, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(UNAUDITED)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenue
Container lease income $ 61,870 $ 49,661 $ 169,784 $ 152,875
Rail lease income 7,279 7,614 23,459 22,462
Logistics revenue   21,012     21,197     61,116     41,743
Total revenue   90,161     78,472     254,359     217,080
 
Operating expenses
Depreciation of rental equipment 27,788 29,873 82,814 77,401
Storage, handling and other expenses 3,506 8,802 16,651 27,176
Logistics transportation costs 17,855 18,045 51,608 35,127
(Gain) loss on sale of used rental equipment (1,663 ) 3,323 (2,539 ) 7,950
Administrative expenses   10,781     11,067     31,212     28,750
Total operating expenses   58,267     71,110     179,746     176,404
 
Operating income   31,894     7,362     74,613     40,676
 
Other expenses
Net interest expense 13,959 10,902 37,916 31,535
Other expense   449     85     651     407
Total other expenses   14,408     10,987     38,567     31,942
 
Income before income taxes and non-controlling interest 17,486 (3,625 ) 36,046 8,734
Income tax (benefit) expense   (101 )   1,826     549     3,320
 
Net income 17,587 (5,451 ) 35,497 5,414
Net income attributable to non-controlling interest   -     -     -     37
Net income attributable to CAI
common stockholders $ 17,587   $ (5,451 ) $ 35,497   $ 5,377
 
 
Net income per share attributable to
CAI common stockholders
Basic $ 0.92 $ (0.28 ) $ 1.86 $ 0.28
Diluted $ 0.90 $ (0.28 ) $ 1.83 $ 0.28
 
Weighted average shares outstanding
Basic 19,180 19,130 19,108 19,427
Diluted 19,633 19,130 19,422 19,498

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

September 30,

2017 2016
Cash flows from operating activities
Net income $ 35,497 $ 5,414
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 83,088 77,636
Amortization of debt issuance costs 2,400 2,217
Amortization of intangible assets 1,536 682
Stock-based compensation expense 1,539 1,320
Reduction in contingent consideration (2,211 ) (1,000 )
Unrealized loss on foreign exchange 42 82
(Gain) loss on sale of used rental equipment (2,539 ) 7,950
Loss on disposal of subsidiary - 146
Deferred income taxes 393 2,193
Bad debt expense 750 2,458
Changes in other operating assets and liabilities:
Accounts receivable (6,280 ) (7,560 )
Prepaid expenses and other assets (72 ) (191 )
Accounts payable, accrued expenses and other current liabilities (5,887 ) 1,540
Due to container investors (2,958 ) (32 )
Unearned revenue   (540 )   1,013  
Net cash provided by operating activities   104,758     93,868  
Cash flows from investing activities
Purchase of rental equipment (277,769 ) (170,582 )
Acquisitions, net of cash acquired - (15,620 )
Net proceeds from sale of used rental equipment 50,036 46,137
Disposal of subsidiary, net of cash disposed of - (460 )
Purchase of furniture, fixtures and equipment (91 ) (92 )
Receipt of principal payments from direct financing leases   11,189     17,368  
Net cash used in investing activities   (216,635 )   (123,249 )
Cash flows from financing activities
Proceeds from debt 556,544 432,540
Principal payments on debt (448,436 ) (408,375 )
Debt issuance costs (3,129 ) (1,461 )
Decrease in restricted cash (6,025 ) 765
Repurchase of stock - (9,176 )
Exercise of stock options   1,362     -  
Net cash provided by financing activities   100,316     14,293  
Effect on cash of foreign currency translation   380     1  
Net (decrease) increase in cash (11,181 ) (15,087 )
Cash at beginning of the period   46,134     52,553  
Cash at end of the period $ 34,953   $ 37,466  

CAI International, Inc.
Fleet Data
(UNAUDITED)
       
As of September 30,
2017 2016
 
Owned container fleet in TEUs 1,121,355 941,345
Managed container fleet in TEUs 83,086   174,162  
Total container fleet in TEUs 1,204,441   1,115,507  
 
Owned container fleet in CEUs 1,188,078 1,010,083
Managed container fleet in CEUs 75,596   156,543  
Total container fleet in CEUs 1,263,674   1,166,626  
 
Owned railcar fleet in units 6,795   6,136  
 
 
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Average Utilization
Container fleet utilization in CEUs 98.0 % 93.3 % 96.9 % 92.5 %
Owned container fleet utilization in CEUs 98.2 % 94.0 % 97.1 % 93.2 %
Railcar fleet utilization in units 89.3 % 96.2 % 91.0 % 96.0 %
 
As of September 30,
2017 2016
Period Ending Utilization
Container fleet utilization in CEUs 98.5 % 93.3 %
Owned container fleet utilization in CEUs 98.6 % 93.9 %
Railcar fleet utilization in units 86.8 % 92.8 %

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.

Conference Call

A conference call to discuss the financial results for the third quarter of 2017 will be held on Thursday, October 19, 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” section of CAI’s website, www.capps.com, by selecting “Q3 2017 Earnings Conference Call.” A webcast replay will be available for 30 days on the “Investors” section of our website.

Earnings Presentation

A presentation summarizing our third quarter 2017 results is available on the “Investors” section of our website, www.capps.com.

About CAI International, Inc.

CAI is one of the world’s leading transportation finance and logistics companies. As of September 30, 2017, CAI operated a worldwide fleet of approximately 1.3 million CEUs of containers, and owned a fleet of 6,795 railcars that it leases within North America. CAI operates through 24 offices located in 14 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 of our logistics business. 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, 2016, 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.

Source: CAI International, Inc.

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

Stock Information

2016 Annual Report

2016 Annual Report